Board Independence and Expertise

Topic   ◾      Zoetis Key Corporate Governance Feature   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 and business Independent Board Chair   ◾   Independent Board Chair   ●Board Chair is an independent director and is elected by Board annually Board Committees   ◾   Board Committees   ●Four Board committees: Audit, Compensation, Corporate Governance and Quality and Innovation   ◾ ●All four committees are composed entirely of independent directors Executive Sessions   ◾   Executive Sessions   ●Directors hold regularly scheduled executive sessions, at which directors can discuss matters without management present   ◾ ●Independent Board Chair presides over all executive sessions of the Board Board Oversight of Risk   ◾   Board Oversight of Risk   ●Risk oversight by full Board and committees Proxy Access   ◾   Proxy Access   Adopted ●   Proactively adopted a proxy access right for shareholders Accountability   ◾   Board Oversight of Management   Succession   ●   Board regularly reviews and discusses succession plans for CEO and other key executives   Board Self-Evaluation ●   Our Board and each of its committees conduct an annual self-evaluation   Accountability ●In uncontested director elections, our directors are elected by a majority of the votes cast   ◾ ●Each share of common stock is entitled to one vote   ◾ ●Processes in place to facilitate communication with shareholders and other stakeholders and ●   Ongoing communication between our Board including(including the Board Chair and committee chairs,chairs) and management Director Stock Ownership   ●   Anti-hedging and anti-pledging policies covering directors and employees ●   Claw-back policy covering incentive compensation paid to executives ◾   Director Stock Ownership   ●Eachnon-employee director is required to hold Zoetis stock worth at least USD $400,000 (including share equivalent units), to be acquired within five years of joining our Board Open Lines of Communication   ◾   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 consultants or experts at the company’s expense   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 ●   In-house presentations, third-party courses and field trips for directors Board Self-Evaluation   ◾ 12   Our Board and each of its committees conduct an annual self-evaluationZOETIS 2018 PROXY STATEMENT CORPORATE GOVERNANCE AT ZOETIS   CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES DIRECTOR INDEPENDENCE It is the policy of our company, and a requirement under New 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 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. 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 member of the company’s consolidated group for financial reporting. From January 1, 20162017 through May 11, 2016,August 2, 2017, our Board of Directors consisted of eleventen directors, nine 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 were Paul M. Bisaro, William Doyle, Louise M. Parent, Willie M. Reed,Frank A. D’Amelio, Sanjay Khosla, Michael B. McCallister, Gregory Norden, Louise M. Parent, Willie M. Reed, Robert W. Scully and William ZOETIS 2017 PROXY STATEMENT 13 CORPORATE GOVERNANCE AT ZOETIS C. Steere, Jr. The onlynon-independent directors during this period were director in 2017 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. On August 3, 2017, Linda Rhodes was elected to our Board. Prior to June 24, 2016, the third anniversary ofher election, our separation from Pfizer, Mr. D’Amelio was considered a non-independent directorBoard determined that Dr. Rhodes is independent under NYSE Listing Standards and our Director Qualification Standards. The Board subsequently determined that as of June 24, 2016, the third anniversary of our complete separation from Pfizer, Mr. D’Amelio was an independent director under our Director Qualification Standards and the NYSE listing standards. On May 12, 2016, Mr. Doyle’s term of service on the Board ended 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 was 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”). On February 14, 2017,13, 2018, our Board completed its annual review of director independence and affirmatively determined that Ms. Parent, Dr. Reed, Dr. Rhodes, and Messrs. Bisaro, 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—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 Chair 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 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. DIRECTOR ATTENDANCE During 2016,2017, our Board met sixfive 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 2016.2017. All Board members are expected to attend our Annual Meeting unless an emergency prevents them from doing so. All of our directors attended our 20162017 Annual Meeting. ZOETIS 2018 PROXY STATEMENT 13 CORPORATE GOVERNANCE AT ZOETIS BOARD COMMITTEE MEMBERSHIP Our Board has a standing Audit Committee, Compensation Committee, 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—Corporate Governance. Each committee has the authority to hire outside advisors at the company’s expense. All of the members of each of our committees 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 independence requirements for members of audit and compensation committees. 14 ZOETIS 2017 PROXY STATEMENT CORPORATE GOVERNANCE AT ZOETIS The following table lists the Chair and current members of each committee and the number of meetings held in 2016.2017.           Committee Name     Independent           Audit           Compensation     Corporate   Governance     Quality and   Innovation             Juan Ramón Alaix     no                     Paul M. Bisaro     yes                         Frank A. D’Amelio     yes                     Sanjay Khosla     yes                         Michael B. McCallister     yes                       Gregory Norden     yes                         Louise M. Parent     yes                         Willie M. Reed     yes                         Robert W. Scully     yes                         William C. Steere, Jr.     yes                         Number of Meetings in 2016         8     8     6     3   Committee Name   Independent          Audit             Compensation     Corporate   Governance    Quality and     Innovation     Juan Ramón Alaix   no Paul M. Bisaro yes Frank A. D’Amelio yes Sanjay Khosla yes Michael B. McCallister yes Gregory Norden yes Louise M. Parent yes Willie M. Reed yes Linda Rhodes yes Robert W. Scully yes William C. Steere, Jr. yes Number of Meetings in 2017 8 6 4 5                         Chair              Member COMPENSATION 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 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 2016,2017, 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.   14   ZOETIS 20172018 PROXY STATEMENT 15 CORPORATE GOVERNANCE AT ZOETIS   PRIMARY RESPONSIBILITIES OF BOARD COMMITTEES     Board Committees               Responsibilities         AUDIT COMMITTEE   All Members Independent   All Members Financially Literate   Each of Mr. Norden and Mr. Scully qualifies as an “audit committee financial expert”          ●   Responsible for the oversightOversees of 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 auditpublic 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   ●   Oversees our Enterprise Risk Management process         COMPENSATION COMMITTEE   All Members Independent          ●   Responsible for reviewing and approving our overall compensation philosophy   ●   Responsible for overseeing the administration ofOversees 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 and oversees the management of risks relating to our compensation plans and arrangements         CORPORATE GOVERNANCE COMMITTEE   All Members Independent          ●   Responsible for matters ofthe company’s corporate governance and matters relating to the practices, policies and procedures of our Board of Directors   ●   Identifies and recommends candidates for election to our Board andBoard; recommends the members and Chairschairs of Board committees   ●   Advises on and recommends director compensation for approval by the Board   ●   Recommends changes in our corporate governance documents ●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   ●   Responsible for the oversight of ourOversees compliance with systemsprocesses and other legal and regulatory requirements relatedinternal controls relating to our manufacturing quality and environmental, health and safety (“EHS”) matters ●   Reviews our manufacturing quality and EHS internal controls and programs and ourprograms; reviews organizational structurestructures and qualifications of key personnel in our supply chain, manufacturing quality and EHS functions       BOARD’S ROLE IN RISK OVERSIGHT The Board of Directors as a whole and through its committees oversees the company’s risk management. Members of senior management regularly reportManagement 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 to these areas. The Audit Committee oversees our Enterprise Risk Management process, 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 the management of risks associated with the independence of the Board, as well as the effectiveness of our Corporate Governance Principles and the Board’s compliance with our Code of Business Conduct and Ethics for Members of the Board.Ethics. The Quality and Innovation Committee oversees risks related to manufacturing quality and environmental, health and safety matters and our strategy and investments in research ZOETIS 2018 PROXY STATEMENT 15 CORPORATE GOVERNANCE AT ZOETIS and development and innovation initiatives. Each committee of the 16 ZOETIS 2017 PROXY STATEMENT CORPORATE GOVERNANCE AT ZOETIS 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 practices supportactive role in risk oversight supports our efforts to oversee and manage areas of material risk to the company. 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.     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; leadership and ability to exercise sound judgment; animal health or veterinary expertise; prior public company executive experience; significant operations, manufacturing or research and 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, 2017,19, 2018, to be considered for the following2019 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 67.66. 16 ZOETIS 2018 PROXY STATEMENT CORPORATE GOVERNANCE AT ZOETIS Since the initial public offering of our stock in 2013, sixseven directors have been elected to our Board: Sanjay Khosla, Robert W. Scully, Louise M. Parent, Willie M. Reed, William F. Doyle (director from February 3, 2015 through May 11, 2016) and, Paul M. Bisaro. Bisaro and Linda Rhodes. Dr. Rhodes was identified as a potential director candidate by an executive officer of the company. The Corporate Governance Committee also retained a third-party search firm that worked with the Committee to identify other director prospects, vet director candidates, verify candidate credentials, and assess interest and willingness to serve on the Zoetis Board. ZOETIS 2017 PROXY STATEMENT 17 CORPORATE GOVERNANCE AT ZOETISBOARD REFRESHMENT Board development and director succession is an integral part of the company’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 director nominees can be found in 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 following Board and committee Chairs at the following email addresses:   Board Chair       BoardChair@zoetis.com Audit Committee Chair       AuditChair@zoetis.com Compensation Committee Chair       CompChair@zoetis.com Corporate Governance Committee Chair       CorpGovChair@zoetis.com Quality and Innovation Committee Chair       QandIChair@zoetis.com 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., 10 Sylvan Way, Parsippany, NJ 07054. Communications are distributed to the Board, or to any individual director as appropriate, depending on the facts and circumstances outlined in the communication, but excluding 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 out under our policy will be made available to any non-management director upon his or her request. ATTENDANCE OF DIRECTORS AT ANNUAL 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 20162017 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 the Code of Conduct can be found on our website www.zoetis.com underAbout Us—Corporate Compliance. We have also ZOETIS 2018 PROXY STATEMENT 17 CORPORATE GOVERNANCE AT ZOETIS 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—Corporate 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. COMPENSATION OF DIRECTORS 20162017 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 directors who are our full-time employees receive no additional compensation for service as a member of our Board of Directors. 18 ZOETISIn 2017, PROXY STATEMENT CORPORATE GOVERNANCE AT ZOETIS For 2016, ournon-employee directors’ compensation consisted of an annual cash retainer for each non-employee director of $100,000 and an equity retainer to eachnon-employee director upon his or her first election as such and annually thereafter with a value of $170,000$200,000 on the date of grant, based upon the closing price of shares of Zoetis common stock on that date. The equity retainer is in the form of restricted stock units which are subject to three-year cliff vesting, remaining unvested untilthat vest on the third anniversary of the date of grant.   2016 Annual Director Compensation 2016 Additional Director Compensation Board Chair: An additional $150,000 annual cash retainer Committee Chairs: An additional $25,000 annual cash retainer During 2016, In 2017, 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:   ●   To each of Ms. Parent, Dr. Reed and Messrs. Bisaro, D’Amelio, Khosla, Norden, McCallister, Scully and Steere, 4,0643,635 restricted stock units valued at $41.83$55.02 per share. ● To Dr. Rhodes upon her initial appointment to the Zoetis Board in August 2017, 3,211 restricted stock units valued at $62.28 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. 18 ZOETIS 2018 PROXY STATEMENT 2017 Annual Director Compensation Board Chair: An additional $150,000 annual cash retainer Committee Chair: An additional $25,000 annual cash retainer CORPORATE GOVERNANCE AT ZOETIS We have adopted share ownership guidelines applicable tonon-employee directors, requiring the directors to hold Zoetis shares with a value of four times their annual cash retainer of $100,000. For purposes of satisfying these requirements, (a) a director’s holdings of the company’s stock shall include, in addition to shares held outright, units granted to the director as compensation for Board service and shares or units held under a deferral or similar plan, and (b) each such unit shall have the same value as a share of the company’s common stock. Eachnon-employee director has five years from (y) the date upon which the guidelines were established, or (z) if later, the date of (y) his or her first election as a director, or (z) if later, an increase in the amount of company stock required to be held to achieve the share ownership requirement. William F. Doyle was appointed to serve as a director of our company on February 3, 2015. Mr. Doyle’s appointment was pursuant to the Letter Agreement with Pershing Square. Prior to leaving the Board on May 12, 2016, Mr. Doyle was eligible to participate in our company’s non-employee director compensation program and he voluntarily waived any compensation from our company in respect of his services as a Board member. Mr. Doyle was a member of Pershing Square and was independently compensated by Pershing Square; the Letter Agreement provided that no compensation paid by Pershing Square to Mr. Doyle would depend directly or indirectly on the performance of our company or its stock price (although compensation arrangements based on the overall value of the funds Pershing Square manages will not be considered to be restricted arrangements unless the value of such funds depended primarily on the performance of our company or our stock price). ZOETIS 2017 PROXY STATEMENT 19 CORPORATE GOVERNANCE AT ZOETIS The following table summarizes the total compensation earned in 20162017 by each of our directors who served as anon-employee director during 2016.2017.   Name   Fees Earned or Paid in Cash($)(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 ($)   Total ($)     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)   $   112,500         $   170,000         –     –     –     –     $   282,500             $125,000          $   200,000          –         –         –         –         $   325,000             Frank A. D’Amelio(5)   $   100,000         $   170,000         –     –     –     –     $   270,000             $100,000          $   200,000          –         –         –         –         $   300,000             Sanjay Khosla(5)   $   100,000         $   170,000         –     –     –     –     $   270,000             $100,000          $   200,000          –         –         –         –         $   300,000             Michael B. McCallister(6)   $   275,000         $   170,000         –     –     –     –     $   445,000             $275,000          $   200,000          –         –         –         –         $   475,000             Gregory Norden(7)   $   125,000         $   170,000         –     –     –     –     $   295,000             $125,000          $   200,000          –         –         –         –         $   325,000             Louise M. Parent(5)   $   100,000         $   170,000         –     –     –     –     $   270,000             $100,000          $   200,000          –         –         –         –         $   300,000             Willie M. Reed(5)   $   100,000         $   170,000         –     –     –     –     $   270,000             $100,000          $   200,000          –         –         –         –         $   300,000       Robert W. Scully(8)   $   125,000         $   170,000         –     –     –     –     $   295,000             Linda Rhodes(8)       $  41,667          $   200,000                  $   241,667             Robert W. Scully(9)       $125,000          $   200,000          –         –         –         –         $   325,000             William C. Steere, Jr.(5)   $   100,000         $   170,000         –     –     –     –     $   270,000             $100,000          $   200,000          –         –         –         –         $   300,000         (1) Non-employee directors may defer the receipt of up to 100% of their annual cash retainer into a notional stock unit account under the ZoetisNon-Employee Director Deferred Compensation Plan. Any deferrals under this plan are credited as phantom stock units in the Zoetis stock fund or an alternate investment fund, with each phantom unit representing one share of Zoetis common stock. Phantom units in the Zoetis stock fund receive dividend equivalent rights but do not receive voting rights. Phantom stock units are settled in cash following the director’s separation from service and may be transferred into an alternate investment fund at any time, subject to the limitations described in the ZoetisNon-Employee Director Deferred Compensation Plan. During 2016,2017, two directors, Ms. Parent and Mr. Steere, deferred all of their cash retainers into their respectiveNon-Employee Director Deferred Compensation Plan accounts.   (2) The amounts in the Stock Awards column reflect the aggregate grant date value of restricted stock units granted to directors in 20162017 calculated in accordance with FASB ASC Topic 718. The grant date fair value of each restricted stock unit granted to a eachnon-employee director other than Dr. Rhodes on February 19, 2016,14, 2017, was $41.83.$55.02. The grant date fair value of each restricted stock unit granted to Dr. Rhodes on August 3, 2017, was $62.28. Restricted stock units accrue dividend equivalents, the value of which is factored into the grant date fair value. Restricted stock units vest and are settled in shares of Zoetis common stock on the third anniversary of the date of grant, subject to the director’s continued service through such vesting date and subject to earlier vesting and settlement upon certain specified events. Dividend equivalents vest and are settled in shares of Zoetis common stock 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 specified events. At the end of 2016,2017, the aggregate number of restricted stock units (including dividend equivalents) held by each currentnon-employee director was as follows: Mr. Bisaro, 7,943;11,654; Mr. D’Amelio, 7,826;11,536; Mr. Khosla, 7,826;11,536; Mr. McCallister, 7,826;11,536; Mr. Norden, 7,826;11,536; Ms. Parent, 7,826;11,536; Dr. Reed, 7,826;11,536; Dr. Rhodes, 3,216; Mr. Scully, 7,826;11,536; and Mr. Steere, 7,826.11,536.   (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. At the end of 2016,2017, the aggregate number of deferred stock units (including dividend equivalents) held by each currentnon-employee director was as follows: Mr. D’Amelio, 9,417;9,484; Mr. Khosla, 9,417;9,484; Mr. McCallister, 10,180;10,252; Mr. Norden, 10,180;10,252; Ms. Parent, 9,417;9,484; Dr. Reed, 4,631;4,664; Mr. Scully, 9,417;9,484; and Mr. Steere, 10,180.10,252.   (4) Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during 2016,2017, (b) a prorated cash retainer of $12,500$25,000 for service as Chair of the Quality and Innovation Committee during the second half of 20162017 and (c) an equity retainer of 4,0643,635 restricted stock units granted on February 19, 2016.14, 2017.   (5) Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during 20162017 and (b) an equity retainer of 4,0643,635 restricted stock units granted on February 19, 2016.14, 2017.   (6) Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during 2016,2017, (b) a cash retainer of $150,000 for service as Chair of the Board during 2016,2017, (c) a cash retainer of $25,000 for service as Chair of the Corporate Governance Committee during 20162017 and (d) an equity retainer of 4,0643,635 restricted stock units granted on February 19, 2016.14, 2017. ZOETIS 2018 PROXY STATEMENT 19 CORPORATE GOVERNANCE AT ZOETIS   (7) Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during 2016,2017, (b) a cash retainer of $25,000 for service as Chair of the Audit Committee during 20162017 and (c) an equity retainer of 4,0643,635 restricted stock units granted on February 19, 2016.14, 2017.   (8) Represents (a) a prorated cash retainer of $41,667 for service to the Board as anon-employee director beginning on August 3, 2017 through the remainder of 2017 and (b) an equity retainer of 3,211 restricted stock units granted on August 3, 2017. (9) Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during 2016,2017, (b) a cash retainer of $25,000 for service as Chair of the Compensation Committee during 20162017 (due to an administrative error a portion of this amount was paid in March 2018) and (c) an equity retainer of 4,0643,635 restricted stock units granted on February 19, 2016.14, 2017.   20   ZOETIS 20172018 PROXY STATEMENT CORPORATE GOVERNANCE AT ZOETIS DIRECTOR COMPENSATION DECISIONS FOR 2017 Effective January 1, 2017, our non-employee directors’ compensation will consist of the following: 2017 Annual Director Compensation 2017 Additional Director Compensation Board Chair: An additional $150,000 annual cash retainer Committee Chairs: An additional $25,000 annual cash retainer For 2017, our non-employee directors’ compensation will consist of an annual cash retainer for each non-employee director of $100,000 and an equity retainer to each non-employee director upon his or her first election as such and annually thereafter with a value of $200,000 on the date of grant, based upon the closing price of shares of Zoetis common stock on that date. 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. ZOETIS 2017 PROXY STATEMENT 21 This page intentionally left blank. 22 ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATION       ITEM 2      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 2422 to 5554 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. At that meeting,Shareholders; our shareholders agreed,voted for, and our Board subsequently approved, that thean annual advisory vote on executive compensation be held on an annual basis.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 leadershipmanagement 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 20172018 PROXY STATEMENT   2321 EXECUTIVE COMPENSATION   COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE SUMMARY In this Compensation Discussion and Analysis (“CD&A”) we 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”) regarding the 2017 compensation of our named executive officers (“NEOs”) during 2016.. Zoetis’ executive compensation program is designed to incent and reward our leadership for increasing shareholder value and align the interests of leadership with those of our shareholders on an annual and long-term basis. Our NEOs for 2016,2017, whose compensation is discussed in this CD&A and shown in the Executive Compensation Tables below, are:     NEO    Title     Juan Ramón Alaix      Chief Executive Officer (“CEO”)       Glenn C. David    Executive Vice President and Chief Financial Officer (“CFO”) since August 19, 2016       Kristin C. Peck    Executive Vice President and President of U.S. Operations *       Clinton A. Lewis, Jr.    Executive Vice President and President of International Operations *       Catherine A. Knupp    Executive Vice President and President of Research and Development   * Paul S. Herendeen Effective March 1, 2018, Ms. Peck assumed the role of Executive Vice President and CFO through August 18, 2016 Group President, U.S. Operations, Business Development and Strategy, and Mr. Lewis assumed the role of Executive Vice President and Group President, International Operations, Commercial Development, Global Genetics and Aquatic Health. 20162017 BUSINESS HIGHLIGHTS In 2016,2017, our leadership team once again drove strong operating performance by buildingbased on the strength of our business model defined by our 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 of 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.   ●   Business Review. We completed the review of our business operationsoperational efficiency initiative that was launched in 2015, referred to as our “Business Review”, and made significant progress towardin 2017 fully realized our Business Review’s goals of: (1) reducing complexity that does not add value for our customers or our business; (2) optimizing resource allocation and efficiency; and (3) better positioning Zoetis for long-term profitable growth. By the end of 2016, we:2017, we exceeded our goal of achieving annual cost savings of $300 million. ¡ Completed the exit or reduction of our footprint in several markets; ¡ Eliminated approximately 5,000 product stock keeping units (“SKUs”) from our product portfolio; and ¡ Implemented organizational changes to create a more efficient, simple and flexible structure for our company. With the progress on our Business Review in 2016, we are on target to exceed our goal of achieving a $300 million reduction in our operating expense base by the end of 2017.   ●   Financial Highlights. Our 2016 financial performance isWe delivered our fifth consecutive year of operational revenue growth and increased profitability consistent with our value proposition, as highlighted below. (For more information please review the Company’scompany’s Annual Report on Form10-K for fiscal year 20162017 and this proxy statement.)   ¡ Revenues. For full year 2016, reported revenue was $4.888 billion, with revenue growth of 5% on an operational3 basis. We saw strong operational revenue growth in the United States, as well as in a number of our international markets, driven by our diverse portfolio and the successful launch of several new products, particularly in the companion animal business line. 3 Operational revenue growth (a non-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange. 2422   ZOETIS 20172018 PROXY STATEMENT EXECUTIVE COMPENSATION       ¡    Revenues. For full year 2017, reported revenue was $5,307 million, with revenue growth of 8% on an operational3 basis; this growth is greater than the expected global animal health growth for the year and in line with our value proposition. We generated strong operational revenue growth based on the diversity of our product portfolio, as well as solid, balanced performance across the U.S. and all our major international markets. Our companion animal products revenue grew 14% operationally3, with particular strength in dermatology, as well as other new products like Simparica®. We delivered 5% operational revenue growth3 in our livestock business. ¡ Adjusted Net Income.Income. Net income for 20162017 was $821$864 million and adjusted net income4 for 20162017 was $975 million, reflecting an increase of 10%$1,185 million. Adjusted net income increased 22% over 2015.2016. In line with our long-term value proposition, we grew adjusted net income faster than revenue, demonstrating our focus on long-term profitable growth.     ¡    Earnings Per Share(“EPS”). Reported diluted EPS for 20162017 was $1.65$1.75 per diluted share, compared to $0.68$1.65 per diluted share reported in 2015.2016. Adjusted diluted EPS4 for 20162017 was $1.96$2.40 per diluted share, an increase of 11% overcompared to the 20152016 amount of $1.77$1.96 per diluted share. Our 20162017 financial performance as compared to 20152016 is reflected in the chart below.     ●   Value-Added Investment Opportunities. Our Research & Development (“R&D”) team continued to increase the value of Zoetis’ long-term portfolio value in 2016.2017. We received approval for more than 200 new and enhanced products worldwide and launched several new important products,completed a number of major research alliance deals, including CytopointTM,a research collaboration with Celgene Global Health to develop novel solutions to help control parasitic infestations in animals and people. We were proud to be the first company to receive approval in the European Union for a veterinary use monoclonal antibody licensed(mAb) therapy with marketing authorization for dogs suffering from atopic dermatitis, and SimparicaCytopoint®, a chewable treatment for ticks and fleasmAb that helps reduce the clinical signs associated with atopic dermatitis, such as itching, in dogs. We also expanded our livestockreceived approval of Suvaxyn®PRRS MLV in the European Union, a vaccine to protect pigs against porcine respiratory and companion animal vaccine portfolios.reproductive syndrome.   ●3 Acquisitions. We executedOperational revenue growth (anon-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange. Page 43 of our 2017 Annual Report on our strategyForm10-K, filed with the SEC on February 15, 2018, contains a reconciliation of thisnon-GAAP financial measure to deploy capital in acquisitions that strengthen our portfolio, including our acquisition of Scandinavian Micro Biodevices, a pioneer in the development and manufacturing of microfluidic “lab on a chip” diagnostic analyzers and testsreported results under GAAP for veterinary point-of-care services.2017. 2016 COMPENSATION HIGHLIGHTS The Committee took several actions in 2016, including: ● Compensation-Related Actions Regarding Change in CFO. Mr. Paul S. Herendeen, Executive Vice President and CFO, resigned from the company effective August 18, 2016. The Board of Directors appointed Mr. Glenn C. David, Senior Vice President, Finance Operations, as the company’s new Executive Vice President and CFO, effective August 19, 2016. Mr. David previously served as the company’s interim CFO in 2014, prior to the hiring of Mr. Herendeen. The Committee took compensation-related actions in connection with Mr. David’s appointment which are disclosed below under “2016 Compensation Program and Decisions”. In accordance with applicable SEC rules, this CD&A and the Executive Compensation Tables contained in this proxy statement include compensation information for both Mr. Herendeen and Mr. David. 4  Adjusted net income and adjusted diluted EPS (non-GAAP(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 such as charges due to U.S. tax reform and costs associated with implementing organizational changes resulting from our Business Review and costs associated with becoming an independent public company.Review. Pages 4745 to 50 of our 20162017 Annual Report on Form10-K, filed with the SEC on February 16, 2017,15, 2018, contain a reconciliation of thesenon-GAAP financial measures to reported results under GAAP for 2016.2017.     ZOETIS 20172018 PROXY STATEMENT   2523 EXECUTIVE COMPENSATION     ●   Restricted Stock Units (“RSUs”).Acquisitions. For RSUs granted underWe executed on our strategy to deploy capital toward acquisitions that strengthen our portfolio, including our acquisition of Nexvet, a biologic therapeutics company developing a pipeline of monoclonal antibody (mAb) therapies for companion animals in pain and other therapeutic areas. We also completed an acquisition of Nordland Sett Vaks AS, a company with vaccination biodevices and services for the Zoetis Inc. 2013 Equityaquaculture market. ● Dividends and Incentive Plan (the “Equity Plan”) beginningCapital Allocation.In 2017, we paid out approximately $206 million dollars in common stock dividends to shareholders totaling $0.42 per share, and in December of 2017, our Board of Directors declared a first quarter 2018 dividend of $0.126 per share, a 20% increase over the quarterly dividend rate paid in 2017. In December 2016, we announced that our Board of Directors had authorized the repurchase of $1.5 billion of our outstanding common stock, and in 2017 the Committee approved enhanced vesting for retirees who arewe bought back approximately $500 million in shares at least age 65 with 10 or more years of service, providing full vesting on the original schedule (all other retirees willregular intervals. We continue to receive pro-rata vesting at retirement). This enhancement, which appliesprioritize our capital allocation in ways that will add value to all Zoetis employees eligiblethrough targeted business development activities and by returning excess capital to receive long-term incentives (including our NEOs), was made to recognize the long-term contributions of our full-career retirees by allowing them to retain an important part of their compensation and to better align our program with market practice. All awards are forfeited upon a retirement that occurs within one year after the grant date.shareholders. 2017 COMPENSATION HIGHLIGHTS Among the Committee’s compensation-related actions in 2017, the Committee revised the cash-based metric under our Annual Incentive Plan (“AIP”). The Committee reviewed the cash-based metric (weighted 20%, with revenue and adjusted diluted EPS each comprising 40%) used to determine 2016 AIP payouts and approved a change to the use of free cash flow beginning in 2017. In 2016, the cash-based metric was defined as our adjusted net income plus depreciation, amortization and stock-based compensation within adjusted income, minus capital expenditures and certainone-time cash costs (after taxes), plus or minus foreign exchange impacts and changes in accounts receivable, inventories and accounts payable. Free cash flow is defined as U.S. GAAP operating cash flow, minus capital expenditures (adjusted to exclude the impact of extraordinary,one-time events, if any). As free cash flow is a widely used capital management metric, this update was made to bring greater consistency to financial performance evaluation and foster increased transparency for employees and shareholders. 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 incentive compensation opportunity and target long-term incentive compensation opportunity. Base Salary and Annual Incentive Mr. Alaix’ base salary for the first three months of 20162017 was $1,120,000$1,160,000 and his target annual incentive opportunity for that three-month period was 115% of his base salary, providing for annualized target total cash compensation of $2,408,000.$2,494,000. On February 19, 2016,14, 2017, the Committee recommended increasing Mr. Alaix’ base salary to $1,160,000,$1,200,000, and maintainingincreasing his target annual incentive opportunity atfrom 115% to 125% of his base salary, providing for annualized target total cash compensation of $2,494,000.$2,700,000. Upon the Committee’s recommendation, the Board of Directors approved this increase effective April 1, 2016,2017, 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 20162017 was $2,472,500$2,648,500 (base salary of $1,150,000$1,190,000 and annual incentive target of $1,322,500)$1,458,500).      2016              2017        January 1 –March 31       April 1 – December 31      Full Year       January 1 – March 31      April 1 – December 31     Full Year Base Pay    $1,120,000      $1,160,000      $   1,150,000         $1,160,000      $1,200,000     $1,190,000   Target Annual Incentive    $1,288,000      $1,334,000      $   1,322,500         $1,334,000      $1,500,000     $1,458,500   Total Target Cash Compensation    $2,408,000      $2,494,000      $   2,472,500         $2,494,000      $2,700,000     $2,648,500   24 ZOETIS 2018 PROXY STATEMENT EXECUTIVE COMPENSATION In February 2017,2018, the Committee recommended, and the Board of Directors approved, an annual incentive payment for 20162017 of $1,720,000 (130.1%$1,750,000 (120% of the full year annual incentive target) for Mr. Alaix based on Zoetis’ 20162017 financial results and his individual performance, including his leadership of our Business Review.performance. Long-Term Incentive On February 19, 2016,14, 2017, Mr. Alaix received a long-term equity incentive grant with a total grant date fair value of $6,300,000,$7,300,000, consisting ofone-third each of stock options, time-vesting RSUsrestricted stock units (“RSUs”) and performance-vesting RSUs (“performance award units”). Each of these awards (187,667(170,163 stock options, 50,20344,226 RSUs and 41,83232,758 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 19, 2019)14, 2020), 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 total 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 of death, disability, retirement or upon a change in control. 26 ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATION Target Total Direct Compensation (“TTDC”) The chart below shows the TTDC for Mr. Alaix for the first three months of 2016,2017, the last nine months of 20162017 (which includes the April 1, 20162017 increase to Mr. Alaix’ base salary described above) and his full year 20162017 TTDC (which reflects thepro-rata combination of Mr. Alaix’pre-April 1, 2016 2017 and post-April 1, 20162017 TTDC).     ZOETIS 2018 PROXY STATEMENT 25 EXECUTIVE COMPENSATION CEO Pay Ratio Item 402(u) of the SEC’s RegulationS-K, which was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires disclosure of the ratio of the annual total compensation of our CEO to our median employee’s annual total compensation. The ratio disclosed below is a reasonable estimate calculated in a manner consistent with item 402(u). To identify our median employee, we chose “annual base pay” as our globally-consistent definition of pay. We calculated annual base pay using a methodology that reasonably reflects the annual compensation of employees, which included reasonable estimates of hours worked during 2017 for hourly workers and annualized base pay for employees who commenced work during 2017. We chose not to exclude any employees. We used a valid statistical sampling approach to estimate the base pay for our median employee. We selected an individual whose base pay as of October 1, 2017 was at or near that value and whose total compensation (determined in a manner consistent with that of our CEO in the Summary Compensation Table) was $70,260. We then compared the annual total compensation of our CEO to the total annual compensation of the median employee. Our CEO’s total annual compensation for the year ended December 31, 2017, as disclosed in the summary compensation table, was $10,528,769. Therefore, the ratio of CEO pay to median employee pay was 150 to 1. OUR COMPENSATION PROGRAM COMPENSATION PHILOSOPHY Our compensation philosophy, which is set by the Committee, is 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 financial and operational metrics, as well aspre-established annual individual goals for each executive           Align Management Interests with Shareholders     Align the interests of management with results delivered to our shareholders through the use of long-term incentive programs that are designed to reward executives for increasing the value of our shareholders’ investment         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 retain our experienced management team, enable us to attract new qualified executives when needed and remain externally aligned with the compensation practices of our peer group     26   ZOETIS 20172018 PROXY STATEMENT 27 EXECUTIVE COMPENSATION   BASIC PRINCIPLES OF OUR EXECUTIVE COMPENSATION PROGRAM Key principles and elements of our executive compensation program are summarized below. We believe these practices promote good governance and serve the interests of our shareholders.   WHAT WE DO:   ✓  Emphasize pay for performance – our executive compensation program emphasizes variable pay over fixed pay, with more thantwo-thirds of our executives’ target compensation tied to our financial results and stock performance.   ✓  Maintain a three-year cliff vesting schedule for equity-based long-term incentive awards.   ✓  Require executives to comply with market-competitive stock ownership guidelines.   ✓  Require executives to hold net shares upon the exercise of stock options or vesting of stock until they achieve the relevant stock ownership guideline.   ✓  Maintain a policy prohibiting traditional perquisites of employment (as determined by our Board of Directors) for our employees, including our NEOs.   ✓  Maintain anti-hedging and anti-pledging policies prohibitingapplicable to our directors and employees, including our NEOs, from hedging or collateralizing their ownership positions in our stock.NEOs.   ✓  Maintain a claw-back policy that allows us to recover incentive payments based on financial results that are subsequently restated or in response to certain inappropriate actions on the part of our executives.   ✓  Provide for “double trigger” equity award vesting and severance benefits following a change in control.   ✓  Provide severance benefits through an Executive Severance Plan, consisting of cash equal to a multiple of base salary and target annual incentive, as well as continued health and welfare benefits, as described in the Executive Severance Plan.   ✓  Use an independent compensation consultant when designing and evaluating our executive compensation policies and programs.   ✓  Conduct an annual risk assessment to ensure that the company’s pay programs and practices do not create risks that are likely to have a material adverse impact on the company.   WHAT WE DON’T DO:   û  Maintain employment agreements with our executives, including our NEOs (other than agreements that are required or customary for executives outside of the U.S.).   û  Allow repricing of stock options without shareholder approval.   û  Provide tax “gross ups” to any of our executives, including our NEOs (except with respect to certain international assignment or relocation expenses, consistent with our policies and available on the same basis to all eligible employees).   û  Provide for “single trigger” equity award vesting or other “single trigger” payments or benefits upon a change in control. ELEMENTS OF 20162017 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 responsibility. Annual Incentive Plan (“AIP”)    ●   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 2016,2017, the AIP pool was funded based on Zoetis’ performance against revenue, adjusted diluted EPS and free cash metricflow goals.    ●   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 performance results in the context of other strategic and operational objectives.   28   ZOETIS 20172018 PROXY STATEMENT 27 EXECUTIVE COMPENSATION   ELEMENTS OF 20162017 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 2016,2017, stock options representedone-third of each NEO’s long-term incentive opportunity based on the grant date fair value of the awards.   ●   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 earlier terminations, such as retirement, death, change in control, etc., that are generally aligned with market practice).   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.   ●   Align NEO and shareholder interests, as NEOs will realize a higher value from RSUs from an increasing stock price.    ●   In 2016,2017, RSUs representedone-third of each NEO’s long-term incentive opportunity based on the grant date fair value of the awards.   ●   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 earlier terminations, such as retirement, death, change in control, etc., that are generally aligned with market practice).   ●   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.   ●   Align NEO and shareholder interests, as the value NEOs realize from their performance award units depends on the value of the shareholders’ investment relative to other investment opportunities over the same time period.    ●   In 2016,2017, the target number of performance award units representedone-third of each NEO’s long-term incentive opportunity based on the grant date fair value of the awards.   ●   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 earlier terminations, such as retirement, death, change in control, etc., that are generally aligned with market practice).   ●   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).     28   ZOETIS 20172018 PROXY STATEMENT 29 EXECUTIVE COMPENSATION   ELEMENTS OF 20162017 COMPENSATION (CONTINUED)         Element      Description and Purpose      Comments   Retirement      U.S. Savings Plan       (“(“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 IRC limitations.   ●   For 2016,2017, we made a profit sharing contribution of 4.5%4.0% of total cash pay (within IRC limitations) to all eligible U.S. employees. 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 AIP payment that is over the IRC 401(a)(17) limit and that is not matched by the company.    ●   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 (9 U.S. employees, including the NEOs) to defer the receipt of our company’s common stock upon vesting of RSUs and performance award units.   ●   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 Plan    ●   Severance benefits provided to NEOs and certain other executives (currently 12 employees, including the NEOs) upon an involuntary termination of employment without cause (whether before or after a change in control), or upon a “good reason” termination of employment upon or within 24 months following a change in control.    ● 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.   30   ZOETIS 20172018 PROXY STATEMENT 29 EXECUTIVE COMPENSATION   SAY ON PAY CONSIDERATION AND SHAREHOLDER OUTREACH At our 20162017 Annual Shareholder Meeting we held a shareholder advisory vote on the compensation of our NEOs in 20152016 (“say on pay”). Our shareholders overwhelmingly approved the compensation of our NEOs, with 98.5%97.6% 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 20162017 we continued to actively engage our shareholders through participation in numerous investor meetings and conferences. The majority of these meetings were attended by our CEO in person, with an emphasis on high-quality interactions with our shareholders and the broader investment community. 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 According 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 Directors;Directors in the first quarter of the year; and   ●   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 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 CONSULTANTSCONSULTANT The Committee retained Willis Towers Watson to serve as its executive compensation consultant in 2016.2017. 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 2016,2017, 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;   ●   Attending all 20162017 Committee meetings and communicating with the Committee Chair between meetings as necessary;   30   ZOETIS 20172018 PROXY STATEMENT 31 EXECUTIVE COMPENSATION     ●   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;   ●   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 Executive Compensation Tables. Management engaged Compensation Advisory Partners, LLC in 2016 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 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, to determine if any changes are necessary or appropriate. Because there are currently no other independent publicly-traded animal health companies of comparable size and complexity, 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. Upon completion As a result of thethis review and due to recent merger and acquisition activity among companies that had previously been identified as peers, the Committee decided notmade certain revisions to make any changes to the company’s compensation peer group as the Committee believes this group continuesfor 2018 in order to provide a robust number of peer companies and a good balance of companies across the various industries. Accordingly, Zoetis’The revised compensation peer group is comprised of the 1715 peer companies listed in the table below.   Agilent Technologies, Inc.     Mallinckrodt plc   Alexion Pharmaceuticals, Inc.           Mead Johnson Nutrition Company Becton, Dickinson and Company   Mettler-Toledo International Inc.   Biogen Inc.     Mylan N.V.   Bio-Rad Laboratories, Inc.     PerkinElmer, Inc.   Boston Scientific Corporation     Perrigo Company plc   Celgene Corporation           Quintiles IMS Holdings Inc.Stryker Corporation   C. R. Bard, Inc.Endo International plc     Zimmer Biomet Holdings, Inc.   Endo International plcIQVIA Holdings Inc.       Zoetis ranks in the 5947th percentile in revenue and 6771thst percentile in total market capitalization among the companies in ourthis revised peer group. This peer group will be used to guide the Committee in making 20172018 compensation decisions. In determining the elements of 20162017 compensation for our NEOs, we used the following benchmarks:   ●   Proxy statement data for the peer group as disclosed in each company’s prior year CD&A and Executive Compensation Tables.   ●   Survey data fromsimilarly-sized companies in life sciences and other industries for benchmarking purposes to ensure robust data. In particular, in certain cases we used data from the Willis Towers Watson Executive Compensation Survey for this purpose. 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. 32 ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATION ROLE OF MANAGEMENT IN COMPENSATION 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 2018 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. 20162017 COMPENSATION PROGRAM AND DECISIONS COMPENSATION 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 incentive 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 2016, 87%2017, 88% of the TTDC of our CEO was incentive-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, and Mr. Herendeen (who left the company in August 2016), on average 73%75% of TTDC was incentive-based pay. The table and chart below show the mix of TTDC for our NEOs for 2016.2017. 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 20162017 Summary Compensation Table (provided later in this proxy statement) in that the Summary Compensation Table reflects actual base salary and annual incentives earned during 20162017 (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. 20162017 NEO Compensation Structure*      Base Salary      Target Annual Incentive      Long-Term Incentive      Target Total Direct Compensation      Pay Mix    Base Salary        Target   Annual   Incentive        Long-Term   Incentive          Target Total   Direct   Compensation        Pay Mix NEO    Base Salary   Target Annual Incentive   Long- Term Incentive    Base   Salary        Target   Annual   Incentive        Long-   Term   Incentive   Juan Ramón Alaix      $   1,160,000          $   1,334,000          $   6,300,000              $8,794,000           13%     15%     72%      $     1,200,000                $     1,500,000                      $7,300,000                      $10,000,000                12%        15%        73%     Glenn C. David      $   585,000          $   409,500          $   1,100,000              $2,094,500           28%     19%     53%      $     600,000                $     480,000                      $1,400,000                      $  2,480,000                24%        19%        56%     Kristin C. Peck      $   640,000          $   448,000          $   1,350,000              $2,438,000           26%     19%     55%      $     660,000                $     528,000                      $1,400,000                      $  2,588,000                26%        20%        54%     Clinton A. Lewis, Jr.      $   640,000          $   448,000          $   1,200,000              $2,288,000           28%     20%     52%      $     660,000              $   528,000                    $1,400,000                      $  2,588,000                26%        20%        54%     Catherine A. Knupp      $   530,000          $   371,000          $   1,100,000              $2,001,000           26%     19%     55%      $     600,000                $     480,000                      $1,400,000                      $  2,480,000                24%        19%        56%     Paul S. Herendeen      $   750,000          $   675,000          $   2,000,000              $3,425,000           22%     20%     58%   * Amounts in this table are as of December 31, 2016, except for Mr. Herendeen’s amounts, which are as of his termination of employment date of August 18, 2016.2017     32   ZOETIS 20172018 PROXY STATEMENT 33 EXECUTIVE COMPENSATION   BASE 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 account 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 tookapproved increases to the following actions for our NEOs for 2016: ● Effective April 1, 2016, the Committee approved increases to the base salaries of Mr. Alaix, Ms. Peck, Mr. Lewis, Dr. Knupp and Mr. Herendeen. The new salaries are shownbase salaries and target incentives of Mr. Alaix, Mr. David, Ms. Peck, Mr. Lewis, and Dr. Knupp, effective April 1, 2017, as reflected in the section above entitled “Compensation Structure”. ● Effective August 19, 2016, the Board of Directors appointed Mr. David, Senior Vice President, Finance Operations, as the company’s new Executive Vice President and CFO upon Mr. Herendeen’s departure. Mr. David previously served as the company’s interim CFO in 2014, prior to the hiring of Mr. Paul Herendeen. The Committee approved a base salary for Mr. David of $585,000, effective August 19, 2016, to reflect his assumption of the CFO role and the accompanying increased level of responsibility. SPECIAL PAYMENTS In February 2016 (prior to his departure from the company), the Committee approved a one-time cash payment of $300,000 to Mr. Herendeen to recognize his work during the first quarter of 2016 in addressing the financial impact to Zoetis of the European Commission’s tax decision announced in January 2016. ANNUAL 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 20162017 was determined by the Committee based on the company’s attainment of the revenue, adjusted diluted EPS and free cash metric5flow goals (weighted 40%, 40% and 20%, respectively) approved by the Committee in the first quarter of the year.           5 The cash metric is defined as our adjusted net income plus depreciation, amortization and stock-based compensation within adjusted income, minus capital expenditures and certain one-time cash costs (after taxes), plus or minus foreign exchange impacts and changes in accounts receivable, inventories and accounts payable.   34   ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATIONBeginning in 2017, the AIP cash-based metric is free cash flow, defined as U.S. GAAP operating cash flow, minus capital expenditures (adjusted to exclude the impact of extraordinary,one-time events, if any). As free cash flow is a widely used capital management metric, this new definition of the cash-based metric was implemented to bring greater consistency to financial performance evaluation and foster increased transparency for employees and shareholders. TheseThe three measures (revenue, adjusted diluted EPS and free cash flow) were selected because:because they reflect the successful execution of our business strategy and support the achievement of the company’s annual operating plan, more specifically: ● They reflect the successful execution of our business strategy and support the achievement of the company’s annual operating plan; and   ●   Revenue and adjusted diluted EPS are measures that shareholders closely track in their analysis of our performance and the ● Free cash metricflow helps drive the efficient management of working capital and cash.discipline in capital expenditures The threshold, target and maximum performance levels for AIP pool funding for 20162017 were established by the Committee in early 2016.2017. ZOETIS 2018 PROXY STATEMENT 33 EXECUTIVE COMPENSATION COMPANY 20162017 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 impact of foreign exchange during 20162017 and are therefore different from our reported revenue, and adjusted diluted EPS and free cash flow results of $4.888 billion$5,307 million, $2.40 per share and $1.96 per share,$1,122 million, respectively. The impact of foreign exchange is excluded as it is not a direct measure of the company’s operating performance. These adjusted financial results for 2016 that exclude the impact of foreign exchange2017 led to above-target payouts under our AIP:   ●   Our revenue6Revenue, excluding the impact of $4.809 billionforeign exchange, was $5,251 million, 101% of the 20162017 revenue target established for the AIP of $4.758 billion.$5,201 million.   ●   Our adjustedAdjusted diluted EPS,6 excluding the impact of $1.92foreign exchange, was $2.38 per share and exceeded the 20162017 adjusted diluted EPS target established for the AIP of $1.74$2.34 per share.   ●   OurFree cash metric6 resultflow in 20162017, excluding the impact of foreign exchange, was $810$1,112 million, which was 122%116% of our 20162017 free cash metricflow target of $662$959 million. Given these results, the Committee approved an overallaggregate funding level of 128%118% of target for all employees eligiblepayment of awards under the AIP. The Committee believes this funding level recognizes Zoetis’ delivery of strong 20162017 financial performance while implementing significant changes to the business as a result of the Business Review.performance. The threshold, target and maximum performance levels for AIP pool funding, as well as the actual results for 2016,2017, are shown in the table 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 2016.2017. Payouts under the AIP program can range from 0% to 200% of the target level depending on actual performance. 34 ZOETIS 2018 PROXY STATEMENT EXECUTIVE COMPENSATION COMPLETION OF BUSINESS REVIEW In February 2018, the Committee approvedone-time cash payments of $300,000 each to Mr. Lewis, Ms. Peck and Dr. Knupp to recognize their contributions to the successful completion of the company’s Business Review. In addition, the Committee approved aone-time cash payment of $150,000 to Mr. David for his contribution to the Business Review since his appointment as Executive Vice President and CFO in August of 2016. In December 2016, Mr. David received a special equity-based award of $300,000 to recognize his contributions to the company’s Business Review prior to the time he was appointed Executive Vice President and CFO. PERFORMANCE AWARD UNITS Our performance award units awarded in 2015 used relative total shareholder return (“Relative TSR”) as the metric for assessing our performance for the three-year performance period ended December 31, 2017. 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 2018, the Committee certified that for the 2015-2017 performance cycle, our Relative TSR was at the 83rd percentile, ranking in the top 20% of the 454 companies remaining in the S&P 500 Group at December 31, 2017. Based on this Relative TSR achievement, in accordance with the vesting matrix established at the beginning of the performance period, each 2015-2017 performance award unit vested at 200% of the established target amount. ZOETIS 2018 PROXY STATEMENT 35 EXECUTIVE COMPENSATION CEO 20162017 PERFORMANCE In determining Mr. Alaix’ 20162017 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 2016 stock price growth and TSR.AIP. The Board of Directors and the Committee also considered Mr. Alaix’ other 20162017 achievements, including those summarized in the table below.   6 Excludes the impact of foreign exchange. ZOETIS 2017 PROXY STATEMENT 35 EXECUTIVE COMPENSATION CEO 20162017 Achievements          Leadership of the Business Review      We completedAs a result of the completion of the Business Review that was launched in 2015 and as a result:2015:   ●   We fully realized our Business Review’s goals of: (1) reducing complexity that does not add value for our customers or our business; (2) optimizing resource allocation and efficiency; and (3) better positioning Zoetis is on track to exceedfor long-term profitable growth. ●   We exceeded our aggressive target of $300 million in annual cost savings by the end of 2017.   ●     We completed the implementation of SAP as our Enterprise Resource Planning system. ●     We eliminated approximately 5,000 low-revenue/low-margin SKUs from our product portfolio and have sold or exited six manufacturing sites. ●     We made efficiency changes and simplified our commercial model in approximately 30 markets and re-sized our field forces where needed. ●     We analyzed and streamlined our R&D portfolio to focus on key early research areas, aligned with our species strategies. ●     We implemented cross-company policy changes, completed planned organizational changes and are on schedule with the transformation of our supply chain model.   Product Launches and Approvals      ●We launched Simparica® in the United States, Canada, Brazil, New Zealanddelivered on all of our key R&D milestones and the European Union, and licensed Simparica® in Australia.notably:   ●   In late December, Zoetis was granted a license by the U.S. Department of Agriculture (“USDA”) for CytopointTM, our atopic dermatitis treatment for dogs that neutralizes IL-31, a key protein that triggers canine itching, making ZoetisWe were the first company to receive a licenseapproval in the European Union for a veterinary use monoclonal antibody (mAb) therapy to help treatwith marketing authorization for Cytopoint, a mAb that helps reduce the clinical signs ofassociated with atopic dermatitis, such as itching, in dogs.   ●   We gained approvalsreceived approval of Suvaxyn PRRS MLV in the European Union (“EU”), a vaccine to protect pigs against porcine respiratory and reproductive syndrome, AlphaJect micro® PD vaccine in Norway, the UK and Ireland for Apoquel®, our targeted anti-itch therapythe control of pancreatic disease in farmed salmon, and Simparica in Japan, a once-monthly chewable formulation of sarolaner to treat skin allergiesfleas and ticks in dogs, in new important markets such as Japan and Brazil, and launched it in several other markets around the world.dogs.   ●   We expandeddelivered on a number of lifecycle innovations including: a chewable formula for Clavamox® (amoxicillin/clavulanic acid), a line of anti-infectives for dogs and cats in the U.S.; Stronghold Plus®, a line extension of our feline parasiticide product Stronghold® into the European Union; Rimadyl® chewable tablets in Singapore to treat chronic pain in dogs; Fostera® PRRS in Korea, a vaccine portfolio through product approvalsto protect against respiratory and launches, including:reproductive disease in pigs; and Cefaclear® in New Zealand to treat bacterial infections in livestock.   ¡     In Chile, our Pharmaq business launched Alpha Ject® Livac® SRS vaccine for salmon, the first attenuated live vaccine against Salmon Rickettsia Syndrome; ¡     We expanded our Vanguard® vaccine franchise with licenses granted by the USDA for a new Vanguard® B Oral vaccine and received approval for three new Vanguard® intranasal vaccines, making Zoetis the first and only manufacturer to offer oral, intranasal and injectable options for vaccinating dogs againstBordetella bronchiseptica; ¡     We were awarded a contract by the USDA to supply the National Veterinary Stockpile with our Avian Influenza Vaccine, H5N1, for use as an aid in preventing disease in chickens caused by avian influenza H5N1; and ¡     Approval of Rui Lan Wen, the second vaccine resulting from our joint venture in China, and the first combination vaccine in China to help protect pigs against certain locally prevalent illnesses.   Business Development and Strategic Alliances      In line with our goal of pursuing strategically aligned business development opportunities that enhance our product portfolio, strengthen our presence in emerging markets and help expand our complementary businesses such as Diagnostics, Genetics and Biodevices:   ●   We acquired Scandinavian Micro Biodevices,Nexvet, a developerbiologic therapeutics company developing a pipeline of mAb therapies for companion animals in pain and manufacturer of microfluidic “lab on a chip” diagnostic analyzers and tests for veterinary point-of-care services; andother therapeutic areas.   ●   We completed three aquatic health acquisitions in 2016.the acquisition of Nordland Sett Vaks AS, a company with vaccination biodevices and services for the aquaculture market.   ●   We completed a number of major research alliance deals, including a collaboration with Celgene Global Health to develop novel solutions to help control parasitic infestations in animals and people. Improvements in Manufacturing Quality, Cost and Reliable Supply We focused on improvements in manufacturing quality, cost and reliable supply initiatives: ●   We continued to execute our Plant Network Strategy initiatives in our efforts to reduce cost of goods sold. ●   We improved our demand forecast accuracy and successfully achieved our targets for reducing inventory on hand, as part of our efforts to improve working capital and cash flow. ●   We completed the purchase of a manufacturing site in Rathdrum, Ireland, enabling us to increase our capacity to produce active pharmaceutical ingredients that are used in many of our key products for companion animals and livestock.   Employee Engagement      We made great progressZoetis was again recognized in developing the culture of Zoetis – a culture that is based on our Core Beliefs – and engaging and retaining a high-performing workforce, evidenced by overall engagement results from our global employee survey of 85% and the recognition of Zoetis as one of the 100top 10 Working Mother’s Best Companies to work for, by Working Mother magazine andwas named a 20162017 Forbes BestMid-Sized Employer. employer, and was named as a top 150 company to work for in Brazil by Voce S/A magazine for the second time.   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’ 20162017 performance. ZET members provided their views on Mr. Alaix’ performance across various leadership dimensions, including strategic acumen and insightfulness, judgment and decision making, team and talent building, operational effectiveness, and reputation and external relationships. The 36 ZOETIS 2018 PROXY STATEMENT EXECUTIVE COMPENSATION results of this survey were considered by the Board of Directors in its assessment of Mr. Alaix’ 20162017 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 20162017 performance, the Committee recommended and the Board of Directors approved an annual incentive payout to Mr. Alaix of 130.1%120% of target ($1,720,000)1,750,000). 36 ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATION OTHER NEO 20162017 PERFORMANCE What follows are highlights of individual and 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’ AIP payouts for 2016.2017. In reviewing 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 2016.2017.   NEO     20162017 Achievements     Glenn C. David   Executive Vice President and Chief Financial Officer     As Senior Vice President of Finance Operations and since his appointment as Executive Vice President and Chief Financial Officer on August 19, 2016,CFO, Mr. David:   ●   Played a key roleSuccessfully completed the issuance of $1,250 million in the initiation and implementation of our Business Review, including the related organizational changes within the Finance organization and across Zoetis;debt.   ●   Led efforts to enhance and improve our internal controls;controls, financial reporting and SOX compliance.   ●   Seamlessly assumed his new responsibilities as he transitioned into the CFO roleImproved efficiency and established himself through positive interactions with internal and external stakeholders; andlowered operating costs of our global finance organization.   ●   Provided effective financial leadership that enabled the company to achieve its strong 20162017 financial results.     Kristin C. Peck   Executive Vice President and President of U.S. Operations     As Executive Vice President and President of U.S. Operations, Ms. Peck:   ●   Delivered above-market revenue, expanded operating margins and delivered strong income growth;growth. ●   Cemented recently launched products as clear market leaders with products such as Apoquel®, Cytopoint and Simparica.   ●   Developed and led several U.S.-wide initiatives to enhance the customer experience, including the introduction ofexperiences and make Zoetis a company that is easy to do business with: ¡  Launched a successful new customer loyaltyrewards program, the launch of new billingMy Zoetis Rewards, and customer service portals and the establishment of a new customer excellence team to ensure greater organizational capability in ¡  Streamlined key customer areas;journeys such as implementing24-hour online account setup for our customers and providing 24/7 access to statements and invoicing.   ●   Drove the organization changes in U.S. Operations associated with our Business ReviewLed successful design and delivered significant organizational efficienciesimplementation of Zoetis’ firstdirect-to-consumer advertising campaign for Apoquel and targeted cost savings.Simparica.     Clinton A. Lewis, Jr.   Executive Vice President and President of International Operations   As Executive Vice President and President of International Operations, Mr. Lewis:   ●   Achieved strong revenue and income growth, growing faster than the overall animal health market (excluding the impact of the SKU eliminationsglobally and the changes in our operating model resulting from our Business Review);each major regional segment.   ●   Drove the organizational changes in International Operations associated with our Business ReviewAchieved strong growth of key and delivered significant operational efficienciesnew products, including Apoquel, Simparica, PCV Combo and targeted cost savings; andStronghold Plus.   ●   Played a key role in facilitating the successful move of the International Operations headquarters from Brusselsplan to Dublin, with no disruption to the business or loss of key talent.expand our presence and capabilities (R&D and Manufacturing) in China.     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 achieved approval forgenerated more than 200 approvals worldwide for new products and enhanced products in 2016, including a number of high priority approvals such as CytopointTM and Vanguard® vaccines inenhancements to the U.S., Simparica® in the U.S., Canada, Brazil and Australia, the Rui Lan Wen vaccine in China and further geographic expansion or new claims for key brands such as Apoquel®, Draxxin®, Fostera® and Versican®;current portfolio.   ●   Drove enhancements toFor companion animals: ¡  In the company’s innovation capability, including identificationEU, received approval of new areasCytopoint, a monoclonal antibody that helps reduce the clinical signs associated with atopic dermatitis in dogs, and Stronghold Plus (selamectin/sarolaner) for external investment;the treatment of fleas, ticks, ear mites, lice and gastrointestinal worms and prevention of heartworm disease in cats. ¡  In the U.S., extended our Clavamox (amoxicillin/clavulanic acid) line of anti-infectives for dogs and cats with approval of a chewable formula.   ●   Led effortsFor livestock, received approval of Suvaxyn PRRS MLV in the EU to strengthenextend our position in China, including the implementation of programsSuvaxyn swine vaccine franchise to meet Chinese regulatory requirements, geographic expansion of key brandshelp protect pigs against porcine respiratory and the establishment of our research laboratory in Beijing.reproductive syndrome.       ZOETIS 20172018 PROXY STATEMENT   37 EXECUTIVE COMPENSATION   NEO AIP DECISIONS In February 2017,2018, 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 NEO for 2016.2017. The NEOs’ 20162017 annual incentive awards were based on:   ●   The financial performance of Zoetis (measured against targets for revenue, adjusted diluted EPS and afree cash metric)flow);   ●   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’sNEO’s individual performance relative to each executive’s performance objectives (indicated above), including an assessment of whether such performance objectives were achieved in alignment with our Core Beliefs, which define the values and behaviors that we expect all Zoetis employees, including our NEOs, to exhibit in carrying out their responsibilities. The 20162017 AIP target amounts are prorated to reflect base salary increases received during the year (except in the case of Mr. David, whose 2016 AIP target amount reflects the full year effect of his August 19, 2016 salary increase related to his appointment as Executive Vice President and CFO).year. The 20162017 AIP awards for our NEOs reflecting the Committee’s assessment of their performance in 20162017 (and, in the case of our CEO, the Board of Director’sDirectors’ assessment of his performance in 2016)2017) are shown in the table below.     NEO*     AIP Target   Amount          AIP Award     % of     Target         AIP Award   Paid         Juan Ramón Alaix     $   1,322,500            130.1%       $   1,720,000           Glenn C. David   $   409,500            128.6%       $   526,676           Kristin C. Peck   $   445,463            127.7%       $   568,856           Clinton A. Lewis, Jr.   $   441,038            129.5%       $   571,303           Catherine A. Knupp   $   367,519            129.2%       $   474,940         * Mr. Herendeen was not eligible for an AIP award for 2016 due to his termination of employment on August 18, 2016.   NEO     AIP Target   Amount          AIP Award     % of     Target          AIP Award   Paid           Juan Ramón Alaix     $   1,458,500            120.0%        $   1,750,000             Glenn C. David     $   462,375            119.0%        $   550,041             Kristin C. Peck     $   508,000            118.0%        $   599,440             Clinton A. Lewis, Jr.     $   508,000            119.5%        $   607,060               Catherine A. Knupp   $   452,750            118.0%        $     534,245             LONG-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.   38 ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATION   In 2016,2017, long-term incentive valuesawards were delivered to the NEOs, other ZET members and approximately 170180 other senior leaders generally through a mix ofone-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 20162017 supports ourpay-for-performance objective by tying executive awards to shareholder value accretion. Long-term incentive valuesawards were delivered to other eligible Zoetis employees generally through RSUs.         38 ZOETIS 2018 PROXY STATEMENT EXECUTIVE COMPENSATION LTI awards vest in full on the third anniversary of the date of grant, assuming 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 “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.Group. For all LTI awards, earlier vesting may occur in connection with certain termination conditions, such as retirement, death, disability, restructuring, change in control, etc., that are generally aligned with market practice. The three forms of LTI awards granted to our senior leaders, including the NEOs, are described below.     Stock Options   Objectives   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 term   ●   Retain executive talent, since executives generally must remain with the company for three years following the date of the grant before they can exercise the stock options (with exceptions for certain terminations of employment), and the options have aten-year term from the date of the grant       Restricted Stock Units   Objectives   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 period   ●   Retain executive talent   ●   Encourage stock ownership by delivering shares upon settlement     ZOETIS 2017 PROXY STATEMENT 39 EXECUTIVE COMPENSATION     Performance Award Units   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 over the performance period relative to the S&P 500 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.   ●   Align the interests of executives with those of shareholders over the performance vesting period   ●   Retain executive talent, as performance awards provide an opportunity for higher rewards when the company’s total shareholder return results exceed the median of the S&P 500 Group   ●   Encourage stock ownership by delivering shares upon settlement in accordance with the company’s relative total shareholder return results   The performance award unit vesting schedule is as follows:   If the company’s total shareholder returnTSR for the 2016-20182017-2019 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 2018 PROXY STATEMENT 39 EXECUTIVE COMPENSATION NEO LTI DECISIONS 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. Although it is infrequent, NEOs may receive interim awards in certain extraordinary situations. Mr. David received such an award valued at $550,000 on August 22, 2016 (delivered as a mix of 50% stock options and 50% RSUs), to recognize his appointment to the position of Executive Vice President and CFO. Mr. David also received an equity-based award valued at $300,000 on December 6, 2016 (delivered as a mix of 50% stock options and 50% RSUs), to recognize his contributions to our Business Review prior to the time he was appointed as Executive Vice President and CFO. The following table sets forth the long-term incentive awards delivered to our NEOs in 2016.2017. In determining the number of shares underlying each applicable award, the value of RSUs is divided by the grant date closing price of Zoetis common shares, the option value is divided by the Zoetis Black-Scholes value as of the grant date and the performance award unit value is divided by the Zoetis Monte Carlo simulation value as of the grant date (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      $   6,300,000               $   2,100,000          $   2,100,000          $   2,100,000                   187,667              50,203          41,832     Glenn C. David      $   1,125,000               $   516,667          $   516,667          $   91,667                   40,636              10,544            1,826     Kristin C. Peck      $   1,350,000               $   450,000          $   450,000          $   450,000                   40,214              10,757            8,964     Clinton A. Lewis, Jr.      $   1,200,000               $   400,000          $   400,000          $   400,000                   35,746              9,562            7,968     Catherine A. Knupp      $   1,100,000               $   366,667          $   366,667          $   366,667                   32,767              8,765            7,304     Paul S. Herendeen*    $ 2,000,000           $ 666,667      $ 666,667      $ 666,667             59,577        15,937      13,280 * Each award granted to Mr. Herendeen was forfeited upon his termination of employment.   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   $   7,300,000          $   2,433,333     $   2,433,333     $   2,433,333             170,163         44,226     32,758     Glenn C. David   $   1,400,000          $   466,667     $   466,667     $   466,667             32,634         8,481       6,282     Kristin C. Peck   $   1,400,000          $   466,667     $   466,667     $   466,667             32,634         8,481       6,282     Clinton A. Lewis, Jr.   $   1,400,000          $   466,667     $   466,667     $   466,667             32,634         8,481       6,282     Catherine A. Knupp   $   1,400,000          $   466,667     $   466,667     $   466,667             32,634         8,481       6,282 RETIREMENT 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 40 ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATION sharingprofit-sharing amount of up to 8% of each eligible employee’s pay (subject to IRC limitations). For 2016,2017, we contributed 4.5%4.0% of each eligible employee’s pay (including the NEOs) as a profit sharing contribution. To the extent the IRC 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 IRC limitations on the amount of compensation that may be taken into account under atax-qualified plan ($265,000270,000 for 2016)2017). 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 IRC 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. 40 ZOETIS 2018 PROXY STATEMENT EXECUTIVE COMPENSATION SEVERANCE The Zoetis Executive Severance Plan covers our NEOs, ZET members and certain other executives (currently 12 employees). We do not maintain individual employment agreements with our 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 causeCause75) that is not in connection with a change in controlChange of Control75, 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”75 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 shown below.         Severance     (Base Salary)        Continued    Health and    Life Insurance    (at active    employee cost)       Annual      Incentive        Non-Change inof Control Severance:              CEO      18 months           12 months           1.5x target          Other Participants      12 months           12 months           1x target          Change inof Control Severance:              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. PERQUISITES 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 provided to Mr. Lewis in connection with his international assignment and relocation to Ireland in 2016 are included in the Summary Compensation Table under the heading “All Other Compensation”. 7 “Cause”, “change in control” and “good reason” are as defined in the Zoetis Executive Severance Plan. ZOETIS 2017 PROXY STATEMENT 41 EXECUTIVE COMPENSATION CORPORATE GOVERNANCE POLICIES STOCK OWNERSHIP REQUIREMENTS Our stock 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 assessing compliance with the guidelines, we count stock held outright, unvested restricted stock or RSUs, unvested performance award units and stock held in benefit plans. Our stock ownership guidelines are as follows:   ●   Mr. Alaix: 5 times base salary   ●   All other ZET members, including our NEOs: 3 times base salary A Zoetis executive must achieve the guidelines before he or she can sell any stock acquired upon the exercise of options or the vesting of other awards, other than stock 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 stock ownership 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 stock ownership requirements. As of the last annual measurement date, all our NEOs have met the stock ownership requirements except for Mr. David, who first became subject to the requirements upon his appointment as CFO in August 2016.requirements. 5 “Cause”, “Change of Control” and “Good Reason” are as defined in the Zoetis Executive Severance Plan. ZOETIS 2018 PROXY STATEMENT 41 EXECUTIVE COMPENSATION ANTI-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 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. At the beginning of 2017,Additionally, our claw-back policy was expanded to includeincludes 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 2016,2017, 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 by Willis Towers Watson, the Committee’s independent executive compensation consultant, the Committee considered the following:   ●   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; 42 ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATION   ●   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. Based on its evaluation in 2016,2017, 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 IRC generally disallowshas historically disallowed a federal income tax deduction to public companies for compensation greater than $1 million paid in any tax year to specifiedcovered executive officers unless the compensation ismeets the requirements of the “qualified performance-based compensation” exemption under that section. As discussed Certain 42 ZOETIS 2018 PROXY STATEMENT EXECUTIVE COMPENSATION below, recent legislation has eliminated the “qualified performance-based compensation” exemption for tax years after 2017. As a general matter, while the Committee considers tax deductibility as one of several relevant factors in determining compensation, it retains the flexibility to design and maintain executive compensation arrangements that it believes will attract and retain executive talent, even if such compensation is not deductible by the company for federal income tax purposes. In 2017 and in prior years, certain of our compensation and benefit plans arewere designed to permit us to grant awards that maycould qualify asfor the “qualified performance-based compensation”; exemption; however, as noted above, this exemption was eliminated by recent tax legislation, effective for taxable years beginning after December 31, 2017. The legislation also expanded the group of executives covered by Section 162(m). Therefore, we expect that compensation paid to our covered executive officers in excess of $1 million in 2018 and later tax years will not be deductible by the company unless it is possiblequalifies for limited transition relief that applies to certain arrangements in place as of November 2, 2017. Because of uncertainties in the application and interpretation of Section 162(m), and the absence at this juncture of regulatory guidance on the scope of the transition relief, no assurance can be given that awards paid in 2018 and later years that were 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, althoughor that were otherwise expected to be deductible prior to the Committee may take action intended to limit the impact of Section 162(m) of the IRC, it also believes that therecent tax deduction is only one of several relevant considerationslegislation, will in setting compensation.fact be deductible. The Committee believes that the tax deduction limitation imposed by Section 162(m) should not be permitted to compromise the ability to design and maintain executive compensation arrangements that will attract and retain executive talent. Accordingly, achieving the desired flexibility in the design and delivery of compensation may result in compensation that in certain cases is not deductible for federal income tax purposes.     ZOETIS 20172018 PROXY STATEMENT   43 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 Sanjay Khosla Gregory Norden Louise M. Parent   44   ZOETIS 20172018 PROXY STATEMENT EXECUTIVE COMPENSATION   EXECUTIVE COMPENSATION TABLES 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, 2017, 2016 2015 and 2014,2015, including salary earned, annual incentive plan awards, the aggregate grant date fair value of equity-based incentive awards granted to our NEOs and all other compensation paid to our NEOs.   2. 20162017 Grants of Plan-Based Awards Table. The 20162017 Grants of Plan-Based Awards Table summarizes all grants of plan-based awards made to our NEOs during the fiscal year ended December 31, 2016.2017.   3. Outstanding Equity Awards at 20162017 FiscalYear-End Table. The Outstanding Equity Awards at 20162017 FiscalYear-End Table summarizes the outstanding equity-based incentive awards held by our NEOs as of December 31, 2016.2017.   4. 20162017 Option Exercises and Stock Vested Table. The 20162017 Option Exercises and Stock Vested Table summarizes our NEOs’ option exercises and equity-based award vesting during the fiscal year ended December 31, 2016.2017.   5. 2016 2017Non-Qualified Deferred Compensation Table. The 2016 2017Non-Qualified Deferred Compensation Table summarizes the activity during 20162017 and account balances under our Supplemental Savings Plan as of December 31, 2016.2017.   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, 2016.2017.     ZOETIS 20172018 PROXY STATEMENT   45 EXECUTIVE COMPENSATION   SUMMARY COMPENSATION TABLE   Name   Year   Salary ($)   Bonus ($)   Stock Awards(1) ($)   Option Awards(2) ($)      Non-Equity Incentive Plan Compensation(3) ($)    All Other Compensation(4) ($)   Total ($)     Year   Salary ($)   Bonus ($)   Stock Awards(1) ($)   Option Awards(2) ($)      Non-Equity Incentive Plan Compensation(3) ($)    All Other Compensation(4) ($)   Total ($)             Juan Ramón Alaix       2016             1,150,000                  —         4,199,957             2,099,994          1,720,000      296,675         9,466,626             2017             1,190,000                —       4,866,579             2,433,331          1,750,000         288,859         10,528,769       Chief Executive Officer       2015             1,115,000                  —         3,733,253             1,866,663          1,705,393      261,878         8,682,187             2016             1,150,000                —       4,199,957             2,099,994          1,720,000         296,675         9,466,626             2015             1,115,000                —       3,733,253             1,866,663          1,705,393         261,878         8,682,187             2014             1,050,000                  —         2,499,989             2,499,993          1,375,700      211,044         7,636,726                 Glenn C. David       2016             483,030                  —         608,223             516,651             526,676         73,526         2,208,106             2017             596,250         150,000(5)         933,252             466,666             550,041         101,388         2,797,597       Executive Vice President and       2015             410,500           75,000           179,943             89,999             291,000         64,145         1,110,587             2016             483,030                —       608,223             516,651             526,676           73,526         2,208,106       Chief Financial Officer       2014             361,126           75,000           281,195             131,244             225,000         51,623         1,125,188             2015             410,500              75,000           179,943             89,999             291,000           64,145         1,110,587                 Kristin C. Peck       2016             636,375                  —         899,958             449,995             568,856      119,499         2,674,683             2017             655,000         300,000(5)         933,252             466,666             599,440         112,245         3,066,603       Executive Vice President and       2015             625,500                  —         866,622             433,330             582,341      112,886         2,620,679             2016             636,375                —       899,958             449,995             568,856         119,499         2,674,683       President of U.S. Operations       2014             620,375                  —         629,971             629,995             490,717         96,847         2,467,905             2015             625,500                —       866,622             433,330             582,341         112,886         2,620,679                 Clinton A. Lewis, Jr.       2016             630,054                  —         799,972             399,998             571,303      966,604         3,367,931             2017             655,000         300,000(5)         933,252             466,666             607,060      1,485,268         4,447,246       Executive Vice President and       2015             558,943                  —         666,639             333,330             512,587      277,016         2,348,515             2016             630,054                —       799,972             399,998             571,303         966,604         3,367,931       President of International Operations       2014             451,375                  —         374,974             374,996             352,073         67,575         1,620,993             2015             558,943                —       666,639             333,330             512,587         277,016         2,348,515                 Catherine A. Knupp       2016             525,027                  —         733,301             366,663             474,940         93,299         2,193,230             2017             582,500         300,000(5)           933,252                 466,666             534,245           99,895         2,916,558       Executive Vice President and       2015             499,625                  —         666,639             333,330             453,923         88,850         2,042,367             2016             525,027                —       733,301             366,663             474,940           93,299         2,193,230       President of R&D       2014             451,375                  —         374,974             374,996             352,073         67,278         1,620,696             2015             499,625                —       666,639             333,330             453,923           88,850         2,042,367       Paul S. Herendeen       2016   (5)          445,962         300,000           1,333,301             666,667                      —       103,072         2,849,002       Former Executive Vice President       2015   (5)          630,000                  —         1,199,956             599,990             595,350         82,638         3,107,934       and Chief Financial Officer       2014   (5)          207,614                  —         437,468             437,495             167,130         18,686       1,268,393     (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 by Zoetis in 2017, 2016 and 2015, and the aggregate grant date fair values for the RSUs granted by Zoetis in 2014, determined in accordance with FASB ACSASC Topic 718 based on the assumptions and methodologies set forth in Note 14 to Zoetis’ 20162017 Annual Report on Form10-K, filed with the SEC on February 16, 201715, 2018 (the “2016“201710-K”). Further information regarding the 20162017 awards is included in the 20162017 Grants of Plan-Based Awards Table and the Outstanding Equity Awards at 20162017 FiscalYear-End Table. With respect to the performance award units granted by Zoetis in 2017, 2016 and 2015, the amounts included in the “Stock Award”Awards” column of the Summary Compensation Table above represent the target payout at the grant date based upon the probable outcome of the performance conditions. The table below shows the amount of the target payout value at the grant date and the maximum value at the grant date assuming that the highest performance conditions would be achieved for each of the performance award units granted in 2016 and 2015.2017.      Performance Award Unit Grants in 2015      Performance Award Unit Grants in 2016      Performance Award Unit Grants in 2017 Name    Grant Date Target Payout $      Maximum Value at Grant Date $      Grant Date Target Payout $      Maximum Value at Grant Date $      Grant Date Target Payout ($)      Maximum Value at Grant Date ($)     Juan Ramón Alaix        1,866,608                  3,733,216              2,099,966                  4,199,932              2,433,264              4,866,528       Glenn C. David        89,975                  179,950              91,665                  183,330              466,627                 933,254       Kristin C. Peck        433,330                  866,660              449,993                  899,986              466,627                 933,254       Clinton A. Lewis, Jr.        333,316                  666,632              399,994                  799,988              466,627                 933,254       Catherine A. Knupp        333,316                  666,632              366,661                  733,322              466,627                 933,254   Paul S. Herendeen*        599,956                  1,199,912              666,656                  1,333,312         * All of Mr. Herendeen’s performance award units were forfeited upon his termination of employment on August 18, 2016.   (2) The amounts shown in the “Option Awards” column represents the aggregate grant date fair values of long-term incentive awards granted to the NEOs by Zoetis in 2017, 2016 2015 and 2014,2015, determined in accordance with FASB ACSASC Topic 718 based on the assumptions and methodologies set forth in Note 14 to the 2016201710-K. Further information regarding the 20162017 awards is included in the 20162017 Grants of Plan-Based Awards Table and the Outstanding Equity Awards at 20162017 FiscalYear-End Table.   (3) The amounts shown in the“Non-Equity Incentive Plan Compensation” column represent annual cash incentive awards earned by the NEOs under the Zoetis Annual Incentive Plan for 2017, 2016 2015 and 2014.2015.   46   ZOETIS 20172018 PROXY STATEMENT EXECUTIVE COMPENSATION     (4) The following table sets forth the component amounts presented in the “All Other Compensation” column above for the year ended December 31, 2016:2017:   Name    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 ($)    Company      Contributions      Under the Zoetis      Savings Plan      (i) ($)         Company      Contributions      Under the Zoetis      Supplemental      Savings Plan      (ii) ($)         International Assignment (iii) ($)      Other (iv) ($)      All Other      Compensation      ($)            Juan Ramón Alaix    10,600      256,317          —                29,758          296,675      10,800           248,331               —                   29,728              288,859              Glenn C. David    25,175        47,289          —                1,062            73,526      23,400             76,737               —                   1,251              101,388              Kristin C. Peck    25,175        89,667          —                4,657          119,499      24,300             85,813               —                   2,132              112,245              Clinton A. Lewis, Jr.    25,175        82,435          856,481                2,513          966,604      24,300             86,033               1,371,864                   3,071           1,485,268              Catherine A. Knupp    25,175        63,873          —                4,251            93,299      24,300             70,749               —                   4,846                99,895        Paul S. Herendeen    25,175        74,024          —                3,873          103,072       (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 Internal Revenue Code of 1986, as amended (“IRC”). The company contribution to the ZSP for Mr. Alaix isand Mr. David are lower than that of the other NEOs as hebecause they reached the IRC § 415 limitlimits for contributions to the ZSP.     (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 20162017Non-Qualified Deferred Compensation Table.     (iii) In connection with his role of President of International Operations, Mr. Lewis was on assignment in Belgium from July 1, 2015 until May 30, 2016 and thereafter onIreland throughout 2017. This assignment in Ireland. These assignments werewas at the company’s request and Mr. Lewis received benefits in line with those that are generally available to all Zoetis employees serving in international assignments. In 20162017 these benefits included $235,616$184,101 for housing and living costs, $60,600$87,383 for home-finding and relocation services for his move from Belgium toin Ireland, $22,167$20,600 for education for his children residing with him and taxes of $538,098$1,079,780 paid by the company for benefits related to his assignment.     (iv) The amounts shown in this column include the imputed income related to Zoetis’ group term life insurance coverage in excess of $50,000.   (5) Mr. Herendeen’s 2016 salary amount inThese NEOs were awarded aone-time cash payment to recognize their contributions to the table above reflects compensation through his terminationsuccessful completion of employment date of August 18, 2016 and Mr. Herendeen’s 2014 salary reflects partial year cash compensation beginning on his date of hire on September 2, 2014. Mr. Herendeen forfeited all Stock Awards and Option Awards granted in 2014, 2015 and 2016, on his termination of employment date of August 18, 2016.the company’s Business Review.     ZOETIS 20172018 PROXY STATEMENT   47 EXECUTIVE COMPENSATION   20162017 GRANTS OF PLAN-BASED AWARDS TABLE The following table provides additional information aboutnon-equity incentive awards and equity incentive awards granted to our NEOs during the fiscal year ended December 31, 2016.2017. All stock options, RSUs and performance award units granted to our NEOs in 20162017 were granted under the 2013 Equity and Incentive Plan and the applicable award agreements. See the discussion under the heading “Long-Term Incentives” in the CD&A for further information about these stock options, RSUs and performance award units.           Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(1)   Estimated Future Payouts Under Equity Incentive Plan Awards(2)   All Other Stock Awards: Number of Shares of Stock or Units (#)     All Other Option Awards: Number of Securities Underlying Options (#)     Exercise or Base Price of Option Awards(3) ($/Sh)     Grant Date Fair Value of Stock and Option Awards(4) ($)           Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(1)   Estimated Future Payouts Under Equity Incentive Plan Awards(2)   All Other Stock Awards: Number of Shares of Stock or Units (#)     All Other Option Awards: Number of Securities Underlying Options (#)     Exercise or Base Price of Option Awards(3) ($/Sh)     Grant Date Fair Value of Stock and Option 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               1,322,500       2,645,000                                 Annual Incentive       0               1,458,500       2,917,000                       Stock Options (5)     2/14/2017                     170,163        55.02         2,433,331         Restricted Stock Units (5)     2/14/2017                   44,226            2,433,315     Stock Options (5)     2/19/2016                     187,667        41.83         2,099,994         Restricted Stock Units (5)     2/19/2016                   50,203            2,099,991     Performance Award Units (6)         2/14/2017                   0                     32,758             65,516                    2,433,264         Performance Award Units (6)         2/19/2016                   0                     41,832             83,664                    2,099,966           Glenn C. David   Annual Incentive       0               409,500       819,000                   Annual Incentive       0               462,375       924,750                   Stock Options (5)     2/19/2016                     8,191        41.83         91,657         Restricted Stock Units (5)     2/19/2016                   2,191            91,650     Stock Options (5)     2/14/2017                     32,634        55.02         466,666     Performance Award Units (6)     2/19/2016             0               1,826       3,652              91,665         Stock Options (5)     8/22/2016                     21,301        51.23         274,996     Restricted Stock Units (5)     2/14/2017                   8,481            466,625     Restricted Stock Units (5)     8/22/2016                   5,367            274,951         Stock Options (5)     12/6/2016                     11,144        50.22         149,998     Performance Award Units (6)          2/14/2017                   0                     6,282             12,564                    466,627         Restricted Stock Units (5)         12/6/2016                         2,986                  149,957           Kristin C. Peck   Annual Incentive       0               445,463       890,926                   Annual Incentive       0               508,000       1,016,000                   Stock Options (5)     2/19/2016                     40,214        41.83         449,995         Restricted Stock Units (5)     2/19/2016                   10,757            449,965     Stock Options (5)     2/14/2017                     32,634        55.02         466,666     Performance Award Units (6)     2/19/2016             0               8,964       17,928              449,993         Restricted Stock Units (5)     2/14/2017                   8,481            466,625         Performance Award Units (6)         2/14/2017                   0                     6,282             12,564                    466,627           Clinton A. Lewis, Jr.   Annual Incentive       0               441,038       882,076                   Annual Incentive       0               508,000       1,016,000                       Stock Options (5)     2/14/2017                     32,634        55.02         466,666         Restricted Stock Units (5)     2/14/2017                   8,481            466,625     Stock Options (5)     2/19/2016                     35,746        41.83         399,998         Restricted Stock Units (5)     2/19/2016                   9,562            399,978     Performance Award Units (6)         2/14/2017                   0                     6,282             12,564                    466,627         Performance Award Units (6)         2/19/2016                   0                     7,968             15,936                    399,994           Catherine A. Knupp   Annual Incentive       0               367,519       735,038                   Annual Incentive       0               452,750       905,500                   Stock Options (5)     2/19/2016                     32,767        41.83         366,663         Restricted Stock Units (5)     2/19/2016                   8,765            366,640     Stock Options (5)     2/14/2017                     32,634        55.02         466,666     Performance Award Units (6)     2/19/2016             0               7,304       14,608              366,661       Paul S. Herendeen   Annual Incentive       0               369,866       739,732                   Stock Options (5)     2/19/2016                     59,577        41.83         666,667     Restricted Stock Units (5)     2/14/2017                   8,481            466,625     Restricted Stock Units (5)     2/19/2016                   15,937            666,645         Performance Award Units (6)         2/19/2016                         0                     13,280             26,560                          666,656         Performance Award Units (6)          2/14/2017                         0                     6,282             12,564                          466,627         (1) These amounts represent the threshold, target and maximumnon-equity incentive plan awards under the Zoetis Annual Incentive Plan for 2016.2017.   (2) These amounts represent the threshold, target and maximum share payouts under our performance award unit program for the performance period beginning January 1, 20162017 and ending December 31, 2018.2019. The payment for threshold performance is 0%, the. The target payout is equal to 100% of the granted units and represents the number of performance award units that may be earned for achieving the target level of the performance goal and thegoal. The maximum payout is 200% of the target number of performance award units and represents the number of performance award units that may be earned for achieving the maximum level of the performance goal. Dividend equivalent units are accrued through the payout date and increase the target number of performance award units.   (3) The exercise price of the stock options is the closing price of the company’s stock on the grant date.   (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 14 to the 2016201710-K. The stock options are shown using a Black-Scholes value of $11.19, $12.91 and $13.46$14.30 on the grant dates of February 19, 2016, August 22, 2016 and December 6, 2016, respectively. Thedate, the RSUs 48 ZOETIS 2017 PROXY STATEMENT EXECUTIVE COMPENSATION are shown using the company’s grant date closing stock price of $41.83, $51.23$55.02, and $50.22 on February 19, 2016, August 22, 2016 and December 6, 2016, respectively. Thethe performance award units are shown using a Monte Carlo simulation model value of $50.20 as of$74.28 on the grant date of February 19, 2016.date. For each NEO, the target grant date values of the stock option, RSU and performance award unit grants were intended to be equally weighted; however, there are slight differences in value due to rounding down upon the conversion from dollar values to a whole number of options or units using the grant date values.   (5) These Zoetis stock option and RSU awards are subject to three-year cliff vesting and vest 100% on the third anniversary of the grant date.   (6) These performance award units are subject to three-year cliff vesting and are earned based on achievement of a performance goal measured over a three-year performance period beginning January 1, 20162017 and ending December 31, 2018.2019. The performance goal is based on the company’s TSR results as compared to the TSR results of the companies comprising the S&P 500 Group. The number of shares paid under these performance award units, if any, ranges from 0% to 200% of the target number of shares (including accrued dividend equivalent units) and depends upon the extent to which the performance goal is achieved, as determined by the Committee after the end of the performance period.   48   ZOETIS 20172018 PROXY STATEMENT 49 EXECUTIVE COMPENSATION   OUTSTANDING EQUITY AWARDS AT 20162017 FISCALYEAR-END TABLE The following table summarizes the Zoetis equity-based long-term incentive awards made to our NEOs that were outstanding as of December 31, 2016.2017.     Option Awards   Stock Awards     Option Awards   Stock Awards   Name(1)        Grant Date        Number of Securities Underlying Unexercised Options Exercisable (#)   Number of Securities Underlying Unexercised Options Unexercisable (#)   Option Exercise Price ($)   Option Expiration Date   Number of Shares or Units of Stock That Have Not Vested(2) (#)        Market Value of Shares or Units of Stock That Have Not Vested(3) ($)   Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested(2) (#)        Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) ($)          Grant Date        Number of Securities Underlying Unexercised Options Exercisable (#)   Number of Securities Underlying Unexercised Options Unexercisable (#)(1)   Option Exercise Price ($)   Option Expiration Date   Number of Shares or Units of Stock That Have Not Vested (#)(1)(2)   Market Value of Shares or Units of Stock That Have Not Vested ($)(3)   Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)(2)(4)        Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3)             Juan Ramón Alaix(7)     1/31/2013     285,306     —       26.00 (5)      1/31/2023       —         —             1/31/2013     285,306       26.00 (5)      1/31/2023                             3/4/2014     312,109       30.89       3/3/2024                             2/27/2015         159,954       46.09       2/26/2025       101,702 (6)        7,326,612                       3/4/2014         312,109 (4)      30.89       3/3/2024       82,701 (4)        4,426,985             2/19/2016         187,667       41.83       2/18/2026       50,864         3,664,243       42,383         3,053,271       2/27/2015         159,954 (4)      46.09       2/26/2025       41,050 (4)        2,197,407       29,965 (6)        1,604,026                 2/19/2016           187,667 (4)      41.83       2/18/2026       50,503 (4)          2,703,426       42,082 (6)          2,252,649       2/14/2017             170,163             55.02             2/13/2027             44,456               3,202,610             32,928               2,372,133           Total     285,306     659,730           174,254         9,327,818       72,047         3,856,675             Glenn C. David     3/4/2014         16,385 (4)      30.89       3/3/2024       4,341 (4)        232,374             3/4/2014     16,385       30.89       3/3/2024                   9/2/2014         —       —       —       4,300 (4)        230,179                       2/27/2015         7,712 (4)      46.09       2/26/2025       1,979 (4)        105,936       1,444 (6)        77,297       2/27/2015             7,712       46.09       2/26/2025       4,903 (6)        353,212             2/19/2016         8,191 (4)      41.83       2/18/2026       2,204 (4)        117,980       1,837 (6)        98,335                 8/22/2016         21,301 (4)      51.23       8/21/2026       5,377 (4)        287,831             2/19/2016             8,191       41.83       2/18/2026       2,220         159,929       1,850         133,274       12/6/2016           11,144 (4)      50.22       12/5/2026       2,986 (4)          159,841                             Total     —     64,733           21,187         1,134,141       3,281         175,632       8/22/2016           21,301       51.23       8/21/2026       5,416         390,169                       12/6/2016           11,144       50.22       12/5/2026       3,007         216,624                       2/14/2017               32,634             55.02             2/13/2027             8,525               614,141             6,315               454,933                 Kristin C. Peck(7)     1/31/2013     79,885     —       26.00 (5)      1/31/2023       —         —             1/31/2013     79,885       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       23,609 (6)        1,700,792                       3/4/2014         78,651 (4)      30.89       3/3/2024       20,840 (4)        1,115,565             2/19/2016           40,214       41.83       2/18/2026       10,899         785,164       9,082         654,267       2/27/2015         37,132 (4)      46.09       2/26/2025       9,529 (4)        510,087       6,956 (6)        372,355                 2/19/2016           40,214 (4)      41.83       2/18/2026       10,821 (4)          579,248       9,017 (6)          482,680       2/14/2017               32,634             55.02             2/13/2027             8,525               614,141             6,315               454,933           Total     79,885     155,997           41,190         2,204,900       15,973         855,035             Clinton A. Lewis, Jr.(7)     1/31/2013     42,796     —       26.00 (5)      1/31/2023       —         —             1/31/2013     42,796       26.00 (5)      1/31/2023                   3/4/2014         46,816 (4)      30.89       3/3/2024       12,404 (4)        663,986                       2/27/2015         28,563 (4)      46.09       2/26/2025       7,330 (4)        392,375       5,351 (6)        286,439       3/4/2014     46,816       30.89       3/3/2024                   2/19/2016           35,746 (4)      41.83       2/18/2026       9,619 (4)          514,905       8,016 (6)          429,096                 Total     42,796     111,125           29,353         1,571,266       13,367         715,535       2/27/2015           28,563       46.09       2/26/2025       18,161 (6)        1,308,318                       2/19/2016           35,746       41.83       2/18/2026       9,688         697,924       8,073         581,579                 2/14/2017               32,634             55.02             2/13/2027             8,525               614,141             6,315               454,933                 Catherine A. Knupp(7)     1/31/2013     42,796     —       26.00 (5)      1/31/2023       —         —             1/31/2013     42,796       26.00 (5)      1/31/2023                   3/4/2014         46,816 (4)      30.89       3/3/2024       12,404 (4)        663,986                       2/27/2015         28,563 (4)      46.09       2/26/2025       7,330 (4)        392,375       5,351 (6)        286,439       3/4/2014     46,816       30.89       3/3/2024                   2/19/2016           32,767 (4)      41.83       2/18/2026       8,817 (4)          471,974       7,348 (6)          393,338                   Total       42,796     108,146               28,551           1,528,335       12,699           679,777       2/27/2015           28,563       46.09       2/26/2025       18,161 (6)        1,308,318                       2/19/2016           32,767       41.83       2/18/2026       8,880         639,715       7,400         533,096                   2/14/2017                   32,634             55.02             2/13/2027             8,525                 614,141             6,315                 454,933         (1) Mr. Herendeen’s long-term incentive awards were forfeited asThese Zoetis stock options, RSUs and performance award units are subject to a three-year cliff vesting schedule and vest 100% on the third anniversary of his terminationthe grant date, and performance award units are earned based on achievement of employment date of August 18, 2016.a performance goal measured over a three-year performance period.   (2) These amounts are shown 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, 2016,29, 2017 of $53.53.$72.04.   (4) These Zoetis stock option and RSU awards are subject to a three-year cliff vesting schedule and vest 100% on the third anniversary of the grant date. (5) Zoetis’ Initial Public Offering (“IPO”) stock price on February 1, 2013. (6) These performance award units are subject to three-year cliff vesting and are earned, in the case of awards granted in 2016, based on achievement of a performance goal over a three-year performance period beginning January 1, 2016 and ending December 31, 2018. The2018, and in the case of awards granted in 2017, based on achievement of a performance goal over a three-year performance period beginning January 1, 2017 and ending December 31, 2019. Each performance goal is based on the company’s TSR results as compared to the TSR results of the companies comprising the S&P 500 Group. The number of shares paid under these performance award units, if any, ranges from 0% to 200% of the target number of shares and depends upon the extent to which the performance goal is achieved, as determined by the Committee after the end of the performance period.   50   ZOETIS 20172018 PROXY STATEMENT 49 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, 2017, and performance award units for which the performance period ended on December 31, 2017 and the level of performance has been determined. The table below shows these amounts for each NEO as of December 31, 2017.   Name     RSUs     Earned Performance Award Units Total Number of Units that Have Not Vested         Juan Ramón Alaix   41,344   60,358   101,702           Glenn C. David *   1,993   2,910   4,903           Kristin C. Peck   9,597   14,012   23,609           Clinton A. Lewis, Jr.   7,383   10,778   18,161           Catherine A. Knupp   7,383   10,778   18,161   * 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’ IPO in February 2013 and continue to hold Pfizer5-7-Year and7- Year Total Shareholder Return Units (“TSRUs”). These TSRUs generally vest three years from the grant date and are settled on the fifth or seventh anniversary of the grant date, respectively.date. The value earned for each TSRU is equal to the difference between the settlement price (the20-day average of the closing prices of Pfizer common stock ending on the settlement date) and the grant price (the closing price of Pfizer common stock on the date of grant) plus the value of dividend equivalents accumulated over the term. This value, if any, is converted into shares of Pfizer common stock by dividing it by the settlement price. Pfizer TSRUs outstanding held by our NEOs as of December 31, 20162017 are summarized in the schedule below.      Number of Securities Underlying Outstanding TSRUs Vested and Held by Each NEO as of December 31, 2016(a)      Number of Securities Underlying Outstanding Pfizer TSRUs Vested and Held by Each NEO as of December 31, 2017(a) Grant Date    Juan Ramón Alaix      Kristin C. Peck      Clinton A. Lewis, Jr.      Catherine A. Knupp      Juan Ramón Alaix    Kristin C. Peck    Clinton A. Lewis, Jr.    Catherine A. Knupp   2/24/2011(b)      35,058                 21,966               7,510               7,510             35,058      21,966      7,510      7,510     2/23/2012(c)      53,635                 22,916               7,010               6,740             45,468      19,427      5,942      5,714   2/23/2012(d)      45,468                 19,427               5,942               5,714              (a) Mr. David did not hold Pfizer TSRUs at December 31, 20162017 and is not included in this table.     (b) These Pfizer TSRUs have an exercise price of $18.90 and become payable on February 24, 2018.     (c) These Pfizer TSRUs have an exercise price of $21.03 and become payable on February 23, 2017. (d) These Pfizer TSRUs have an exercise price of $21.03 and become payable on February 23, 2019.   50   ZOETIS 20172018 PROXY STATEMENT 51 EXECUTIVE COMPENSATION   20162017 OPTION EXERCISES AND STOCK VESTED TABLE The following table provides information about the number and value of shares acquired upon vesting of RSUs held by, and theexercises of stock options exercised by, our NEOs during 2016.2017.      Option Awards      Stock Awards     Name(1)    Number of Shares Acquired on Exercise (#)      Value Realized on Exercise ($)      Number of Shares Acquired on Vesting (#)      Value Realized on Vesting ($)(2)     Juan Ramón Alaix(8)      —        —        78,803 (3)       3,385,377     Glenn C. David(8)      14,265        370,403 (4)       3,940 (3)       169,262     Kristin C. Peck(8)      —        —        43,037 (5)       2,046,435     Clinton A. Lewis, Jr.(8)      —        —        18,433 (6)       854,176     Catherine A. Knupp(8)      —        —        18,250 (7)       844,591     (1) Mr. Herendeen’s long-term incentive awards were forfeited as Option Awards Stock Awards   Name Number of his termination Shares Acquired on Exercise (#) Value Realized on Exercise ($) Number of employment date of August 18, 2016. Shares Acquired on Vesting (#) Value Realized on Vesting ($)(1) Juan Ramón Alaix(4) —            —         82,862(2) 4,426,488    Glenn C. David —            —         8,673(3) 504,173    Kristin C. Peck(4) —            —         20,880(2) 1,115,410    Clinton A. Lewis, Jr.(4) —            —         12,428(2) 663,904    Catherine A. Knupp(4) —            —         12,428(2) 663,904      (2)(1) The amounts shown in the “Value Realized on Vesting” column were calculated by multiplying the number of vested RSUs by the Zoetis closing stock price on the vesting date ($42.9653.42 on February 1, 2016, $52.38March 4, 2017 and $62.87 on August 15, 2016)September 2, 2017).   (3)(2) These RSU awards were granted on January 31, 2013March 4, 2014 and vested on February 1, 2016.March 4, 2017. (3) Consists of 4,349 RSUs vested on March 4, 2017 (grant date of March 4, 2014) and 4,324 RSUs vested on September 2, 2017 (grant date of September 2, 2014)   (4) Mr. David exercised 14,265 stock options from his January 31, 2013 grant (grant price of $26.00) on August 11, 2016 at a market price of $51.97 per share. (5) 22,064 RSUs vested on February 1, 2016 (grant date of January 31, 2013) and 20,973 RSUs vested on August 15, 2016 (grant date of August 15, 2013). (6) 11,820 RSUs vested on February 1, 2016 (grant date of January 31, 2013) and 6,613 RSUs vested on August 15, 2016 (grant date of August 15, 2013). (7) 11,820 RSUs vested on February 1, 2016 (grant date of January 31, 2013) and 6,430 RSUs vested on August 15, 2016 (grant date of August 15, 2013). (8) Certain NEOs were Pfizer employees at the time of Zoetis’ IPO in February 2013 and continue to hold Pfizer equity-based long-term incentive awards. The table below shows Pfizer stock options exercised in 2016 and Pfizer TSRUs that settled in 2016.2017.      TSRU Awards(b)    Option Awards    TSRU Awards(b) Name(a)    Number of    Shares Acquired    on Exercise    (#)       Value Realized on Exercise ($)    Number of    Shares Acquired    on Exercise    (#)       Value Realized on Exercise ($)    Number of Shares Acquired on Exercise (#)      Value          Realized          on Exercise          ($)              Juan Ramón Alaix        22,365                 671,397             —          —        27,667                942,338            Glenn C. David        —                 —               25,362 (c)         341,993 (c)     Kristin C. Peck        14,013                 420,670             —          —        11,821                402,623                Clinton A. Lewis, Jr.        4,790                 143,796             —          —        3,616                123,161                Catherine A. Knupp        4,790                 143,796             —          —        3,476                118,393                (a) Mr. Herendeen isDavid does not a formerhold Pfizer employeeequity-based long-term incentive awards and is not included in this table.     (b) These5-Year Pfizer TSRUs were granted on February 24, 2011,23, 2012, vested on February 24, 201423, 2015 and settled in Pfizer stock on February 24, 20162017 at the Pfizer closing stock price of $30.02.$34.06.   (c) Mr. David exercised these Pfizer stock options granted February 24, 2011 (grant price $18.90): 12,000 on April 20, 2016 at a market price of $33.05 and 3,362 on May 19, 2016 at a market price of $33.36. On May 19, 2016, Mr. David exercised 10,000 Pfizer stock options granted February 23, 2012 (grant price $21.03) at a market price of $33.39.   52   ZOETIS 20172018 PROXY STATEMENT 51 EXECUTIVE COMPENSATION   20162017NON-QUALIFIED DEFERRED COMPENSATION TABLE The following table summarizes activity during 20162017 and account balances in the Zoetis Supplemental Savings Plan (“ZSSP”) for our NEOs as of December 31, 2016.2017. Amounts for our NEOs who were Pfizer employees at the time of the IPO include priornon-qualified Supplemental Savings Plan balances held by NEOs when they served as executives of Pfizer and transferred to the ZSSP.   Name   Plan(1)   Aggregate Balance at January 1, 2016(2) ($)   Executive Contributions in 2016(3) ($)   Company Contributions in 2016(4) ($)   Aggregate Earnings in 2016 ($)   Aggregate Withdrawals/ Distributions in 2016 ($)   Aggregate Balance as of December 31, 2016 ($)     Plan(1)   Aggregate Balance at January 1, 2017(2) ($)   Executive Contributions in 2017(3) ($)   Company Contributions in 2017(4) ($)   Aggregate Earnings in 2017(4) ($)   Aggregate Balance as of December 31, 2017 ($)     Juan Ramón Alaix   Zoetis Supplemental  Savings Plan     4,421,912       1,296,423           256,317            498,534          —                6,473,186          Zoetis Supplemental    Savings Plan           6,473,186                  1,325,739                  248,331                  1,202,984                  9,250,240              Glenn C. David   Zoetis Supplemental Savings Plan     286,943       49,778           47,289            42,108          —                426,118          Zoetis Supplemental   Savings Plan           426,118             109,437             76,737             119,291             731,583         Kristin C. Peck   Zoetis Supplemental Savings Plan     917,991       47,194           89,667            105,293          —                1,160,145          Zoetis Supplemental   Savings Plan           1,160,145             47,674             85,813             287,305             1,580,937         Clinton A. Lewis, Jr.   Zoetis Supplemental Savings Plan     251,627       52,064           82,435            38,495          —                424,621          Zoetis Supplemental           Savings Plan           424,621             57,355             86,033             131,831             699,840         Catherine A. Knupp   Zoetis Supplemental Savings Plan     985,929       136,888           63,873            88,070          —                1,274,760          Zoetis Supplemental   Savings Plan               1,278,793     (5)           181,180             70,749             232,791             1,763,513     Paul S. Herendeen   Zoetis Supplemental Savings Plan     126,423       50,608           74,024            22,244          —                273,299        (1) The key features of the ZSSP are described in the CD&A under “Retirement Benefits”.   (2) Amounts in this column that were reported in the Summary Compensation Table for the years 20142015 and 20152016 (combined) are as follows: Mr. Alaix: $2,446,430,$2,868,200, Mr. David: $131,943,$171,167, Ms. Peck: $251,750,$268,104, Mr. Lewis: $176,071,$237,862 and Dr. Knupp: $284,987 and Mr. Herendeen: $126,357.$363,190.   (3) Executive contribution amounts shown in this column are included in the Summary Compensation Table for the year 2016.2017.   (4) 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. Aggregate earnings are not reflected in the Summary Compensation Table. (5) The “Aggregate Balance at January 1, 2017” shown for Dr. Knupp has been restated from the amount shown in the “Aggregate Balance as of December 31, 2016” column in the 2016Non-Qualified Deferred Compensation Table to include an additional amount of $4,033 that was transferred from the ZSP, in compliance with IRC rules and limits.   52   ZOETIS 20172018 PROXY STATEMENT 53 EXECUTIVE COMPENSATION   POTENTIAL PAYMENTS UPON EMPLOYMENT TERMINATION TABLE The NEOs are eligible to receive benefits under the Zoetis Executive Severance Plan which provides for payment of severance benefits in the event of an involuntary termination of employment (other than for “Cause”) that is not in connection with a change in control of the company (“CIC”) and a higher level of benefits in the event of an involuntary termination of employment (other than for “Cause”) or a termination for “good reason”“Good Reason” that is in connection with,occurs upon, or within 24 months after, a CIC. The amounts payable under the Zoetis Executive Severance Plan are summarized in the CD&A under “Severance”. Treatment of long-term incentive awards upon termination of employment is in accordance with the terms of the Equity Plan and the long-term incentive award agreements, as described in the footnotes to the table below. The following table shows the estimated benefits payable upon a hypothetical termination of employment under the Zoetis Executive Severance Plan and the Equity Plan under various termination scenarios, assuming the applicable termination occurred on December 31, 2016.2017. Payment of severance benefits is contingent upon the execution of a release agreement.   Name    Description        Without Cause: Apart from a Restructuring Event or CIC ($)        Without Cause: Restructuring Event ($)        Without Cause or for Good Reason Upon or Within 24 Months Following a CIC ($)        Death or Disability ($)        Retirement ($)           Description        Without Cause: Apart from a Restructuring Event or CIC ($)        Without Cause: Restructuring Event ($)        Without Cause or for Good Reason Upon or Within 24 Months Following a CIC ($)        Death or Disability ($)        Retirement ($)      Juan Ramón Alaix    Severance Amount       3,741,000 (1)        3,741,000 (1)        6,235,000 (6)        —         —        Severance             4,050,000   (1)             4,050,000   (1)             6,750,000   (6)             —               —       Value of Benefits Continuation       15,918 (2)        15,918 (2)        23,877 (7)        —         —     Benefits Continuation             16,932   (2)             16,932   (2)             25,398   (7)             —               —       Value of Outplacement Services       9,000 (3)        9,000 (3)        9,000 (3)        —         —     Outplacement Services             9,000   (3)             9,000   (3)             9,000   (3)             —               —          Equity Acceleration         14,763,012 (4)          18,387,645 (5)          23,636,381 (8)          23,636,381 (9)          14,763,012 (10)         Equity Acceleration               18,874,015   (4)               23,399,345   (5)               30,161,207   (8)               30,161,207   (9)               18,874,015   (10)          TOTAL       18,528,930         22,153,563         29,904,258         23,636,381         14,763,012          TOTAL             22,949,947               27,475,277               36,945,605               30,161,207               18,874,015     Glenn C. David    Severance Amount       994,500 (1)        994,500 (1)        1,989,000 (6)        —         —          Severance                 1,080,000     (1)                 1,080,000     (1)                 2,160,000     (6)                 —                     —         Value of Benefits Continuation       21,302 (2)        21,302 (2)        31,953 (7)        —         —     Benefits Continuation             22,637   (2)             22,637   (2)             33,955   (7)             —               —       Value of Outplacement Services       9,000 (3)        9,000 (3)        9,000 (3)        —         —     Outplacement Services             9,000   (3)             9,000   (3)             9,000   (3)             —               —          Equity Acceleration         —           1,220,760 (5)          1,919,843 (8)          1,919,843 (9)          —          Equity Acceleration               —   (4)               2,673,139   (5)               3,906,857   (8)               3,906,857   (9)               —            TOTAL       1,024,802         2,245,562         3,949,796         1,919,843         —          TOTAL             1,111,637               3,784,776               6,109,812               3,906,857               —     Kristin C. Peck    Severance Amount       1,088,000 (1)        1,088,000 (1)        2,176,000 (6)        —         —          Severance                 1,188,000     (1)                 1,188,000     (1)                 2,376,000     (6)                 —                     —         Value of Benefits Continuation       21,638 (2)        21,638 (2)        32,457 (7)        —         —     Benefits Continuation             13,207   (2)             13,207   (2)             19,810   (7)             —               —       Value of Outplacement Services       9,000 (3)        9,000 (3)        9,000 (3)        —         —     Outplacement Services             9,000   (3)             9,000   (3)             9,000   (3)             —               —          Equity Acceleration         — (4)          4,426,909 (5)          5,587,389 (8)          5,587,389 (9)          —          Equity Acceleration               —   (4)               5,073,449   (5)               6,438,414   (8)               6,438,414   (9)               —            TOTAL       1,118,638         5,545,547         7,804,846         5,587,389         —          TOTAL             1,210,207               6,283,656               8,843,224               6,438,414               —     Clinton A. Lewis, Jr.    Severance Amount       1,088,000 (1)        1,088,000 (1)        2,176,000 (6)        —         —          Severance                 1,188,000     (1)                 1,188,000     (1)                 2,376,000     (6)                 —                     —         Value of Benefits Continuation       21,663 (2)        21,663 (2)        32,494 (7)        —         —     Benefits Continuation             22,751   (2)             22,751   (2)             34,127   (7)             —               —       Value of Outplacement Services       9,000 (3)        9,000 (3)        9,000 (3)        —         —     Outplacement Services             9,000   (3)             9,000   (3)             9,000   (3)             —               —          Equity Acceleration         — (4)          3,005,486 (5)          3,977,453 (8)          3,977,453 (9)          —          Equity Acceleration               —   (4)               4,355,344   (5)               5,645,151   (8)               5,645,151   (9)               —            TOTAL       1,118,663         4,124,149         6,194,947         3,977,453         —          TOTAL             1,219,751               5,575,095               8,064,278               5,645,151               —     Catherine A. Knupp    Severance Amount       901,000 (1)        901,000 (1)        1,802,000 (6)        —         —          Severance                 1,080,000     (1)                 1,080,000     (1)                 2,160,000     (6)                 —                 —       Value of Benefits Continuation       21,292 (2)        21,292 (2)        31,938 (7)        —         —     Benefits Continuation             22,472   (2)             22,472   (2)             33,707   (7)             —               —       Value of Outplacement Services       9,000 (3)        9,000 (3)        9,000 (3)        —         —     Outplacement Services             9,000   (3)             9,000   (3)             9,000   (3)             —               —       Equity Acceleration         2,315,088 (4)          2,947,948 (5)          3,863,925 (8)          3,863,925 (9)          2,315,088 (10)      Equity Acceleration               3,331,241   (4)               4,199,090   (5)               5,448,519   (8)               5,448,519   (9)               3,331,241   (10)          TOTAL         3,246,380           3,879,240           5,706,863           3,863,925           2,315,088            TOTAL               4,442,713                 5,310,562                 7,651,226                 5,448,519                 3,331,241         (1) These amounts represent severance payable under the Zoetis Executive Severance Plan, equal to 18 months’ base salary and target annual incentive for the year of termination for the CEO and equal to 12 months’ base salary and target annual incentive for the year of termination for the other NEOs, in each case, in the event of the executive’s involuntary termination of employment without Cause.   54   ZOETIS 20172018 PROXY STATEMENT 53 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 named executive officer 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 Cause apart from a CIC or a Restructuring Eventrestructuring event using Zoetis’ closing stock price of $53.53$72.04 on December 31, 2016.29, 2017. Executives that are not retirement-eligible upon termination of employment forfeit their unvested stock options, RSUs and performance award units. Executives that are retirement-eligible at the time of termination of employment receive Equity Accelerationequity acceleration treatment described under the “Retirement” column (Mr. Alaix and Dr. Knupp are retirement-eligible aton December 31, 2016)2017).   (5) These amounts represent the value of Zoetis long-term incentive awards that vest on the executive’s involuntary termination of employment without Cause due to a Restructuring Eventrestructuring event using Zoetis’ closing stock price of $53.53$72.04 on December 31, 2016.29, 2017. Upon termination, unvested stock options fully vest while unvested RSUs and performance award units will vest on a pro rata basis, with payout of performance award units being subject to achievement of performance goals to be determined after the end of the performance period. Stock option awards held for at least one year by retirement-eligible executives (Mr. Alaix and Dr. Knupp are retirement-eligible aton December 31, 2016)2017) will continue to vest under the original vesting schedule and have the remaining option term to exercise.   (6) These amounts represent severance payable under the Zoetis Executive Severance Plan, equal to 30 months’ base salary and target annual incentive for the year of termination for the CEO and equal to 24 months’ base salary and target annual incentive for the year of termination for the other NEOs, in each case, in the event of the executive’s involuntary termination without Cause or for Good Reason upon or within 24 months after a CIC.   (7) These amounts represent the cost of 18 months of active health and life insurance coverage at the levels provided to the applicable named executive officer 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 change in controlCIC using Zoetis’ closing stock price of $53.53$72.04 on December 31, 2016.29, 2017. In the event of the executive’s involuntary termination of employment without Cause or for Good Reason upon, or within 24 months after, a CIC, all unvested awards will fully vest (performance award units vest at the target level).   (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 $53.53$72.04 on December 31, 2016.29, 2017. In the event of the executive’s termination of employment due to death or disability, all unvested awards will fully vest (performance award units vest at the target level).   (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 are retirement-eligible aton December 31, 2016)2017) using Zoetis’ closing stock price of $53.53$72.04 on December 31, 201629, 2017 (and, with respect to performance award units, assuming achievement of performance goals at the target level). In the event of the executive’s termination of employment due to retirement, unvested stock options held for at least one year will continue to vest under the original vesting schedule and have the remaining option term to exercise, while RSUs and performance award units will vest on a pro rata basis, with payout of performance award units being subject to achievement of performance goals to be determined after the end of the performance period. Any awards held prior to the first anniversary of the date of grant will be forfeited in the event of a termination of employment due to retirement.   54   ZOETIS 20172018 PROXY STATEMENT 55 EXECUTIVE COMPENSATION   EQUITY COMPENSATION PLANS 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, 2016.2017.   Plan Category    Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (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 Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (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)   Equity compensation plans approved by security holders      7,536,949(1)        $33.23(2)        14,396,257                           7,069,655(1)                    $37.10(2)                    13,108,937                      Equity compensation plans not approved by security holders      —                     —                     —                       —                           —                           —                    Total      7,536,949(1)        $33.23                     14,396,257                         7,069,655(1)              $37.10                           13,108,937                    (1) Includes 5,370,7844,905,884 stock options, 72,83873,359 shares underlying deferred stock units (granted in 2013 and 2014 tonon-employee directors), 1,792,9881,662,787 shares underlying RSUs and 300,339427,625 underlying performance award units.   (2) The weighted-average exercise price is only applicable to stock options.   56   ZOETIS 20172018 PROXY STATEMENT 55   AUDIT COMMITTEE MATTERS       ITEM 3      RATIFICATION OF APPOINTMENT OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 20172018 The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’scompany’s independent registered public accounting firm. At least annually, 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. Further, in conjunction with the upcoming mandated rotation of the audit firm’s lead engagement partner in 2017, the Chairman of the Audit Committee has been directly involved in the selection of KPMG’s lead engagement partner. Based on its review, the Audit Committee has appointed KPMG as our independent registered public accounting firm for the year ending December 31, 2017.2018. The Audit Committee and Zoetis’ Board of Directors believe that the continued retention of KPMG as the Company’scompany’s independent registered public accounting firm is in the best interests of the Companycompany and its shareholders. KPMG has served as our independent accounting firm continuously since 2013, 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 2017.2018. 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 of 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 2017.2018.     KPMG FEES AND SERVICES The following table sets forth the aggregate fees for professional services billed or to be billed by KPMG for the years ended December 31, 20162017 and 20152016 for the audits of our financial statements, and fees for other services rendered by KPMG during those periods.        2016     2015     Audit services   $ 14,046,468     $ 13,298,150     Audit-related services     137,000       125,000     Tax services     586,700       656,171     Total fees   $ 14,770,168     $ 14,079,321        2017       2016         Audit fees             $9,965,280             $     14,046,468             Audit-related fees         93,100                 137,000             Tax fees             1,263,304                   586,700             All other fees             —                   —             Total fees       $     11,321,684             $     14,770,168         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, in 2015,2017, for the preparation and delivery of comfort letters. Audit servicesfees includes reimbursement for directout-of-pocket travel and other sundry expenses, which were approximately $300,000 and $400,000 for each of the years ended December 31, 2017 and 2016, and 2015. respectively.   56   ZOETIS 20172018 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. POLICY ONPRE-APPROVAL OF AUDIT FIRM SERVICES In 2013, subsequent to our Initial Public Offering and consistentConsistent with the requirements of the SEC and the Public Company Accounting Oversight Board 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 for assurance and related services that are traditionally performed by the independent registered public accounting firm, including employee benefit plan audits and special procedures required to meet certain regulatory requirements.   ●   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; assistance with coordination of execution oftax-related activities, primarily in the area of corporate development; support of othertax-related regulatory requirements; and tax compliance and reporting.   ●   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 table for 20152016 and 20162017 werepre-approved by our Audit Committee in accordance with the above policy.   58   ZOETIS 20172018 PROXY STATEMENT 57 AUDIT COMMITTEE MATTERS   REPORT OF THE AUDIT COMMITTEE 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, 2016,2017, be included in the company’s 20162017 Annual Report on Form10-K that was filed with the SEC on February 16, 2017.15, 2018. The Audit Committee also recommended, and the Board has approved the appointment of KPMG as our independent auditors for the fiscal year ending December 31, 2017.2018. THE AUDIT COMMITTEE Gregory Norden, Chair Louise M. Parent Robert W. Scully William C. Steere, Jr.   58   ZOETIS 20172018 PROXY STATEMENT 59 OWNERSHIP OF OUR COMMON STOCK   STOCK OWNERSHIP TABLES The tables below show how many shares of Zoetis common stock certain individuals and entities beneficially owned on March 15, 2017.2018. 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 46 and (4) all 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 unless otherwise described below.   Name of Beneficial Owner    Number of Shares Owned      Percent of Class (%) (1)      Number of Shares Owned      Percent of Class (%) (1)   5% Beneficial Owners:             BlackRock, Inc.(2)      33,943,989        6.90 %       38,485,542        7.93%   55 East 52nd Street             New York, NY 10022       T. Rowe Price Associates, Inc.(3)      41,237,906        8.39 %  100 E. Pratt Street       Baltimore, MD 21202       The Vanguard Group(4)      32,198,134        6.55 %  New York, NY 10055       The Vanguard Group(3)      34,726,187        7.15%   100 Vanguard Blvd.             Malvern, PA 19355                       (1) Percentages based on 491,691,279485,384,025 shares outstanding on March 15, 2017.2018.   (2) Based on a Schedule 13G/A that BlackRock Inc. filed with the SEC on January 27, 2017,23, 2018, which contained information as of December 31, 2016.2017. Such Schedule 13G/A states that BlackRock Inc. has sole voting power with respect to 29,182,51033,308,757 shares of Zoetis common stock, sole dispositive power with respect to 33,943,98938,485,542 shares of Zoetis common stock and shared voting and dispositive power with respect to 0 shares of Zoetis common stock.   (3) Based on a Schedule 13G that T. Rowe Price Associates, Inc. filed with the SEC on February 7, 2017, which contained information as of December 31, 2016. Such Schedule 13G states that T. Rowe Price Associates, Inc. has sole voting power with respect to 12,052,660 shares of Zoetis common stock, sole dispositive power with respect to 41,237,906 shares of Zoetis common stock and shared voting and dispositive power with respect to 0 shares of Zoetis common stock. (4) Based on a Schedule 13G/A that Vanguard Group Inc. filed with the SEC on February 10, 2017,9, 2018, which contained information as of December 31, 2016.2017. Such Schedule 13G/A states that The Vanguard Group has sole voting power with respect to 756,266699,392 shares of Zoetis common stock and sole dispositive power with respect to 31,358,41333,942,178 shares of Zoetis common stock; and together with its wholly-owned subsidiaries Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., has shared voting power with respect to 89,670103,622 shares of Zoetis common stock and shared dispositive power with respect to 839,721784,009 shares of Zoetis common stock.   60   ZOETIS 20172018 PROXY STATEMENT 59 OWNERSHIP OF OUR COMMON STOCK     Name of Beneficial Owner    Common Stock(1)      Deferred Stock Units(2)      Vested Options(3)      Total     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      —        —        —        —           —                     —             —             3,889             3,889     Frank A. D’Amelio      5,000        9,435        —        14,435           7,568               9,500             —                  —             17,068     Sanjay Khosla      —        9,435        —        9,435           2,568               9,500             —                  —             12,068     Michael B. McCallister      9,000        10,199        —        19,199           12,771             10,269             —                  —             23,040     Gregory Norden      3,075        10,199        —        13,274           5,900             10,269             —                  —             16,169     Louise M. Parent      —        9,435        —        9,435           2,418               9,500             —                  —             11,918     Willie M. Reed      —        4,640        —        4,640           3,771               4,672             —                  —             8,443     Linda Rhodes         5                     —             —                  —             5     Robert W. Scully      —        9,435        —        9,435           3,771               9,500             —                  —             13,271     William C. Steere, Jr.      4,500        10,199        —        14,699           8,271             10,269             —                  —             18,540     Juan Ramón Alaix      96,726        —        597,415        694,141           96,711                     —             757,369                  —             854,080     Glenn C. David      9,304        —        16,385        25,689           15,180                     —             24,097                  —             39,277     Paul S. Herendeen      71        —        —        71   Kristin C. Peck      36,334        —        158,536        194,870           48,316                     —             163,668                  —             211,984     Clinton A. Lewis, Jr.      33,007        —        89,612        122,619           48,710                     —             118,175                  —             166,885     Catherine A. Knupp      31,111        —        89,612        120,723           35,683                     —             75,379                  —             111,062     Directors and executive officers as a group (20 persons)(4)      300,203        72,980        1,154,412        1,527,594   Directors and executive officers as a group (19 persons)(5)         372,558             73,480             1,229,696             3,889             1,679,622       (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 491,691,279485,384,025 shares outstanding on March 15, 2017.2018. SECTION 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 our common stock to file reports with the SEC about their ownership of and transactions in our common stock. Based on our records and other information, we believe that all reports that were required to be filed under Section 16(a) during 20162017 were timely filed.   60   ZOETIS 20172018 PROXY STATEMENT 61 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, 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 on the review to the Committee at its next regularly scheduled meeting. A description of our related person transaction approval policy is available on our website at www.zoetis.com underAbout Us—Corporate Governance. RELATED PERSON TRANSACTIONS Since the beginning of 2016,During fiscal year 2017, we havedid not enteredenter into any related person transactions.   62   ZOETIS 20172018 PROXY STATEMENT 61 INFORMATION ABOUT THE ANNUAL MEETING AND VOTING   We are providing this proxy statement to you in connection with the solicitation of proxies by the Zoetis Board of Directors for the 20172018 Annual Meeting of Shareholders and for any adjournment or postponement thereof. We mailed our proxy materials on or about March 31, 2017April 2, 2018 and filed our proxy materials with the SEC on March 31, 2017.April 2, 2018. ANNUAL MEETING INFORMATION We are holding our 20172018 Annual Meeting of Shareholders at 10:00 a.m. Eastern Time on Thursday,Tuesday, May 11, 2017,15, 2018, 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 17, 2017,21, 2018, 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. Since seating may be limited, admissionAdmission to the 20172018 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 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 11, 201715, 2018 Our proxy statementProxy Statement and 20162017 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 March 31, 2017,April 2, 2018, 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 20162017 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 your15-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.   62   ZOETIS 20172018 PROXY STATEMENT 63 INFORMATION ABOUT THE ANNUAL MEETING AND VOTING   HOW TO VOTE BY PROXY WeYour vote is important and 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 17, 2017,21, 2018, the record date for the 20172018 Annual Meeting of Shareholders. 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:     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 11, 201715, 2018     By Internet    Online at www.envisionreports.com/ZTS    24 hours a day until 4:00 a.m., Eastern Daylight Time, on May 11, 201715, 2018     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 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. REVOCATION OF PROXIES 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 Corporate Secretary at Zoetis Inc., 10 Sylvan Way, Parsippany, NJ 07054;   ●   Submitting a later-dated proxy;   ●   Providing subsequent telephone or Internet voting instructions; or   ●   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. VOTING AT THE MEETING 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.   64   ZOETIS 20172018 PROXY STATEMENT 63 INFORMATION ABOUT THE ANNUAL MEETING AND VOTING   QUORUM AND REQUIRED VOTE 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 20172018 Annual Meeting of Shareholders. At the close of business on March 17, 2017,21, 2018, the record date for the 20172018 Annual Meeting of Shareholders, 491,627,927485,110,817 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.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 Abstentions and Broker Non-Votes*   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 20172018      Majority of the votes cast    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 not a “routine” item under New York Stock Exchange rules and the broker has not received voting instructions from the beneficial owner of the shares. Your broker may vote without your instructions only on Item 3 — Ratification of Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for 2017,2018, which is considered a “routine” matter. 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 any of the Items at the Annual Meeting. If you are a registered shareholder and sign and return a proxy card without specific voting instructions, or if 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 2017.2018. 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.   64   ZOETIS 20172018 PROXY STATEMENT 65 INFORMATION ABOUT THE ANNUAL MEETING AND VOTING   COST 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 their names shares 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 of Shareholders from their customers who are beneficial owners of our stock and will reimburse those firms for relatedout-of-pocket expenses. We have retained Saratoga Proxy Consulting, LLC, a professional proxy solicitation firm, to help us solicit proxies. Zoetis expects that it will pay Saratoga Proxy Consulting, LLC its customary fees, estimated to be approximately $15,000 in the aggregate, plus reasonableout-of-pocket expenses incurred in the process of soliciting proxies. Zoetis also has agreed to indemnify Saratoga Proxy Consulting, LLC against certain liabilities relating to or arising out of its engagement. AVAILABILITY OF VOTING RESULTS We will disclose the voting results in a Current Report on Form8-K to be filed with the SEC within 4 business days following the 20172018 Annual Meeting of Shareholders. QUESTIONS 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: Saratoga Proxy Consulting, LLC 520 Eighth Avenue, 14th Floor New York, NY 10018 Call Collect:212-257-1311 Call Toll-Free:888-368-0379   66   ZOETIS 20172018 PROXY STATEMENT 65 INFORMATION ABOUT SUBMITTING SHAREHOLDER PROPOSALS AND OUR 20182019 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 norbut no more than 120 days before the first anniversary of the prior year’s meeting. Under this provision, we must receive notice pertaining to the 20182019 Annual Meeting no earlier than January 11, 2018,15, 2019, and no later than February 10, 2018.14, 2019.   ●   However, if we hold the 20182019 Annual Meeting on a date that is not within 25 days before or after the anniversary date of the 20172018 Annual Meeting, we must receive the notice 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.   ●   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, ourBy-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 20182019 Annual Meeting no earlier than January 11, 2018,15, 2019, and no later than February 10, 2018.14, 2019. Under SEC rule Rule14a-8, if a shareholder wants us to include a shareholder proposal in our proxy statement for the 20182019 Annual Meeting, our Corporate Secretary must receive the proposal at our principal executive offices no later than December 1, 2017,3, 2018, which is 120 calendar days before theone-year anniversary of the release date of our proxy statement for the 20172018 Annual Meeting. If we change the date of our 20182019 meeting by more than 30 days from theone-year anniversary of the 20172018 meeting, then the deadline is a reasonable time before we print and send our proxy materials for the 20182019 meeting. Any such proposal must comply with all of the requirements of SEC Rule14a-8. Shareholders should mail all nominations and proposals for our 20182019 Annual Meeting to our Corporate Secretary at Zoetis Inc., 10 Sylvan Way, Parsippany, NJ 07054. You may obtain a copy of ourBy-laws from our Corporate Secretary ZOETIS 2017 PROXY STATEMENT 67 INFORMATION ABOUT SUBMITTING SHAREHOLDER PROPOSALS AND OUR 2018 ANNUAL MEETING 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. 66 ZOETIS 2018 PROXY STATEMENT INFORMATION ABOUT SUBMITTING SHAREHOLDER PROPOSALS AND OUR 2019 ANNUAL MEETING To reduce costs and 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 statement and the Annual Report, to multiple shareholders who share the same address unless we have received contrary instructions from an impacted 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 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., 10 Sylvan Way, Parsippany, NJ 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 68 ZOETIS 2017 PROXY STATEMENT  FOR ANIMALS. FOR HEALTH. FOR YOU.     ZOETIS 2018 PROXY STATEMENT   67   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.                 Electronic Voting Instructions               Available 24 hours a day, 7 days a week!               Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.               VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.               Proxies submitted by the Internet or telephone must be received by 4:00 a.m., Eastern Time, on May 11, 2017.15, 2018.             Vote by Internet             • Go towww.envisionreports.com/ZTS             • Or scan the QR code with your smartphone             • Follow the steps outlined on the secure website             Vote by telephone             •  Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.   ☒         •  Follow the instructions provided by the recorded message     q  IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.  q    A    Proposals — The Board recommends a voteFOR all nominees andFOR Proposals 2 and 3. 1. Election of Directors: + For Against Abstain For Against Abstain For   Against Abstain 01 - Sanjay Khosla ☐ ☐ ☐ 02 - Willie M. Reed ☐ ☐ ☐ 03 - Linda Rhodes ☐ ☐   ☐ For Against Abstain 04 - William C. Steere, Jr. ☐ ☐ ☐ 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 2018. ☐ ☐ ☐   1.     Election of Directors:                                            +         For   Against   Abstain               For     Against   Abstain           For     Against   Abstain        01 - Gregory Norden     ☐     ☐     ☐         02 - Louise M. Parent       ☐       ☐     ☐       03 - Robert W. Scully       ☐     ☐       ☐                    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 2017.     ☐   ☐   ☐       B    Non-Voting Items Change of Address— Please print your new address below.      Comments— Please print your comments below.   Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting.    ☐                                      C    Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below 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    +                                  02JGFB02SB5F   q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q         Proxy — Zoetis Inc.     Notice of 20172018 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — May 11, 201715, 2018 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 11, 2017,15, 2018, or at any postponement or adjournment thereof. 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.)                Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas.   ☒      Zoetis 2017 Annual Meeting Proxy Card   q  PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.  q    A    Proposals — The Board recommends a voteFOR all nominees andFOR Proposals 2 and 3.   1.     Election of Directors:                                           +         For    Against    Abstain               For     Against    Abstain           For       Against     Abstain       01 - Gregory Norden     ☐      ☐     ☐         02 - Louise M. Parent       ☐        ☐     ☐       03 - Robert W. Scully       ☐      ☐     ☐                   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 2017.       ☐      ☐     ☐   1. Election of Directors: + For  Against Abstain For Against  Abstain For     Against   Abstain 01 - Sanjay Khosla ☐  ☐ ☐ 02 - Willie M. Reed ☐  ☐ ☐ 03 - Linda Rhodes ☐  ☐ ☐ For  Against Abstain 04 - William C. Steere, Jr. ☐  ☐ ☐ 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 2018. ☐  ☐ ☐    B    Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below 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    +                                  02JGGB02SB6B   q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q         Proxy — Zoetis Inc.     Notice of 20172018 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — May 11, 201715, 2018 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 11, 2017,15, 2018, or at any postponement or adjournment thereof. 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.)