2017
2018 Proxy Statement and
Notice of
Annual Meeting of Stockholders
Stockholders
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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☑ | Definitive Proxy Statement | |||
☐ | Definitive Additional Materials | |||
☐ | Soliciting Material Pursuant to Section 240.14a-12 | |||
AMGEN INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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2017
2018 Proxy Statement and
Notice of
Annual Meeting of Stockholders
Stockholders
Robert A. Bradway Chairman of the Board, Chief Executive Officer and President | ||
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Amgen Inc. One Amgen Center Drive Thousand Oaks, CA 91320-1799 |
April 6, 201711, 2018
Dear Fellow Stockholder:
You are invited to attend the 20172018 Annual Meeting of Stockholders, or Annual Meeting, of Amgen Inc. to be held on Friday,Tuesday, May 19, 2017,22, 2018, at 11:00 A.M., local time, at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362.
Our Company:At Amgen, our mission is to serve patients; this mission guides our unwavering commitment to deliver breakthrough treatments for unmet medical needs. In 2017, we secured 80 country/product launches of new medicines in new indications around the world. We are a values-based company, deeply rootedadvanced the largest early pipeline in scienceAmgen’s history and set the stage for continued innovation in the years to transform new ideas and discoveries into medicines for patients with serious illnesses. We believe that innovative medicines offer the best hope to reduce both the human and financial burden that serious diseases, such as cancer and heart disease, place on people, their families and our society. Sixcome. Our products span six therapeutic areas form the core of our business – cardiovascular, oncology/hematology, neuroscience, inflammation, nephrology, and bone health neuroscience, inflammation– and nephrology.we make a significant difference in the fight against serious illness. We continue to seek new treatments for serious diseases and lowering the cost burden that these diseases place on society.
Business Strategy:At the core of ourOur strategy is aclear – in six focused therapeutic areas we seek to develop innovativemedicines that address important unmet medical needs in the fight against serious illness. Our strategy includes an integrated set of activities we are pursuing to strengthen our competitive position in our industry. In addition to our significant commitment to innovation in these six therapeutic areas. To capitalize fully on our innovation,innovative research and development, we have identified a set of strategic priorities, including continuing our transformation efforts,are developing branded biosimilars, expanding our global geographic reach, deploying next-generation biomanufacturing technology, advancing newfacilities, improving drug delivery systems, adhering to a disciplined approach to capital allocation while investing for long-term growth, and developing branded biosimilars, that enable multiple approaches to creating stockholder value.transforming Amgen for the future. In the Compensation Discussion and Analysis section of this proxy, we further outlinediscuss our progress for 2017 against these objectives. In 2017, we had consistent, strong execution of our strategy and discussremained focused on generating long-term stockholder value and built on a strong record of delivering superior returns to our progress againststockholders. A clear measure of our strategic priorities in 2016.success is the number of patients reached and helped by our medicines throughout the world.
Stockholder Engagement:We valueare also guided by the perspectives of our stockholders as expressed at our Annual Meeting and through direct conversationsengagement with us throughout the year.year and at our Annual Meeting. Since our 20162017 annual meeting of stockholders, in addition to our outreach by our executives and our Investor Relations department to investors, we have engaged in governance-focused outreach activities and discussions with the governance teams for stockholders comprising approximately 52% of our outstanding shares. Topics discussed included our business and financial performance, our governance and executive compensation programs, including the direct link to our business strategy, and our corporate responsibility and sustainability initiatives. Feedback received during these meetings wasis shared with the full Board of Directors informingand informed Board decisions. The conversations held with our stockholders are beneficial, and we look forward to continuing our dialogue in the coming year.
I look forward to sharing more about our Company at the Annual Meeting. In addition to the business to be transacted and described in the accompanying Notice of Annual Meeting of Stockholders, and proxy statement, I will discuss recent developments during the past year, the substantial progress we made on our strategic priorities for 2016,2017, and respond to comments and questions of general interest.questions.
On behalf of the Board of Directors, I thank you for your participation and investment in Amgen. We look forward to seeing you on May 19.22. As a final note and also on behalf of the Board of Directors, I would like to thank Frank J. Biondi, Jr.David Baltimore and Judith C. Pelham,François de Carbonnel who are not standing forre-election, for their years of wise counsel and guidance.guidance for Amgen.
Sincerely,
Robert A. Bradway
Chairman of the Board,
Chief Executive Officer and President
Amgen Inc.
One Amgen Center Drive Thousand Oaks, California 91320-1799 |
Notice of Annual Meeting of Stockholders
To be Held on May 19, 201722, 2018
To the Stockholders of Amgen Inc.:
Date and Time: |
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Location: | Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362 | |||
Record Date: | March | |||
Mail Date: | We intend to mail the Notice Regarding the Availability of Proxy Materials, or the proxy statement and proxy card, as applicable, on or about April | |||
| Items of Business: | ||||
1. | To elect 13 directors to the Board of Directors of Amgen for a term of office expiring at the | |||
2. | To hold an advisory vote to approve our executive compensation; | |||
3. | To ratify the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, | |||
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4. | To | |||
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| To transact such other business as may properly come before the Annual Meeting or any continuation, postponement or adjournment thereof. | |||
Attendance: If you plan to attend the Annual Meeting, you will need an admittance ticket and proof of ownership of our Common Stock as of the close of business on March | ||||
Voting:Your vote is important, regardless of the number of shares that you own. Whether or not you plan to attend the Annual Meeting in person, it is important that your shares be represented and voted. Please read the Notice of Annual Meeting of Stockholders and proxy statement with care and follow the voting instructions to ensure that your shares are represented. By submitting your proxy promptly, you will save the Company the expense of further proxy solicitation. We encourage you to submit your proxy as soon as possible by Internet, by telephone or by signing, dating and returning all proxy cards or instruction forms provided to you.
By Order of the Board of Directors
Jonathan P. Graham
Secretary
Thousand Oaks, California
April 6, 201711, 2018
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ï 20172018 Proxy Statement
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This summary contains highlights about our Company and the upcoming 20172018 Annual Meeting of Stockholders, or Annual Meeting. This summary does not contain all of the information that you should consider in advance of the meeting and we encourage you to read the entire proxy statement before voting.
20172018 Annual Meeting of Stockholders
Date and Time: |
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Location: | Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362 | |
Record Date: | March | |
Mail Date: | We intend to mail the Notice Regarding the Availability of Proxy Materials, or the proxy statement and proxy card, as applicable, on or about April | |
Voting Matters and Board Recommendations
Matter | Our Board Vote Recommendation | |||
Item 1:
| Election of 13 Nominees to the Board of Directors (page
| FOR each Director Nominee
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Item 2:
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| FOR
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Item 3:
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Item 4:
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| AGAINST
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ï 20172018 Proxy Statement1
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9 new Directors since 2012 8 Experienced Current and Former Public Company 6 Directors w/ Scientific Research and/or CEO/CFO Healthcare Experience 5 Directors with Financial Industry Experience 3 Women PROXY ACCESS FOR DIRECTOR NOMINATIONS 92% INDEPENDENT DIRECTORS* LEAD INDEPENDENT DIRECTOR 9 NEW DIRECTORS SINCE 2012* ~4.8 YEARS AVERAGE TENURE*8 CURRENT/FORMER PUBLIC COMPANY CEO/CFOs
Item 1: Election of 13 Nominees to the Board of Directors (Page 16)7)
| Nominee | Age | | Director Since |
| Audit(1) | | Governance and Nominating |
| Executive | | Compensation and Management Development(1) |
| | Equity Award(1) |
| | Corporate Responsibility and Compliance |
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David Baltimore
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79
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1999
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X
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X
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Robert A. Bradway
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54
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2011
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C
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X
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François de Carbonnel
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70
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2008
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X
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X
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Robert A. Eckert
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62
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2012
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X
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X
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X
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Greg C. Garland
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59
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2013
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C
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X
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X
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X
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Fred Hassan
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71
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2015
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X
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X
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Rebecca M. Henderson
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56
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2009
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X
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X
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Frank C. Herringer
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74
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2004
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X
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X
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C
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C
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Charles M. Holley, Jr.
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60
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2017
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X
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X
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Tyler Jacks
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56
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2012
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X
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X
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Ellen J. Kullman
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61
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2016
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X
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X
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Ronald D. Sugar
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68
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2010
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X
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X
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C
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R. Sanders Williams
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68
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2014
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X
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X
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Nominee | Age | | Director Since |
| Audit | | Governance and Nominating |
| Executive | | Compensation and Management Development |
| | Equity Award |
| | Corporate Responsibility and Compliance | |||||||||||||||||
Wanda M. Austin
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| 63
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| 2017
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| M
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| M
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Robert A. Bradway
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| 2011
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| C
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Brian J. Druker(1)
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| Initial Election
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Robert A. Eckert
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| 63
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| 2012
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| M
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| M
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Greg C. Garland
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| 60
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| 2013
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| C
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| M
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| M
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| M
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Fred Hassan
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| 72
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| 2015
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| M
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| M
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Rebecca M. Henderson
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| 57
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| 2009
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| M
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| M
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Frank C. Herringer
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| 75
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| 2004
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| M
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| M
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Charles M. Holley, Jr.
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| 61
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| 2017
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| C
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| M
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Tyler Jacks
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| 57
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| 2012
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| M
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| M
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Ellen J. Kullman
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| 62
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| 2016
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| M
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| M
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Ronald D. Sugar
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| 69
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| 2010
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| M
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| M
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| C
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R. Sanders Williams
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| 69
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| 2014
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| M
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| M
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| “C” | indicates Chair of the committee. |
| “M” | indicates member of the committee. |
| (1) |
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Our Board possesses a deepCorporate Governance Highlights and broad set of skills and experiences that facilitate strong oversight and strategic direction for a leading global innovator in biomedicine:Best Practices
| * | For our director nominees. |
2 ï 20172018 Proxy Statement
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CorporateWe Have Implemented Governance HighlightsBest Practices
We continuously monitor developments and best practices in corporate governance and consider stockholder feedback when enhancing our governance structures. Below are highlights of our key governance practices:
| ✓ | Proxy |
| - | up to 20 eligible stockholders |
| - | for |
| - | can nominate the greater of 20% or two nominees |
| ✓ | Majority Voting |
| ✓ | Stockholders May Act By Written Consent |
| ✓ |
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| ✓ | No Supermajority Vote Provisions in Articles or Bylaws |
| ✓ | Highly Independent Board – 12 of our 13 director nominees(page 21) |
| ✓ | Strong Refreshment Practices With 9 New Directors Since 2012 – Average Board tenure of approximately 4.8 years for our director nominees(pages 8 and |
| ✓ | Annual Anonymous Board and Committee Evaluation Process(page 21) |
| ✓ | All |
| ✓ | Robust Lead Independent |
| ✓ | Significant Stock Ownership |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE 13 NAMED NOMINEES. | ||||
ï 20172018 Proxy Statement3
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Stockholder Engagement Program
Throughout 2016, in addition to our outreach by our executives and our Investor Relations department to investors, we contacted stockholders representing approximately 52% of our outstanding shares seeking governance-focused engagement meetings. Topics discussed included Amgen’s business and financial performance, the Company’s governance and executive compensation programs, including the direct link to our business strategy, and our corporate responsibility and sustainability initiatives. Feedback received during these meetings was shared with the full Board and subsequently incorporated into Board decisions. We believe the conversations held with our stockholders are very beneficial and look forward to continued dialogue.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF
THE 13 NAMED NOMINEES.
Item 2: Advisory Vote to Approve Our Executive
Compensation (Page 27)
2017 Target Total Direct Compensation Mix
We pay for performance, and pay outcomes reflect the achievements of our Named Executive Officers, or NEOs, against our strategic priorities.
We use median values as the reference point for each element of compensation at all levels, including our NEOs. We consider performance, job scope, and contribution in our final pay decisions.
Our compensation program is directly linked to our performance and strategy. Each year, our Compensation and Management Development Committee approves Company performance goals under our annual cash incentive programs that are designed to focus our staff on delivering financial and operational objectives to drive annual performance, advance strategic priorities, and position us for longer-term success. Based on our overall performance in 2017 compared to thepre-established Company performance goals of our annual cash incentive award program, we achieved 115% of our target bonus opportunity.
| • | Performance units earned for the 2015-2017 (January 30, 2015 to January 30, 2018) performance period were based on an earned payout percentage of 93.4% reflecting the Company’s three-year Total Shareholder Return, or TSR, performance at the 46.7th percentile relative to the TSRs of the companies in the Standard & Poor’s 500 Index, or S&P 500, during the performance period. Our beginning stock price and ending stock price for purposes of the 2015-2017 performance period are each the average daily closing price of a share of our Common Stock for the beginning and last twenty trading days of the performance period ($154.49 and $186.61, respectively). Separately, but of note, Amgen’s 2015-2017 three-year TSR (30.0%) outperformed that of the average TSR of our 2017 peer group (11.6%). |
Long-term Incentive Equity Awards Target Annual Cash Incentive Base Salary CEO 90% Pay at Risk 75% Performance based Other NEOs 82% Pay at Risk 69% Performance based
4 ï 2018 Proxy Statement
Proxy Statement Summary |
2017 Performance
2017 Annual Cash Incentive Program
Goal
| Weighting
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% of Target
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1. Financial Performance
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Revenues
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| 30%
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| 110.6%
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Non-GAAP Net Income(1)
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| 30%
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| 116.8%
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2. Progress Innovative Pipeline
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Execute Key Clinical Studies and Regulatory Filings
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| 20%
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| 123.0%
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Advance Early Pipeline
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| 5%
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| 201.7%
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3. Deliver Annual Priorities
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Execute Critical Launches and Long-Term Commercial Objectives
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| 10%
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| 76.0%
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Realize Functional Transformation Objectives
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| 5%
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| 90.4%
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Composite Score
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| Achieved 115.0%
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Long-Term Incentive Performance Award Program
Long-Term Incentive Program
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Equity
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% of Target
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Performance Units | 50% | 93.4% | ||||
(2015-2017 performance period)
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| (1) | Non-Generally Accepted Accounting Principles net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled inAppendix B. |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ADVISORY RESOLUTION INDICATING THE APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS. |
ï 2018 Proxy Statement 5
Proxy Statement Summary |
Item 3: Ratification of Selection of Independent Registered Public Accountants (Page 30)86)
The Audit Committee of the Board has selected Ernst & Young LLP, or Ernst & Young, as our independent registered public accountants for the fiscal year ending December 31, 2017.2018.
Ernst & Young has served as our independent registered public accounting firm since the Company’s inception in 1980.
Each year, the Audit Committee evaluates the qualifications and performance of the Company’s independent registered public accountants and determines whether tore-engage the current independent registered public accountants.
Based on this evaluation, the Audit Committee believes that the continued retention of Ernst & Young is in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
4 
ï 2017 Proxy Statement
Item 3: Advisory Vote to Approve Our Executive Compensation (Page 31)
2016 Performance Highlights
Executive Compensation Aligned With Business Strategy
The focus of our strategy is to develop innovative medicines that meet important unmet medical needs. Six therapeutic areas form the core of our business (cardiovascular, oncology/hematology, bone health, neuroscience, inflammation, and nephrology). Our strategy to execute in these therapeutic areas is multifaceted, with seven strategic priorities that allow us to drive long-term growth, while also delivering on our short- and medium-term goals.
Strategic Priorities
We Delivered Strong Financial Performance and Made Progress on Our Strategic Priorities
We delivered strong financial results while making significant progress on our 2016 performance goals, which facilitate execution of our strategic priorities.
We grew revenues by 6% over 2015 to $23 billion in 2016.
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We continued to execute on the transformation and process improvement efforts announced in 2014 and, since that time, have realized approximately $1.2 billion of transformation and process improvement savings the majority of which was reinvested in product launches, clinical programs and external business development.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. |
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ï 2017 Proxy Statement5
We Executed Product and Delivery System Launches
2016 was the first full year that we have been able to provide patients with six innovative products launched in 2015 (Repatha®, Kyprolis®, BLINCYTO®, IMLYGIC®, Neulasta®On-Pro® Kit, and Corlanor®).
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We Significantly Advanced Our Pipeline
We have continued our focus on developing innovative, breakaway medicines to address important unmet needs.
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We Invested for Long-Term Growth While Returning Substantial Capital to Our Stockholders
Our strong cash flows and balance sheet (along with our successful execution of our transformation efforts) allowed continued investment for long-term growth through internal research and development and external business development transactions, while simultaneously providing substantial returns to stockholders.
In 2016,while investing $3.8 billion in research and development, we also returned a total of $6 billion to our stockholders:
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6 ï 2017 Proxy Statement
Executive Compensation Highlights
We pay for performance, and pay outcomes reflect the achievements of our NEOs against our strategic priorities.
We target compensation at the 50th percentile, or median, of our peer group for all elements of compensation.
2016 Target Total Direct Compensation Mix
Our compensation program is directly linked to our strategy. Each year, our Compensation and Management Development Committee, or Compensation Committee, approves Company performance goals that are designed to focus our staff on delivering on our financial and operational objectives to drive annual performance, facilitate the execution of our strategic priorities, and position us for longer-term success.
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ï 2017 Proxy Statement7
2016 Award Allocation and Performance
2016 Annual Cash Incentive Program
| Goal | Weighting | % of Target Earned | ||||||
1. Financial Performance |
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Revenues | 30% | 139.7% | ||||||
Non-GAAP Net Income(1) | 30% | 147.5% | ||||||
2. Execute Product and Delivery System Launches |
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Execute Product and Delivery System Launches | 10% | 127.8% | ||||||
3. Progress Innovative Pipeline |
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Execute Key Clinical Studies and Regulatory Filings | 20% | 190.0% | ||||||
Advance Early Pipeline | 10% | 225.0% | ||||||
Composite Score | Achieved 159.5% | |||||||
Long-Term Incentive Performance Award Program
| Long-Term Incentive Program | Weighting | % of Target | ||||||
Performance Units (2014-2016 performance period) | 80% | 112.5% | ||||||
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE
ADVISORY RESOLUTION INDICATING THE APPROVAL OF THE COMPENSATION OF THE
COMPANY’S NAMED EXECUTIVE OFFICERS.
8 ï 2017 Proxy Statement
Item 4: Advisory Vote on the Frequency of Future Stockholder Advisory Votes to Approve Executive Compensation (Page 37)
Stockholders are being asked to vote on the frequency of future stockholder advisory votes to approve executive compensation.
The Board believes annual votes facilitate the highest level of accountability to, and communication with, our stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS ELECT TO HAVE
ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY “ONE YEAR” FOR THE
REASONS STATED ABOVE.
Item 5: Stockholder Proposal (Page 38)88)
Stockholders have informed the Company that they intend to present a proposal at our Annual Meeting.
The proposal requests a change inrelates to the Company’s governing documentsrequest for an annual report on the extent to adopt majority votes cast standard for matters presented by stockholders.which risks related to public concern over drug pricing strategies are integrated into our executive incentive compensation.
The Board has thoroughly considered the proposal and believes that it is NOT in the CompanyCompany’s or stockholders’ best interests for the reasons identified starting on page 3989 of the proxy statement, which include the following:
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THE BOARD STRONGLY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST”
THE STOCKHOLDER PROPOSAL ON MAJORITY VOTES CAST STANDARD.
THE BOARD STRONGLY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST” THE STOCKHOLDER PROPOSAL FOR AN ANNUAL REPORT ON THE EXTENT TO WHICH RISKS RELATED TO PUBLIC CONCERN OVER DRUG PRICING STRATEGIES ARE INTEGRATED INTO OUR EXECUTIVE INCENTIVE COMPENSATION. |
6 ï 20172018 Proxy Statement9
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Proxy Statement
Information Concerning Voting and Solicitation
General
The enclosed proxy is solicited on behalf of the Board of Directors, or Board, of Amgen Inc., a Delaware corporation, for use at our 2017 Annual Meeting of Stockholders, or Annual Meeting, to be held on Friday, May 19, 2017, at 11:00 A.M., local time, or at any continuation, postponement or adjournment thereof, for the purposes discussed in this proxy statement and in the accompanying Notice of Annual Meeting of Stockholders and any business properly brought before the Annual Meeting. Amgen Inc. may also be referred to as Amgen, the Company, we, us or our in this proxy statement. Proxies are solicited to give all stockholders of record an opportunity to vote on matters properly presented at the Annual Meeting. The Annual Meeting will be held at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362.
Pursuant to the rules adopted by the Securities and Exchange Commission, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials, or Notice, to certain of our stockholders of record, and we are sending a paper copy of the proxy materials and proxy card to other stockholders of record who we believe would prefer receiving such materials in paper form. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar Notice. Stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the Notice and on the website referred to in the Notice, including an option to request paper copies on an ongoing basis. We intend to make this proxy statement available on the Internet
and to mail the Notice, or to mail the proxy statement and proxy card, as applicable, on or about April 6, 2017 to all stockholders entitled to notice of and to vote at the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the 2017 Stockholder Meeting to Be Held on May 19, 2017.
This proxy statement, our 2016 annual report and our other proxy materials are available at:www.astproxyportal.com/ast/Amgen. At this website, you will find a complete set of the following proxy materials: notice of 2017 Annual Meeting of Stockholders; proxy statement; 2016 annual report and form proxy card. You are encouraged to access and review all of the important information contained in the proxy materials before submitting a proxy or voting at the meeting.
What Are You Voting On?
You will be entitled to vote on the following proposals at the Annual Meeting:
The election of the 13 director nominees named herein to serve on our Board for a term of office expiring at the 2018 annual meeting of stockholders;
The ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2017;
The advisory vote to approve our executive compensation;
The advisory vote on the frequency of future stockholder advisory votes to approve executive compensation;
10 ï 2017 Proxy Statement
One stockholder proposal, if properly presented; and
Any other business as may properly come before the Annual Meeting.
Who Can Vote
The Board has set March 20, 2017 as the record date for the Annual Meeting. You are entitled to notice and to vote if you were a stockholder of record of our Common Stock, $.0001 par value per share, or Common Stock, as of the close of business on March 20, 2017. You are entitled to one vote on each proposal for each share of Common Stock you held on the record date. Your shares may be voted at the Annual Meeting only if you are present in person or your shares are represented by a valid proxy.
Difference Between a Stockholder of Record and a “Street Name” Holder
If your shares are registered directly in your name in the records of the Company’s transfer agent, you are considered the stockholder of record with respect to those shares.
If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares. However, you are still considered to be the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot submit a proxy or vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares using the methods described below.
Shares Outstanding and Quorum
At the close of business on March 20, 2017, there were 735,890,171 shares of our Common Stock outstanding and entitled to vote at the Annual Meeting. The presence of the holders of a majority of the outstanding shares of our Common Stock entitled to vote constitutes a quorum, which is required to hold and conduct business at the Annual Meeting. Shares are counted as present at the Annual Meeting if:
You are present in person at the Annual Meeting; or
Your shares are represented by a properly authorized and submitted proxy (submitted by mail, by telephone or over the Internet).
If you are a record holder and you submit your proxy, regardless of whether you abstain from voting on one or more matters, your shares will be counted as present at the Annual Meeting for the purpose of determining a quorum. If your shares are held in “street name,” your shares are counted as present for purposes of determining a quorum if your broker, bank, trust or other nominee submits a proxy covering your shares. Your broker, bank, trust or other nominee is entitled to submit a proxy covering your shares as to certain “routine” matters, even if you have not instructed your broker, bank, trust or other nominee on how to vote on those matters. Please see the subsection “If You Do Not Specify How You Want Your Shares Voted” below. In the absence of a quorum, the Annual Meeting may be adjourned, from time to time, by the chairman of the meeting or by the vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting.
Voting Your Shares
You may vote by attending the Annual Meeting and voting in person or by submitting a proxy. The method of voting by proxy differs (1) depending on whether you are viewing this proxy statement on the Internet or receiving a paper copy and (2) for shares held as a record holder and shares held in “street name.”
Shares Held as a Record Holder. If you hold your shares of Common Stock as a record holder and you are viewing this proxy statement on the Internet, you may submit a proxy over the Internet by following the instructions on the website referred to in the Notice previously mailed to you. You may request paper copies of the proxy statement and proxy card by following the instructions on the Notice. If you hold your shares of Common Stock as a record holder and you are reviewing a paper copy of this proxy statement, you may submit a proxy over the Internet or by telephone by following the instructions on the proxy card, or by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in thepre-addressed, postage-paid envelope provided to you.
ï 2017 Proxy Statement11
Shares Held in Street Name. If you hold your shares of Common Stock in street name, you will receive a Notice from your broker, bank, trust or other nominee that includes instructions on how to vote your shares. Your broker, bank, trust or other nominee may allow you to deliver your voting instructions over the Internet and may also permit you to submit your voting instructions by telephone. In addition, you may request paper copies of the proxy statement and proxy card from your broker by following the instructions on the Notice provided by your broker, bank, trust or other nominee.
The Internet and telephone voting facilities will close at 11:59 P.M., Eastern Time, on May 18, 2017. Stockholders who submit a proxy through the Internet or telephone should be aware that they may incur costs to access the Internet or telephone, such as usage charges from telephone companies or Internet service providers and that these costs must be borne by the stockholder. Stockholders who submit a proxy by Internet or telephone need not return a proxy card or the form forwarded by your broker, bank, trust or other holder of record by mail.
YOUR VOTE IS VERY IMPORTANT.
You should submit your proxy even if you plan to
attend the Annual Meeting.
Voting in Person
If you plan to attend the Annual Meeting and wish to vote in person, you may request a ballot at the Annual Meeting.Please note that if your shares are held of record by a broker, bank, trust or other nominee, and you decide to attend and vote at the Annual Meeting, your vote in person at the Annual Meeting will not be effective unless you present a legal proxy, issued in your name from the record holder (your broker, bank, trust or other nominee). Even if you intend to attend the Annual Meeting, we encourage you to submit your proxy in advance of the Annual Meeting. Please see the important instructions and requirements below regarding “Attendance at the Annual Meeting.”
Changing Your Vote
As a stockholder of record, if you submit a proxy, you may revoke that proxy at any time before it is voted at the Annual Meeting. Stockholders of record may revoke a proxy by (i) delivering a written notice of revocation to the attention of
the Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, (ii) duly submitting a later-dated proxy over the Internet, by mail or by telephone or (iii) attending the Annual Meeting in person and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.
If your shares are held in the name of a broker, bank, trust or other nominee, you may change your voting instructions by following the instructions of your broker, bank, trust or other nominee.
If You Receive More Than One Proxy Card or Notice
If you receive more than one proxy card or Notice, it means you hold shares that are registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or, if you submit a proxy by telephone or the Internet, submit one proxy for each proxy card or Notice you receive.
How Will Your Shares Be Voted
Stockholders of record as of the close of business on March 20, 2017 are entitled to one vote for each share of our Common Stock held on all matters to be voted upon at the Annual Meeting. All shares entitled to vote and represented by properly submitted proxies received before the polls are closed at the Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in accordance with the instructions indicated on those proxies.YOUR VOTE IS VERY IMPORTANT.
If You Do Not Specify How You Want Your Shares Voted
As a stockholder of record, if you submit a signed proxy card or submit your proxy by telephone or Internet and do not specify how you want your shares voted, the proxy holder will vote your shares:
FOR the election of the 13 nominees listed in this proxy statement to serve on our Board for a term of office expiring at the 2018 annual meeting of stockholders;
FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2017;
12 ï 2017 Proxy Statement
FOR the advisory vote to approve our executive compensation;
FOR holding the advisory vote on the frequency of future stockholder advisory votes to approve executive compensation every “ONE YEAR”; and
AGAINST the one stockholder proposal to adopt majority votes cast standard for matters presented by stockholders, if properly presented.
A “brokernon-vote” occurs when a nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner and the nominee does not have discretionary authority to vote the shares. If you hold your shares in street name and do not provide voting instructions to your broker or other nominee, your shares will be considered to be brokernon-votes and will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote. Shares that constitute brokernon-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum, but will not be considered entitled to vote on the proposal in question. Brokers generally have discretionary authority to vote on the ratification of the selection of Ernst & Young LLP as our independent registered public accountants. Brokers, however, do not have discretionary authority to vote on the election of directors to serve on our Board, the advisory vote to approve our executive compensation, the advisory vote on the frequency of future advisory votes to approve executive compensation or on any stockholder proposals.
In their discretion, the proxy holders named in the proxy are authorized to vote on any other matters that may properly come before the Annual Meeting and at any continuation, postponement or adjournment thereof. The Board knows of no other items of business that will be presented for consideration at the Annual Meeting other than those described in this proxy statement. In addition, other than the stockholder proposal described in this proxy statement, no other stockholder proposal or nomination (that was not subsequently withdrawn or excluded) was received on a timely basis, so no such matters may be brought to a vote at the Annual Meeting.
Inspector of Election and Counting of Votes
All votes will be tabulated as required by Delaware law, the state of our incorporation, by the inspector of election
appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and brokernon-votes. Shares held by persons attending the Annual Meeting but not voting, shares represented by proxies that reflect abstentions as to one or more proposals and brokernon-votes will be counted as present for purposes of determining a quorum.
Election of Directors.We have a majority voting standard for the election of directors in an uncontested election, which is generally defined as an election in which the number of nominees does not exceed the number of directors to be elected at the meeting. In the election of directors, you may either vote “for,” “against” or “abstain” for each nominee. Cumulative voting is not permitted. Under our majority voting standard, in uncontested elections of directors, such as this election, each director must be elected by the affirmative vote of a majority of the votes cast by the shares present in person or represented by proxy. A “majority of the votes cast” means that the number of votes cast “for” a director nominee exceeds the number of votes cast “against” the nominee. For these purposes, abstentions will not count as a vote “for” or “against” a nominee’s election and thus will have no effect in determining whether a director nominee has received a majority of the votes cast. Brokers do not have discretionary authority to vote on this proposal. Brokernon-votes will have no effect on the election of directors as brokers are not entitled to vote for or against a nominee without instruction from the beneficial owner. If a director nominee is an incumbent director and does not receive a majority of the votes cast in an uncontested election, that director will continue to serve on the Board as a “holdover” director, but must tender his or her resignation to the Board promptly after certification of the election results of the stockholder vote. The Governance and Nominating Committee of the Board will then recommend to the Board whether to accept the resignation or whether other action should be taken. The Board will act on the tendered resignation, taking into account the recommendation of the Governance and Nominating Committee, and the Board’s decision will be publicly disclosed within 90 days after certification of the election results of the stockholder vote. A director who tenders his or her resignation after failing to receive a majority of the votes cast will not participate in the recommendation of the Governance and Nominating Committee or the decision of the Board with respect to his or her resignation.
ï 2017 Proxy Statement13
Management Proposals (Ratification of Ernst & Young LLP, Advisory Vote to Approve Our Executive Compensation and Advisory Vote on the Frequency of Future Stockholder Advisory Votes to Approve Executive Compensation) and Stockholder Proposal to Adopt Majority Votes Cast Standard for Matters Presented by Stockholders.The ratification of the selection of Ernst & Young LLP, the approval of the advisory vote to approve our executive compensation, the approval of the advisory vote on the frequency of future stockholder advisory votes to approve executive compensation, and the approval of the stockholder proposal, if properly presented at the Annual Meeting, each require the affirmative votes of the holders of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter. Abstentions will have the same effect as votes “against” each proposal. With respect to the advisory vote on the frequency of future stockholder advisory votes to approve executive compensation, if none of the frequency alternatives (one year, two years or three years) receive a majority vote, we will consider the frequency that receives the highest number of votes by stockholders to be the frequency that has been selected by our stockholders on an advisory basis.
Because brokers have discretionary authority to vote on the ratification of the selection of Ernst & Young LLP, we do not expect any brokernon-votes in connection with the ratification. Brokers do not have discretionary authority to vote on the advisory vote to approve our executive compensation, the advisory vote on the frequency of future stockholder advisory votes to approve executive compensation or on the stockholder proposal to adopt majority votes cast standard for matters presented by stockholders. Brokernon-votes, therefore, will have no effect on the advisory votes to approve our executive compensation, the advisory vote on the frequency of future stockholder advisory votes to approve executive compensation, or on the stockholder proposal as brokers are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner.
Solicitation of Proxies
We will bear the entire cost of solicitation of proxies, including preparation, assembly and mailing of this proxy statement, the proxy, the Notice and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding shares of our Common Stock in their names that are beneficially owned by others to forward to those beneficial owners. We may reimburse persons representing beneficial owners for their costs of forwarding the solicitation materials to the beneficial owners. Original solicitation of proxies may be supplemented by telephone, facsimile, electronic mail or personal solicitation by our directors, officers or staff members. No additional compensation will be paid to our directors, officers or staff members for such services. In addition, we have retained D.F. King & Co. to assist in the solicitation of proxies for a fee of approximately $150,000 plus distribution costs and other costs and expenses. A list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder for any purpose germane to the Annual Meeting during ordinary business hours at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California, 91320-1799 for the ten days prior to the Annual Meeting and also at the Annual Meeting.
Attendance at the Annual Meeting
To attend the Annual Meeting, you will need an admittance ticket and proof of ownership of our Common Stock as of the close of business on March 20, 2017. If you have received a paper copy of the proxy statement, to receive an admittance ticket you will need to complete and return the postage-paid reply card included in this proxy statement. If you received electronic delivery of this proxy statement, you will receive ane-mail with instructions for obtaining an admittance ticket. If you are viewing the proxy statement over the Internet, please follow the instructions indicated on the website referred to in the Notice. Each stockholder is entitled to one admittance ticket. Directions to attend the Annual Meeting will be sent with your admittance ticket and are available at the website referred to in the Notice andwww.astproxyportal.com/ast/Amgen.
You must bring certain documents with you to be admitted to the Annual Meeting. The purpose of this requirement is to help us verify that you are actually a stockholder of the Company. Please read the following rules carefully, because they specify the documents that you must bring with you to the Annual Meeting to be admitted. The items that you must bring with you differ depending upon whether or not you
14 ï 2017 Proxy Statement
were a record holder of our Common Stock as of the close of business on March 20, 2017. See “Difference Between a Stockholder of Record and a ‘Street Name’ Holder” previously discussed.
All persons must bring a valid personal photo identification (such as a driver’s license or passport). If you are a record holder, at the Annual Meeting, we will check your name for verification purposes against our list of record holders as of the close of business on March 20, 2017.
If a broker, bank, trust or other nominee was the record holder of your shares of Common Stock as of the close of business on March 20, 2017, then in addition to the applicable items above, you must also bring to the Annual Meeting:
Proof that you owned shares of our Common Stock as of the close of business on March 20, 2017; and
If you intend to vote at the Annual Meeting, the executed proxy naming you as the proxy holder, signed by the
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Examples of proof of ownership include the following: (1) an original or a copy of the voting information form from your bank or broker with your name on it; (2) a letter from your bank or broker stating that you owned shares of our Common Stock as of the close of business on March 20, 2017 or (3) a brokerage account statement indicating that you owned shares of our Common Stock as of the close of business on March 20, 2017.
If you are a proxy holder for a stockholder of the Company who owned shares of our Common Stock as of the close of business on March 20, 2017, then you must also bring to the Annual Meeting:
The executed proxy naming you as the proxy holder, signed by a stockholder of the Company who owned shares of our Common Stock as of the close of business on March 20, 2017.
ï 2017 Proxy Statement15
Election of Directors
Under our governing documents, the Board of Directors, or Board, has the power to set the number of directors from time to time by resolution. We currently have 1514 authorized directors serving on our Board. Ellen J. KullmanWanda M. Austin was appointed on October 14, 2016 and Charles M. Holley, Jr. was appointed on February 1, 2017 to serve on our Board.Board effective December 11, 2017. Based upon the recommendation of our Governance and Nominating Committee, the Board has nominated each ofthe current directors directornomineessetforthbelowto stand forre-election, or in thecaseof Ms. Kullman Dr. Austinand Mr. Holley BrianJ.Drukertostandforinitialelectionby ourstockholders,ineachcasefor aone-yeartermexpiringatour 20182019 annualmeetingofstockholdersanduntilhisorhersuccessoriselected andqualified,oruntilhisorherearlierretirement,resignation,
disqualification, removal or death. Frank J. Biondi, Jr.David Baltimore and Judith C. Pelham François de Carbonnelwill retire from our Board and have not been nominated forre-election at the 20172018 Annual Meeting of Stockholders, or Annual Meeting. The Board has fixed the authorized number of directors at 13 to be effective as of the close of the Annual Meeting and the election by stockholders of the nominees standing for election. The independent members of the Board have elected Robert A. Eckert to continue to serve as our lead independent director, subject to hisre-election to the Board by our stockholders at the Annual Meeting. As lead independent director, Mr. Eckert will continue to have the specific and significant duties as discussed under “Corporate Governance.”
OurNominees to the Board possesses a deep and broad set of skills and experiences that facilitate strong oversight and strategic direction for a leading global innovator in biomedicine:
Nominee | Age | Director Since | Audit | Governance and Nominating | Executive | Compensation and Management Development | Equity Award | Corporate Responsibility and Compliance | ||||||||||||
Wanda M. Austin
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| 63
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| 2017
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| M
| M
| ||||||||||||
Robert A. Bradway
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| 55
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| 2011
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| C
| M
| ||||||||||||
Brian J. Druker(1)
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| 62
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|
| Initial Election
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| ||||||||||||||
Robert A. Eckert
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| 63
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| 2012
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| M
| M
| C
| C
| ||||||||||
Greg C. Garland
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| 60
|
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| 2013
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| C
| M
| M
| M
| ||||||||||
Fred Hassan
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| 72
|
|
| 2015
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| M
| M
| ||||||||||||
Rebecca M. Henderson
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| 57
|
|
| 2009
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| M
| M
| ||||||||||||
Frank C. Herringer
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| 75
|
|
| 2004
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| M
| M
| M
| |||||||||||
Charles M. Holley, Jr.
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| 61
|
|
| 2017
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| C
| M
| ||||||||||||
Tyler Jacks
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| 57
|
|
| 2012
|
| M
| M
| ||||||||||||
Ellen J. Kullman
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| 62
|
|
| 2016
|
| M
| M
| ||||||||||||
Ronald D. Sugar
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| 69
|
|
| 2010
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| M
| M
| C
| |||||||||||
R. Sanders Williams
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| 69
|
|
| 2014
|
| M
| M
| ||||||||||||
| “C” | indicates Chair of the committee. |
| “M” | indicates member of the committee. |
| (1) | Dr. Druker is standing for initial election to the Board. Dr. Druker has been appointed to the Audit Committee and the Corporate Responsibility and Compliance Committee, effective as of the Annual Meeting and subject to his election to the Board by our stockholders. |
16 ï 20172018 Proxy Statement 7
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Nominees to the Board of Directors
| Nominee | Age | Director Since | Audit(1) | Governance and Nominating | Executive | Compensation and Management Development(1) | Equity Award(1) | Corporate Responsibility and Compliance | ||||||||||||
David Baltimore
| 79 | 1999 | X | X | ||||||||||||||||
Robert A. Bradway
| 54 | 2011 | C | X | ||||||||||||||||
François de Carbonnel
| 70 | 2008 | X | X | ||||||||||||||||
Robert A. Eckert
| 62 | 2012 | X | X | X | |||||||||||||||
Greg C. Garland
| 59 | 2013 | C | X | X | X | ||||||||||||||
Fred Hassan
| 71 | 2015 | X | X | ||||||||||||||||
Rebecca M. Henderson
| 56 | 2009 | X | X | ||||||||||||||||
Frank C. Herringer
| 74 | 2004 | X | X | C | C | ||||||||||||||
Charles M. Holley, Jr.
| 60 | 2017 | X | X | ||||||||||||||||
Tyler Jacks
| 56 | 2012 | X | X | ||||||||||||||||
Ellen J. Kullman
| 61 | 2016 | X | X | ||||||||||||||||
Ronald D. Sugar
| 68 | 2010 | X | X | C | |||||||||||||||
R. Sanders Williams
| 68 | 2014 | X | X | ||||||||||||||||
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Vacancies on the Board (including any vacancy created by an increase in the size of the Board) may be filled only by a majority of the directors remaining in office, even though less than a quorum of the Board. A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the size of the Board) will serve until the next annual meeting of stockholders and until such director’s successor is elected and qualified, or until such director’s earlier retirement, resignation, disqualification, removal or death.
Each nominee has agreed to serve if elected and the Board has no reason to believe that any nominee will be unable to serve. However, if any nominee should become unavailable for election prior to the Annual Meeting (an event that currently is not anticipated by the Board) the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or, alternatively, the number of directors may be reduced accordingly by the Board.
Summary of Director Nominee Core Experiences and Skills
Our Board possesses a deep and broad set of skills and experiences that facilitate strong oversight and strategic direction for a leading global innovator in biomedicine. The following chart summarizes the competencies of each director nominee to be represented on our Board. The details of each director’s competencies are included in each director’s profile.
The lack of a “✓” for a particular item does not mean that the director does not possess that qualification, characteristic, skill or experience. Each of our Board members have experience and/or skills in the enumerated areas, however, the✓ is designed to indicate that a director has particular strength in that area.
9 new Directors since 2012 8 Experienced Current and Former Public Company 6 Directors w/ Scientific Research and/or CEO/CFO Healthcare Experience 5 Directors with Financial Industry Experience 3 Women Experience / Skills Austin Bradway Druker Eckert Garland Hassan Henderson Herringer Holley Jacks Kullman Sugar Williams Healthcare Industry, Providers and Payers Science/Technology Public Company CEO/COO/CFO Regulatory Compliance Financial/Accounting Government/Public Policy International
8 ï 20172018 Proxy Statement17
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES NAMED BELOW.NOMINEES. PROXIES WILL BE VOTED “FOR” THE ELECTION OF THE NOMINEES UNLESS OTHERWISE SPECIFIED.
Set forth below is biographical information for each nominee and a summary of the specific qualifications, attributes, skills and experiences which led our Board to conclude that each nominee should serve on the Board at this time. All of our directors meet the qualifications and skills of our Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations included in this proxy statement asAppendix A. There are no family relationships among any of our directors or among any of our directors and our executive officers.
David Baltimore
Wanda M. Austin Director since:
Age:
Committees: • Audit • Corporate Responsibility and Compliance
Other Public CompanyBoards: •
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Wanda M. Austin has served as a director of the Company since December 11, 2017. Dr. Austin was first identified to the Governance and Nominating Committee as a potential director candidate by anon-employee member of the Board. She is the retired President Dr. Austin has served as an Adjunct Research Professor | |||
California and previously served on the boards of directors of
Qualifications
The Board concluded that Dr. | ||||
18 ï 2017 Proxy Statement
Robert A. Bradway
Director since:2011
Age:
Committees: • Equity Award • Executive (Chair)
Other Public Company Boards: • The Boeing
| Robert A. Bradway has served as our director since
Mr. Bradway has been a director of | |||
since
Qualifications
The Board concluded that Mr. Bradway should serve on the Board | ||||
ï 20172018 Proxy Statement19 9
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François de CarbonnelElection of Directors
Brian J. Druker Director since:
Age:
Committees: If elected by stockholders, Dr. Druker is expected to serve on the following committees: • Audit • Corporate Responsibility and Compliance
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Brian J. Druker is standing for initial election to the Company’s Board and will be appointed as a director Dr. Druker has served on the scientific advisory boards of Aptose Biosciences Inc., a biotechnology company, since 2013, and Grail, Inc., a biotechology company, since 2016. In 2011, he founded Blueprint Medicines Corporation, a biopharmaceutical company, and remains as a scientific advisor to this company. In 2006, he founded MolecularMD, a privately-held |
Qualifications
The Board concluded that | ||
20 ï 2017 Proxy Statement
Robert A. Eckert
Lead Independent Director
Director since: 2012 Age:
• Compensation and Management • Equity Award (Chair) • Executive • Governance and Nominating
Other Public CompanyBoards: • McDonald’s Corporation | Robert A. Eckert is our lead independent director. Mr. Eckert has been an Operating Partner at Friedman Fleischer & Lowe, a private equity firm, since
Mr. Eckert has been a director of McDonald’s Corporation, a company which franchises and operates McDonald’s restaurants in the global restaurant industry, since 2003, serving as the Chair of the Public Policy and Strategy Committee and a member of the Executive and Governance Committees. Mr. Eckert was a director of Smart & Final Stores, Inc., a warehouse store, from
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Greg C. GarlandQualifications
The Board concluded that Mr. Eckert should serve on our Board because of Mr. Eckert’s long-tenured experience as a chief executive officer of large public companies, his broad international experience in marketing and business development, and his valuable leadership experience.
10 ï 2018 Proxy Statement
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Director since: 2013 Age:
Committees: • Compensation and Management Development • Equity Award • Executive • Governance and Nominating (Chair)
Other Public CompanyBoards: • Phillips 66(1) | Greg C. Garland is the Chairman and Chief Executive Officer of Phillips 66, an energy manufacturing and logistics company with midstream, chemical, refining and marketing and specialties businesses created through the repositioning of ConocoPhillips, having held this position since
Qualifications
The Board concluded that Mr. Garland should serve on our Board because of Mr. Garland’s experience as a |
ï 2017 Proxy Statement21
| (1) | Mr. Garland also serves as Chairman and Chief Executive Officer of Phillips 66 Partners LP, a master limited partnership and wholly-owned subsidiary of Phillips 66 without any employees. |
Fred Hassan
Fred Hassan Director since:2015
Age:
Committees: • Audit • Compensation and Management
Other Public CompanyBoards: • Intrexon Corporation • Time Warner Inc.
Audit Committeefinancial expert | Fred Hassan
Mr. Hassan has been a director of Time Warner Inc., a media company, since 2009, serving on its Nominating and Governance and Compensation and Human Development Committees; and Intrexon Corporation, a synthetic biology company, since | |||
from 1999 until 2013 and served on its Compensation and Management Development, Nominating and Corporate Governance and Audit Committees, as lead independent director from 2009 to 2012, and Chairman of the Board between January and April 2013. Mr. Hassan was Chairman of the Board of Bausch & Lomb, from 2010 until its acquisition by Valeant Pharmaceuticals International, Inc., a pharmaceutical company, in 2013. Mr. Hassan served on the board of directors and Compensation and Audit Committees of Valeant Pharmaceuticals International, Inc.
Qualifications
The Board concluded that Mr. Hassan should serve on the Board | ||||
22 ï 20172018 Proxy Statement 11
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Rebecca M. HendersonElection of Directors
Director since: 2009 Age:
Committees: • Audit • Corporate Responsibility and Compliance
Other Public CompanyBoards: • IDEXX Laboratories, Inc. | Rebecca M. Henderson has been the John and Natty McArthur University Professor at Harvard University since 2011. From 2009 to 2011, Dr. Henderson served as the Senator John Heinz Professor of Environmental Management at Harvard Business School. Prior to this, she was a professor of management at the Massachusetts Institute of Technology, or MIT, for 21 years, having been the Eastman Kodak LFM Professor of Management since 1999. Since 1995, she has also been a Research Associate at the National Bureau of Economic Research. She specializes in technology strategy and the broader strategic problems faced by companies in high technology industries.
Dr. Henderson has been a director of IDEXX Laboratories, Inc., a company which provides diagnostic and information technology-based products and services for veterinary, food and water applications, since 2003, chairing its Finance Committee and serving on its Nominating and Governance Committee. Dr. Henderson has also served as a director of the Ember Corporation, a privately-held semiconductor chip manufacturer, and on its Compensation Committee, from 2001 to July 2009. She has further been a
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director of Linbeck Construction Corporation, a privately-held facility solutions company, from 2000 until 2004. Dr. Henderson has published articles, papers and reviews in a range of scholarly journals. Dr. Henderson received an undergraduate degree from MIT and a doctorate from Harvard University.
Qualifications
The Board concluded that Dr. Henderson should serve on the Board because Dr. Henderson’s study of the complex strategy issues faced by high technology companies provides valuable insight into the Company’s strategic and technology issues.
ï 2017 Proxy Statement23
Frank C. Herringer
Frank C. Herringer Director since:2004
Age:
Committees: • • Executive
• Governance and Nominating
Other Public Company Boards: • The Charles Schwab Corporation Audit Committee financial expert | Frank C. Herringer has been a director of the Board of Transamerica Corporation, a financial services company since 1986, serving as Chairman of the board of directors from 1995 to
Mr. Herringer has been a director of The Charles Schwab Corporation, a brokerage and banking company, since 1996, serving on its Compensation Committee and chairing its Nominating and Corporate Governance Committee. Mr. Herringer is a member of the Board of Trustees of the California Pacific Medical Center Foundation, anot-for-profit organization which develops philanthropic resources for the California Pacific Medical Center, a privately-held,not-for-profit academic medical center, since 2013. Mr. Herringer was a director of Safeway Inc., a food and drug retailer, from 2008 until | |||
and was a director of its parent company, Cardax Pharmaceuticals, Inc., from 2006 until
Qualifications
The Board concluded that Mr. Herringer should serve on the Board | ||||
2412 ï 20172018 Proxy Statement
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Charles M. Holley, Jr.Election of Directors
Director since: 2017 Age:
Committees: • Audit (Chair) • Corporate Responsibility and Compliance
Audit Committeefinancial expert | Charles M. Holley, Jr.
Mr. Holley serves on the |
Qualifications
The Board concluded that Mr. Holley should serve on the Board | ||
ï 2017 Proxy Statement25
Tyler Jacks
Director since: 2012 Age:
Committees: • Audit • Compensation and Management Development
Other Public Company Boards: • Thermo Fisher Scientific, Inc. | Tyler Jacks joined the faculty of Massachusetts Institute of Technology, or MIT, in 1992 and is currently the David H. Koch Professor of Biology and director of the David H. Koch Institute for Integrative Cancer Research, which brings together biologists and engineers to improve detection, diagnosis and treatment of cancer, a position he has held since 2007. Dr. Jacks has been an investigator with the Howard Hughes Medical Institute, a nonprofit medical research organization, since 1994.
Dr. Jacks has been a director of Thermo Fisher Scientific, Inc., a life sciences supply company, since | |||
Advisory Board, which advises and assists the Director of the National Cancer Institute with respect to the National Cancer Program, in
Qualifications
The Board concluded that Dr. Jacks should serve on the Board | ||||
26 ï 20172018 Proxy Statement 13
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Ellen J. KullmanElection of Directors
Ellen J. Kullman Director since:2016
Age:
Committees: • Audit • Governance and Nominating
Other Public Company Boards: • Goldman Sachs Group, Inc. • United Technologies Corporation
Audit Committeefinancial expert | Ellen J.
Ms. Kullman has also served as a director of Carbon3D, Inc., a privately-held 3D printing company, since |
Technologies, a privately-held technology company, and the Temasek Americas Advisory Panel of Temasek Holdings (Private) Limited, a privately-held investment company based in Singapore. Ms. Kullman received a bachelor of science in mechanical engineering degree from Tufts University and a master’s degree from the Kellogg School of Management at Northwestern University.
Qualifications
The Board concluded that Ms. Kullman should serve on the Board | ||
ï 2017 Proxy Statement27
Ronald D. Sugar
Director since:2010
Age:
Committees: • Corporate Responsibility and Compliance (Chair) • Executive • Governance and Nominating
Other Public CompanyBoards: • Air Lease Corporation • Apple Inc. • Chevron Corporation | Ronald D. Sugar is the retired Chairman of the Board and Chief Executive Officer of Northrop Grumman Corporation, a global aerospace and defense company, having held these posts from 2003 through 2009.
Dr. Sugar has been a director of Chevron Corporation, a petroleum, exploration, production and refining company, since 2005, serving as the lead director and on the Management Compensation Committee and chairing the Board Nominating and Governance | |||
Qualifications
The Board concluded that Dr. Sugar should serve on our Board because Dr. Sugar’s board and senior executive-level expertise, including his experience as | ||
2814 ï 20172018 Proxy Statement
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R. Sanders WilliamsElection of Directors
R. Sanders Williams Director since:2014
Age:
Committees: • Corporate Responsibility and Compliance • Governance and Nominating
Other Public Company Boards: • Laboratory Corporation of America Holdings | R. Sanders Williams is
Dr. Williams has been a director of the Laboratory Corporation of America Holdings, a diagnostic technologies company, since 2007, serving on the Audit Committee and chairing the Quality and Compliance Committee. Dr. Williams was a director of Bristol-Myers Squibb Company, a pharmaceutical |
company, from 2006 until 2013. Dr. Williams has served on the board of directors of the Gladstone Foundation, anon-profit institution that is distinct from Gladstone Institutes, since 2012 and on the board of directors of Exploratorium, anon-profit science museum and learning center located in San Francisco, since 2011. Dr. Williams was elected to the National Academy of Medicine in 2002. Dr. Williams received his undergraduate degree from Princeton University and his doctorate from Duke University.
Qualifications
The Board concluded that Dr. Williams should serve on the Board |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE ABOVE 13 NAMED NOMINEES.
ï 20172018 Proxy Statement29 15
Ratification of Selection of Independent Registered Public Accountants
The Audit Committee of the Board of Directors, or Board, has selected Ernst & Young LLP, or Ernst & Young, as our independent registered public accountants for the fiscal year ending December 31, 2017, and the Board has directed that management submit this selection for ratification by the stockholders at our 2017 Annual Meeting of Stockholders, or Annual Meeting. Ernst & Young has served as our independent registered public accounting firm and has audited our financial statements since the Company’s inception in 1980. The Audit Committee periodically considers whether there should be a rotation of our independent registered public accountants. Each year, the Audit Committee evaluates the qualifications and performance of the Company’s independent registered public accountants and determines whether tore-engage the current independent registered public accountants. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent registered public accountants, their technical expertise and knowledge of our operations and industry. Based on this evaluation,the members of the Audit Committee believe that the continued retention of Ernst & Young as our independent registered public accountants is in the best interests of the Company and its stockholders. In conjunction with the mandated rotation of Ernst & Young’s lead engagement partner, the Audit Committee and its chairperson are directly
involved in the selection of Ernst & Young’s new lead engagement partner. The process for selection of Ernst & Young’s lead engagement partner involves a meeting between the Audit Committee’s chairperson and the candidate, as well as an assessment by the full Audit Committee and management. A representative of Ernst & Young is expected to be present at the Annual Meeting and will have an opportunity to make a statement and respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young as our independent registered public accountants is not required by the Amgen Inc. Restated Certificate of Incorporation, the Amended and Restated Bylaws of Amgen Inc., or otherwise. However, the Board is submitting the selection of Ernst & Young to the stockholders for ratification because we believe it is a matter of good corporate governance practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Ernst & Young, but still may retain them. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in our best interests and that of our stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
30 ï 2017 Proxy Statement
Advisory Vote to Approve Our Executive Compensation
This advisory stockholder vote, commonly known as “Say on Pay,” gives you, as a stockholder, the opportunity to endorse or not endorse our executive pay program and policies. Accordingly, you are being asked to vote on the compensation of our Named Executive Officers, or NEOs, as disclosed in the Compensation Discussion and Analysis (pages 56 through 87) and related compensation tables and the narrative in this proxy statement (pages 88 through 106).
Our executive compensation program is designed to achieve the following objectives:
Pay for performance in a manner that strongly aligns with stockholder interests by rewarding both ourshort-and long-term measurable performance.
Drive implementation of our business strategy and position our staff to execute on our strategy in thenear-and longer-term.
Attract, motivate and retain the highest level of executive talent by providing competitive compensation, consistent with their roles and responsibilities, our success and their contributions to this success.
Mitigate compensation riskby maintaining pay practices that reward actions and outcomes consistent with the sound operation of our Company and with the creation of long-term stockholder value.
Consider all Amgen staff members in the design of our executive compensation programs, to ensure a consistent approach that encourages and rewards all staff members who contribute to our success.
2016 Executive Compensation Was Aligned With Our Strategy and Performance
As discussed more fully in our Compensation Discussion and Analysis starting on page 56, a significant majority of each NEO’s compensation is dependent on our performance and our execution of our strategic priorities and the compensation objectives discussed above.
The focus of our strategy is to develop innovative medicines that meet important unmet medical needs. Six therapeutic areas form the core of our business (cardiovascular, oncology/hematology, bone health, neuroscience, inflammation, and nephrology). Our strategy to execute in these therapeutic areas is multifaceted, with seven strategic priorities that allow us to drive long-term growth, while also delivering on our short- and medium-term goals.
Strategic Priorities
ï 2017 Proxy Statement31
Our annual cash incentive award program compensation is tied directly to our performance based onpre-established financial and operating performance goals that support execution of our strategic priorities
| Goal | Weighting | % of Target Earned | ||||||
1. Financial Performance
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Revenues
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30%
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139.7%
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Non-GAAP Net Income(1)
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30%
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147.5%
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2. Execute Product and Delivery System Launches
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Execute Product and Delivery System Launches
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3. Progress Innovative Pipeline
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Execute Key Clinical Studies and Regulatory Filings
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| 190.0%
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Advance Early Pipeline
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10%
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225.0%
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Composite Score
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Achieved 159.5%
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Below is a summary discussion of our key accomplishments for 2016. For further discussion of these accomplishments, the achievement of which aligns our NEO pay with performance and supports the execution of our strategic priorities, please see pages 57 through 61 of our Compensation Discussion and Analysis.
1. We delivered on our financial performance goals.
In 2016, our financial performance was strong, and we delivered on our financial performance goals.
We grew revenues by 6% over 2015 to $23 billion in 2016.
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to execute on the transformation and process improvement efforts announced in 2014. Our transformation and process improvement efforts across Amgen are enabling us to reallocate resources to fund many of our innovative pipeline and growth opportunities that deliver value to patients and stockholders.
Operating leverage from the changes we have made enables us to drive net income growth in the near-term while our longer-term investments have laid the foundation for growth beyond this period.
Since 2014, we have realized approximately $1.2 billion of transformation and process improvement savings the majority of which was reinvested in product launches, clinical programs and external business development.
2. We executed on product and delivery system launches.
This is the first full year that we have been able to provide patients with our six innovative products launched in 2015 (Repatha®, Kyprolis®, BLINCYTO®, IMLYGIC®, Neulasta®On-Pro® Kit, and Corlanor®). Repatha® and Kyprolis® both represent substantial opportunities as they address serious diseases impacting large patient populations with significant unmet medical needs.
For Repatha® (our medicine for certain patients who are unable to get theirlow-density lipoprotein (bad cholesterol) under control with current treatment options), we have focused on competing effectively, including capturing approximately 60% of share of new to brand prescriptions in the U.S., as of January 2017. Our focus remains on enabling Repatha® for appropriate patients as hurdle rates for access and reimbursement for prescribers and patients remain high. Supportive of our Repatha® launch, we also announced the results from three significant Phase 3 studies that demonstrate (1) significant low-density lipoprotein reductions for patients with high cholesterol treated with Repatha® who cannot tolerate statins, (2) that Repatha® regresses atherosclerosis in patients with coronary artery disease, and (3) that Repatha® reduces the risk of cardiovascular events in patients with clinically evident atherosclerotic disease.
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32 ï 2017 Proxy Statement
In our oncology therapeutic area for Kyprolis® (our medicine for patients with relapsed or refractory multiple myeloma), we reported strong unit growth driven by increased share andex-U.S. launches.
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During the last five years, we have expanded our reach to approximately 100 countries. In 2016, capitalizing on our expansion activities, we had 94 product country launches.
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Our pipeline continued to advance in 2016. In addition to announcing the approval of Parsabiv™ (etelcalcetide) in the E.U., we reported the results of several important clinical trials, including the Phase 3 trials discussed above for Repatha®, as well as successful Phase 3 trials in EVENITY™* (romosuzumab)(1), Prolia®, XGEVA®, and erenumab(2). We have programs nearing key regulatory milestones, including the Biologics License Application under review with the FDA(3) for EVENITY™*.
Also, in our nephrology therapeutic area, we reported that the European Commission approved Parsabiv™ (etelcalcetide) for the treatment of secondary hyperparathyroidism in adult patients with chronic kidney disease on hemodialysis.
In our biosimilars portfolio in 2016, we reported we received FDAapproval for AMJEVITA™ (biosimilar adalimumab (HUMIRA®)) and submitted applications to the FDA and EMEA(4) for ABP 215(5) (biosimilar bevacizumab (Avastin®)) and are in Phase 3 for ABP 980(5) (biosimilar trastuzumab (Herceptin®)), ABP 798(5) (biosimilar rituximab (Rituxan®/Mabthera®)), and ABP 710 (biosimilar infliximab (REMICADE®)).
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ï 2017 Proxy Statement33
In 2016, we also made strong progress on executing against our other strategic priorities:
➣ We invested for long-term growth while returning substantial capital to our stockholders.
Our strong cash flows and balance sheet allowed continued investment for long-term growth through internal research and development and external business development transactions, while simultaneously providing substantial returns to stockholders.
In 2016, we invested $3.8 billion in research and development while also returning $6 billion of capital to our stockholders through the payment of dividends and stock repurchases.
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We repurchased approximately 20 million shares of our Common Stock during 2016 at an aggregate cost of $3 billion.
We made investments in next-generation biomanufacturing that dramatically reduces the scale and costs of making biologics while maintaining a reliable, high-quality, compliant supply of medicines.
Our Long-Term Incentive Program Results
Our long-term incentive, or LTI, equity award compensation is tied directly to our stock performance and aligns with the interests of our stockholders.
80% of our annual LTI equity award grants are performance-based and, as such, a significant portion of total compensation is tied to our stock price performance and value creation for our stockholders.
Payout under our LTI performance award program for our 2014-2016 performance period at 112.5% reflects our three-year total shareholder return, or TSR, performance at the 56.2nd percentile relative to the TSRs of the companies in the Standard & Poor’s 500 Index for this performance period.
Positive 2016 Say on Pay Vote Outcome and Engagement With Our Stockholders
In 2016, we received approximately 97% stockholder support on our say on pay advisory vote. We have engaged consistently in broad direct stockholder outreach over the past several years and the compensation-related feedback is reviewed by our Compensation and Management Development Committee, or Compensation Committee. We have made a number of compensation changes in response to past discussions with our stockholders and have implemented the compensation best practices discussed below.
Since our 2016 annual meeting of stockholders, in addition to our outreach by our executives and our Investor Relations department to investors, we have engaged ingovernance-focused outreach activities and discussions with stockholders comprising approximately 52% of our outstanding shares. While we are pleased with our say on pay results and stockholder feedback, we will continue to reach out to understand and address any concerns of our stockholders. For more detail regarding stockholder engagement, see page 62.
34 ï 2017 Proxy Statement
We Have Implemented Compensation Best Practices
We are mindful of compensation and governance best practices as demonstrated below:
What we do
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What we don’t do
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ï 2017 Proxy Statement35
Board Recommends a Vote “FOR” Our Executive Compensation
Our Board believes that our current executive compensation program aligns the interests of our executives with those of our stockholders and compensation outcomes are primarily based on the performance of our Company. We intend that our compensation programs reward actions and outcomes that are consistent with the sound operation of our Company, advance our strategy and are aligned with the creation of long-term stockholder value.
For the reasons discussed above, the Board recommends that stockholders vote “FOR” the following resolution:
“Resolved, that the stockholders approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Securities and
Exchange Commission rules in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosure of this proxy statement.”
Although this vote is advisory and is not binding on the Board, our Compensation Committee values the opinions expressed by our stockholders and will consider the outcome of the vote when making future executive compensation decisions.
We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote on executive compensation at our 2018 annual meeting of stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ADVISORY RESOLUTION INDICATING THE APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
36 ï 2017 Proxy Statement
Advisory Vote on the Frequency of Future Stockholder Advisory Votes to Approve Executive Compensation
In connection with the advisory vote on our executive compensation, Item 3, stockholders are also being asked to vote on the frequency of future stockholder advisory votes to approve executive compensation, as required by Securities and Exchange Commission rules. Stockholders may vote whether an advisory vote to approve our executive compensation should be held every year, every two years or every three years. Our current practice is to provide advisory votes on executive compensation every year.
We believe that it is important to give our stockholders the opportunity to provide input on our executive compensation in a consistent and meaningful manner. As such, the Board believes that our stockholders should have the opportunity to voice their approval or disapproval of our executive compensation each year. The Board believes that annual votes will facilitate the highest level of accountability to, and communication with, our stockholders. Further, an annual
vote clearly ties the advisory vote on executive compensation to the current year’s compensation disclosure and avoids the potential for confusion as to which year stockholders are being asked to evaluate and vote on that might exist with a biennial or triennial vote.
This vote is advisory and is not binding. However, the Board values the opinions expressed by our stockholders and will consider the outcome of the vote when determining the frequency with which advisory votes on executive compensation should be held. Stockholders are not being asked to approve or disapprove of the Board’s recommendation of an advisory vote on executive compensation every year, but rather to indicate their own choice among the frequency options for an advisory vote on executive compensation of every one year, every two years or every three years.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS ELECT TO HAVE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION EVERY “ONE YEAR” FOR THE REASONS STATED ABOVE.
ï 2017 Proxy Statement37
Stockholder Proposal
Stockholders have informed the Company that they intend to present the proposal to adopt majority votes cast standard for matters presented by stockholders set forth below at our 2017 Annual Meeting of Stockholders, or Annual Meeting. If the stockholders (or their respective “qualified representative” as determined under our Amended and Restated Bylaws of Amgen Inc.) are present at the Annual Meeting and properly submit the proposal for a vote, then the stockholder proposal will be voted upon at the Annual Meeting.
In accordance with the Federal securities laws, the stockholder proposal and supporting statement is presented below as submitted by the stockholders, is quoted verbatim and in italics. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the supporting statement.
FOR THE REASONS STATED IN THE BOARD OF DIRECTOR’S, OR BOARD, RESPONSES, WHICH FOLLOW THE STOCKHOLDER PROPOSAL, THE BOARD STRONGLY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST” THE STOCKHOLDER PROPOSAL.
Stockholder Proposal
Sarah F. Rutherford and M. Burke Stansbury, each the owner of 50 shares of our Common Stock as of December 5, 2016, along with aco-filer and appointing Investor Voice, SPC as their representative, with an address of 111 Queen Anne Ave N, Suite 500, Seattle, WA 98109, have notified the Company that they intend to submit the following proposal at the Annual Meeting. Walden Asset Management, owner of a purported 27,018 shares of our Common Stock as of December 7, 2016, has notified us that they areco-filing the proposal.
RESOLVED: Amgen, Inc. (“Amgen”) shareholders ask the Board to take or initiate steps to amend Company governing documents to provide that all non-binding matters presented by shareholders shall be decided by a simple majority of the
votes cast FOR and AGAINST an item. This policy would apply to all such matters unless shareholders have approved higher thresholds, or applicable laws or stock exchange regulations dictate otherwise.
SUPPORTING STATEMENT:
This proposal seeks greater transparency, clarity, and understanding around how informed stockholders vote on shareholder proposals
A democratic “simple majority” formula includes votes cast FOR and AGAINST but not abstentions. It provides the most clear and accurate picture of the intent of shareowners who are both informedand decided, while not including in the formula the votes of abstaining voters who, by definition, have chosen not to express an opinion.
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When abstaining voters choose to not express an opinion and mark ABSTAIN (whether they are confused, disinterested, agnostic, or lack time to become fully informed), it is apparent that their votes should be regarded as neither FOR nor AGAINST an item.
Instead of this, Amgen counts ABSTAIN votes as if AGAINST every shareholder sponsored proposal.
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Amgen has implied that it must use the Delaware “default standard” (which includes abstentions). However, this nominal ‘standard’ is not mandated – it is what Delaware assigns to companies that do not proactively choose “simple majority” voting.
Research has demonstrated that the so-called ‘default standard’ systematically disadvantages shareholders:
http://bit.ly/Voting-Research_Corporate-Secretary.
38 ï 2017 Proxy Statement
How does it do this?
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The math is simple: When abstaining shareholders elect to not express an opinion, but then are treated as if having voted AGAINST a proposal, management benefits. This is because shareholder proposals normally appear in proxies only when management disagrees with the proposal or would rather avoid the subject.
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Historically, these practices have allowed management teams to describe numerous true majority votes on shareholder items as, instead, having ‘failed’.
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Annual meeting votes offer the sole opportunity for most shareholders to communicate with Boards. Counting abstentions as de facto votes AGAINST
shareholder proposals, management changes how outcomes are reported and how the public perceives support for shareholder concerns.
In contrast to how shareholder items are treated, we note that Amgen’s Director Election (where management benefits from the appearance of strong support), does not count abstentions.Thus, management items and shareholder items donot receive equal treatment; though the Company has complete discretion to cure these inconsistencies in its voting policies.
To avert such discrepancies, aCouncil of Institutional Investors policy states: “...abstentions should be counted only for purposes of a quorum.”
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~ ~ ~
Board Response to the Stockholder Proposal
The Board of Directors recommends a vote “AGAINST” the Stockholder Proposal for the following reasons:
Our Board of Directors has considered this proposal and has concluded that it is not in the best interests of the Company or its stockholders to adopt the proponent’s vote-counting methodology.
Our stockholder approval standard and vote counting methodology of including abstentions adheres to Delaware law.The Company is incorporated in the State of Delaware and, therefore, Delaware law governs the voting standards for action by the Company’s stockholders. The required vote for action by the Company’s stockholders follows the default approval standard for stockholder action under Delaware law. The Company’s Amended and Restated Bylaws provide that, except in the election of directors, as otherwise provided by the Company’s governing documents or required by applicable laws, rules and regulations, when a quorum is present, the affirmative vote of the holders of a majority of the shares present (in person or by proxy) and entitled to vote is required to approve any matter brought before a stockholder meeting. We believe the majority of Delaware corporations adhere to the same default voting standard.
Under Delaware law, abstentions are considered shares “entitled to vote.” Accordingly, in the vote tabulation for matters that require the affirmative vote of the majority of the shares present and entitled to vote, abstentions are not included in the numerator (because they are not affirmative votes), but are included in the denominator as shares entitled to vote. Therefore, abstentions under this standard have the same practical effect as a vote “against” a proposal.
Our vote counting methodology applies identically to management-sponsored proposalsand stockholder proposals. In its supporting statement, the proponent focuses on the effect that counting abstentions has on stockholder proposals. As disclosed in this proxy statement, abstention votes are included in the vote count for each of the management-sponsored proposals and have the same practical effect as a vote against them. This vote count standard does not favor the management-sponsored proposals over the stockholder proposals. Both are treated equally. In contrast, the proponent’s vote-counting methodology favors stockholder proposals over management-sponsored proposals.
ï 2017 Proxy Statement39
Our Board of Directors believes that since stockholders are made aware of the treatment and effect of abstentions, counting abstention votes effectively honors the intent of our stockholders. Stockholders typically have three voting choices for a particular proposal: for; against; and abstain. In the proxy statement for each annual meeting, the Company discloses the vote required to approve each proposal, and also describes how abstentions will be counted in the vote tabulation and the effect of abstentions on the outcome of a matter. The Company’s stockholders are informed that if they vote “abstain” on a proposal other than the election of directors their vote will have the same practical effect as an “against” vote, and the Board believes that counting abstention votes effectively honors the intent of the Company’s stockholders.
If a stockholder elects to abstain on a matter, the Board believes that the stockholder recognizes the impact of the vote and expects it to be included in the vote count.
Furthermore, the Board believes that abstentions serve a worthwhile purpose. The proponent of an item of business, be it management or a stockholder, bears the burden of persuading a majority of stockholders to affirmatively vote in favor of the item. Contrary to the proponent’s perception, we believe that our stockholders are fully informed (and not “confused, disinterested, agnostic, or lack time to become fully informed”) when they choose to abstain. Consistent with conversations we have had with some of our stockholders, a CalPERS report recognizes the value of abstentions, noting, “that some institutional investors abstain on shareholder proposals when they wish to convey support for the general subject matter, but have reservations about the specific action requested.”(1) We therefore do not believe it would be in our stockholders’ best interest or effective corporate governance to disregard these views.
Our Board of Directors believes that lowering the approval standard for stockholder-sponsored proposals would be poor corporate governance. The proponent
requests that abstentions be ignored for all stockholder-sponsored matters presented to the Company’s stockholders. Ignoring abstention votes would lower the approval standard and effectively make approval easier. Except with respect to the election of directors and matters that require, statutorily or otherwise, a different vote, the Board believes that a proposal—whether management-sponsored or stockholder-sponsored—should receive more “for” votes than the sum of “against” and “abstain” votes in order to constitute approval by the Company’s stockholders.
The Board believes that it would not be effective corporate governance or serve the best interests of the Company’s stockholders to take one voting standard that an organization applies to a specific context and adopt that standard to stockholder-sponsored matters. Further, we also note that based on our review of our prior annual meeting voting results, the counting of abstention votes as shares entitled to vote was not determinative of the outcome of any proposal submitted to our stockholders at any of our annual meetings in the past decade.
Faced with similar proposals in 2016, stockholders overwhelmingly did not support the adoption of the proposed vote counting methodology. In 2016, eight companies, including Amgen, included a proposal related to a majority vote counting methodology in their 2016 annual meeting proxy statements. Each of those proposals received less than 13% support from stockholders. Additionally, Investor Voice (then known as Newground Social Investment, SPC) included a similar proposal in our 2016 annual meeting proxy statement which received very low support (approximately 6.5%) from our stockholders. Moreover, this proposal has been in our proxy statement for a number of years and has consistently received very low support (well under 10%), a clear indication that stockholders are informed about our vote counting methodology and approve of our current practice.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE STOCKHOLDER PROPOSAL ON MAJORITY VOTES CAST STANDARD.
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40 ï 2017 Proxy Statement
Security Ownership of Directors and Executive Officers
The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of March 20, 2017 by: (i) each current director and nominee; (ii) our Named Executive Officers, or NEOs (as specified on page 56) and (iii) all of our current directors and executive officers as a group. There were 735,890,171 shares of our Common Stock outstanding as of March 20, 2017. None of our directors, nominees, NEOs or executive officers, individually or as a group, beneficially owns greater than 1% of our outstanding shares of Common Stock.
| Amgen Inc. Common Stock(1)(2) | ||||||||||||
| Beneficial Owner | Total Common Stock Beneficially Owned | Shares Acquirable Within 60 Days | Percent of Total | |||||||||
Non-Employee Directors and Nominees | ||||||||||||
David Baltimore |
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48,629 |
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15,000 |
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Frank J. Biondi, Jr. |
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31,696 |
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15,000 |
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* |
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François de Carbonnel |
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16,382 |
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0 |
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* |
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Robert A. Eckert |
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20,435 |
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20,000 |
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* |
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Greg C. Garland |
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4,694 |
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0 |
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* |
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Fred Hassan |
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4,861 |
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0 |
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* |
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Rebecca M. Henderson |
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8,000 |
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8,000 |
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* |
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Frank C. Herringer(3) |
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42,722 |
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15,000 |
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* |
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Charles M. Holley, Jr. |
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30 |
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0 |
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* |
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Tyler Jacks |
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21,890 |
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20,000 |
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* |
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Ellen J. Kullman |
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410 |
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0 |
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* |
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Judith C. Pelham |
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10,002 |
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0 |
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* |
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Ronald D. Sugar |
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30,000 |
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30,000 |
|
|
* |
| |||
R. Sanders Williams |
|
2,779 |
|
|
0 |
|
|
* |
| |||
Named Executive Officers | ||||||||||||
Robert A. Bradway |
|
519,217 |
|
|
200,500 |
|
|
* |
| |||
Anthony C. Hooper |
|
177,032 |
|
|
0 |
|
|
* |
| |||
David W. Meline |
|
14,769 |
|
|
0 |
|
|
* |
| |||
Sean E. Harper |
|
72,614 |
|
|
37,000 |
|
|
* |
| |||
Jonathan P. Graham |
|
6,018 |
|
|
0 |
|
|
* |
| |||
All current directors and executive officers as a group (24 individuals)(4)
|
|
1,388,369 |
|
|
417,467 |
|
|
* |
| |||
|
|
ï 2017 Proxy Statement41
|
| Name | RSUs and Dividend Equivalents Included | Stock Included | RSUs and Dividend Equivalents Excluded Because of Deferrals | |||||||||
David Baltimore |
|
0 |
|
|
15,000 |
|
|
0 |
| |||
Frank J. Biondi, Jr. |
|
0 |
|
|
15,000 |
|
|
18,709 |
| |||
François de Carbonnel |
|
0 |
|
|
0 |
|
|
2,229 |
| |||
Robert A. Eckert |
|
0 |
|
|
20,000 |
|
|
6,485 |
| |||
Greg C. Garland |
|
0 |
|
|
0 |
|
|
0 |
| |||
Fred Hassan |
|
0 |
|
|
0 |
|
|
0 |
| |||
Rebecca M. Henderson |
|
0 |
|
|
8,000 |
|
|
10,435 |
| |||
Frank C. Herringer |
|
0 |
|
|
15,000 |
|
|
20,211 |
| |||
Charles M. Holley, Jr. |
|
0 |
|
|
0 |
|
|
0 |
| |||
Tyler Jacks |
|
0 |
|
|
20,000 |
|
|
4,478 |
| |||
Ellen J. Kullman |
|
0 |
|
|
0 |
|
|
0 |
| |||
Judith C. Pelham |
|
0 |
|
|
0 |
|
|
0 |
| |||
Ronald D. Sugar |
|
0 |
|
|
30,000 |
|
|
10,056 |
| |||
R. Sanders Williams |
|
0 |
|
|
0 |
|
|
0 |
| |||
Robert A. Bradway |
|
0 |
|
|
200,500 |
|
|
0 |
| |||
Anthony C. Hooper |
|
0 |
|
|
0 |
|
|
0 |
| |||
David W. Meline |
|
0 |
|
|
0 |
|
|
0 |
| |||
Sean E. Harper |
|
0 |
|
|
37,000 |
|
|
0 |
| |||
Jonathan P. Graham |
|
0 |
|
|
0 |
|
|
0 |
| |||
|
|
42 ï 2017 Proxy Statement
Security Ownership of Certain Beneficial Owners
The following table shows the number of shares of our Common Stock owned by each person or entity known to the Company to be the beneficial owners of more than 5% of our Common Stock as of March 20, 2017, based on a review of publicly available statements of beneficial ownership filed with the Securities and Exchange Commission, or SEC, on Schedules 13D and 13G through March 20, 2017.
| Common Stock Beneficially Owned | ||||||||
| Name and Address of Beneficial Owner | Number of Shares | Percent of Total(1) | ||||||
Capital Research Global Investors(2) 333 South Hope Street Los Angeles, CA 90071
|
| 65,482,167
|
|
| 8.9%
|
| ||
BlackRock, Inc.(3) 55 East 52nd Street New York, NY 10055
|
| 50,485,583
|
|
| 6.9%
|
| ||
The Vanguard Group(4) 100 Vanguard Blvd. Malvern, PA 19355
|
| 48,096,649
|
|
| 6.5%
|
| ||
FMR LLC(5) 245 Summer Street Boston, MA 02210
|
| 40,789,786
|
|
| 5.5%
|
| ||
|
|
|
|
|
ï 2017 Proxy Statement43
Board of Directors Corporate Governance Highlights
Our Board of Directors, or Board, is governed by our Amgen Board of Directors Corporate Governance Principles, or Corporate Governance Principles which are amended from time to time to incorporate certain current best practices in corporate governance. Our Corporate Governance Principles may be found on our website atwww.amgen.com and are available in print upon written request to the Company’s Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799. The Board’s corporate governance practices and stockholder rights include the following:
Board Governance Practices
|
| • | Lead Independent Director. The independent members of the Board elect a lead independent director on an annual basis. The lead independent director has |
| • | Regular Executive Sessions of Independent Directors.Our independent directors meet privately on a regular basis. Our lead independent director presides at such meetings. |
| • | Majority Approval Required for Director Elections. If an incumbent director up forre-election at a meeting of stockholders fails to receive a majority of affirmative votes in an uncontested election, the Board will adhere to the director resignation policy as provided in |
| • | Board Access to Management. We afford our directors ready access to our management. Key members of management attend Board and committee meetings to present information concerning various aspects of the Company, its operations and results. The Corporate Responsibility and Compliance Committee, or Compliance Committee, members also have regular meetings in executive session with our Chief Compliance Officer, and the Audit Committee members have regular meetings in executive session with our internal and external auditors and separate meetings in executive session with our head of Corporate Audit. |
| • | Board Authority to Retain Outside Advisors. Our Board committees have the authority to retain outside advisors. The Audit Committee has the sole authority to appoint, compensate, retain and oversee the independent registered public accountants. The Compensation and Management Development Committee, or Compensation Committee, has the sole authority to appoint, compensate, retain and oversee compensation advisors for senior management compensation review. The Governance and Nominating Committee, or Governance Committee, has the sole authority to appoint, retain and replace search firms to identify director candidates and compensation advisors for our directors’ compensation review. |
| • | Director Limitation on Number of Boards. A director who is currently serving as our Chief Executive Officer, or CEO, should not serve on more than two outside public company boards. No director should serve on more than five outside public company boards. |
| • | Director Tenure. Our average Board tenure |
| • | Director Retirement Age. The Board has established a retirement age of 72. A director is expected to retire from the Board on the day of the annual meeting of stockholders following his or her |
44 ï 2017 Proxy Statement
with respect to |
| • | Director Changes in Circumstances Evaluated. If a director has a substantial change in principal business or professional affiliation or responsibility, including a change in principal occupation, he or she shall offer his or her resignation to the chairman of the Governance Committee. The Governance Committee determines whether to accept the resignation based on what it believes to be in the best interests of the Company and our stockholders. |
| • | Director Outside Relationships RequirePre-Approval. Without the prior approval of disinterested members of the Board, directors should not enter into any transaction or relationship with the Company in which they will have a financial or a personal interest or any transaction that otherwise involves a conflict of interest. |
| • | Director Conflicts of Interest. If an actual or potential conflict of interest arises for a director or a situation arises giving the appearance of an actual or potential conflict, the director must promptly inform the Chairman |
of the Board, or Chairman, or the chairman of the Governance Committee. All directors |
| • | Regular Board and Committee Evaluations. The Board and the Audit, Compensation, Compliance and Governance Committees each have an annual evaluation |
| • | Solicitation of Stockholder Perspectives. The Board believes that engagement with stockholders is the source of valuable information and perspectives on the Company. The Board has requested that management solicit input from investors on behalf of the Board and the lead independent director may also meet directly with stockholders when appropriate. We provide more information regarding the stockholder engagement program on page |
Director Qualifications and Review of Board Diversity
Our Governance Committee is responsible for determining Board membership qualifications and for selecting, evaluating and recommending to the Board nominees for annual election to the Board and to fill vacancies as they arise. The Governance Committee reviews periodically with the Board the composition and size of the Board, each committee’s performance and makes recommendations, as necessary, so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity advisable for the Board as a whole and contains at least the minimum number of independent directors required by applicable laws and regulations.
The Governance Committee maintains guidelines for selecting nominees to serve on the Board and for considering stockholder recommendations for nominees. The Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations are included in this proxy statement asAppendix A. Among other things, Board members should possess demonstrated breadth and depth of management and leadership experience, financial and/or business acumen or relevant industry or scientific experience, integrity and high ethical standards, sufficient time to devote to the Company’s business, the ability to oversee, as a director, the Company’s business and affairs for the benefit of our
16 ï 20172018 Proxy Statement45
|
stockholders, the ability to comply with the Amgen Board of Directors Code of Conduct and a demonstrated ability to think independently and work collaboratively. In addition, although the Governance Committee does not maintain a diversity policy, the Governance Committee considers diversity in itsStockholder Rights
| • | Proxy Access. Our Bylaws permit proxy access for director nominations. Eligible stockholders with an ownership threshold of 3% who have held their shares for at least 3 years and who otherwise meet the requirements set forth in our Bylaws may have their nominees consisting of the greater of 20% or two nominees of our Board included in our proxy materials. Up to 20 eligible stockholders may group together to reach the 3% ownership threshold. In the course of designing our proxy access provisions, we carefully considered each element in the interest of our stockholders as a whole, including that the number of stockholders who may group together (20) would afford those stockholders likely to utilize proxy access with the opportunity to do so. |
| • | Written Consent. Our Amgen Inc. Restated Certificate of Incorporation, or Certificate of Incorporation, permits stockholders to act by written consent in lieu of a meeting upon the request of the holders of at least 15% of our outstanding common shares who otherwise meet the requirements of our Certificate of Incorporation. |
determinations. Diversity includes race, ethnicity, age and gender and is also broadly construed to take into consideration many other factors, including industry knowledge, operational experience and scientific and academic expertise, geography and personal backgrounds.
| • | Special Meetings. Our Bylaws permit stockholders to call a special meeting upon the written request of the holders of at least 15% of our outstanding common shares who otherwise meet the requirements set forth in our Bylaws. |
| • | No Supermajority Vote Provisions in Certificate of Incorporation or Bylaws. We have a simple majority voting standard to amend our Certificate of Incorporation and Bylaws and to approve major mergers and acquisitions. |
Our current leadership structure and governing documents permit the roles of Chairman and CEO to be filled by the same or different individuals. The Board has currently determined that it is in the best interests of the Company and our stockholders to have Robert A. Bradway, our CEO and President, serve as Chairman, coupled with an active lead independent director. As such, Mr. Bradway holds the position of Chairman, CEO and President, and Mr. Eckert has served as the lead independent director since the May 19, 2016 annual meeting of stockholders, or 2016 Annual Meeting. Prior to this, Vance D. Coffman served as the lead independent director until his retirement from the Board.
Corporate Governance Structure. The Board believes our corporate governance structure, with its strong emphasis on Board independence, an active lead independent director and strong Board and committee involvement, provides sound and robust oversight of management.
Director Independence. At least annually, the Governance Committee reviews the independence of eachnon-employee director and makes recommendations regarding director independence to the Board and the Board affirmatively determines whether each director qualifies as independent. Each director must keep the Governance Committee fully and promptly informed as to any development that may affect the director’s independence. 12 out of the 13 director nominees (approximately 92%) are independent as defined by The NASDAQ Stock Market, or NASDAQ, listing standards and the requirements of the Securities and Exchange Commission, or SEC, with the exception being Mr. Bradway. All of our directors are elected annually.
Lead Independent Director. The lead independent director is elected by the independent members of the Board on an annual basis. Mr. Eckert has been elected as the lead independent director effective since the 2016 Annual Meeting and wasre-elected by our Board on March 7, 20172018 to continue to serve as lead independent director subject to hisre-election to the Board by our stockholders at the Annual Meeting.
In such position, the lead independent director serves as a means for regular communication between the independent directors and Mr. Bradway, keeping Mr. Bradway apprised of any concerns, issues or determinations made during the independent sessions, and consults with Mr. Bradway on other matters pertinent to the Company and the Board. The lead independent director’s additional responsibilities include:
Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Serving as a liaison between the Chairman and the independent directors;
Previewing the information to be provided to the Board;
Approving meeting agendas for the Board;
Assuring that there is sufficient time for discussion of all meeting agenda items;
Organizing and leading the Board’s evaluation of the CEO;
Being responsible for leading the Board’s annualself-assessment;
Having the authority to call meetings of the independent directors; and
If requested by major stockholders, ensuring that he/she is available for consultation and direct communication.
Key Committees Composed of Independent Directors. The Audit, Compensation, Compliance and Governance Committees are each composed solely of independent directors and provide independent oversight of management. In addition, the Audit, Compensation and Compliance Committees meet in executive session on a regular basis with no members of management present (unless otherwise requested by the committee). Each of our committees effectively manages its Board-delegated duties and communicates regularly with the Chairman and members of
46 ï 2017 Proxy Statement
management. In addition, the Compensation Committee has an effective process for monitoring and evaluating Mr. Bradway’s compensation and performance. Each committee chair provides a report on committee meetings held to the full Board at each regular meeting of the Board.
Independent Directors Sessions. On a regular basis, the independent directors meet in an executive session without Mr. Bradway to review Company performance, management effectiveness, proposed programs and transactions and the Board meeting agenda items. These independent sessions are organized and chaired by our lead independent director.
Annual Assessment. As part of the Board’s annualself-evaluation process, the Board reviews its leadership structure and whether combining or separating the roles of Chairman and CEO is in the best interests of the Company and our stockholders.
ï 2018 Proxy Statement 17
Corporate Governance |
Benefits of Combined Leadership Structure. The Board believes that the Company and our stockholders have been best served by having Mr. Bradway in the role of Chairman and CEO for the following reasons:
Mr. Bradway is most familiar with our business and the unique challenges we face. Mr. Bradway’sday-to-day insight into our challenges facilitates a timely deliberation by the Board of important matters.
Mr. Bradway has and will continue to identify agenda items and lead effective discussions on the important matters affecting us. Mr. Bradway’s knowledge and extensive experience regarding our operations and the highly-regulated industries and markets in which we compete position him to identify and prioritize matters for Board review and deliberation.
As Chairman and CEO, Mr. Bradway serves as an important bridge between the Board and management and provides critical leadership for carrying out our strategic initiatives and confronting our challenges. The Board believes that Mr. Bradway brings a unique, stockholder-focused insight to assist the Company to most effectively execute its strategy and business plans to maximize stockholder value.
The strength and effectiveness of the communications between Mr. Bradway as our Chairman and Mr. Eckert as our lead independent director result in effective Board oversight of the issues, plans and prospects of our Company.
This leadership structure provides the Board with more complete and timely information about the Company, a unified structure and consistent leadership direction internally and externally and provides a collaborative and collegial environment for Board decision making.
Flexibility of the Leadership Structure. The Board is committed to high standards of corporate governance. The Board values its flexibility to select, from time to time, a leadership structure that is most able to serve the Company’s and stockholders’ best interests based on the qualifications of individuals available and circumstances existing at the time. As such, the Board regularly evaluates whether combining or separating the roles of Chairman and CEO is in the best interests of the Company and our stockholders. The Board believes that a policy limiting its flexibility to choose consistent with its fiduciary duties, a leadership structure that will enable the Company to most effectively execute its strategy and business plans to maximize stockholder value would be detrimental to the Company and our stockholders.
The Board’s Role in Risk Oversight
Our Board oversees an enterprise-wide approach to risk management, which is designed to support the achievement of the Company’s objectives, including strategic objectivespriorities to improve long-term financial and operational performance and enhance stockholder value. Our Board believes that a fundamental part of risk management is understanding the risks that we face, monitoring these risks and adopting appropriate control and mitigation of these risks. We believe that the risk management areas that are fundamental to the success of our annual and strategic plans include the areas of product development, safety, supply, quality, value and access, sales and promotion, and corporatebusiness development, as well as protecting our assets (financial, intellectual property and information)information (including cybersecurity)), all of which are managed cross-functionally by senior executive management reporting directly to our CEO.
We have implemented an Enterprise Risk Management, or ERM, program, which is a Company-wide effort to identify, assess, manage, report and monitor enterprise risks and risk areas that may affect our ability to achieve the Company’s objectives. The ERM program involves our Board ourand management and other personnel and is overseen by one of our senior executive officers. Enterprise risks are identified and managed by management and the business functions and, as discussed below, are overseen by the Board or the appropriate Board committee.
ï 2017 Proxy Statement47
The Board discusses enterprise risks with our senior management on a regular basis, including as a part of its annual strategic planning process, annual budget review and approval, capital plan review and approval and through reviews of compliance issues in the applicable committees of
our Board, as appropriate.
18 ï 2018 Proxy Statement
Corporate Governance |
While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board are structured to oversee specific risks, as follows:
Committee
| Primary Risk Oversight Responsibility
| |||
Audit Committee | • Oversees financial risk, such as capital risk, financial compliance risk and internal controls over financial reporting.
| |||
Corporate Responsibility and Compliance Committee | • Overseesnon-financial compliance risk, such as regulatory
| |||
Compensation and Management Development Committee | • Evaluates whether the right management talent is in
| |||
Governance and Nominating Committee | • Oversees the assessment of each member of the Board’s independence, as well as the effectiveness of our Corporate Governance Principles and Board of Directors’ Code of Conduct.
| |||
At each regular meeting, or more frequently as needed, the Board considers reports from each of the committees set forth above, which reports may provide additional detail on risk management issues and management’s response.
Compensation Risk ManagementBoard Meetings
On an annual basis, management, working with the Compensation Committee’s independent compensation consultant, conducts an assessment of the Company’s compensation policies and practices for all staff members generally, and for our staff members who participate in our sales incentive compensation program, for material risk to the Company. The results of this assessment are reviewed and discussed with the Compensation Committee. Based on this assessment, review and discussion, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and our Company performance goals, our compensation policies and practices do not present risks that are reasonably likely to have a material adverse effect on us.
In evaluating our compensation policies and practices, a number of factors were identified which the Company, the Compensation Committee and its independent consultant believe discourage excessive risk-taking, including the factors described below:
Our compensation programs consist of a mix of incentives that are tied to varying performance periodsThe Board held seven meetings in 2017 and are designed to balance our need to drive our current performance with the need to position the Company for longer-term success.
Of this mix of incentives, Company-wide results are the most important factor in determining the amount of an incentive award for each of our staff members. Additionally, we cap short-term incentives and make long-term incentive, or LTI, equity awards a component of compensation for nearly all of the directors attended at least 75% of the total number of meetings of the Board and committeesonwhichtheyserved.WandaM.Austin was appointed to the Board effective in December 2017 and attended all meetings of the Board and committees on which she served after thedate of her
appointment. It is the Company’s policy that all current directors attend our full-time staff members. In particular,annual meetings of stockholders barring unforeseen circumstances or irresolvable conflicts. Thirteen of the CEO andthen-current members of the other executive officers participate in compensation plans that are designed so that the largest componentBoard were present at our 2017 annual meeting of theirstockholders, or 2017 Annual Meeting.
Our48annualmeetingofstockholdersprovidesanopportunityeachyear forstockholderstoaskquestionsof,orotherwisecommunicatedirectly with, membersoftheBoardonappropriatematters.In addition,stockholders maycommunicateinwritingwithanyparticulardirector,any committeeoftheBoard,orthedirectorsasagroup,bysendingsuch written communication to our Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799.Copiesofwrittencommunicationsreceivedatsuchaddresswill be provided to the Boardortherelevantdirectorunlesssuch communicationsareconsidered,inthereasonablejudgmentofour Secretary,tobe inappropriate for submission to the intended recipient(s). Examples of stockholder communications that would be considered inappropriate for submission to the Board include, without limitation, customer complaints, solicitations, communications that do
not relate directly or indirectly to our business or communications that relate to improper or irrelevant topics. The Secretary or his designee may analyze and prepare a response to the information contained in communications received and may deliver a copy of the communication to other Company staff members or agents who are responsible for analyzing or responding to complaints or requests. Communications concerning potential director nominees submitted by any of our stockholders will be forwarded to the chairman of the Governance Committee.
For information on our engagement with our stockholders since the 2017 Annual Meeting, please see page 38 of our Compensation Discussion and Analysis.
ï 20172018 Proxy Statement 19
|
TheBoardhasfour key standing committees: Governance Committee; Audit Committee; Compliance Committee; and Compensation Committee. The Compensation Committee has delegated certain responsibilitiestoanEquityAwardCommittee.Inaddition,anExecutive CommitteeoftheBoardhasallofthepowersandauthorityofthe Boardinthemanagementofourbusinessandaffairs,exceptwith respect to certain enumerated matters, including Board composition and compensation, changes to ourCertificate of Incorporation or any other matter expressly prohibited by law or our Certificate of Incorporation.
The Executive Committee did not meet in 2017. The Board maintains charters for each of these standing committees. In addition, the Board has adopted a written set of Corporate Governance Principles and a Board of Directors’ Code of Conduct that generally formalize practices we have in place. To view the charters of our standing Board committees, our Corporate Governance Principles and the Board of Directors’ code of conduct, please visit our website atwww.amgen.com.
We employ strong practices with respect to equity awards: we do not award mega-grants, discounted stock options or immediately vested stock options to staff members; we have grant guidelines that generally limit the grant date for our equity grants to the third business day after our announcementDirector Qualifications and Review of quarterly earnings.
We have robust stock ownership guidelines for vice presidents and above that require significant investment by these individuals in our Common Stock.
We require that each officer who has not met their required ownership guidelines retain shares of our Common Stock acquired through the vesting of restricted stock units, the payout of performance units, and the exercise of stock options awarded on or after December 15, 2015, net of shares retained by us to satisfy associated tax withholding requirements and exercise price amounts, until such officer has reached his or her required stock ownership level.
Our Company values and leadership behaviors are an integral part of the performance assessments of our
|
The Compensation Committee retains full discretion to reduce or eliminate annual cash incentive awards to our executive officers and can and has modified awards downwards.
We have a clawback policy that requires our Board to consider recapturing past cash or equity compensation payouts awarded to our executive officers if it is subsequently determined that the amounts of such compensation were determined based on financial results that are later restated and the executive officer’s misconduct caused or partially caused such restatement.
We have recoupment provisions that expressly allow the Compensation Committee or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an employee has earned an annual cash incentive award or the amount of any such award.
Our Insider Trading Policy prohibits pledging or purchasing of our Common Stock on margin and hedging the economic risk of our Common Stock.
Codes of Ethics and Business ConductDiversity
Our Governance Committee is responsible for determining Board has adopted two codesmembership qualifications and for selecting, evaluating and recommending to the Board nominees for annual election to the Board and to fill vacancies as they arise. The Governance Committee reviews periodically with the Board the composition and size of the Board, each committee’s performance and makes recommendations, as necessary, so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity advisable for the Board as a whole and contains at least the minimum number of independent directors required by applicable laws and regulations.
The Governance Committee maintains guidelines for selecting nominees to serve on the Board and for considering stockholder recommendations for nominees. The Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations are included in this proxy statement asAppendix A. Among other things, Board
members should possess demonstrated breadth and depth of management and leadership experience, financial and/or business conductacumen or relevant industry or scientific experience, integrity and ethics, one that applieshigh ethical standards, sufficient time to our directorsdevote to the Company’s business, the ability to oversee, as a director, the Company’s business and affairs for the second which applies to allbenefit of our staff members, including our executive officers. We also have astockholders, the ability to comply with the Amgen Board of Directors Code of Ethics for senior financial officers. To view our codes of business conduct, please visit our website atwww.amgen.com. We intendConduct and a demonstrated ability to
disclose any future amendments think independently and work collaboratively. In addition, although the Governance Committee does not maintain a diversity policy, the Governance Committee considers diversity in its determinations. Diversity includes race, ethnicity, age and gender and is also broadly construed to certain provisions of our codes of business conducttake into consideration many other factors, including industry knowledge, operational experience and ethics, or waivers of such provisions, applicable to our directorsscientific and executive officers, at the same location on our website identified above. There were no waivers of any of the codes of business conduct or the codes of ethics in 2016.academic expertise, geography and personal backgrounds.
20 ï 20172018 Proxy Statement49
|
Regular Board and Committee Evaluations
The Board and the Audit, Compensation, Compliance and Governance Committees each have an annual evaluation process which focuses on their roles, effectiveness, and fulfillment of their fiduciary duties.
1. | Initiation | Formal annual anonymous evaluations of the full Board as well as the Audit, Compensation, Compliance, and Governance Committees are compiled and distributed • Overseen by the Governance Committee | ||||
2. | Evaluation and Assessment | Directors provide feedback regarding Board or committee – • Composition and structure • Role and effectiveness • Fulfillment of fiduciary duties • Meetings and materials • Board interaction with management | ||||
3. | Review | • The lead independent director speaks with each member of the Board forone-on-one discussion • Each committee and the full Board conduct separate discussions in executive session | ||||
4. | Incorporation of Feedback | Follow-up items are addressed at subsequent Board or committee meetings and any committee actions are reported back to the full Board |
The Audit, Compensation, Compliance and Governance Committees each completed their assessments in October 2017 for further evaluationbytheGovernanceCommitteeinDecember2017.TheBoard completeditsevaluationinDecember2017.Eachcommitteeandthe
Board was satisfied with its performance and each was considered to be operating effectively, with appropriate balance among governance, oversight, strategic and operational matters.
At least annually, the Governance Committee reviews the independence of eachnon-employee director and makes recommendations to the Board and the Board affirmatively determines whether each director qualifies as independent. Each director must keep the Governance Committee fully and promptly informed as to any development that may affect the director’s independence.
The Board has determined that each of ournon-employee directors as well as Dr. Coffman,is and Frank J. Biondi, Jr. and Judith C. Pelham, who served as a directordirectors during part of 2016, is2017, were independent during 2017 under theThe NASDAQ Stock Marketing listing standards of NASDAQ and the requirements of the SEC. The Board also determined that Brian J. Druker, who is standing for initial election to the Board, is independent. Mr. Bradway is not independent based on his service as our CEO and President. Mr. Bradway is the only director who also serves us in a management capacity. In making its independence determinations, the Board reviewed direct and indirect transactions and relationships between each director, or any member of his or her immediate family, and us or one of our subsidiaries or affiliates based on information provided by the director, our records and publicly available information.
Allofthereviewedtransactionsandarrangementswereenteredintoin theordinarycourseofbusinessandnoneofthebusinesstransactions, donationsorgrantsinvolvedanamountthat(i)exceededthegreaterof
5% of the recipient entity’s revenues or $200,000 with respect to transactions where a director or any member of his or her immediate family or spouse served in any capacity other than as a director of a publicly held-corporation or (ii) exceeded $10,000 with respect to professional or consulting services provided by entities at which our directors serve as professors or employees. The following types and categories of transactions, relationships and arrangements were considered by our Board in making its independence determinations:
Each of ourthe independent directors (or their immediate family members), currently serves or has previously served within the last three years as a professor, trustee, director, or member of a board, advisory board, council or committee for one or more colleges, universities ornon-profit, charitable organizations, including research or scientific institutions, to which The Amgen Foundation, Inc. has made matching donations under our Amgen matching gift program that is available to all of our employees and directors, or has made grants.
|
Each of ourthe independent directors (or their immediate family members), other than Judith C. Pelham, currently serves or has previously served within the last three years as a member of the board of directors or the board of trustees or an advisory board for an entity with which Amgen has business transactions or to which Amgen makes donations or grants. The business transactions include, among other things, purchasing supplies, equipment and software licenses, repair and maintenance fees, healthcare sponsorships and programs, utilities, clinical trials, research and development expenses, executive education, conferences and consulting services.
ï 2018 Proxy Statement 21
Corporate Governance |
purchasing supplies, equipment and software licenses, payment of fees and expenses relating to repair and maintenance, utilities, clinical trials, research and development and training, sponsorship of healthcare programs and conferences and investment management, financial advisory and consulting services. |
Drs. Baltimore, Rebecca M.Druker, Henderson, Tyler Jacks and R. Sanders Williams currently serve as professors for universities to which Amgen has made payments for certain business transactions such as symposiums, conferences internships,and exhibits, postdoctoral research programs, clinical trials, training and research and development expenses, software licenses and maintenance fees, as well as for grants.
trials, training and research and development, software licenses and maintenance, as well as for grants. |
None of ourthe directors directly or indirectly provides any professional or consulting services to us and none of ourthe directors currently has or has had any direct or indirect material interest in any of the above transactions and arrangements. The Board determined that these transactions and arrangements did not warrant a determination that the director was not independent.
Board MeetingsGovernance Committee Processes and Procedures for Considering and Determining Director Compensation
The Governance Committee has the authority to evaluate and make recommendations to our Board held six meetingsregarding director compensation.
The Governance Committee conducts this evaluation periodically by reviewing our director compensation practices against the practices of an appropriate peer group and the Governance Committee may determine to make recommendations to our Board regarding possible changes to director compensation. The Governance Committee conducted such an assessment in 20162017 and allno changes were made to director compensation.
The Governance Committee has the authority to retain consultants to advise on director compensation matters. During 2017, the
Governance Committee engaged Frederic W. Cook and Co., or Cook & Co., to provide advice regarding director compensation. Cook & Co. reported directly to the Governance Committee and attended the Governance Committee meeting to evaluate director compensation. No executive officer has any role in determining or recommending the form or amount of director compensation. |
The Governance Committee has authority to delegate any of the directors attended at least 75%these functions to a subcommittee of the total numberits members. No delegation of meetings of the Board and committees on which they served. Ellen J. Kullmanthis authority was appointed to the Boardmade in October 2016 and attended all meetings of the Board and committees on which she served after the date of her appointment. It is the Company’s policy2017.
that all current directors attend our annual meetings of stockholders barring unforeseen circumstances or irresolvable conflicts. All of the then-current members of the Board, except for Dr. Baltimore, were present at our 2016 Annual Meeting.
Current Members: Charles M. Holley, Jr.* (Chair) (since February 2017 and appointed Chair October 2017) Wanda M. Austin (since December 2017) François de Carbonnel* Fred Hassan* Rebecca M. Henderson Frank C. Herringer* (served as Chair from 2017 Annual Meeting to October 2017) Tyler Jacks Ellen J. Kullman* *Audit Committee financial expert Others Who Served in 2017: Frank J. Biondi, Jr. (Chair until retirement at 2017 Annual Meeting) Judith C. Pelham (until retirement at 2017 Annual Meeting) Number of Meetings Held in 2017:9 Each member has been determined by the Board to be independent under The NASDAQ Stock Market listing standards and the requirements of the SEC, including the requirements regarding financial literacy and sophistication. | Description and Key Responsibilities: • Oversees our accounting and financial reporting process and the audits of the financial statements, as required by NASDAQ. • Assists the Board in fulfilling its fiduciary responsibilities with respect to the oversight of our financial accounting and reporting, the underlying internal controls and procedures over financial reporting, and the audits of the financial statements. • Has sole authority for the appointment, compensation, retention and oversight of the work of the independent registered public accountants. • Reviews and discusses, prior to filing or issuance, with management and the independent registered public accountants (when appropriate) our audited consolidated financial statements to be included in our Annual Report on Form10-K and earnings press releases. • Approves all related party transactions, as required by NASDAQ. | |||
5022 ï 20172018 Proxy Statement
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Board Committees and ChartersAbout Our Compliance Program
Amgen’s Compliance Program is designed to promote ethical business conduct and ensure compliance with applicable laws and regulations. The Board has six standing committees: Audit Committee; Compensation Committee;key objectives of our compliance program operations include:
developing policies and procedures;
providing ongoing compliance training and education;
auditing and monitoring of compliance risks;
maintaining and promoting avenues for staff to raise concerns, including anonymously through a business conduct hotline;
conducting investigations;
responding appropriately to any compliance violations; and
taking appropriate steps to detect and prevent recurrence.
Our Chief Compliance Committee; Equity Award Committee; Executive CommitteeOfficer, who reports to the CEO, oversees the ongoing operations of the compliance program.
Codes of Ethics and Governance Committee. The Board maintains charters for each of these standing committees. In addition, theBusiness Conduct
Our Board has adopted a written settwo codes of Corporate Governance Principlesbusiness conduct and ethics, one that applies to our directors and a Boardsecond that applies to our directors and all of Directors’our staff members, including our executive officers. We also have a code of conduct that generally formalize practices we have in place.ethics for senior financial officers. To view the chartersour codes of our standing Board committees, our Corporate Governance Principles and the Board of Directors’ code ofbusiness conduct, please visit our website atwww.amgen.comwww.amgen.com. We intend to disclose any future amendments to.
Audit Committee
The Audit Committee met ten times in 2016. Throughout 2016certain provisions of our codes of business conduct and currently, Frank J. Biondi, Jr. serves as chairmanethics, or waivers of such provisions, applicable to our directors and Ms. Pelham, François de Carbonnel, and Fred Hassan serve as membersexecutive officers, at the same location on our website identified above. There were no waivers of any of the Audit Committee, with Drs. Hendersoncodes of business conduct or the codes of ethics in 2017.
ï 2018 Proxy Statement 23
Corporate Governance |
Our Environmental Sustainability and Jacks joining the Audit CommitteeSocial Responsibility Efforts
We have demonstrated our commitment to environmentally responsible operations by reducing our impact on the dateenvironment in multiple areas of our global business. Our next-generation biomanufacturing facility in Singapore dramatically reduces the 2016 Annual Meetingscale and Ms. Kullmancosts of making biologics, vastly reduces water and Charles M. Holley, Jr. joining upon their appointmentsenergy use, while maintaining a reliable, high-quality, compliant supply of medicines. We earned placement on the Dow Jones Sustainability World Index for the fourth year in a row and on the North America Index for the fifth year in a row. Our Responsibility Highlights Report is available online on the Company’s website atwww.amgen.com/responsibility. Further, we are a signatory to the Board. Dr. Baltimore, Mr. EckertUnited Nations Global Compact, a voluntary initiative based on commitments to implement universal sustainability principles and Greg C. Garland served ontake steps to support United Nations goals.
Amgen is committed to assisting patients with no or limited drug coverage to access the Audit Committeemedicines they need. We provide patient support and education programs and help patients in 2016 untilfinancial need access our medicines. We partner with payers to share risk and accountability for health outcomes, and help patients access the 2016 Annual Meeting. Allmedicines they need without significant financial burden. We have been at the forefront of developing innovative contracting and
partnerships designed to improve population health and patient access, as well as outcomes-based and risk-sharing approaches that directly link the price of our medicines to their effectiveness.
Through our Amgen Foundation, established in 1991, we seek to advance excellence in science education to inspire the next generation of innovators, and invest in strengthening communities where our staff members live and work. The Amgen Foundation has contributed approximately $300 million tonon-profit organizations across the world that reflect our core values and complement Amgen’s dedication to impacting lives in inspiring and innovative ways. We have also provided support following devastating disasters, including, for example, the contribution of immediate relief and reconstruction efforts in Puerto Rico to address the Audit Committee meetimpact of Hurricane Maria. Moreover, through a twelve-year, $50 million commitment from the NASDAQ composition requirements, includingAmgen Foundation, the requirements regarding financial literacyAmgen Scholars Program makes it possible for young scientists across the globe to engage in cutting-edge research experiences and financial sophistication,learn more about biotechnology and drug discovery. Additionally, the Board has determinedAmgen Foundation supports the Amgen Biotech Experience, an innovative science education program that each member is independent under the listing standards of NASDAQempowers high school and the rules of the SEC regarding audit committee membership. The Board has also determined that Ms. Kullman and Messrs. de Carbonnel, Hassan, and Holley are each an “audit committee financial expert” as defined by SEC rules. The Audit Committee has sole authority for the appointment, compensation, retention and oversight of the work of the independent registered public accountants, and responsibility for reviewing and discussing, priormiddle school teachers to filing or issuance, with management and the independent registered public accountants (when appropriate) our audited consolidated financial statements to be included in our Annual Report on Form10-K and earnings press releases.bring biotechnology into their classrooms.
Compensation and Management Development Committee24 ï 2018 Proxy Statement
The
Corporate Governance |
Compensation Committee met five timesProcesses and Procedures for Considering and Determining Executive Compensation in 2016. Throughout 2016 and currently, Mr. Herringer serves as
chairman and Ms. Pelham, and Messrs. Biondi and Hassan serve as members of the Compensation Committee, with Dr. Coffman retiring and Messrs. Eckert and Garland and Dr. Jacks joining the Compensation Committee on the date of the 2016 Annual Meeting. Each member of the Compensation Committee has been determined by the Board to be independent under the listing standards of NASDAQ and the requirements of the SEC.
The Compensation Committee assists the Board in fulfilling its fiduciary responsibilities with respect to the oversight of the Company’s compensation plans, policies and programs, especially those regarding executive compensation. The Compensation Committee is responsible for designing the Company’s compensation programs that encourage high performance, promote accountability and adherence to Company values and the staff member code of conduct and to align with the interests of the Company’s stockholders. The Compensation Committee is responsible for ensuring that the executive management development processes attract, develop and retain talented leadership to serve the long-term best interests of the Company.
The Compensation Committee has authority for overseeing the Board’s relationship with stockholders on executive compensation matters, including stockholder outreach efforts, stockholder proposals, advisory votes, communications with proxy advisory firms and related matters.
The processes and procedures of the Compensation Committee for considering and determining compensation for 2016 for our executive officers were as follows:2017
With respect to our CEO, by the first calendar quarter of each year, the Compensation Committee reviews and approves Company performance goals and objectives for the current year and evaluates the CEO’s performance for the previous year in light of the Company performance goals and objectives established for the prior year. The Compensation Committee evaluates the performance of the CEO within the context of the financial and operational performance of the Company, considers competitive market data and establishes the CEO’s compensation based on this evaluation. The values of each component of total compensation (base salary, target annual cash incentive awards, and equity awards) for the current year, as well as total annual compensation for the prior year (including the value of equity holdings, potential change of control payments and vested benefits under our Retirement and Savings Plan, Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan as of the end of the last fiscal year) are considered at this time. Final determinations regarding our CEO’s performance and compensation are made during an executive session of the Compensation Committee and are reported to and reviewed by the Board in an independent directors’ session.
ï 2017 Proxy Statement51
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During 2016,2017, the Compensation Committee engaged Frederic W. Cook & Co., Inc., or Cook & Co. or the consultant, an independent compensation consultant, to provide advice regarding executive compensation and executive compensation trends and developments, compensation designs and equity compensation practices, market data as requested, and opinions on the appropriateness and competitiveness of our executive compensation programs relative to market practice. Cook & Co. reported directly to the Compensation Committee and attended regularly scheduled meetings of the Compensation Committee (including meeting in executive session with the Compensation Committee, as requested). Each year the Compensation Committee reviews the independence of Cook & Co., an independent compensation consultant, and whether any conflicts of interest exist. After review and consultation with Cook & Co., the Compensation Committee has determined that Cook & Co. is independent and there is no conflict of interest resulting from retaining Cook & Co. currently or during the year ended December 31, 2017. In performing its analysis, the Compensation Committee considers the factors set forth in the SEC rules and The NASDAQ Stock Market listing standards.
In cooperation with management, Cook & Co. assesses the potential risks arising from our compensation policies and practices. Management interacts with the consultant to provide information or the perspective of management as requested by the consultant or Compensation Committee, coordinates payment to the consultant out of the Board’s budget, notifies the consultant of upcoming agenda items and makes the consultant aware of regular or special meetings of the Compensation Committee.
In setting executive compensation, the Compensation Committee compares the Company’s pay levels and programs to those of the Company’s competitors for executive talent and uses this comparative data as a guide in its review and determination of compensation. Our Compensation Committee considers and selects an appropriate peer group (consisting of biotechnology and pharmaceutical companies), based, in part, on the recommendations of Cook & Co., and, for each Named Executive Officer, or NEO, the Compensation Committee reviews the compensation levels and practices of our peer group, which for our NEOs, other than the CEO, isare based on reports prepared by management from information contained in compensation surveys and proxy statements. Cook & Co. provides the Compensation Committee with market data, the practices of our peer group and recommendations for the CEO position.
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Our Compensation Committee determines compensation for the executive officers (other than the CEO) based, in part, on the recommendations of our CEO regarding base salary, annual cash incentive awards, and equity awards. In determining his compensation recommendations for each NEO, our CEO reviews comparative peer group data. The Compensation Committee has typically followed these recommendations.
The Compensation Committee generally holds executive sessions (with no members of management present, unless requested by the Compensation Committee) at its regular meetings.
The Compensation Committee has authority to delegate any of the functions described above to a subcommittee of its members. No delegation of this authority was made in 2016.2017.
Each year
Following is a reasonable estimate, prepared under applicable SEC rules, of the Compensation Committee reviewsratio of the independenceannual total compensation of Cook & Co.our CEO to the median of the annual total compensation of our other staff members, calculated in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K. The Company determined our median employee based on total direct compensation paid to all of our staff members worldwide (consisting of approximately 20,600 individuals) recorded in our global systems as of November 1, 2017. Total direct compensation included base salary (wages earned based on our payroll records), annual cash incentive awards earned for the period (and target sales incentive awards for our sales force), and whether any conflictsthe
annual grant value of interest exist. In performing its analysis,long-term incentive, or LTI, equity awards during 2017. Earnings of our staff members outside of the Compensation Committee considersU.S. were converted to U.S. dollars using the factors set forthcurrency exchange rate as of November 1, 2017. Nocost-of-living adjustments were made. We then determined the annual total compensation of our median employee for 2017 which was $132,930. As disclosed in the SEC rules and“Summary Compensation Table” appearing on page 64, our CEO’s annual total compensation for 2017 was $16,899,789. Based on the NASDAQ listing standards. After review and consultation with Cook & Co.,foregoing, the Compensation Committee has determined that Cook & Co. is independent and there is no conflict of interest resulting from retaining Cook & Co. currently or during the year ended December 31, 2016.
Equity Award Committee
The Equity Award Committee met four times in 2016. Throughout 2016 and currently, Mr. Herringer serves as chairman and Mr. Bradway serves as a memberratio of the Equity Award Committee, with Mr. Garland joiningannual total compensation of our CEO to that of the Equity Award Committee after Dr. Coffman’s retirement at the 2016 Annual Meeting. Our Board has delegatedmedian staff member was 127 to the Equity Award Committee the responsibility for determining annual equity-based awards to vice presidents and below who are not Section 16 officers and authority to make equity-based awards from time to time to such eligible staff members for purposes of compensation, retention, promotion and upon commencement of their employment consistent with the1.
52 ï 20172018 Proxy Statement 25
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equity grant guidelines established byOn an annual basis, management, working with the Compensation Committee’s independent compensation consultant, conducts an assessment of the Company’s compensation policies and practices for all staff members generally, and for our staff members who participate in our sales incentive compensation program, for material risk to the Company. The results of this assessment are reviewed and discussed with the Compensation Committee. Based on this assessment, review and discussion, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and our Company performance goals, our compensation policies and practices do not present risks that are reasonably likely to have a material adverse effect on us. In addition,evaluating our compensation policies and practices, a number of factors were identified which the Equity Award Committee presents a report toCompany, the Compensation Committee detailing the equity-based awards made by the Equity Award Committee at least twice per year.
Governance and Nominating Committee
The Governance Committee met five times in 2016. Currently, Mr. Garland serves as chairman, having served on the Governance Committee throughout 2016 and as chairman since Dr. Coffman’s retirement at the 2016 Annual Meeting. Throughout 2016 and currently, Drs. Baltimore, Sugar and Williams, and Mr. Herringer serve as members of the Governance Committee, with Mr. Eckert joining the Governance Committee at the 2016 Annual Meeting and Ms. Kullman joining upon her appointment to the Board. Messrs. de Carbonnel and Drs. Henderson and Jacks served on the Governance Committee until the 2016 Annual Meeting. Each of the members of the Governance Committee has been determined by the Board to be independent under the listing standards of NASDAQ and the requirements of the SEC.
The Governance Committee is responsible for developing and overseeing the Board’s Corporate Governance Principles and a code of conduct applicable to members of the Board and for monitoring the independence of the Board. The Governance Committee also determines Board membership qualifications, selects, evaluates and recommends to the Board nominees to fill vacancies as they arise, reviews the performance of the Board and its committees and is responsible for director education. The Governance Committee maintains, withindependent consultant believe discourage excessive risk-taking, including the approval of the Board, guidelines for selecting nominees to serve on the Board and considering stockholder recommendations for nominees. Such guidelines are included in this proxy statement asAppendix A. Stockholders wishing to communicate with the Governance Committee regarding recommendations for director nominees should follow the procedurefactors described in “Communication with the Board” below. See “OTHER MATTERS—Stockholder Proposals for the 2018 Annual Meeting” for a description of the information that a stockholder proposing to nominate a director for election must provide to the Company in their advance notice. Additionally, the Governance Committee recommends to the Board nominees for appointment as executive officers and certain other officers.
The Governance Committee also oversees the corporate governance and Board membership matters of the Company. The Governance Committee identifies and recommends to the Board qualified individuals for Board and committee membership and considers and recommends to the Board nominees to stand for election at the annual meeting of stockholders and to fill vacancies as they arise as more fully described previously in “Director Qualifications and Review of Board Diversity.” Among the Governance Committee’s responsibilities, the Governance Committee evaluates and makes recommendations to our Board regarding compensation fornon-employee Board members. Any Board member who is also an employee of the Company does not receive separate compensation for service on the Board.
The processes and procedures of the Governance Committee for considering and determining director compensation are as follows:below:
The Governance Committee hasOur compensation programs consist of a mix of incentives that are tied to varying performance periods and are designed to balance our need to drive our current performance with the authorityneed to evaluateposition the Company for longer-term success.
Of this mix of incentives, Company-wide results are the most important factor in determining the amount of an annual cash incentive award for each of our staff members. Additionally, we cap short-term incentives and make recommendations toLTI equity awards a component of compensation for nearly all of our Board regarding director compensation. The Governance Committee conducts this evaluation periodically by reviewing our director compensation practices againstfull-time staff members. In particular, the practices of an appropriate peer groupCEO and the Governance Committee may determineother executive officers participate in compensation plans that are designed so that the largest component of their compensation is in the form of LTI equity awards to make recommendationsensure that a significant portion of their compensation is associated with long-term, rather than short-term, outcomes, which aligns these individuals’ interests with our stockholders.
We employ appropriate practices with respect to equity awards: we do not award mega-grants, discounted stock options or immediately vested stock options to staff members; we have grant guidelines that generally limit the grant date for our Board regarding possible changesequity grants to director compensation.the third business day after our announcement of quarterly earnings.
We have robust stock ownership guidelines for vice presidents and above that require significant investment by these individuals in our Common Stock.
We require that each officer who has not met his or her required ownership guidelines retain shares of our Common Stock acquired through the vesting of restricted stock units, the payout of performance units, and the exercise of stock options awarded on or after December 15, 2015, net of shares retained by us to satisfy associated tax withholding requirements and exercise price amounts, until such officer has reached his or her required stock ownership level.
Our Company values and leadership behaviors are an integral part of the performance assessments of our staff members and are particularly emphasized in our assessment tools at higher positions. These evaluations serve as an important information tool and basis for compensation decisions.
The GovernanceCompensation Committee retains full discretion to reduce or eliminate annual cash incentive awards to our executive officers and can and has the authority to retain consultants to advise on director compensation matters. No executive officer has any role in determining or recommending the form or amount of director compensation.modified awards downwards.
The GovernanceWe have a clawback policy that requires our Board to consider recapturing past cash or equity compensation payouts awarded to our executive officers if it is subsequently determined that the amounts of such compensation were determined based on financial results that are later restated and the executive officer’s misconduct caused or partially caused such restatement.
We have recoupment provisions that expressly allow the Compensation Committee has authorityor management, as appropriate, to delegate any of these functions to a subcommittee of its members. No delegation of this authority was made in 2016.
Corporate Responsibility and Compliance Committee
The Compliance Committee met five times in 2016. Throughout 2016 and currently, Dr. Sugar serves as chairman and Drs. Henderson and Williams serve as members of the Compliance Committee, with Dr. Baltimore and Mr. de Carbonnel joining the Compliance Committee on the date of the 2016 Annual Meeting and Mr. Holley joining upon his appointmentconsider employee misconduct that caused serious financial or reputational damage to the Board.Company when determining whether an employee has earned an annual cash incentive award or the amount of any such award.
Our Insider Trading Policy prohibits pledging or purchasing of our Common Stock on margin and hedging the economic risk of our Common Stock.
ï 2017 Proxy Statement53
The Compliance Committee is responsible for overseeing our compliance program and reviewing our programs in a number of areas governing ethical conduct including: (i) Federal health care program requirements; (ii) Food and Drug Administration requirements and other regulatory agency requirements, including good manufacturing, clinical and laboratory practices, drug safety and pharmacovigilance activities; (iii) interactions with members of the healthcare community; (iv) the Company’s Corporate Integrity Agreement; (v) environment, health and safety and (vi) human resources and government affairs. Additionally, the Compliance Committee receives regular updates on political, social and environmental trends, and public policy issues that may affect our business or public image, and reviews our sustainability, political and philanthropic activities.
Our compliance program is designed to promote ethical business conduct and ensure compliance with applicable laws and regulations. We have codes of conduct for our officers, staff and suppliers that delineate standards for ethical business conduct and legal and regulatory compliance as well as a business conduct hotline through which anonymous reports of misconduct can be made to our Chief Compliance Officer. To view the codes of conduct, please visit our website atwww.amgen.com.
Our Chief Compliance Officer, who reports to the Compliance Committee, oversees the ongoing operations of the compliance program. The key objectives of our compliance program operations include developing policies and procedures, providing ongoing compliance training and education, auditing and monitoring of compliance risks, maintaining and promoting the business conduct hotline, conducting investigations, responding appropriately to any compliance violations and taking appropriate steps to detect and prevent recurrence.
Executive Committee
The Executive Committee did not meet in 2016. Throughout 2016 and currently, Mr. Bradway serves as chairman and Messrs. Biondi and Herringer and Dr. Sugar serve as members of the Executive Committee, with Dr. Coffman retiring and Mr. Garland joining on the date of the 2016 Annual Meeting and Mr. Eckert joining in July 2016, respectively. The Executive Committee has all the powers and authority of the Board in the management of our business and affairs, except with respect to certain enumerated matters, including Board composition and compensation, changes to the Amgen Inc. Restated Certificate of Incorporation or any other matter expressly prohibited by law or the Amgen Inc. Restated Certificate of Incorporation.
Communication with the Board
Our annual meeting of stockholders provides an opportunity each year for stockholders to ask questions of, or otherwise communicate directly with, members of the Board on appropriate matters. In addition, stockholders may communicate in writing with any particular director, any committee of the Board, or the directors as a group, by sending such written communication to our Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799. Copies of written communications received at such address will be provided to the Board or the relevant director unless such communications are considered, in the reasonable judgment of our Secretary, to be inappropriate for submission to the intended recipient(s). Examples of stockholder communications that would be considered inappropriate for submission to the Board include,
without limitation, customer complaints, solicitations, communications that do not relate directly or indirectly to our business or communications that relate to improper or irrelevant topics. The Secretary or his designee may analyze and prepare a response to the information contained in communications received and may deliver a copy of the communication to other Company staff members or agents who are responsible for analyzing or responding to complaints or requests. Communications concerning potential director nominees submitted by any of our stockholders will be forwarded to the chairman of the Governance Committee.
For information on our engagement with our stockholders since the 2016 Annual Meeting, please see page 62 of our Compensation Discussion and Analysis.
54 ï 2017 Proxy Statement
The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with management, and based on the review and discussions, recommendedtotheBoardofDirectors thattheCompensationDiscussionandAnalysisbeincludedinthe
Compensation Discussion and Analysis be included in the Company’s 20172018 Annual Meeting proxy statement and incorporated by reference into the Company’s Annual Report on Form10-K for the year ended December 31, 2016.2017.
Compensation Committee of the Board of Directors
Frank C. Herringer, Chairman
Frank J. Biondi, Jr.
Robert A. Eckert, Chairman
Greg C. Garland
Fred Hassan
Tyler Jacks
Judith C. Pelham
26 ï 20172018 Proxy Statement55
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Advisory Vote to Approve Our Executive Compensation
This advisory stockholder vote, commonly known as “Say on Pay,” gives you, as a stockholder, the opportunity to endorse or not endorse our executive pay program and policies. Accordingly, you are being asked to vote on the compensation of our Named Executive Officers, or NEOs, as disclosed in the Compensation Discussion and Analysis (pages 32 through 63) and related compensation tables and the narrative in this proxy statement (pages 64 through 78).
Our executive compensation program is designed to achieve the following objectives:
Pay for performance in a manner that strongly aligns with stockholder interests by rewarding both ourshort-and long-term measurable performance.
Drive implementation of our business strategy and position our staff to execute on our strategic priorities in thenear- and longer-term.
Attract, motivate and retain the highest level of executive talent by providing competitive compensation, consistent with their roles and responsibilities, our success and their contributions to this success.
Mitigate compensation riskby maintaining pay practices that reward actions and outcomes consistent with the sound operation of our Company and with the creation of long-term stockholder value.
Consider all Amgen staff members in the design of our executive compensation programs, to ensure a consistent approach that encourages and rewards all staff members who contribute to our success.
We Have Implemented Compensation Best Practices
What we do |
| ✓ | A substantial majority of NEO compensation is performance-based andat-risk |
| ✓ | Clawback policy tied to financial restatement |
| ✓ | Recoupment in the case of misconduct causing serious financial or reputational damage |
| ✓ | Robust stock ownership and retention guidelines |
| ✓ | Minimum vesting periods |
| ✓ | Double-trigger for stock options and restricted stock units in the event of a change of control |
| ✓ | Long-term performance-based equity awards (80% of total equity) |
| ✓ | Independent compensation consultant |
What we don’t do |
| × | Nore-pricing or backdating |
| × | No taxgross-ups (except in connection with relocation) |
| × | No excessive perks |
| × | No employment agreements |
| × | No dividends paid on unvested equity |
| × | No defined benefit pension or supplemental executive retirement plan (SERP) benefits |
ï 2018 Proxy Statement 27
Item 2 — Advisory Vote to Approve Our Executive Compensation |
2017 Executive Compensation Was Aligned With Our Strategy and Performance
As discussed more fully in our Compensation Discussion and Analysis starting on page 32, a significant majority of each NEO’s compensation isat-risk and dependent on our performance and execution of our strategic priorities and the compensation objectives discussed above.
2017 Target Total Direct Compensation Mix
2017 Award Allocation and Performance
2017 Annual Cash Incentive Program
Our annual cash incentive award program compensation is tied directly to our performance based onpre-established financial and operating performance goals that support execution of our strategic priorities. The table below illustrates the weighting of each goal and our actual performance for 2017. Based on our overall performance in 2017 compared to thepre-established Company performance goals, we paid annual cash incentive awards at 115% of target bonus opportunity, a decrease of 44.5 percentage points from our 2016 payout of 159.5% of target bonus opportunity. The following is a summary of our progress against these goals and our strategic priorities. See the Compensation Discussion and Analysis for an expanded discussion.
| Goal | Weighting | % of Target Earned | ||||||
1. Financial Performance |
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Revenues
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30%
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110.6%
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Non-GAAP Net Income(1)
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30%
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116.8%
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2. Progress Innovative Pipeline |
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Execute Key Clinical Studies and Regulatory Filings
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20%
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123.0%
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Advance Early Pipeline
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5%
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201.7%
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3. Deliver Annual Priorities |
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Execute Critical Launches and Long-Term Commercial Objectives
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10%
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76.0%
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Realize Functional Transformation Objectives
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5%
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90.4%
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Composite Score |
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Achieved 115.0% |
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| (1) | Non-Generally Accepted Accounting Principles, ornon-GAAP, net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled inAppendix B. |
10% 75% 15% At Risk 18% 64% 18% At Risk Long-term Incentive Equity Awards Target Annual Cash Incentive Base Salary CEO 90% Pay at Risk 75% Performance based Other NEOs 82% Pay at Risk 69% Performance based
28 ï 2018 Proxy Statement
Item 2 — Advisory Vote to Approve Our Executive Compensation |
ªWe Delivered on Our Financial Performance Goals.
| • | Ournon-GAAP net income(1)grew 5% to $9.2 billion in 2017, driven by lower expenses, including transformation and process improvement savings, and increased interest income from higher cash balances partially offset by investments to grow our business, including launching and maintaining new products, building out new therapeutic areas, advancing our biosimilars business and increasing our global presence. |
Revenues were $22.8 billion in 2017, a slight decrease from 2016 despite increased competition for many of our largest products, several of which have lost patent protection. Actual performance was strong as 2017 reported product sales declined by less than $100 million (0.4%) compared to 2016 reported sales.
ªWe Progressed Our Pipeline.
Our medicines treat serious illnesses. In 2017, we have progressed important product candidates in all six of our therapeutic areas.
Executing Key Clinical Studies and Regulatory Filings.
Innovative Portfolio Developments.
| • | Bone Health.ForProlia®, our medicine for patients with osteoporosis, we filed a supplemental BLA(2) with the FDA(3) based on Phase 3 study data that demonstrated that Prolia treatment led to greater increases in bone mineral density in patients with glucocorticoid-induced osteoporosis compared with risedronate. |
| • | Cardiovascular.ForRepatha®, this therapy was approved by the FDA: |
| - | as the first PCSK9 inhibitor to prevent heart attacks, strokes, and coronary revascularizations in adults with established cardiovascular disease; and |
| - | to be used as an adjunct to diet, alone or in combination with other lipid-lowering therapies, such as statins, for the treatment of adults with primary hyperlipidemia to reducelow-density lipoprotein cholesterol. |
In 2018, the CHMP(4) of the EMA(5) adopted a positive opinion for the Marketing Authorization to include similar indications.
| • | Oncology/Hematology. |
| - | ForKYPROLIS®, our medicine for patients with relapsed or refractory multiple myeloma, we reported three positive Phase 3 studies – two of which demonstrated that different KYPROLIS regimens improved overall survival as compared to other therapeutic regimens. One set of overall survival data has been approved by the FDA for inclusion in the label and recommended for inclusion by the CHMP of the EMA and the other set is under consideration for inclusion by both regulators. |
| - | ForXGEVA®, our medicine for the prevention of fractures and other skeletal-related events, in 2018 the FDA approved a supplemental BLA for the prevention of skeletal-related events in patients with multiple myeloma and the European Commission approved a variation to the Marketing Authorization to include a similar indication. |
| - | ForBLINCYTO®, our medicine for patients with acute lymphoblastic leukemia, or ALL, the FDA approved a supplemental BLA to include overall survival data from the Phase 3 TOWER study and expanded the indication to the treatment of relapsed or refractoryB-cell precursor ALL in adults and children. In 2018, the FDA approved a supplemental BLA for the treatment of minimal residual disease in adults and children with B-cell precursor ALL. |
| - | ForVectibix®, our medicine for patients with colorectal cancer, the FDA approved a supplemental BLA for Vectibix as a first-line therapy in combination with FOLFOX and as a monotherapy following disease progression after prior treatment with chemotherapies for patients with wild-typeRASmetastatic colorectal cancer. |
| • | Neuroscience. ForAimovig™(6), our medicine being developed to prevent migraine, based on multiple positive studies demonstrating that Aimovig reduced the number of migraine days for patients with episodic and chronic migraine, we submitted a BLA to the FDA. |
| • | Inflammation.Fortezepelumab(7), our medicine being developed for asthma, we reported that Phase 2b trial results demonstrated that tezepelumab significantly reduced asthma exacerbations in patients with uncontrolled asthma and initiated a Phase 3 study in early 2018. |
| • | Nephrology.ForParsabiv™, we received FDA approval for the treatment of secondary hyperparathyroidism in adult patients with chronic kidney disease on hemodialysis. We launched Parsabiv in the U.S. in January 2018 and continue to launch in new markets throughout the world. |
| (1) | Non-GAAP net income is reported and reconciled inAppendix B. |
| (2) | Biologics License Application. |
| (3) | U.S. Food and Drug Administration. |
| (4) | Committee for Medicinal Products for Human Use. |
| (5) | European Medicines Agency. |
| (6) | Jointly developed in collaboration with Novartis AG. |
| (7) | Jointly developed in collaboration with AstraZeneca plc. |
ï 2018 Proxy Statement 29
Item 2 — Advisory Vote to Approve Our Executive Compensation |
Biosimilars Portfolio Developments.
| • | The FDA approvedMVASI™(1) (biosimilar bevacizumab (Avastin®)) for the treatment of five types of cancer, the first ever biosimilar to fight cancer approved by the FDA, and the European Commission granted Marketing Authorization in January 2018. |
| • | The European Commission granted Marketing Authorization forAMGEVITA™ (biosimilar adalimumab (HUMIRA®)) in all available indications. We expect to begin launching AMGEVITA in Europe in 2018. |
| • | We submitted a BLA to the FDA and, in 2018, the CHMP of the EMA adopted a positive opinion for the Marketing Authorization forABP 980(1) (biosimilar trastuzumab (Herceptin®)). |
ªWe Advanced Our Early Pipeline.
Generated11 product teams (formed when a molecule has the potential to be safe and effective in humans), a record number for our Company.
Initiated4first-in-human studies.
| • | AdvancedAMG 301(2), our medicine being investigated for migraine prevention, into Phase 2. |
| ª | We Delivered on Our Annual Priorities to Execute Critical Launches and Long-Term Commercial Objectives. |
Prolia worldwide sales increased in 2017 by 20% year-over-year. Prolia is the leading osteoporosis therapy today. There are 3.5 million patients worldwide taking Prolia, and the demand for it continues to grow.
We increased Repatha U.S. net sales and average annual total prescriptions share, as well as E.U. average annual market share. Our focus remains on enabling access to Repatha for appropriate patients as hurdle rates for access and reimbursement for patients remain high.
We increased KYPROLIS U.S. andex-U.S. net sales. Our clinical development program has delivered overall survival results in support of KYPROLIS as a backbone therapy for multiple myeloma.
ªWe Realized Our Functional Transformational Objectives.
We realized approximately $400 million in savings as a result of initiatives at the Company level as well as activities within each function designed to transform approaches and improve processes with specific savings targets established for each area.
Together with our progress this year, since 2014, we have realized approximately $1.5 billion of transformation and process improvement savings. These savings were reinvested in product launches, clinical programs and external business development. Consequently, net savings in the same period have not been significant.
Further Progress on Our Strategic Priorities
Capitalizing on our expansion activities, we secured 80 product country launches.
While investing $3.6 billion in research and development, we also returned a total of $6.5 billion of capital to our stockholders through dividends and stock repurchases.
| • | We have built leading patient- and provider-friendly device capabilities to enhance patient experience and to differentiate our product, including the Enbrel Mini™ single-dose prefilled cartridge with AutoTouch™ reusable auto-injector and the Neulasta®Onpro® kit. |
We made investments in next-generation biomanufacturing that build on our existing industry leadership in biologic manufacturing. This next-generation biomanufacturing dramatically reduces the scale and costs of making biologics while maintaining a reliable, high-quality, compliant supply of medicines. In 2017, our new Singapore facility that utilizes the next-generation biomanufacturing approach was approved for certain commercial scale production by multiple regulatory agencies, including the FDA and the EMA.
Long-Term Incentive Performance Award Program
Our long-term incentive, or LTI, equity award compensation is tied directly to our stock performance and aligns with the interests of our stockholders.
Long-Term Incentive Program
|
Equity
| % of Target
| ||||
Performance Units
|
|
50% |
|
93.4% | ||
(2015-2017 performance period)
| ||||||
| (1) | Jointly developed in collaboration with Allergan plc. |
| (2) | Jointly developed in collaboration with Novartis AG. |
30 ï 2018 Proxy Statement
Item 2 — Advisory Vote to Approve Our Executive Compensation |
| • | Performance units earned for the 2015-2017 performance period (January 30, 2015 to January 30, 2018) were based on an earned payout percentage of 93.4% reflecting the Company’s three-year total shareholder return, or TSR, performance at the 46.7th percentile relative to the TSRs of the companies in the Standard & Poor’s 500 Index, or S&P 500, since the beginning of the performance period. Our beginning stock price and ending stock price for purposes of the 2015-2017 performance period are each the average daily closing price of a share of our Common Stock for the beginning and last twenty trading days of the performance period ($154.49 and $186.61, respectively). Separately, but of note, Amgen’s 2015-2017 three year TSR (30.0%) outperformed that of the average TSR of our 2017 peer group (11.6%). |
The 2015-2017 performance period of the performance award program is the last performance period that is earned based solely on our relative TSR performance. Commencing in 2016, and continuing in 2017 and 2018, our outstanding LTI equity award performance units are earned based on our financial performance as measured under annual financial measures, equally weighted with the resulting average earnout percentage increased or decreased by our relative TSR performance against the companies in the S&P 500 for the performance period that commences with the grant date and continues through December 31 of the last year of the relevant three-year performance period. The annual financial performance goals for each of the three years in the performance period are established at the commencement of the three-year performance period.
While retaining most of the elements of the 2016-2018 performance period goal design, the Compensation and Management Development Committee, or Compensation Committee, replacednon-GAAP operating expense withnon-GAAP return on invested capital, or ROIC, for the third year (2019) of the 2017-2019 performance period. The Compensation Committee’s replacement ofnon-GAAP operating expense withnon-GAAP ROIC as one of the three financial performance measures (in addition tonon-GAAP earnings per share andnon-GAAP operating margin) in the third year of the 2017-2019 performance period is designed to support our transformation strategic priority to deliver an efficient, disciplined business model beyond 2018.
Positive 2017 Say on Pay Vote Outcome and Engagement With Our Stockholders
In 2017, we received approximately 95% stockholder support on our sayonpayadvisoryvote.Consistentwithourbroaddirectstockholder outreach over the past several years, since our 2017 annual meeting of stockholders, in addition to our outreach by our executives and our InvestorRelationsdepartmenttoinvestors,wehaveengaged in governance-focusedoutreachactivitiesanddiscussionswith
stockholders comprising approximately 52% of our outstanding shares. The compensation-related feedback is reviewed by our Compensation Committee. We have made a number of compensation changes in response to past discussions with our stockholders and have implemented the compensation best practices discussed below. For more detail regarding our stockholder engagement, see page 38.
Board Recommends a Vote “FOR” Our Executive Compensation
Our Board believes that our current executive compensation program aligns the interests of our executives with those of our stockholders and compensation outcomes are primarily based on the performance of our Company. We intend that our compensation programs reward actions and outcomes that are consistent with the sound operation of our Company, advance our strategy and are aligned with the creation of long-term stockholder value.
For the reasons discussed above and more fully in the Compensation Discussion and Analysis, the Board recommends that stockholders vote “FOR” the following resolution:
“Resolved, that the stockholders approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers, as
disclosed pursuant to Securities and Exchange Commission rules in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosure of this proxy statement.”
Although this vote is advisory and is not binding on the Board, our Compensation Committee values the opinions expressed by our stockholders and will consider the outcome of the vote when making future executive compensation decisions.
We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote on executive compensation at our 2019 annual meeting of stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
ï 2018 Proxy Statement 31
Compensation Discussion and Analysis |
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes our compensation strategy, philosophy, policies, programs and practices, or compensation program, for our Named Executive Officers, or NEOs, and the positions they held in 2016 below:2017 below.
Table of Contents
| Name | ||
Robert A. Bradway | Chairman of the Board, Chief Executive Officer and President | |
Anthony C. Hooper | Executive Vice President, Global Commercial Operations | |
Sean E. Harper | Executive Vice President, Research and Development | |
David W. Meline | Executive Vice President and Chief Financial Officer | |
|
| |
Jonathan P. Graham | Senior Vice President, General Counsel and Secretary | |
5632 ï 20172018 Proxy Statement
|
INNOVATIVE MEDICINES TRANSFORMING AMGEN FOR THE FUTURE GLOBAL GEOGRAPHIC REACH NEXT-GENERATION BIOMANUFACTURING IMPROVED DRUG DELIVERY SYSTEMS CAPITAL ALLOCATION AND INVESTING FOR LONG-TERM GROWTH BRANDED BIOSIMlLARS Innovative Medicines Transforming Amgen for the Future Global Geographic Reach Next-Generation Biomanufacturing Improved Drug Delivery Systems Capital Allocation and Investing for long-Term Growth Branded Biosimilars
Six therapeutic areas form the core of our business—cardiovascular, oncology/hematology, bone health, neuroscience, inflammation, nephrology, and nephrology.bone health. Our strategy to execute in these therapeutic areas is multifaceted, with sevenincludes a series of integrated activities to strengthen our long-term competitive position in the industry. These activities include the following strategic priorities that allow us to drive long-term growth, while also delivering on our short- and medium-term goals. As a result, our strategy enables multiple approaches to creating stockholder value. priorities:
Our Strategic Priorities
Key 20162017 activities that align our NEO pay with performance and support the execution of these strategic priorities are summarized in the following pages.
Our Strategic Priorities
Strategic Priorities
| Description
| |
| Our focus on developing innovative,
| |
| ||
| We continue to improve our business and operating model through significant transformation and process improvement efforts. Among these programs, we have reduced the time it takes to bring new medicines to market, reengineered internal processes to make them more efficient, and explored new technologies with potential to further enhance the value we deliver to patients. Further, these transformation and process improvement efforts have resulted in significant costs savings and improved return on capital.
| |
| ||
| We have been actively expanding our presence by opening new affiliates and locations around the world, pursuing appropriate acquisitions and acquiring global rights to market our products. Amgen medicines are now available to patients in approximately 100 countries worldwide. We are leveraging our global presence to deliver the potential of our products to patients globally. | |
| Our first next-generation biomanufacturing facility in Singapore has been constructed in less than half the time, at a quarter of the cost of a traditional facility while using 75% less space and having a much smaller impact on the environment. This facility was approved for certain commercial scale production by multiple regulatory agencies, including the FDA(1) and the EMA(2) in 2017. We are expanding our application of next-generation manufacturing in our organization. We announced in 2018 that we will invest in greater manufacturing capacity to support the volume growth that we foresee and plan to build a new drug substance manufacturing plant using our next-generation biomanufacturing capability in the U.S. | |
| Biologic medicines are, for the most part, injected subcutaneously or administered | |
| ||
| We recognize that stockholders who support investment in developing innovative medicines require an appropriate return on the capital they commit to Amgen. In 2017, we returned $6.5 billion in capital to our stockholders ($3.4 billion in dividends and $3.1 billion in stock repurchases). | |
| We believe our deep experience in biologics development and unparalleled capabilities in biotechnology manufacturing make entry into the emerging biosimilars market attractive and position us for leadership. | |
| ||
| (1) |
|
| (2) |
|
|
|
ï 20172018 Proxy Statement57 33
|
Aligning Pay With Performance and Execution of Our Strategic Priorities
A significant majority of each NEO’s compensation is dependent on our performance and execution of our strategic priorities. Our annual cash incentive and long-term equity incentive programs together promote focus on both near- and long-term stockholder value creation by providing incentive compensation that is earned based on our financial, operating, and stock price performance and is “at risk.” We have been pleased with the level of stockholder support we have received on our say on pay advisory vote over time, receiving in excess of 95% support over the last three years (2015-2017). In 2016,2017, we delivered strong financial results while makingmade significant progress on our 2016 operating2017 performance goals and advancing our strategic priorities, which facilitate execution of our strategy.
Annual Cash Incentive Program Results
Our annual cash incentive compensation program is tied directly to our performance based onpre-established financial goals of revenues (30%) andnon-GAAP net income(1) (30%), and operating performance goals tied to executing product and delivery system launches (10%) and progressing innovative pipeline (30%):
| Goal | Weighting | % of Target Earned | ||||||
1. Financial Performance
|
| |||||||
Revenues
|
|
30%
|
|
|
139.7%
|
| ||
Non-GAAP Net Income(1)
|
|
30%
|
|
|
147.5%
|
| ||
2. Execute Product and Delivery System Launches
|
| |||||||
Execute Product and Delivery System Launches
|
| 10%
|
|
| 127.8%
|
| ||
3. Progress Innovative Pipeline
|
| |||||||
Execute Key Clinical Studies and Regulatory Filings
|
| 20%
|
|
| 190.0%
|
| ||
Advance Early Pipeline
|
|
10%
|
|
|
225.0%
|
| ||
Composite Score
|
| Achieved 159.5%
|
| |||||
Our annual cash incentive compensation program is tied directly to our performance based onpre-established financial goals (revenues (30%) andnon-GAAP net income(1)(30%)), and operating performance goals (progressing our pipeline (25%) and delivering on annual priorities (15%)): | ||||
| Goal | Weighting
|
% of Target | ||||
Financial Performance
| ||||||
Revenues
|
| 30%
|
| 110.6%
| ||
Non-GAAP Net Income(1)
|
| 30%
|
| 116.8%
| ||
Progress Innovative Pipeline
| ||||||
Execute Key Clinical Studies and Regulatory Filings
|
| 20%
|
| 123.0%
| ||
Advance Early Pipeline
|
| 5%
|
| 201.7%
| ||
Deliver Annual Priorities
| ||||||
Execute Critical Launches and Long-Term Commercial Objectives
|
| 10%
|
| 76.0%
| ||
Realize Functional Transformation Objectives
|
| 5%
|
| 90.4%
| ||
Composite Score
|
| Achieved 115.0%
| ||||
1. We delivered on our financial performance goals.
Revenues increased 6% to $23 billionin 2016
In 2016, ourOur financial performance was strong and we delivered on our financial performance goals.strong.
We grew revenues by 6% over 2015 to $23 billion in 2016.
| • | Our |
Our commitment tore-shape the expense base of the business delivered results once moreRevenues were $22.8 billion in 2017, a slight decrease from 2016 as we continued to execute on the transformation and process improvement efforts announced in 2014. Our transformation and process improvement efforts across Amgen are enabling us to reallocate resources to funddespite increased competition for many of our innovative pipeline and growth opportunities that deliver valuelargest products, several of which have lost patent protection. Actual performance was strong as 2017 reported product sales declined by less than $100 million (0.4%) compared to patients and stockholders.2016 reported sales.
2. We progressed our pipeline.
Operating leverage from
We develop innovative medicines in six focused therapeutic areas that meet unmet medical needs in addressing serious illnesses. (For complete information of all of our material pipeline advancements, please refer to our Form10-K for the changesyear ended December 31, 2017.) In 2017, we have made enables us to drive net income growthprogressed important products and product candidates in the near-term whileall six of our longer-term investments have laid the foundation for growth beyond this period.therapeutic areas.
Bone Health Therapeutic Area
| • | ForProlia® (our medicine for patients with osteoporosis), in 2017 positive Phase 3 study data demonstrated that Prolia treatment led to greater increases in bone mineral density in patients with glucocorticoid-induced osteoporosis compared with risedronate. We filed a supplemental BLA(2) and the FDA set a PDUFA(3) target action date of May 28, 2018. |
Since 2014, we have realized approximately $1.2 billion of transformation and process improvement savings, the majority of which was reinvested in product launches, clinical programs and external business development.
| • | ForEVENITY™(4) (our medicine for patients with osteoporosis), the EMA accepted the Marketing Authorization Application for the treatment of osteoporosis in postmenopausal women and in men at increased risk of fracture. |
| (1) |
|
| (2) | Biologics License Application. |
| (3) | Prescription Drug User Fee Act. |
| (4) | Jointly developed in collaboration with UCB. |
INNOVATIVE MEDICINES
5834 ï 20172018 Proxy Statement
|
2. We executed on product and delivery system launches.Cardiovascular Therapeutic Area
This is the first full year that we have been able to provide patients with our six innovative products launched in 2015 (Repatha®, Kyprolis®, BLINCYTO®, IMLYGIC®, Neulasta®On-Pro® Kit, and Corlanor®). Repatha® and Kyprolis® both represent substantial opportunities as they address serious diseases impacting large patient populations with significant unmet medical needs.
Cardiovascular disease is the most costly disease for society today. In the absence of new therapies to reduce the risk of cardiovascular events for the millions of high risk patients in the U.S. and around the world, the burden of this disease is set to rapidly rise.
ForRepatha® (our medicine for certain patients who are unable to get their low-density lipoprotein, or LDL, cholesterol (bad cholesterol) under control):
| • |
|
Also during 2017, we performed additional analyses of the cardiovascular outcomes study that demonstrated that reducing LDL cholesterol levels with Repatha also reduced:
| - | cardiovascular events in patients |
| - |
|
| - |
|
| - | cardiovascular events in high-risk patients with peripheral artery disease. |
Oncology Therapeutic Area
| • | For |
 |
|
| - |
|
| - |
|
| • | ForXGEVA® (our medicine for the prevention of fractures and other skeletal-related events), in 2017 we reported results from a study that demonstrated that XGEVA isnon-inferior to zoledronic acid in delaying the time to first skeletal-related event in patients with multiple myeloma and in January 2018 the FDA approved XGEVA for this indication, providing a new treatment option for multiple myeloma patients for prevention of skeletal-related events without the associated kidney toxicity of currently available therapies. In 2018, the European Commission approved a variation to the Marketing Authorization to similarly expand XGEVA’s indication. |
During the last five years, we have expanded our reach to approximately 100 countries. In 2016, capitalizing on our expansion activities, we had 94 product country launches.
| • | ForBLINCYTO® (our medicine for patients with acute lymphoblastic leukemia, or ALL), in 2017 the FDA approved a supplemental BLA to include overall survival data from the Phase 3 TOWER study and expanded the indication to the treatment of relapsed or refractoryB-cell precursor ALL in adults and children. In 2018, the CHMP of the EMA adopted a positive opinion recommending a label variation to include the same overall survival data and supported the conversion of the conditional Marketing Authorization to a full Marketing Authorization in adult patients with relapsed or refractoryB-cell precursor ALL. In 2018, the FDA approved a supplemental BLA for the treatment of minimal residual disease in adults and children with B-cell precursor ALL. |
| (1) |
|
| (2) |
|
|
RandomizEd, OpeN Label, Phase 3 Study of Carfilzomib Plus DExamethAsone Vs Bortezomib Plus DexamethasOne in Patients |
| (3) | CArfilzomib, Lenalidomide, and DexamethaSone versus Lenalidomide and Dexamethasone for the treatment of PatIents with Relapsed Multiple MyEloma. |
| (4) | RAndomized, Open-label, Phase 3 Study in Subjects with Relapsed and Refractory Multiple Myeloma Receiving Carfilzomib in Combination with Dexamethasone, Comparing Once-Weekly versus Twice-weekly Carfilzomib Dosing. |
ï 20172018 Proxy Statement59 35
|
| • | ForVectibix® (our medicine for patients with colorectal cancer), in 2017 the FDA approved a supplemental BLA for Vectibix as first-line therapy in combination with FOLFOX and as monotherapy following disease progression after prior treatment with chemotherapies for patients with wild-typeRAS metastatic colorectal cancer. |
3. We significantly advanced our pipeline.Neuroscience Therapeutic Area
| • | ForAimovig™(1) (our medicine to prevent migraine), based on multiple positive studies demonstrating that Aimovig reduced the number of migraine days for patients with episodic and chronic migraine, in 2017 we submitted a BLA to the FDA. |
Our pipeline continued to advance in 2016. In addition to the Repatha®Inflammation Therapeutic Area trials and Kyprolis® E.U. approval discussed above, we reported the results of many important clinical trials, and we also have a number of programs nearing key regulatory milestones. A selected summary of these developments is contained below. (For complete information of all of our material pipeline advancements, please refer to our Form10-K for the year ended December 31, 2016.)
In our bone health therapeutic area in 2016, we reported that:
| • | For |
Nephrology Therapeutic Area
| • | For |
Also, in 2016 in our oncology therapeutic area, we reported that our Phase 3 study evaluating XGEVA® in the prevention of skeletal-related events, or SREs, in patients with multiple myeloma met its primary endpoint ofnon-inferiority compared with zoledronic acid in delaying the time to firston-study SRE.
In our neuroscience therapeutic area, we reported three positive pivotal studies for erenumab(4)(our medicine designed for the treatment of migraine):
A Phase 2b chronic migraine study showed that erenumab statistically significantly reduces patients’ monthly migraine days; and
Two Phase 3 episodic migraine studies demonstrated statistically significant reductions in monthly migraine days in patients treated with erenumab.
In our nephrology therapeutic area, we reported that the European Commission approved Parsabiv™ (etelcalcetide)2017 we received FDA approval for the treatment of secondary hyperparathyroidism in adult patients with chronic kidney disease on hemodialysis.
Our deep experience in biologics development and capabilities in biotechnology manufacturing positions us for success in the emerging biosimilars market. In our biosimilars portfolio in 2017, we reported:
• | The European Commission granted Marketing Authorization forAMGEVITA™ (biosimilar adalimumab (HUMIRA®)) in all available indications. We expect to begin launching AMGEVITA in Europe in 2018; |
| • | The FDA approvedMVASI™(3) (biosimilar bevacizumab (Avastin®)) for the treatment of five types of cancer, the first ever biosimilar to fight cancer approved by the FDA, and the European Commission granted Marketing Authorization in January 2018; |
| • | We submitted a BLA to the FDA forABP 980(3) (biosimilar trastuzumab (Herceptin®)) and the FDA has set a Biosimilar User Fee Act target action date of May 28, 2018. In 2018, the CHMP of the EMA adopted a positive opinion for the Marketing Authorization for ABP 980; and |
| • | We are in Phase 3 for two other biosimilars –ABP 710 (biosimilar infliximab (REMICADE®)) andABP 798(3) (biosimilar rituximab (RITUXAN®)). |
3. We delivered on our annual priorities to execute critical launches and long-term commercial objectives and realize our transformational objectives.
|
|
and the demand for it continues to grow by double-digit percentages.
Our focus remains on enabling access to Repatha for appropriate patients as hurdle rates for access and reimbursement for patients remain high.
| - | We increased U.S. net sales and average annual total prescriptions (TRx) share, as well as E.U. average annual market share. |
| - |
|
| - | We have entered into outcomes-based contracts which provide refunds for the cost of Repatha for eligible patients who have a heart attack or stroke while on Repatha. |
Our clinical development program has delivered results in support of KYPROLIS as a backbone therapy for multiple myeloma.
| - | We increased U.S. andex-U.S. net sales. |
| - | The addition of overall survival data to the U.S. KYPROLIS label and the CHMP of the EMA adopted a positive opinion recommending the inclusion of overall survival data from the ENDEAVOR study discussed previously. |
| - | KYPROLIS has established strong share in second and later lines of multiple myeloma therapy, and we expect the addition of overall survival data to strengthen its appeal to physicians, payers, and patients. |
| We have built leading patient- and provider-friendly device capabilities to enhance patient experience and to differentiate our products. This year: |
We launched theEnbrel Mini™ single-dose prefilled cartridge with AutoTouch™ reusable auto-injector, a device that is ergonomically designed to meet the needs of rheumatoid arthritis patients; and
| • | In the U.S., theNeulasta® Onpro® kit represented approximately 60% of Neulasta sales at the end of 2017. The CHMP of the EMA issued a positive opinion in 2018 recommending a label variation for Neulasta to include the NeulastaOnpro kit – a device that combines the efficacy of Neulasta with an innovativeon-body injector delivery |
Branded Biosimilars INNOVATIVE MEDICINES Improved Drug Delivery Systems
| (1) | Jointly developed in collaboration with Novartis AG. |
| (2) | Jointly developed in collaboration with AstraZeneca plc. |
| (3) | Jointly developed in collaboration with Allergan plc. |
36 ï 2018 Proxy Statement
Compensation Discussion and Analysis |
system which has the potential to deliver better adherence to therapy and more convenience for patients and oncology practices. |
In 2017, capitalizing on our expansion activities, we secured 80 country product launches.
Our commitment to improve our business and operating model through significant transformation and process improvement efforts announced in 2014 delivered results in 2017. These transformation and process improvement efforts across Amgen are continuing tore-shape the expense base and enable us to reallocate resources to fund many of our pipeline and growth opportunities that deliver value to patients and stockholders.
• |
|
Since 2014, we have realized approximately $1.5 billion of transformation and process improvement savings. These savings were reinvested in product launches, clinical programs and external business development. Consequently, net savings in the same period have not been significant.
Through our next-generation biomanufacturing capability, as well as other efforts to optimize our fixed capital infrastructure, we are on track to meet our 2018 goal of reducing our facility footprint by 23%.
In 2016,2017, we also made strong progress on executing against our other strategic priorities:
| ➣ | We invested for long-term growth while returning substantial capital to our stockholders. |
| Our strong cash flows and balance sheet allowed continued investment for long-term growth through internal research and development ($3.6 billion in 2017) and external |
Our strong cash flows and balance sheet allowed continued investment for long-term growth through internal research and development ($3.8 billion in 2016) and external business development transactions, while simultaneously providing substantial returns to stockholders.
In 2016,2017, whileinvesting $3.8$3.6 billion in research and development, we alsoreturned$6returned $6.5 billion of capital to our stockholders ($33.4 billion in dividends and ~20~18.5 million shares
in stock repurchases)
|
|
|
|
|
|
|
60 ï 2017 Proxy Statement
Annual Dividend Increases
| * | Represents annualized dividend |
We increased our quarterly dividend per share 27%15% over 20152016 (to $1.00$1.15 per share for 2016)2017).
We made investmentsOn December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act, or the 2017 Tax Act, resulting in next-generation biomanufacturing that buildour having global access to our $41.7 billion balance of cash, cash equivalents and marketable securities as of December 31, 2017. Based on our existing competitive advantageconfidence in the long-term outlook for our business, enhanced by the 2017 Tax Act, and consistent with our ongoing objective to return capital to our stockholders, we executed a tender offer of $10 billion in shares. In addition to this approximately $10 billion share repurchase, we are evaluating other ways to deploy our balance of cash, cash equivalents and marketable securities and invest in our business.
| We made investments in next-generation biomanufacturing that build on our existing expertise in human biology and protein |
manufacturing. This next-generation biomanufacturing dramatically reduces the scale and costs of making biologics while maintaining a reliable, high-quality, compliant supply of medicines. Final preparations are underway for licensure of
In 2017, our new Singapore facility.facility was approved for certain commercial scale production by multiple regulatory agencies, including the FDA and the EMA. At this facility, the next-generation biomanufacturing approach is environmentally responsible, vastly reducingreduces water use and requiring less energy.energy use, in turn, significantly reducing our carbon footprint. We are leveraging our global presence to deliver the potential of our products to patients globally.
We announced in 2018 that we will invest in greater manufacturing capacity to support the volume growth that we foresee. As a result, we plan to build a new drug substance manufacturing plant using our next-generation biomanufacturing capability in the U.S. and add highly skilled jobs.
Global Geographic Reach Transforming Amgen for the Future Capital Allocation and Investing for long-Term Growth $1.12 $0.68 29% $1.44 31% $1.88 30% $2.44 30% $3.18 27% $4.00 15% $4.80 2011 † 2012 2013 2104 2015 2016 2017 Next-Generation Biomanufacturing
| (1) | Reported and reconciled inAppendix B. |
ï 2018 Proxy Statement 37
Compensation Discussion and Analysis |
Performance Under Our Long-Term Incentive
Long-Term Incentive Program
Our long-term incentive, or LTI, equity award compensation is tied directly to our stock performance and aligns with the interests of our stockholders.
80% of our annual LTI equity award grants are performance-based, and, as such, a significant portion of totalthus aligning compensation is tied to our stock price performance andwith value creation for our stockholders. Our performance units that were earned based onfor the three yearthree-year performance period ending January 31, 201730, 2018 were earned based on our relative total shareholder return, or TSR. Our beginning stock price and ending stock price for purposes of the 2015-2017 performance period are each the average daily closing price of a share of our Common Stock for the beginning and last twenty trading days of the performance period ($154.49 and $186.61, respectively), representinga three-year TSR of 30%.
Payout under our LTI performance award program for our 2014-20162015-2017 performance period at 112.5%93.4% reflects our three-year TSRperformance at the 56.246.7ndth percentile relative to the TSRs of the companies in the Standard & Poor’s 500 Index, or S&P 500, for this performance period.
An investor who had investedThe 2015-2017 performance period is the last LTI performance unit program that is earned based solely on our relative TSR performance. Commencing in 2016, and continuing in 2017 and 2018, our Company Common Stockoutstanding LTI performance awards are earned based on January 1, 2014 would have earned aour financial performance as determined under annual financial measures equally weighted with the resulting average earnout percentage increased or decreased by our relative TSR of 37% as of December 31, 2016 versus 29% forperformance against the companies in the S&P 500 for the sameperformance period as depicted above.that commences with the grant date and continues through December 31 of the last year of the relevant three-year performance period. The annual financial performance goals for each of the three years in the performance period are established at the commencement of the three-year performance period.
ï 2017 Proxy Statement61
Positive 20162017 Say on Pay Vote Outcome and Engagement With Our Stockholders
In 2016,2017, we received approximately 97%95% stockholder support on our say on pay advisory vote. We have engaged consistently in broad direct stockholder outreach over the past several years. Since our 20162017 annual meeting of stockholders, in addition to our outreach by our executives and our Investor Relations department to investors, we have engaged in governance-focused outreach activities and discussions with stockholders comprisingowning approximately 52% of our outstanding shares. These discussions have been valuable and informative and we
will continue to engage with our stockholders to further enhance our understanding of the perspectives of our investors. The compensation-related feedback from our stockholders is reviewed by our Compensation and Management Development Committee, or Compensation Committee, and we have made a number of compensation changes in response to past discussions with our stockholders, including changes to our long-term incentive equity award design described below. Governance-related feedback is reviewed by our Governance and
Nominating Committee and has also been a source of governance changes, including our adoption of proxy access for director nominations. Insights from investors are reported to the full Board of Directors, or Board.
In 2016, our2017, the predominant feedback from investors with respect to our compensation and governance practices was that they are satisfied with our compensation program and governance practices. While weWe are pleased with our say on pay results and stockholder feedback, weand will continue to reach outengage with our stockholders to be sure we understand and address any concernsconcerns.
Annual Meeting of our stockholders. Our stockholder outreach efforts will continue after the filing of this proxy statement, as well as through our executiveStockholders Executive compensation website (accessible atwww.amgen.com/executivecompensation) initiated in 2008available year-round that invites stockholders to provide feedback directly to the Compensation Committee regarding our executivewww.amgen.com/executivecompensation Post-Proxy Filing for Annual Meeting Post-Annual Meeting Targeted outreach to investors requestingfollow-uppre-proxy filing or related to key issues •Discuss vote outcomes •Consider existing governance and compensation program.practices in light of feedback Year-Round Stockholder Outreach and EngagementPre-Proxy Filing for Annual Meeting •Compensation-related feedback reviewed by Compensation Committee •Governance-related feedback reviewed by Governance Committee •Insights from investors provided to the full Board •Appropriate committees and Board (as necessary) evaluate potential changes in light of stockholder feedback
LTI Equity Award Design Changes in 2016
In 2016, the Compensation Committee made the following LTI equity award design changes which take into account feedback from dialogue with our stockholders and are designed to drive operating performance and increase performance hurdles.
Weaddednon-GAAP financial measures of earnings per share, operating margin and operating expense, and maintained the relative TSR measure as a modifier forour 2016-2018 performance period performance award goal design. The new operating performance measures were chosen to drive operating performance in alignment with our operating performance commitments to stockholders through 2018, focus our executives on the transformation of our business and our operating efficiency and profitability, and address the challenges of a single performance metric for a full three-year period.
To better align our performance award program with those of our peers and to further encourage our executives to drive performance, we increased the maximum amount that can be earned for the 2016-2018 performance period from 150% to 200%.
To emphasize the importance of long-term growth and stock appreciation, we reintroducednon-qualified stock options, or stock options, into our LTI equity award mix. Like our restricted stock units, or RSUs, stock options generally vest in three approximately equal annual installments on the second, third and fourth anniversaries of the grant date. Stock options directly align with stockholder interests as they only have value if the Company’s stock price increases after grant. The addition of stock options results in a more diversified mix of performance-based equity.
We revised our equity incentive plan design to require aminimum vesting period of no less than one year on 95% of equity awards granted.
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LTI Equity Award Design Changes in 2017
In 2017, the Compensation and Management Development Committee, or Compensation Committee, constructed the 2017-2019 performance period award goal design to take into account feedback from dialogue with our stockholders and was designed to drive operating performance and increase performance hurdles. The 2017-2019 performance period performance award goal design mirrors much of the 2016-2018 performance period goal design. While retaining most of the elements of the 2016-2018 performance period goal design, the Compensation Committeereplacednon-GAAP operating expense with non-GAAP return on invested capital (or
ROIC)for the third year of this performance period. The other two financial measures that apply for the full three-year period are annualnon-GAAP earnings per share, or EPS, andnon-GAAP operating margin. The Compensation Committee’s replacement ofnon-GAAP operating expense withnon-GAAP ROIC as one of the three financial performance measures in the third year of the 2017-2019 performance period is designed to support our transformation strategic priority to deliver an efficient, disciplined business model beyond 2018.
ï 2018 Proxy Statement 39
Compensation Discussion and Analysis |
Our 20162017 Compensation Program Highlights and Objectives
Total Target Direct Compensation Focuses on “At Risk” Compensation All preceding pie charts are calculated using (i) the “Salary” column from tile “Summary Compensation Table” in our Executive Compensation Tables (ii) the target annual caSh incentive caSh incentive award in the “estimated Possible Payouts under non-Equity incentive Plan Awards- Target” column in the table in footnote 2 to the Grants of Plan-based Awards” table in our Executive Compensation Tables and (iii) the grant date fair value of annual grants of performance units RSUs and stock options In the “Grant Date Fair Value of Stock and Option Awards” column of the “Grants of Plan-Based Awards” table in our Executive Compensation Tables. CEO 90o/o Pay at Risk 75% Performance based Other NEOs 82% Pay at Risk 69% Performance based Purpose LTI Equity Awards provide a direct link to the creation of shareholder value and execution of our strategy All NEO’s interests with stockholders foster long-term focus and retention Annual Cash Incentives Measure NEO’s performancepre-established company performance goals Align all staff members the same company performance goals as all such annual cash incentive awards are based on these on these goals Motivate NEO’s to meet or exceed our annual Company performance goals to drive annual performance and position us for longer-term success via our strategy Base Salary Provides a degree or financial certainty that helps us retain talent Recognizes competitive market condition sandlot rewards individual performance through periodic increases LTI Equity Award alloction:80% performance based 50% performance units 30% Stock Options 20% Restricted stock units
40 ï 20172018 Proxy Statement63
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LTI Equity Awards (“At Risk”)
Performance Units.Units (50%). The Compensation Committee establishes the performance award goal design at the commencement of each three yearthree-year period of the performance award program. There is no guarantee of any value realized from the grants as they are earned only if specific long-term performance goals are achieved.
Stock Options.Options (30%). Aligned with stockholder interests as they only have value if the Company’s stock price increases after grant.
Restricted Stock Units.Units, or RSUs (20%). Designed to encourage retention and long-term value creation.
Stock options and RSUs vest in three approximately equal installments on the second, third and fourth anniversaries of the grant date. The delay in the commencement of vesting further emphasizes the long-term performance focus of our LTI equity award program and enhances retention.
Performance Units Earned for the 2014-20162015-2017 Performance Period
| • | Our payout for the most recent |
Annual Cash Incentive Awards (“At Risk” and Designed to Drive Execution of Our Strategic Priorities)
In 2016, we delivered strong financial results while making significant progress on our 2016 operating objectives and advancing our strategic priorities, which facilitate execution of our strategy. Our Compensation Committee annually approves Company performance goals that are designed to focus our staff on delivering on our financial performance, operational objectives and specific strategic priorities to drive annual performance and position us to execute on our strategy in the near- and longer-term. Our Executive Incentive Plan, or EIP, establishes a maximum award possible for each participant and annual cash incentive awards are generally made to our NEOs under the EIP based on the Company’s performance against thepre-established Company performance goals.
| • | Our annual cash incentive awards are earned based on achieving financial |
Increased target bonus opportunities in 2016, to more closely approximate the Market Median, to have a greater proportion of cash compensation performance-based and “at risk,” and to foster a team approach. For 2016, we increased our Chief Executive Officer’s, or CEO’s, target annual cash incentive award opportunity from 140% to 150% of base salary for target total annual cash and, each Executive Vice President target annual cash incentive award opportunity was increased to 100% of base salary (from 90%) for 2016.
Base Salaries (the smallest component of compensation for our NEOs)
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Based on data provided to the Compensation Committee, including recommendations of Frederic W. Cook & Co., or Cook & Co., the Compensation Committee’s independent consultant, the Compensation Committee approved an overall merit increase of 2% for our NEOs, adjusted to align with the Market Median for each position.
| (1) | Non-GAAP net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled inAppendix B |
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What we do
| ✓ |
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| ✓ | Clawback policy:Our Board is required to consider the recapture of past cash or LTI equity award payouts to our NEOs if the amounts were determined based on financial results that are later restated and the NEOs’ misconduct is determined by the Board to have caused the restatement. |
| ✓ | Recoupment: Our incentive compensation plans contain recoupment provisions applicable to all staff members that expressly allow the Compensation Committee to determine that annual cash incentive awards are not earned fully or in part where such employee has engaged in misconduct that causes serious financial or reputational damage to the Company. |
| ✓ | Robust stock ownership and retention guidelines: We have a six times base salary ownership requirement for our CEO. Officers are required to retain shares of our Common Stock acquired through the vesting of RSUs, the payout of performance units, or the exercise of stock options until they have reached the required stock ownership level. |
| ✓ | Minimum vesting periods:Our equity incentive plan provides that our equity awards are subject to a minimum vesting period of no less than one year on 95% of equity awards granted and our grants generally vest over four years, with no vesting in the first year and vesting in three approximately equal annual installments on the second, third and fourth anniversaries of the grant date. |
| ✓ | Double-trigger in the event of a change of |
| ✓ | Performance-based equity: Our LTI equity award grants are primarily (80%) performance-based. |
What we don’t do
× | No hedging or pledging: With respect to our Common Stock, our staff members and Board are prohibited from engaging in short sales, purchasing or pledging our Common Stock on margin, or entering into any hedging, derivative or similar transactions.
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× | Nore-pricing or backdating:We have strong LTI equity award plans and policies that prohibitre-pricing or backdating of equity awards.
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× | No
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× | No excessive perks:Our perquisites are limited to those with a clear business-related rationale.
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× | No employment agreements:We do not have employment contracts or guaranteed bonuses, other than in countries where they are required by law.
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× | No dividends paid on unvested equity:Dividends accrue on our performance units and RSUs, but are paid only when and to the extent the underlying award is earned and vested.
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× | No defined benefit pension or supplemental executive retirement plan (SERP) benefits or “above market” interest on deferred compensation. |
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How Compensation Decisions Are Made For Our Named Executive Officers
2016-2018 Performance Period Performance Award Goal Calculation
All operating goals (for each year) are established at the commencement of the three-year performance period.
| (1) | 2017 operating measures have been adjusted by $147 million in operating expense ($0.16 in EPS) for the impact of Hurricane Maria as prescribed by the terms of the 2016-2018 goal document. Otherwise,Non-GAAP EPS,Non-GAAP Operating Margin andNon-GAAP Operating Expense for purposes of 2016 and 2017 with respect to the 2016-2018 performance period are as reported and reconciled inAppendix B.Non-GAAP for purposes of each of the years of the 2016-2018 performance period was defined as earnings per share, operating margin and operating expense under GAAP, excluding certain items, net of tax, related to |
Non-GAAP(1) Operating Measures (Scoring 50%-150%) Operating Expense 1/3rd Operating Margin 1/3rd EPS 1/3rd S&P 500 Relative TSR Modifier (Scoring +/- 50%) Maximum (50%) for 75th percentile and above Target (0%) for median, or 50th percentile Minimum (-50%) for 25th percentile or below Linear interpolation for performance along the payout curve Payout no greater than target (0%) if Amgen’s absolute TSR is less than 0 (Scoring 0%-200% of Target) Final Payout Multiplier) 2016-2018 Operating Measures Score (Operating Measure Percentages 50%-150% subject to linear interpolation along the payout curve) Operating Measures Percentages are Measured Annually and Equally Weighted for Each of the Three Years of the Performance PeriodNon-GAAP EPS(1) Growth (1/3rd)Non-GAAP Operating Margin(1) (1/3rd)Non-GAAP Operating Expense(1) (1/3rd) Average Operating Measure Percentages 2016 137% 129% 94% 120% 2017 129% 135% 116% 126% 2018 TBD TBD TBD TBD Three Year Average Operating Measure 2016 Targets 2016 Actual 2017 Targets 2017 ActualNon-GAAP EPS(1) ($) Minimum (50%) Less than or equal to $10.64 $11.65 (137%) Less than or equal to $10.89 $12.74 (129%) Target (100%) $10.90 $11.63 Intermediate (125%) $11.52 $12.66 Maximum (150%) More than or equal to $11.79 More than or equal to $13.19Non-GAAP Operating Margin(1) (%) Minimum (50%) Less than or equal to 48% 52.3% (129%) Less than or equal to 48% 54.2% (135%) Target (100%) 50% 51% Intermediate (125%) 52% 53% Maximum (150%) More than or equal to 54% More than or equal to 56%Non-GAAP Operating Expense(1) ($B) Minimum (50%) More than or equal to $11.9 $11.45 (94%) More than or equal to $11.7 $11.0 (116%) Target (100%) $11.5 $11.2 Maximum (150%) Less than or equal to $11.1 Less than or equal to $10.7
ï 20172018 Proxy Statement75 51
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Performance Award Goal Design—Performance Units Granted in 2017 for the 2017–2019 Performance Period
To ensure that the performance award program continues to strongly align with the interests of our stockholders and motivates management to create long-term value, the Compensation Committee regularly reviews and considers whether to update the performance award goal design with input from management and Cook & Co. Based on review and deliberation in December 2016 and March 2017, and having considered the performance award goal designs of our peer group and stockholder feedback, the Compensation Committee approved the 2017-2019 performance period (January 1, 2017 to December 31, 2019). The Compensation Committee constructed the 2017-2019 performance period performance award goal design to leverage the 2016-2018 performance period goal design, retaining all of the elements of the 2016-2018 performance period goal design for 2017 and 2018, but changing one operating measure for the last year of the three-year performance period. For the first and second years of the 2017-2019 performance period, the Compensation Committee retained the three annualnon-GAAP operating measures:
| • | Non-GAAP earnings per share(1) (EPS) growth; |
| • | Non-GAAP operating margin(1); and |
| • | Non-GAAP operating expense(1). |
For the third year of this performance period, the Compensation Committee replacednon-GAAP operating expense withnon-GAAP return on invested capital, or ROIC. The Compensation Committee’s replacement ofnon-GAAP operating expense withnon-GAAP ROIC was made in part in response to stockholder feedback, and is
designed to support our transformation strategic priority to deliver an efficient, disciplined business model beyond 2018 with focused management of our return on deployment of invested capital.
The operating performance measures were chosen to:
Drive operating performance in alignment with our operating performance commitments to stockholders through 2018;
Focus our executives on the transformation of our business and our operating efficiency, productivity, and profitability; and
Address the challenges of a single performance metric for a full three-year period.
The three annual operating measures are weighted equally(one-third per measure) and calculated againstpre-established targets for each year in the 2017-2019 performance period. All operating goals (for each year) are established at the commencement of the three-year performance period. At the end of the performance period, the final average operating measure percentages for each of the three years are averaged, resulting in a total operating measures score that can range from 50% to 150% for maximum performance. The total operating measures score is then modified up or down by up to 50 percentage points based on our TSR performance ranking relative to the TSRs of the companies in the S&P 500 from the grant date of May 1, 2017 through the end of the performance period (the relative TSR modifier) resulting in a payout range of 0% to 200% of target awards granted. The TSR modifier is limited to target (zero, or no increase) where our absolute TSR is less than zero to limit reward in a performance period in which we perform better than the S&P 500 for the period but investors do not recognize stock price growth.
| (1) | 2017 operating measures have been adjusted by $147 Million in operating expense ($0.16 in EPS) for the impact of Hurricane Maria as prescribed by the terms of the 2017-2019 goal document. Otherwise,Non-GAAP EPS,Non-GAAP Operating Margin andNon-GAAP Operating Expense for purposes of the 2017-2019 performance period are as reported and reconciled inAppendix B.Non-GAAP for purposes of each of the years of the 2017-2019 performance period was defined as earnings per share, operating margin, operating expense, and ROIC under GAAP, excluding certain items, net of tax, related to acquisitions, restructuring and certain other items, and the impact of tax law changes. |
52 ï 2018 Proxy Statement
Compensation Discussion and Analysis |
2017-2019 Performance Period Performance Award Goal Calculation
All operating goals (for each year) are established at the commencement of the three-year performance period.
| (1) | 2017 operating measures have been adjusted by $147 Million in operating expense ($0.16 in EPS) for the impact of Hurricane Maria as prescribed by the terms of the 2017-2019 goal document. Otherwise,Non-GAAP EPS,Non-GAAP Operating Margin andNon-GAAP Operating Expense for purposes of the 2017-2019 performance period are as reported and reconciled inAppendix B.Non-GAAP for purposes of each of the years of the 2017-2019 performance period was defined as earnings per share, operating margin, operating expense, and ROIC under GAAP, excluding certain items, net of tax, related to acquisitions, restructuring and certain other items, and the impact of tax law changes. |
Non-GAAP(1) Operating Measures (Scoring 50%-150%) EPS 1/3rd Operating Margin 1/3rd Operating Expense Years 1 & 2 ROIC Years 3 1/3rd S&P 500 Relative TSR Modifier (Scoring +/- 50%) Maximum (50%) for 75th percentile and above Target (0%) for median, or 50th percentile Minimum (-50%) for 25th percentile or below Linear interpolation for performance along the payout curve Payout no greater that target (0%) if Amgen’s absolute TSR is less than 0 (scoring 0%-200% of Target) Final Payout Multiplier 2017-2019 Operating Measures Score (Operating Measure Percentages 50%-150% subject to linear interpolation along the payout curve) Operating Measures Percentages are Measured Annually and Equally Weighted for Each of the Three Years of the Performance PeriodNon-GAAP EPS(1) GrowthNon-GAAP Operating Margin(1)Non-GAAP Operating Expense(1) Years 1 & 2Non-GAAP ROIC(1) Year 3 Average Operating Measure Percentages 2017 134% 115% 107% N/A 118% 2018 TBD TBD TBD TBD 2019 TBD TBD N/A TBD TBD 1/3rd 1/3rd 1/3rd Three Year Average Operating Measure 2017 Targets 2017 ActualNon-GAAP EPS(1) ($) Minimum (50%) Less than or equal to $11.80 $12.74 (134%) Target (100%) $12.00 Intermediate (125%) $12.60 Maximum (150%) More than or equal to $13.00Non-GAAP Operating Margin(1) (%) Minimum (50%) Less than or equal to 51% 54.2% (115%) Target (100%) 53% Intermediate (125%) 55% Maximum (150%) More than or equal to 57%Non-GAAP Operating Expense(1) ($B) Minimum (50%) More than or equal to $11.5 $11.0 (107%) Target (100%) $11.1 Maximum (150%) Less than or equal to $10.7
ï 2018 Proxy Statement 53
Compensation Discussion and Analysis |
Change to Performance Award Goal Design—2017–20192018–2020 Performance Period
As part of its regular review and consideration of the performance award program, the Compensation Committee evaluated potential performance award goal designs for the 2017-20192018-2020 performance period (January 1, 20172018 to December 31, 2019) and reviewed those of our peer group2020) with input from management and Cook & Co. inat its December 20162017 and March 2017.2018 meetings. The Compensation Committee constructed the 2017-20192018-2020 performance period performance award goal design to leverage the 2016-2018 performance period goalcurrent design retaining most of the elementsCompany’s performance awards, retaining a combination of operating measures and the 2016-2018 performance period goal design but changing one operating measure for the last year of the three year performance period.relative TSR modifier. The Compensation Committee retained the same threenon-GAAP operating measures (EPS growth, operating margin, and operating expense) for the first and second yearsyear of the 2018-2020 performance period as is used for 2018 in the 2017-2019 performance period. For the second and third yearyears of thisthe 2018-2020 performance period, the Compensation Committee replacedmoved to twonon-GAAP operating expense withnon-GAAP returnmeasures (EPS growth and ROIC), reflecting our continued focus on investment of capital, or ROIC. The Compensation Committee’s replacement ofnon-GAAP operating expense withnon-GAAP ROICremaining disciplined in the third yearour management of the 2017-2019business as we move beyond our 2018 operating performance period is designed to support our transformation strategic priority to deliver an efficient, disciplined business model beyond 2018.investor commitments. The operating measures continue to beare weighted equally in each year(one-third per measure)measure for 2018 andone-half per measure for 2019 and 2020) and are measured against established targets for each year in the 2017-20192018-2020 performance period. Allperiod; all such operating goalsgoal targets are established at the commencement of the three year performance period. The operating measures percentages are calculated for each year of the 2018-2020 performance period and are averaged at the end of the performance period, resulting in a total operating measures percentage that can range from 30% for minimum to 170% for maximum performance. The total operating measures percentage is then modified by an increase or decrease of up to 30 percentage points based on the TSR modifier. The Compensation Committee believes that rebalancing the weighting in favor of the operating measures relative to the TSR modifier further emphasizes the Company’s operational priorities over the performance period while maintaining alignment of our performance with the experience of our stockholders. Consistent with the design of our 2016-2018 and 2017-2019 performance period performance awards, the total operating measures score and the relative TSR modifier result in a payout range of 0% to 200% of target awards granted and, in the event our absolute TSR is less than zero, the TSR modifier shall not add any percentage points notwithstanding our ranking.
Stock Options
Commencing with 2016, stockStock options comprise 30% of our LTI equity award grants for NEOs to emphasize the importance of achieving long-term growth and align with stockholder interests as stock options only have value if the Company’s stock price increases after the grant.
Restricted Stock Units
Consistent with our focus on performance-based equity, time-vested RSUscompriseonly20%ofourLTIequityawardgrantsforNEOs.They
result in one share of Common Stock being delivered for each vested RSU and serve as an
important and cost-effective retention tool because RSUs have intrinsic value on the grant date and going forward.
Dividend Equivalents
RSUs and performance units have dividend equivalent rights. Such dividend equivalents are payable only when, and to the extent, the underlying RSUs and performance units are earned and converted to shares of Common Stock. The dividend equivalents may be paid in stock (with cash paid for fractional shares) or in cash.cash at the Compensation Committee’s election. Stock options do not have dividend equivalent rights.
Plan Minimum Vesting Period of One YearYear; Actual Minimum of Two Years
Mindful of stockholder concerns and best practices, our equity incentive plan requires that at least 95% of all equity awards, including RSUs, restricted stock, stock options, performance awards, and dividend equivalents granted to staff members (including NEOs) will be subject to a minimum vesting period of no less than one year. Our annual stock option and RSU grants generally vest over four years in three approximately equal annual installments on the second, third and fourth anniversaries of the grant date. This delayed vesting schedule further underscores the long-term focus of our LTI equity award program and enhances the retention of staff members.
Long-Term Incentive Equity Awards Granted to Named Executive Officers in 20172018
In March 2017,2018, the Compensation Committee reviewed the LTI equity award grant values proposed to be granted to NEOs in 2017.2018. The Compensation Committee determined to continue to align the value of the LTI equity awards grantedapproved an increase in 2017 to approximate the Market Median. The Compensation Committee determined to increase Mr. Bradway’s LTI equity award from $11$12 million to $12$12.5 million which is slightly aboveto reward Mr. Bradway for strong performance and leadership of the Company in a year of transition for the Company. In making its decision, the Compensation Committee noted that the Market Median (4.3%) and positions Mr. Bradway’s target total direct compensation slightly (1%) above Market Median and retains the highest proportionhad declined because of compensationturnover in “at risk” and performance-based compensation.leadership at a number of our peer group companies while LTI awards for CEOs who had remained in place at peer companies were increased by 10%. The Compensation Committee granted Messrs.Mr. Hooper and Meline the same LTI equity award valuesvalue that theyhe had received in 20162017 as this aligned themhim with the Market Median. The Compensation Committee determined to increase Dr. Harper’s and Mr. Meline’s LTI equity award grant value from $3.7 million and $3.5 million, respectively, in 2017 to $4 million in 2018 and Mr. Graham’s LTI equity award value from $2.5 million in 2017 to $2.8 million in 2018 as these increases positioned their respective target total direct compensation closer to the Market Median for their respective roles.
7654 ï 20172018 Proxy Statement
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$3.5 million in 2016 to $3.7 million in 2017 and Mr. Graham’s LTI equity award value from $2.3 million in 2016 to $2.5 million in 2017 as these increases positioned such grant values at and closer to the Market Median for their respective roles.
Annual Cash Incentive Awards
Executive Incentive Plan
Annual cash incentive awards to our NEOs are generally made under our stockholder-approved EIP, which employs a formula that establishes a maximum award possible for each participant based on ournon-GAAP net income(1). Our EIP is an umbrella plan intended to satisfy the performance-based requirements of Section 162(m) of the Internal Revenue Code.Code as in effect in 2017. This year, and in the past, actual awards under the EIP are determined by the Compensation Committee using their negative discretion under the EIP, based on thepre-established Company performance goals for the year designed to advance our strategic priorities. In confirming this approach, the Compensation Committee also considers the contributions of each participant’s role to our success during the year.
No later than the first 90 days of the calendar year,In March 2017, the Compensation Committee determinesdetermined for the EIP participants, the definition ofnon-GAAP net income(1), the maximum award payable for each participant, the target annual cash incentive award opportunities and, for the EIP, Global Management Incentive Plan, or GMIP, and Global Performance Incentive Plan, or GPIP, the Company performance goals and the weightings and percentages payable for threshold, target and maximum performance.
For 2016,2017, each of our NEOs was a participant in the EIP and the maximum award continued to be expressed as the EIPnon-GAAP net income(1) definition and, consistent with past years, was 0.125% for our CEO, 0.075% for each of the Executive Vice President NEOs and 0.05% for the Senior Vice President NEO. Historically, and in 2016,2017, the Compensation Committee has paid well below the maximum award permitted under the EIP based on a practice of exercising negative discretion from the calculated EIP maximum award payable to each participant by using the Company
performance goals composite score as applied to the participant’s target annual cash incentive award for actual awards.
Target Incentive Opportunity
The target annual cash incentive award opportunity for Mr. Bradwayeach of our NEOs remained the same in 2017 as it was increased for 2016 from 140% to 150% as2016. Mr. Bradway’s 2015 target total annual cash compensation approximated the 25th percentile of our peer group and the Compensation Committee wanted his target total annual cash compensation to more closely align with the Market Median of our peer group, while continuing to emphasize compensation that is “at risk” and performance-based. Following the 2016 changes made to Mr. Bradway’s compensation, his total target annual cash compensation remained below the Market Median.incentive award opportunity remains 150% of base salary in 2017. For our Executive Vice Presidents, to also align with the Market Median, continue to emphasize compensation that is “at risk” and performance-based, and promote internal equity and treat our Executive Vice Presidents as a team, each Executive Vice President target annual cash incentive award opportunity for 2016 was increased to2017 also remained at 100% of base salary (from 90%).salary. As a Senior Vice President,
Mr. Graham’sGraham's target annual cash incentive award opportunity of 80% of base salary was also maintained for 20162017 as it aligned with the Market Median for his role.
20162017 Company Performance Goals
The 20162017 Company performance goals approved by the Compensation Committee were:
“Deliver Results” goals (70%(60%):
| - | “Revenues” and“Non-GAAP Net Income |
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ï 2017 Proxy Statement77
“Progress Innovative Pipeline” goals (30%(25%):
| - | “Execute Key Clinical Studies and Regulatory Filings” (20%) and “Advance Early Pipeline” |
“Deliver Annual Priorities” goals (15%):
| - | “Executive Critical Launches and Long-Term Commercial Objectives” (10%) focused on executing on our key innovative product and delivery systems launched. |
| - | “Realize Functional Transformation Office Objectives” (5%) focused on target savings in connection with our transformation. |
While all of the goals measure single–year performance, taken as a whole, they are intended to positively position us for bothnear- and longer-term success, delivery on our
strategic priorities and create stockholder value. There are no payouts for below-threshold performance on the two financial metrics. Measurements of performance for thenon-financial primary metrics, which are often expressed in milestones, are more subjective in nature than are the financial metrics and could result in a very small payout percentage (less than 1% of annual cash compensation). Maximum performance under each metric results in earning 225% of target annual cash incentive award opportunity for that metric. Annual cash incentive awards are paid in March of the year following the annual performance period and certification of the resulting payouts by the Compensation Committee.
| (1) | For 2017, Non-GAAP net income for purposes of the EIP has been adjusted by $116 million ($147 million in operating expense less the related income tax effects) for the impact of Hurricane Maria. Otherwise, Non-GAAP net income for purposes of the EIP is as reported and reconciled inAppendix B. Non-GAAP for purposes of net income was defined as net income under GAAP, excluding certain items, net of tax, related to acquisitions, restructuring and certain other items, and the impact of tax law changes. |
| (2) | Non-GAAP net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled inAppendix B. |
2016ï 2018 Proxy Statement 55
Compensation Discussion and Analysis |
2017 Company Performance Goals and Results
The table below illustrates the weighting of each goal, the goals established and our actual performance for 2016:2017. No amounts can be earned for below threshold performance for our financial metrics. For a more detailed description of our performance under each of thenon-financial measures, please see the “Executive Summary” section above.
| Deliver Results (70% weighting) | Weighted Score Achieved 99.0% | |||||||||||||||||
| Financial Goals (60%) ($ In Millions) | Threshold | Target | Maximum | Achieved | ||||||||||||||
| Revenues (30%) | $20,900 | $22,330 | $24,120 | | $22,991 139.7% |
| ||||||||||||
| Non-GAAP Net Income(1) (30%) | $7,410 | $8,235 | $9,225 | | $8,690 147.5% |
| ||||||||||||
Deliver Results (60% weighting)
|
|
Weighted Score Achieved 68.2%
|
| |||||||||||||||||
Financial Goals (60%) ($ In Millions)
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Weighting
|
|
|
Achieved
|
| |||||
Revenues |
|
$21,085 |
|
|
$22,525 |
|
|
$24,325 |
|
|
30% |
|
|
$22,849 110.6% |
| |||||
Non-GAAP Net Income(1) | $8,000 | $8,890 | $9,955 | 30% | | $9,246 116.8% |
| |||||||||||||
Progress Innovative Pipeline (25% weighting)
|
Weighted Score Achieved 34.7%
| |||||||||
Goals
|
Results
|
Weighting
|
Achieved
| |||||||
Execute Key Clinical Studies and |
• Executed key clinical studies for KYPROLIS, BLINCYTO, EVENITY, IMLYGIC®, omecamtiv mecarbil, AMG 301, and ABP 980 (biosimilar trastuzumab (Herceptin®)). |
|
20% |
|
|
123.0% |
| |||
• Completed regulatory filings for Repatha, XGEVA, BLINCYTO, EVENITY, Aimovig, Prolia, Parsabiv, ABP 980 and AMGEVITA (biosimilar adalimumab (HUMIRA®)). | ||||||||||
Advance Early Pipeline | • Generated a total of 11 product teams (formed when a molecule has been judged to have the potential to be safe and effective in humans), a record number for our Company, initiated fourfirst-in-human studies, and advanced AMG 301 through theearly-to-late stage portal.
| 5% | 201.7% | |||||||
Deliver Annual Priorities (15% weighting)
|
Weighted Score Achieved 12.1%
| |||||||||
Goals
|
Results
|
Weighting
|
Achieved
| |||||||
Execute Critical Launches and Long-Term Commercial Objectives |
• Prolia—increased worldwide net sales. |
|
10% |
|
|
76.0% |
| |||
• Repatha—increased U.S. net sales, U.S. average annual total prescriptions (TRx) share, as well as E.U. average annual market share. While we increased net sales, we did not achieve our overall sales target. | ||||||||||
• KYPROLIS—increased U.S. andex-U.S. net sales. While we increased net sales, we did not achieve our overall sales target. | ||||||||||
• We did not meet our launch timelines for Parsabiv and EVENITY. | ||||||||||
Realize Functional Transformation Office Objectives | • We introduced a program to drive additional savings across the Company. For this program, we realized approximately $400 million in savings as a result of initiatives at both the Company level as well as activities within each function designed to transform approaches with specific savings targets established for each area.
| 5% | 90.4% | |||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
|
| |||||||
| Achieved |
|
| (1) | Non-GAAP net income for purposes of the |
|
7856 ï 20172018 Proxy Statement
|
20162017 Annual Cash Incentive Awards
As shown in the table above, our performance against the 20162017 Company performance goals yielded a composite score of 159.5%115% and the Compensation Committee awarded actual annual cash incentive awards under the EIP to our NEOs based on this composite score. No further discretion was employed.
| Named Executive Officer | Target Opportunity (% of Base Salary) | Target Award($) | Actual Award($)(1) |
Target Opportunity | Target 2017 Award($) | Actual 2017 Award($)(1) | ||||||||||||||||||
Robert A. Bradway
|
|
150
|
|
|
2,288,077
|
|
|
3,650,000
|
|
| 150
|
|
| 2,333,077
|
|
| 2,683,000
|
| ||||||
Anthony C. Hooper
|
|
100
|
|
|
1,027,354
|
|
|
1,639,000
|
|
| 100
|
|
| 1,049,769
|
|
| 1,207,000
|
| ||||||
Sean E. Harper
|
| 100
|
|
| 970,308
|
|
| 1,116,000
|
| |||||||||||||||
David W. Meline
|
|
100
|
|
|
942,310
|
|
|
1,503,000
|
|
| 100
|
|
| 970,308
|
|
| 1,116,000
|
| ||||||
Sean E. Harper
|
|
100
|
|
|
941,769
|
|
|
1,502,000
|
| |||||||||||||||
Jonathan P. Graham
|
|
80
|
|
|
730,278
|
|
|
1,165,000
|
|
| 80
|
|
| 745,785
|
|
| 858,000
|
| ||||||
| (1) | Calculated in accordance with the |
20172018 Company Performance Goals
In March 2017,2018, the Compensation Committee established Company performance goal categories for 20172018 performance as follows:
2018 Company Performance Goals | ||
60% | Deliver Results | |
• Revenues (30%)
• Non-GAAP Net Income (30%) | ||
25% | Progress Innovative Pipeline | |
• Execute Key Clinical Studies and Regulatory Filings (20%)
• Advance Early Pipeline (5%) | ||
15% | Deliver Annual Priorities | |
• Execute Critical Launches and Long-Term Commercial Objectives (10%)
• |
Based on Cook & Co.’s recommendation and a review of Market Median data,In March 2018, the Compensation Committee determined thatreviewed the target incentive award opportunity for each NEO. Mr. Graham’s target annual cash incentive award opportunity percentages were generally in alignmentwas increased from 80% of base salary to 90% of base salary to align with the Market Median for each NEO’s role and would remain unchangedhis role. No changes were made to the target incentive award opportunity for 2017 for each of the NEOs (150% of base salary for Mr. Bradway, 100% of base salary for Messrs. Hooper and Meline and Dr. Harper, and 80% of base salary for Mr. Graham).
Mr. Graham’s Vesting ofSign-On Bonus
To replace thepro-rata value of Mr. Graham’s 2015 bonus at his former employer, which was forfeited upon his leaving, and to induce Mr. Graham to accept the Company’s offer of employment and join us in July 2015, Mr. Graham received asign-on bonus of $2,000,000 (50% was paid as an advance by August 13, 2015, and theany other 50% was paid in July 2016). Mr. Graham will be required to repay the advance of $1,000,000 if he resigns his employment on or before July 13, 2017.NEO.
ï 2017 Proxy Statement79
Base Salaries
Generally, in March of each year, the base salaries for the NEOs are set based, in part, upon the Compensation Committee’s review of the peer group data compared with the Market Median as previously described under “How Compensation Decisions Are Made For Our
Named Executive Officers—Peer Group Data Sources.” In addition, the Compensation Committee considers our performance, market conditions, retention and such other factors deemed relevant. Further, the Compensation Committee receives management’s, including our CEO’s, assessment of the performance of each of the other NEOs and recommendations regarding any base salary adjustments for them. The Compensation Committee uses our CEO’s evaluation of the performance of the NEOs that report to our CEO, the Compensation Committee’s own evaluation of our CEO’s performance, information with respect to each NEO’s experience and other qualifications, the Market Median and environmental conditions to determine each NEO’s base salary. No increase in base salary is automatic or guaranteed.
In both 2014 and 2015, no base salary increases were made to the NEOs. In March 2016,2017, the Compensation Committee reviewed the market competitiveness of each NEO’s base salary based on Market Median data and such executive
officer’s performance as well as the Company’s overall performance. Based on the data provided to the Compensation Committee, including recommendations of Cook & Co., an overall merit increase of 3%2% was recommended for our NEOs, adjusted to align with the Market Median for each position. The Compensation Committee approved a 20162017 base salary increase of 2% for Mr. Bradway based on recommendations from Cook & Co., to bring him closerraise his base salary nearer to the Market Median for his position, while managing his target total annual cash compensation atto approximate the Market Median and continuing to retain the substantial majority of his compensation as “at risk” and performance-based. Consistentperformance-based, and generally consistent with our projections for 2016 base salary industry average increases, Messrs. Hooperthe increase to other senior executives. Dr. Harper and GrahamMr. Meline each received base salary increases of 3% which aligned them with the Market Median for their respective roles. Mr. Meline’s and Dr. Harper’s 2015 base salaries were significantly lower than the Market Median, in part as a result of not having received base salary increases in the previous two years. To make progress in decreasing the disparity between2.5% to raise their base salaries and Market Median for their positions, the Compensation Committee approved base salary increases for Mr. Meline and Dr. Harper of 5.6% and 6%, respectively, which positioned them closernearer to the Market Median for their respective roles.
2016 Base Salary Market Position
The 2016 base salariespositions. Messrs. Hooper and the Market Median position are shown in the table below:
| Named Executive Officer | 2015 Base Salary ($) | Increase (%) | 2016 Base Salary ($) | 2015 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||||||||
Robert A. Bradway
|
|
1,500,000
|
|
|
2.0
|
|
|
1,530,000
|
|
|
1,596,000
|
|
|
(4.1
|
)
| |||||
Anthony C. Hooper
|
|
1,001,800
|
|
|
3.0
|
|
|
1,032,000
|
|
|
1,013,922
|
|
|
1.8
|
| |||||
David W. Meline
|
|
900,016
|
|
|
5.6
|
|
|
950,000
|
|
|
1,012,974
|
|
|
(6.2
|
)
| |||||
Sean E. Harper
|
|
896,500
|
|
|
6.0
|
|
|
950,000
|
|
|
1,007,257
|
|
|
(5.7
|
)
| |||||
Jonathan P. Graham
|
|
890,006
|
|
|
3.0
|
|
|
917,000
|
|
|
877,734
|
|
|
4.5
|
| |||||
2017 Base Salary Adjustments
In March 2017, the Compensation Committee reviewed the market competitiveness ofGraham each NEO’s base salary based onreceived a review of Market Median data and such executive officer’s performance, experience and other qualifications, as well as
the Company’s overall performance. The Compensation Committee approved a 2017 base salary increase of 2% for Mr. Bradway based on recommendations from Cook & Co. and equal2017 consistent with the increase to the budgeted amount for U.S. staff members generally while positioning him slightly below (1.8%) theother senior executives.
80 ï 20172018 Proxy Statement 57
|
2017 Base Salary Market Position
The 2017 base salaries and the Market Median position are shown in the table below:
| Named Executive Officer | 2016 Base Salary ($) | Increase (%) | 2017 Base Salary ($) | 2016 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||||||||
Robert A. Bradway
|
| 1,530,000
|
|
| 2.0
|
|
| 1,560,000
|
|
| 1,588,000
|
|
| (1.8
| )
| |||||
Anthony C. Hooper
|
| 1,032,000
|
|
| 2.0
|
|
| 1,053,000
|
|
| 999,440
|
|
| 5.4
|
| |||||
Sean E. Harper
|
| 950,000
|
|
| 2.5
|
|
| 974,000
|
|
| 1,004,107
|
|
| (3.0
| )
| |||||
David W. Meline
|
| 950,000
|
|
| 2.5
|
|
| 974,000
|
|
| 996,373
|
|
| (2.2
| )
| |||||
Jonathan P. Graham
|
| 917,000
|
|
| 2.0
|
|
| 935,000
|
|
| 876,479
|
|
| 6.7
|
| |||||
Market Median2018 Base Salary Adjustments
In March 2018, the Compensation Committee reviewed the market competitiveness of each NEO’s base salary based on a review of market data and continuingsuch executive officer’s performance, experience and other qualifications, as well as the Company’s overall performance. In light of the Company’s decision to retain the substantial majority of his compensation as “at risk”provide no salary increases to its executive directors and performance-based. Messrs. Hooper’s and Graham’s base salaries were increased by 2%,officers (except in exceptional circumstances) to be consistent with the budgeted amount establishedmarket for U.S. staff members generally. Mr. Meline’s and Dr. Harper’s 2016 base salaries were lower thantalent as well as with our continuing exercise of financial discipline, the Market Median, in part, as a result of not having receivedCompensation Committee decided to provide no base salary increases in 2014 and 2015. For 2017, the Compensation Committee approved 2017 base salary increases for Mr. Meline and Dr. Harper of 2.5% each which aligns them closer to the Market Median for their respective roles.our NEOs.
Target Total Annual Cash Compensation
Target total annual cash is the sum of the NEO’s base salary and target annual cash incentive award. The Compensation Committee
Committee believes that reviewing our NEOs’ total target annual cash compensation as compared to the Market Median provides a useful check in making compensation decisions.
In March 2016,2017, the Compensation Committee reviewed target total annual cash compensation for each NEO comparing it to the Market Medianmarket data and historical target total annual cash compensation figures. Our prior year target annual cash compensation reviewed by the Compensation Committee was generally below the Market Median with the exception of the CEO, for the reasons previously discussed, and is set forth below.Mr. Graham as the Market Median for his position declined over the prior year. For more information regarding the determination of Market Median and the peer group data reviewed, see “How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously described.
Target Total Annual Cash Compensation
Target total annual cash compensation reviewed by the Compensation Committee in March 20162017 prior to the compensation changes being made are shown in the table below:
| Named Executive Officer | 2015 Amgen Target Total Annual Cash ($) | 2015 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | 2016 Amgen Target Total Annual Cash ($) | 2016 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | ||||||||||||||||||
Robert A. Bradway
|
|
3,600,000
|
|
|
3,829,000
|
|
|
(6.0
|
)
|
| 3,825,000
|
|
| 3,750,000
|
|
| 2.0
|
| ||||||
Anthony C. Hooper
|
|
1,903,420
|
|
|
2,139,689
|
|
|
(11.0
|
)
|
| 2,064,000
|
|
| 2,195,771
|
|
| (6.0
| )
| ||||||
Sean E. Harper
|
| 1,900,000
|
|
| 1,965,625
|
|
| (3.3
| )
| |||||||||||||||
David W. Meline
|
|
1,710,030
|
|
|
2,066,107
|
|
|
(17.2
|
)
|
| 1,900,000
|
|
| 1,979,256
|
|
| (4.0
| )
| ||||||
Sean E. Harper
|
|
1,703,350
|
|
|
2,008,248
|
|
|
(15.2
|
)
| |||||||||||||||
Jonathan P. Graham
|
|
1,602,011
|
|
|
1,589,214
|
|
|
0.8
|
|
| 1,650,600
|
|
| 1,546,353
|
|
| 6.7
|
| ||||||
58 ï 2018 Proxy Statement
Compensation Discussion and Analysis |
Perquisites
Perquisites are limited in both type and monetary value. The Compensation Committee believes, however, that certain perquisites facilitate the efficient operation of our business, allowing our NEOs to better focus their time, attention and capabilities on our Company, permit them to be accessible to the business as required, alleviate safety and security concerns and assist us in recruiting and retaining key executives. The perquisites provided to our NEOs generally include an allowance for personal financial planning services, including tax preparation services (not to exceed $15,000 annually in aggregate), annual physical examinations, Company-paid moving and relocation expenses paid on behalf of newly-hired and current executives who agree to
relocate to work on the Company’s behalf and, in limited instances, personal expenses when on business travel such as guests accompanying NEOs. Certain of our NEOs also have access to a Company car and driver and, subject to the approval of our CEO, the Company aircraft for personal use. Our CEO is encouraged to use our Company aircraft for all of his travel (business and personal) because the Compensation Committee believes that the value to us of making the aircraft available to our CEO, in terms of safety, security, accessibility and efficiency, is greater than the incremental cost that we incur. No taxgross-up reimbursements are provided to NEOs, except in connection with reimbursement of moving and relocation expenses consistent with our other staff members and our general relocation policy.
ï 2017 Proxy Statement81
We believe that providing taxgross-up reimbursements on the applicable moving and relocation expenses paid on behalf of newly-hired and current executives who agree to relocate on the Company’s behalf is appropriate because it treats these executives in a similar manner asnon-executives under our Company-wide policy which is designed to maximize allocation of our human resources in the best interest of the Company. It also assists in the attraction and retention of the executive talent necessary to compete successfully.
We provide limited home sale loss assistance for Senior Vice Presidents and above in connection with relocations that benefit the Company and are at the Company’s request, and in certain new hire situations. We do not provide tax
gross-ups for assistance with loss on sale of a home. Our limited home sale loss assistance serves as an important tool in inducing senior management to fully commit to their new role and relocation.
Our Company-wide policy includes a repayment provision applicable to all staff members (including our NEOs) whichthat requires a new staff member hired from outside the Company or staff members who accept an assignment and relocate, to repay us for moving and relocation expenses and home loss assistance incurred by us in the event that the staff member does not complete the move, resigns or is discharged for cause from the Company within two years of the employment start date or relocation date, as applicable (with apro-rata refund in the second year).
Compensation Policies and Practices
Clawback Policy
We have a clawback policy that requires our Board to consider recapturing past cash or equity compensation payouts awarded to our executive officers, including our NEOs, if it is subsequently determined that the amounts of such compensation were determined based on financial results that are later restated and the executive officer’s misconduct caused or partially caused such restatement.
Recoupment Provisions
Our cash incentive award programs (EIP, GMIP and GPIP) expressly allow the Compensation Committee, or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an employee has earned an annual cash incentive award or the amount of any such award. This provision is not intended to limit any other action that the Company could take against an employee, including other
disciplinary actions (up to termination), ordinary course performance considerations,
disclosure of wrongdoing to the government and pursuit of any other legal claims against such employees.
Stock Ownership and Retention Guidelines
Our stock ownership guidelines require our executives to hold a meaningful amount of our Common Stock, promote a long-term perspective in managing the Company, further align the interests of our executives and stockholders and mitigate potential compensation-related risk. InSince December 2015, the Compensation Committee amended our guidelines to require that each officer who has not met their required ownership guidelinesrequirements must retain shares of our Common Stock acquired through the vesting of RSUs, the payout of performance units, and the exercise of stock options awarded on or after December 15, 2015, net of shares retained by us to satisfy associated tax withholding requirements and exercise price amounts, until such officer has reached his or her required stock ownership level.
82 ï 20172018 Proxy Statement 59
|
Stock Ownership Guidelines Requirements
The stock ownership guidelines for 20162017 were:
Position | Stock Ownership Requirement
| Compliance | ||
Chief Executive Officer(1)
|
6x base salary
|
✓
| ||
Executive Vice President
|
3x base salary
|
✓ ��
| ||
Senior Vice President
|
2x base salary
|
✓
| ||
Vice President
|
1x base salary
|
✓
|
| (1) | Mr. Bradway exceeded his ownership requirement and holds approximately |
The following holdings count towards satisfying these stock ownership requirements:
shares of our Common Stock beneficially held that are not subject to forfeiture restrictions;
shares of our Common Stock held through a 401(k) plan or other qualified pension or profit-sharing plan; and
shares purchasable with funds then allocated under our Employee Stock Purchase Plan.
Executives are generally given five years following their placement into their current job level to comply with these guidelines. Executives who are promoted to a status with a stock ownership level one level higher than the executive was previously required to satisfy, have three years to comply with the new ownership level if the executive has been subject to the stock ownership guidelines for five or more years. Once these ownership guidelines are met, executives are required to maintain such ownership until they change job levels or are no longer employed by the Company. As of November 16, 2016,October 20, 2017, the effective date of our executive certifications, all executive officers, including our NEOs, who were expected to meet such guidelines, were in compliance. Messrs. Meline and Graham commenced employment with our Company on July 21, 2014 and July 13, 2015 and have until 2019 and 2020, respectively, to meet their guidelines.
Insider Trading Policy and Practices
All staff members and our Board are prohibited from: (i) buying or selling our Common Stock while aware of any material nonpublic information; (ii) engaging in short sales
with respect to our Common Stock; (iii) pledging or purchasing our Common Stock on marginmargin; or (iv) entering into any derivative, hedging or similar transactions with respect to our Common Stock. We do not have any executive10b5-1 plans.
Policies for Grants of Long-Term Incentive Equity Awards
In accordance with our equity awards policy, our regular annual LTI equity award grants are typically approved at anin-person or telephonic meeting of the Compensation Committee (for grants of equity awards to executive management, including our NEOs) or the Equity Award Committee (for grants to all other staff members) with a grant date that is the third business day after the release of our next
quarterly or annual earnings announcement after the date of determination by our Compensation Committee or Equity Award Committee, as applicable. In unusual circumstances, LTI equity awards may be approved by the Compensation Committee or Equity Award Committee by unanimous written consent. Our NEOs may also receive special equity awards as determined by the Compensation Committee as new hires or for recognition and retention, promotions or other purposes, but generally also only on the third business day after the release of our quarterly or annual earnings after the date of determination by our Compensation Committee.
Tally Sheets
The Compensation Committee annually reviews tally sheets for each NEO, setting forth all components of compensation,
ï 2017 Proxy Statement83
including compensation payable at termination, retirement or a change of control. These tally sheets summarize the number of shares and the value at a given price of the LTI equity awards held by each NEO, as well as each NEO’s individual cumulative account balances in our benefit plans. These tools are employed by the Compensation Committee as a useful check on total annual compensation and the cumulative impact of our long-term programs and are considered important to understand both the overall and longer-term impact of compensation decisions.
Based on its review of the tally sheets, the Compensation Committee may increase or decrease certain individual elements of compensation to align total compensation with peer group market data and to promote internal equity among our NEOs, other than our CEO. No material
adjustments to total compensation for any of our NEOs were made as a result of the review of these tally sheets by the Compensation Committee in 2016.2017.
Stockholder Outreach—Executive Compensation Website
We maintain a website accessible throughout the year atwww.amgen.com/executivecompensation, which provides a link to our most recent proxy statement and invites our stockholders to fill out a survey to provide input and feedback to the Compensation Committee regarding our executive compensation policies and practices. All input from our stockholders is valuable and the Compensation Committee appreciates your time and effort in completing the survey.
60 ï 2018 Proxy Statement
Compensation Discussion and Analysis |
Non-Direct Compensation and Payouts in Certain Circumstances
Offer Letter, Severance Arrangement and Change of Control Benefits and Offer Letter With Limited Severance Benefits
Our CEO and other NEOs are participants in our double-trigger Change of Control Severance Plan discussed below. In connection with new hires, we typically enter into offer letters detailing their initial compensation and requirements to pay back certain elements of compensation. To attract talented executives from outside the Company, our offer letters generally include severance terms that apply to terminations initiated by the Company and occur for reasons other than for “cause” within three years from the date of hire. These benefits are sometimes provided to officer-level candidates to provide an incentive for them to join us by reducing the risks associated with making such a job change. Other than the foregoing, our CEO and NEOs are not covered by contractual arrangements that provide for severance or other benefits in the event of termination.
Offer Letter—Mr. Meline
Mr. Meline commenced employment as our Chief Financial Officer effective July 21, 2014. Mr. Meline’s offer letter contains severance protection terms payable only if Mr. Meline is terminated other than for “cause” on or before July 21, 2017. For a qualifying termination that occurs before
July 21, 2017, Mr. Meline would be entitled to a cash payment equal to one year’s annual base salary plus target annual cash incentive award (currently 100% of his annual base salary) and up to 12 months of Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, medical and dental coverage paid by us.
Offer Letter—Mr. Graham
Mr. Graham commenced employment as our Senior Vice President, General Counsel and Secretary effective July 13, 2015. Mr. Graham’s offer letter includes a $2,000,000sign-on bonus discussed earlier to replace thepro-rata value of Mr. Graham’s 2015 bonus with his former employer that was forfeited upon leaving his position and to induce Mr. Graham to join the Company. Mr. Graham received $1,000,000 in July 2016 as the second payment and final payment under thissign-on bonus. His offer letter also contains severance protection terms that are payable only if Mr. Graham is terminated other than for cause that expire on July 13, 2018. For a qualifying termination that occurs before July 13, 2018, Mr. Graham would be entitled to a cash payment equal to a multiple of two times annual base salary plus target annual cash incentive award (currently 80%90% of his annual base salary) and up to 18 months of COBRA(1) medical and dental coverage paid by us.
84 ï 2017 Proxy Statement
Change of Control Benefits
Change of Control Severance Plan
In the event of a change of control and a qualifying termination, our Change of Control Severance Plan provides severance payments to 1,5331,613 U.S. staff members (as of December 31, 2016)2017), including each NEO. There are no taxgross-up payments provided under the plan. The plan is structured so that payments and benefits are provided only if there is both a change of control and a termination of employment, either by us other than for “cause” or “disability” or by the participant for “good reason” (as each is defined in the plan)—sometimes referred to as a “double-trigger”—because the intent of the plan is to provide appropriate severance benefits in the event of a termination following a change of control, rather than to provide a change of control bonus. The cash severance multiple for our CEO and all other NEOs is two times annual cash compensation. The payments and benefit levels under the Change of Control Severance Plan do not influence and were not influenced by other elements of compensation. The Change of Control Severance Plan was adopted, and is continued by the Compensation Committee:
To reinforce and encourage the continued attention and dedication of members of management to their assigned duties without the distraction arising from the possibility of a change of control;
To enable and encourage management to focus their attention on obtaining the best possible deal for our stockholders and making an independent evaluation of all possible transactions, without being influenced by their personal concerns regarding the possible impact of various transactions on the security of their jobs and benefits; and
To provide severance benefits to any participant who incurs a termination of employment under the circumstances described within a certain period following a change of control in recognition of their contributions to the Company.
Change of Control Treatment of Long-Term Incentive Equity Awards
Restricted Stock Units and Stock Options
All unvested RSUs and stock options have “double-trigger” acceleration of vesting that requires a qualifying termination
in connection with a change of control. All RSUs and stock options vest in full only if the grantee’s employment is involuntarily terminated other than for “cause” or “disability,” or, in the case of staff members subject to the Change of Control Severance Plan, voluntarily terminated with “good reason”reason,” in each case within two years following a change of control.
Performance Units
The Compensation Committee has maintained change of control features for each of the performance periods under our performance award programs to ensure that these programs reward participants for our performance until the successful closing of theany change of control. In general, the performance units are earned based on a truncated performance period and our performance through any change of control (or target performance for the operating measures if the change in control occurs in the first year of a performance period). If the change of control and providesoccurs within the first six months of a performance period, the amount earned ispro-rated based on the number of months of the performance period prior to the change of control. In the event of a termination of employment due to death, disability or retirement, our performance units provide for potentialearn-out at the end of the performance period based on actual results with the amount earnedpro-rated for a change of control that occurs withinbased on the first six months of the performance period or thereafter.termination date. For additional information on the levels of payout, see “Potential Payments Upon Termination or Change of Control—Long-Term Incentive Equity Awards—Performance Units” in our Executive Compensation Tables.
Limited Retirement Benefits and Deferred Compensation Plan
Health, retirement and other benefits programs are generally available to our U.S.-based staff members, including our NEOs, and are typically targeted to align in value with our peer group. The primary survey used to make this comparison is the Aon Hewitt Benefit Index®, last updated as of May 2016April 2017, using a sample group of 14 companies, chosen so as
| (1) | The Consolidated Omnibus Budget Reconciliation Act of 1985. |
ï 2018 Proxy Statement 61
Compensation Discussion and Analysis |
to have the greatest representation from our peer group. The data generated from this survey is used by the Compensation Committee and management in evaluating the competitive positioning and program design of these health, retirement and other benefit programs.
Retirement and Savings Plan, Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan
Our Retirement and Savings Plan, or 401(k) Plan, is available to regular U.S.-based staff members of the Company and participating subsidiaries. All 401(k) Plan participants are eligible to receive the same proportionate level of matching and core contributions from us.
ï 2017 Proxy Statement85
We credit to our Supplemental Retirement Plan, or SRP, which is available to all 401(k) Plan participants, Company core and matching contributions on eligible compensation that cannot be made to the 401(k) Plan because they relate to compensation that is in excess of the maximum amount of recognizable compensation allowed under the Internal Revenue Code’s qualified plan rules. We also credit staff members in the SRP for lost 401(k) Plan Company match and core contributions resulting from making a deferral into the Nonqualified Deferred Compensation Plan, or NDCP. Earnings under the SRP are market-based—there are no “above market” or guaranteed rates of returns offered in this plan and this plan enables us to provide the same percentage of base salary and annual cash incentive award as a retirement contribution to U.S.-based staff members at all levels. SRP and NDCP participants can direct notional account investments using the 401(k) Plan investing structure (excluding self-direct brokerage and our Company stock) as well as a variety of target date funds. Unlike a traditional pension plan, which provides a lifetime annuity that replaces a significant portion of a participant’s final pay,
retirement benefits from our 401(k) Plan and SRP are based on the investment return on the staff member’s own investment elections, with the participant bearing the investment risk. The NDCP offers all U.S.-based staff members (including Puerto Rico) at director level and above the opportunity to defer eligible base salary and annual cash incentive awards, up to maximum amounts typical at our peer group. We also have the discretion to make contributions to this plan, but we do not make such contributions on a regular basis. We believe that offering the NDCP is appropriate because it provides executives the opportunity to save for retirement in atax-effective fashion that is not readily available without our sponsorship.
Health Savings Account and Retiree Medical Savings Account Plan for all U.S.-based Staff Members
Effective January 1, 2016, we offered a high deductible health plan, or HDHP, and a health savings account, or HSA, that is generally available to U.S.-based (excluding Puerto Rico) staff members. To encourage participation, in the first year of offering of the HDHP and HSA only, we made a $1,000 Company contribution to U.S.-based (excluding Puerto Rico) staff members enrolled in family coverage in the HDHP and HSA on January 1, 2016. We ceased making this contribution in 2017. We also maintain a Retiree Medical Savings Account Plan available to U.S.-based (excluding Puerto Rico) staff members that allows all staff members to makeafter-tax deferrals to be used post-termination to reimburse them for eligible medical expenses. Under this plan, the Company credits all eligible staff members with an annual contribution ($1,000) and makes a matching contribution equal to 50% of a staff member’s deferrals (up to a match of $1,500 per year). Company credits can be accessed to reimburse eligible medical expenses of staff members who terminate having fulfilled the Company’s retirement criteria. The permissible uses of such credits were expanded to include COBRA, individual and health insurance exchange-related premiums. We do not offer a traditional Company-paid retiree medical plan to our NEOs or other U.S.-based staff members. We terminated our Retiree Health Access Plan effective January 1, 2016 as our retirees who are not eligible for Medicare now have access to health coverage through the health insurance exchange system under the Affordable Care Act.
Taxes and Accounting Standards
Tax Deductibility Under Section 162(m) of the Internal Revenue Code
We maintain certain incentive compensation programs that are intended to provide for compensation that is tax deductible to us, but we recognize that the best interests of our stockholders may at times be better served by compensation arrangements that are not tax deductible. At the time the Compensation Committee made its 2017 compensation decisions, Section 162(m) placesplaced a $1,000,000 limit on the amount of compensation that we may deduct for tax purposes for any
year with respect to the executive who serves as our CEO atyear-end, and any of our three other most highly compensated employees who serve as executive officers atyear-end, other than our Chief Financial Officer. The $1,000,000 limit doesdid not apply to performance-based compensation, as defined under Section 162(m). Our 2017 executive compensation program iswas designed with the intent to provide cash incentive compensation under our EIP, performance units under our performance award program and stock options under our equity incentive plan as qualifying
86 ï 2017 Proxy Statement
performance-based compensation. Due to competitive or other factors, the Compensation Committee may decide in certain circumstances to
exceed the deductibility limit under Section 162(m) or to otherwise paynon-deductible compensation. These circumstances have included the following:
To maintain a competitive base salary, the base salary provided to Messrs. Bradway and Hooper in 20162017 exceeded thetax-deductible limit.
The use of RSUs as part (20%) of the annual LTI equity award mix for executives and officers is focused primarily on the attraction and retention of the talent needed to drive our long-term success. This compensation, however, is not performance-based compensation under Section 162(m). The fiscal impact for 20162017 of the RSUs not being performance-based is approximately $2.6$2.3 million assuming the Company’s U.S. combined effective tax rate for 2016.2017.
To attract highly qualified executives to join us and to promote their retention, we may offer other compensation elements that are not performance-based compensation under Section 162(m), such as retention bonuses orsign-on bonuses and moving and relocation, as part of their initial employment offers, and bonuses paid under our GMIP to executives who are hired past the eligibility date of our EIP.
62 ï 2018 Proxy Statement
|
|
The 162(m) exception was repealed in the tax reform legislation signed into law on December 22, 2017 for taxable years beginning after December 31, 2017. It is uncertain whether compensation that the Compensation Committee originally intended to structure as performance-based compensation under Section 162(m) that is paid in 2018 or subsequent years will be deductible under transition rules. The Compensation Committee will continue to focus on performance-based compensation, though certain of the requirements of Section 162(m) will no longer be relevant, and thus will not be taken into consideration when setting future compensation.
Accounting Standards
Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718 requires us to recognize
an expense for the fair value of equity-based compensation awards. Grants of stock options, RSUs and performance units under our LTI equity award plans are accounted for under FASB ASC Topic 718. The Compensation Committee regularly considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our LTI equity award plans and programs. For example, the Compensation Committee took these accounting standards into account when discontinuing grants of incentive stock options. In addition, we modified our Employee Stock Purchase Plan to make itnon-compensatory under the “safe harbor” provisions of the accounting rules and therefore we no longer recognize compensation expense under this plan. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
ï 20172018 Proxy Statement87 63
|
Summary Compensation Table
The following table sets forth summary information concerning the compensation awarded to, paid to, or earned by each of our Named Executive Officers, or NEOs.
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||||||
Performance Units and Restricted Stock Units | Stock Options | EIP/GMIP | ||||||||||||||||||||||||||||||||||
Robert A. Bradway | 2017 2016 2015
|
| 1,555,962 1,531,731
1,505,769 |
| 0 0 0 |
| 8,399,812 7,699,723 10,199,959
|
| 3,599,974 3,299,994
0 |
| 2,683,000 3,650,000 3,841,000
|
| 661,041 668,553 550,986
|
| 16,899,789 16,850,001 16,097,714
|
| ||||||||||||||||||||
Anthony C. Hooper Executive Vice President, Global Commercial Operations | 2017 2016 2015
|
| 1,050,173 1,031,788
1,005,653 |
| 0 0 0 |
| 2,799,937 2,799,874 3,499,865
|
| 1,199,973 1,199,995
0 |
| 1,207,000 1,639,000 1,649,000
|
| 295,467 294,528 260,211
|
| 6,552,550 6,965,185 6,414,729
|
| ||||||||||||||||||||
Sean E. Harper Executive Vice President, Research and Development | 2017 2016 2015 | 970,769 946,246 899,948 | 0 0 0 | 2,589,867 2,449,925 2,999,795 | 1,110,000 1,049,986 0 | 1,116,000 1,502,000 1,476,000 | 269,731 264,885 232,082 | 6,056,367 6,213,042 5,607,825 | ||||||||||||||||||||||||||||
David W. Meline(6) Executive Vice President and Chief Financial Officer | 2017 2016 2015
|
| 970,769 946,733 903,478
|
| 0
1,000,000 |
| 2,449,878 2,449,925 2,999,795
|
| 1,049,990 1,049,986
0 |
| 1,116,000 1,503,000 1,482,000
|
| 271,651 268,821 207,351
|
| 5,858,288 6,218,465 6,592,624
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Jonathan P. Graham(7) Senior Vice President, General Counsel and Secretary |
|
|
2017 2016 2015 |
|
932,577 916,789 424,464 |
|
0 1,000,000 1,427,203 |
|
1,749,939 1,609,898 8,599,985 |
|
749,997 689,990 0 |
|
858,000 1,165,000 151,797 | ��
| 231,695 1,038,668 2,179,852 | 4,522,208 6,420,345 12,783,301 |
| |||||||||||||||||||
| (1) | Reflects base salary earned in eachbi-weekly pay period (or portion thereof) during each fiscal year beforepre-tax contributions and, therefore, includes compensation deferred under our qualified deferred compensation plan and nonqualified deferred compensation plan, or NDCP. Under payroll practices for salaried staff members of our U.S. entities, including our NEOs, base salary earned in a pay period is computed by dividing the annual base salary then in effect by 26, which is the number of fullbi-weekly pay periods in a year. |
| (2) | For |
The number of units to be earned for the performance units granted during |
8864 ï 20172018 Proxy Statement
|
The table below shows the grant date fair values of these performance unit awards: (1) if the maximum is achieved with regard to all of the operating performance measures which would result in an earnout of 150% based on the operating performance measures with the TSR market condition at target, with no increase or decrease based on the market condition, and (2) if the maximum is achieved with regard to all of the operating performance measures and maximum performance occurs under the TSR market condition which results in an additional 50% earnout, for total earned payout of 200% of performance units granted.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (3) | For |
| (4) | Reflects amounts that were earned under our Executive Incentive Plan, or EIP, for |
| (5) | See the subsection “All Other Compensation—Perquisites and Other Compensation” immediately following these footnotes. |
| (6) |
|
| (7) | Mr. Graham was hired to serve as Senior Vice President, General Counsel and Secretary effective July 13, 2015. This table reflects his compensation earned beginning on that date. The amount shown in the bonus column for 2016 is the second of two installments due to Mr. Graham as asign-on bonus to replace thepro-rata value of Mr. Graham’s 2015 bonus at his previous employer, which was forfeited upon his leaving, and to induce Mr. Graham to accept the Company’s offer of employment. The amount shown in the bonus column for 2015 includes: (i) the first of two $1,000,000 installments due Mr. Graham as asign-on bonus and (ii) $427,203 which is a portion of the bonus paid under the Global Management Incentive Plan, or GMIP, to Mr. Graham that was guaranteed in his offer letter. |
All Other Compensation—Perquisites and Other Compensation
Perquisites. The amounts reported reflect the aggregate incremental cost of perquisites and other personal benefits provided to our NEOs and are included in the “All Other Compensation” column of the “Summary Compensation Table.” The following table sets forth the perquisites provided to our NEOs in 2016.2017.
| Personal Use of Company Aircraft(1) | Personal Use of Company Car and Driver(2) | Personal Financial Planning Services | Moving and Relocation Expenses(3) | Other(4) | Personal Use of Company Aircraft(1) | Personal Use of Company Car and Driver(2) | Personal Financial Planning Services | Other(3) | ||||||||||||||||||||||||||||||||||||||||
| Name | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Tax Gross- Up($) | Aggregate Incremental Cost($) | Total($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Total($) | ||||||||||||||||||||||||||||||||||||
Robert A. Bradway | 98,221 | 4,191 | 15,000 | 0 | 0 | 14,502 | 131,914 |
|
111,098
|
|
|
3,866
|
|
|
15,000
|
|
|
10,539
|
|
|
140,503
|
| ||||||||||||||||||||||||||
Anthony C. Hooper | 747 | 1,426 | 15,000 | 0 | 0 | 9,720 | 26,893 |
|
805
|
|
|
1,455
|
|
|
15,000
|
|
|
9,330
|
|
|
26,590
|
| ||||||||||||||||||||||||||
Sean E. Harper
|
|
0
|
|
|
0
|
|
|
15,000
|
|
|
7,500
|
|
|
22,500
|
| |||||||||||||||||||||||||||||||||
David W. Meline | 108 | 880 | 15,000 | 0 | 0 | 10,402 | 26,390 |
|
90
|
|
|
2,388
|
|
|
15,000
|
|
|
6,842
|
|
|
24,320
|
| ||||||||||||||||||||||||||
Sean E. Harper | 112 | 0 | 15,000 | 0 | 0 | 7,996 | 23,108 | |||||||||||||||||||||||||||||||||||||||||
Jonathan P. Graham | 589 | 0 | 15,000 | 440,294 | 425,120 | 8,480 | 889,483 |
|
90
|
|
|
40
|
|
|
15,000
|
|
|
6,842
|
|
|
21,972
|
| ||||||||||||||||||||||||||
| (1) | The aggregate incremental cost of use of our aircraft for personal travel by our NEOs is allocated entirely to the highest ranking NEO present on the flight (except foron-board catering costs which are allocated to each NEO present). If each NEO present on the flight is the same level, the aggregate incremental costs of use of our aircraft for personal travel is allocated to each NEO present. The aggregate incremental cost for personal use of our aircraft is calculated based on our variable operating costs, which include the cost of crew travel expenses,on-board catering, landing fees, trip-related hangar/parking costs, fuel, trip specific maintenance and other smaller variable costs. In determining the incremental cost relating to fuel and trip-related maintenance, we applied our actual average costs. We believe that the use of this methodology for |
| (2) | The aggregate incremental cost for personal use of the car and driver provided by us is determined as the sum of the cost of fuel, driver overtime costs allocable to personal usage and maintenance costs for the total number of personal miles driven. Personal miles include travel to and from work from home. As the cars are used primarily for business travel, fixed costs that would be incurred by us to operate the company cars for business use such as car lease costs and driver salaries are not included. |
ï 20172018 Proxy Statement89 65
|
| (3) |
|
|
|
|
|
|
Other expenses include Company contributions tonon-profit charities designated by the executive in the amount of $7,488 for |
Other Compensation. The following table sets forth compensation for our NEOs in 20162017 incurred in connection with our 401(k) Retirement and Savings Plan, or 401(k) Plan, and our Supplemental Retirement Plan, or SRP. These amounts are included in the “All Other Compensation” column of the “Summary Compensation Table.” See “Nonqualified Deferred Compensation” below for a description of these plans.
| Name | Company Contributions to 401(k) Retirement Plan($) | Company Credits to Supplemental Retirement Plan($) | Total($) | |||||||||
Robert A. Bradway | 26,500 | 510,139 | 536,639 | |||||||||
Anthony C. Hooper | 26,500 | 241,135 | 267,635 | |||||||||
David W. Meline | 26,500 | 215,931 | 242,431 | |||||||||
Sean E. Harper | 26,500 | 215,277 | 241,777 | |||||||||
Jonathan P. Graham | 26,500 | 122,685 | 149,185 | |||||||||
Narrative Description to the Compensation Tables—Performance Units
Long-term incentive performance units are granted to our NEOs annually during the first year of the performance period, generally three years, and are paid out following the end of the performance period based on our level of achievement of the applicablepre-established performance goals over the performance period, as determined by our Compensation and Management Development Committee, or Compensation Committee, for such performance period for each grant. The number of performance units earned are paid out in shares of our Common Stock at a ratio of one share of Common Stock for each performance unit earned.
Performance units are generally forfeited unless a participant is continuously employed through the last business day of the performance period. The underlying principle is that the participant needs to have been an active employee during the entire performance period in order to have contributed to
the results on which the earned awards are based. Exceptions to this treatment are a termination of employment in connection with a change of control or the death, disability or retirement of a participant as discussed under “Potential Payments Upon Termination or Change of Control” below.
Performance Goals and Formulas
For a description of the performance units for the 2014-2016 performance period that began on January 31, 2014 and ended on January 31, 2017 and for the 2016-2018 performance period that began on January 1, 2016 and will end on December 31, 2018, see “Elements of Compensation and Specific Compensation Decisions—Long-Term Incentive Equity Awards” in our Compensation Discussion and Analysis.
90 ï 2017 Proxy Statement
The structure of the performance goals for the outstanding 2014-2016 performance period that began on January 31, 2014 and ended on January 31, 2017 and the 2015-2017 performance period are substantially similar and are based upon our TSR for the 2014-2016 and 2015-2017 performance periods, respectively, relative to the TSRs of the companies that are listed in the S&P 500, as defined (the
Reference Group), over the performance period. If the rank of the TSR of our Common Stock is the 0th, 25th, 50th or 75th percentile or greater relative to the companies of the Reference Group, the percentage payout will be 0%, 50%, 100% or 150%, respectively, with linear interpolation between these percentiles.
| Name | Company Contributions to 401(k) Retirement and Savings Plan($) | Company Credits to Supplemental Retirement Plan($) | Total($) | |||||||||
Robert A. Bradway
|
|
27,000
|
|
|
493,538
|
|
|
520,538
|
| |||
Anthony C. Hooper
|
|
27,000
|
|
|
241,877
|
|
|
268,877
|
| |||
Sean E. Harper
|
|
27,000
|
|
|
220,231
|
|
|
247,231
|
| |||
David W. Meline
|
|
27,000
|
|
|
220,331
|
|
|
247,331
|
| |||
Jonathan P. Graham
|
|
27,000
|
|
|
182,723
|
|
|
209,723
|
| |||
Grants of Plan-Based Awards
The following table sets forth summary information regarding all grants of plan-based awards made to our NEOs for the year ended December 31, 2016.2017. All of our equity based awards were granted under the Amgen Inc. 2009 Equity Incentive Plan, as amended.
Estimated Future Payouts |
Estimated Future | All Other Stock Awards: Number of Shares of Stock or Units(#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards($) |
Estimated Future Payouts |
Estimated Future | All Other Stock Awards: Number of Shares of Stock or Units(#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | Exercise ($/Sh) | Grant Date Fair Value of Stock and Option Awards($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Approval Date(1) | Threshold | Target | Maximum | Threshold | Target | Maximum | Grant Date | Approval Date(1) | Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EIP | Performance Units | RSUs | Stock Options | EIP | Performance Units | RSUs | Stock Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert A. Bradway | 3/2/16 | 3/2/16 | (2 | ) | (2 | ) | 10,981,250 | 3/7/17 | 3/7/17 | (2) | (2) | 11,702,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | (3 | ) | 32,246 | 64,492 | 5,499,878 | (6) | 5/1/17 | 3/7/17 | (3) | 33,543 | 67,086 | 5,999,836 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 14,070 | 2,199,845 | (7) | 5/1/17 | 3/7/17 | 14,760 | 2,399,976 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 119,782 | 156.35 | 3,299,994 | (8) |
| 5/1/17
|
|
| 3/7/17
|
|
| 130,718
|
|
| 162.60
|
|
| 3,599,974
| (8)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony C. Hooper | 3/2/16 | 3/2/16 | (2 | ) | (2 | ) | 6,588,750 | 3/7/17 | 3/7/17 | (2) | (2) | 7,021,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | (3 | ) | 11,726 | 23,452 | 1,999,987 | (6) | 5/1/17 | 3/7/17 | (3) | 11,181 | 22,362 | 1,999,945 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 5,116 | 799,887 | (7) | 5/1/17 | 3/7/17 | 4,920 | 799,992 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 43,557 | 156.35 | 1,199,995 | (8) |
| 5/1/17
|
|
| 3/7/17
|
|
| 43,572
|
|
| 162.60
|
|
| 1,199,973
| (8)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David W. Meline | 3/2/16 | 3/2/16 | (2 | ) | (2 | ) | 6,588,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 3/7/17 | 3/7/17 | (2) | (2) | 7,021,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | (3 | ) | 10,260 | 20,520 | 1,749,946 | (6) | 5/1/17 | 3/7/17 | (3) | 10,342 | 20,684 | 1,849,874 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 4,477 | 699,979 | (7) | 5/1/17 | 3/7/17 | 4,551 | 739,993 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 38,112 | 156.35 | 1,049,986 | (8) |
| 5/1/17
|
|
| 3/7/17
|
|
| 40,305
|
|
| 162.60
|
|
| 1,110,000
| (8)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 3/2/16 | 3/2/16 | (2 | ) | (2 | ) | 6,588,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David W. Meline | 3/7/17 | 3/7/17 | (2) | (2) | 7,021,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | (3 | ) | 10,260 | 20,520 | 1,749,946 | (6) | 5/1/17 | 3/7/17 | (3) | 9,783 | 19,566 | 1,749,885 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 4,477 | 699,979 | (7) | 5/1/17 | 3/7/17 | 4,305 | 699,993 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 38,112 | 156.35 | 1,049,986 | (8) |
| 5/1/17
|
|
| 3/7/17
|
|
| 38,126
|
|
| 162.60
|
|
| 1,049,990
| (8)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jonathan P. Graham | 3/2/16 | 3/2/16 | (2 | ) | (2 | ) | 4,392,500 | 3/7/17 | 3/7/17 | (2) | (2) | 4,681,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 6,742 | 13,484 | 1,149,916 | (6) | 5/1/17 | 3/7/17 | (3) | 6,988 | 13,976 | 1,249,944 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 2,942 | 459,982 | (7) | 5/1/17 | 3/7/17 | 3,075 | 499,995 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/3/16 | 3/2/16 | 25,045 | 156.35 | 689,990 | (8) |
| 5/1/17
|
|
| 3/7/17
|
|
| 27,233
|
|
| 162.60
|
|
| 749,997
| (8)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Reflects the date on which the grants were approved by the Compensation and Management Development Committee, or Compensation Committee. |
| (2) | Represents awards to our NEOs made under our EIP. For our EIP participants, the “maximum” amounts shown in the table above reflect the largest possible payments under our EIP for the |
66 ï 20172018 Proxy Statement91
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maximum. Consistent with its practice since the EIP was approved by our stockholders, the Compensation Committee employed thepre-established Company performance goals, as illustrated in the table below, in determining the actual amounts awarded under the EIP in |
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards($) | Non-Equity Incentive Plan Compensation($) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards($) | Non-Equity Compensation($) | |||||||||||||||||||||||||||||
| Name | Threshold | Target | Maximum | Actual | Threshold | Target | Maximum | Actual | ||||||||||||||||||||||||
Robert A. Bradway
|
|
—
|
|
|
2,288,077
|
|
|
5,148,173
|
|
|
3,650,000
|
|
|
—
|
|
|
2,333,077
|
|
5,249,423
|
2,683,000
| ||||||||||||
Anthony C. Hooper
|
|
—
|
|
|
1,027,354
|
|
|
2,311,547
|
|
|
1,639,000
|
|
|
—
|
|
|
1,049,769
|
|
2,361,980
|
1,207,000
| ||||||||||||
Sean E. Harper
|
|
—
|
|
|
970,308
|
|
2,183,193
|
1,116,000
| ||||||||||||||||||||||||
David W. Meline
|
|
—
|
|
|
942,310
|
|
|
2,120,198
|
|
|
1,503,000
|
|
|
—
|
|
|
970,308
|
|
2,183,193
|
1,116,000
| ||||||||||||
Sean E. Harper
|
|
—
|
|
|
941,769
|
|
|
2,118,980
|
|
|
1,502,000
|
| ||||||||||||||||||||
Jonathan P. Graham
|
|
—
|
|
|
730,278
|
|
|
1,643,126
|
|
|
1,165,000
|
|
|
—
|
|
|
745,785
|
|
1,678,016
|
858,000
| ||||||||||||
| (3) | Reflects estimated payouts regarding performance units granted during |
The payout percentage for the |
| (4) | Reflects the RSUs granted during |
| (5) | Reflects the |
| (6) | Reflects the grant date fair values of performance units granted during |
92 ï 2017 Proxy Statement
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| ||||
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
| (7) | Reflects the grant date fair values of RSUs granted during |
| (8) | Reflects the grant date fair values of stock options granted during |
ï 20172018 Proxy Statement93 67
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Outstanding Equity Awards at Fiscal Year End
The following table sets forth summary information regarding the outstanding equity awards at December 31, 20162017 granted to each of our NEOs.
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($/ Option) | Option Expiration Date(1) | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Number of Securities Underlying Unexercised Options Exercisable (#) Number of Securities Underlying Unexercised Options Unexercisable (#) Option Exercise Price ($/Option) Option Expiration Date(1) Number of Shares or Units of Stock That Have Not Vested (#)(2) Market Value of Shares or Units of Stock That Have Not Vested ($)(3) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) Stock Options(1) Restricted Stock Units and Dividend Equivalents Performance Units and Dividend Equivalents Robert A. Bradway 45,070 7,837,673 Anthony C. Hooper 0 43,572 162.60 5/1/27 15,563 2,706,406 22,812 Sean E. Harper 0 40,305 162.60 5/1/27 14,043 2,442,078 21,100 David W. Meline 0 38,126 162.60 5/1/27 26,592 4,624,349 19,959 (4) 3,470,870 Jonathan P. Graham 0 27,233 162.60 5/1/27 32,403 5,634,882 14,257 (4) 2,479,292 Stock options expire on the tenth anniversary of their grant date. No stock options were granted to NEOs during 2012 through 2015. The following table shows the vesting of RSUs and related accrued dividend equivalents (rounded down to the nearest whole number of units) outstanding as of December 31, May 3, 2016(a) August 4, 2015(b) January 30, 2015(c) August 1, 2014(d) January 31, 2014(e) January 28, 2013(f) May 1, 2017(a) May 3 2016(a) August 4, 2015(b) January 30, 2015(c) August 1, 2014(d) January 31, 2014(e) Robert A. Bradway 14,343 0 14,032 0 10,813 6,902 15,057 14,726 0 9,653 0 5,634 Anthony C. Hooper 5,215 0 4,814 0 3,605 2,762 5,019 5,354 0 3,312 0 1,878 Sean E. Harper 4,642 4,685 0 2,838 0 1,878 David W. Meline 4,563 0 4,126 28,592 0 0 4,391 4,685 0 2,838 14,678 0 Sean E. Harper 4,563 0 4,126 0 3,605 2,762 Jonathan P. Graham 2,999 38,260 0 0 0 0 3,136 3,079 26,188 0 0 0 Scheduled to vest at a rate of approximately 33%, 33% and 34% on the second, third and fourth anniversaries of the grant date, respectively. Scheduled to vest in approximately equal installments on each of the Approximately Scheduled to vest on the fourth anniversary of the grant date. All units vested on January
68
The estimated payouts of the performance units described above are disclosed in the limited context of our executive compensation program and should not be understood to be statements of our expectations of our stock price or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts. Option Exercises and Stock Vested
The following table summarizes the
Nonqualified Deferred Compensation
The following table sets forth summary information regarding aggregate contributions to and account balances under our SRP and NDCP for and as of the year ended December 31,
General Provisions of the Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan
The SRP is designed to provide a “make-whole” benefit to 401(k) Plan participants who have eligible compensation in excess of the Internal Revenue Code’s qualified plan compensation limit. The Company credits to the SRP a 10% contribution on such compensation to represent the equivalent percentage of Company contributions that would have been made to the 401(k) Plan if the compensation had been eligible for deferral into the 401(k) Plan. For the same reason, the Company also credits to the SRP a 10% contribution on amounts deferred into the NDCP. No “above market” crediting rates are offered under the SRP and employee contributions are not permitted. The SRP and the NDCP are unfunded plans for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. Deferred amounts are our general unsecured obligations and are subject to ouron-going financial solvency. We have established a grantor trust (aso-called “rabbi” trust) for the purpose of accumulating funds to assist us in satisfying our obligations under the NDCP. Earnings on amounts contributed to our SRP and NDCP, like our 401(k) Plan, are based on participant selections among the investment options selected by a committee of our executives. This committee has the sole discretion to discontinue, substitute or add investment options at any time. Participants can select from among these investment options for purposes of determining the earnings or losses that we will credit to their plan accounts, but they do not have an ownership interest in the investment options they select. Unlike our 401(k) Plan, we do not offer the opportunity to invest through a brokerage window or in our Common Stock under our NDCP or SRP. The investment options in the NDCP and the SRP also differ in that they include six portfolios based on different target retirement dates, referred to as “Target Retirement Portfolios,” that have been created for use as default investment options. The
investment options during available plan investment options on any business day and effective at the close of business on that day (subject to the time of the request and the market being open).
Retirement and Savings Plan and Supplemental Retirement Plan
Our 401(k) Plan is a qualified plan that is available to regular U.S.-based staff members of the Company and participating subsidiaries. All 401(k) Plan participants, including our NEOs, are eligible to receive the same proportionate level of matching and nonelective or “core” contributions from us. Company contributions on eligible compensation earned above the Internal Revenue Code qualified plan compensation limit and on amounts that were deferred to the NDCP are credited to our SRP, a nonqualified plan that is available to all 401(k) Plan eligible staff members. Contributions. We make a core contribution of 5% of eligible compensation to all regular Distributions. Participants receive distributions from the SRP following their termination of employment. Distributions for most participants are made in a lump sum payment in the first or second year following termination of employment, or, for balances in excess of a de minimis amount, in installments that commence in the year following termination. For our NEOs, Section 409A of the Internal Revenue Code generally requires that their distributions may not occur earlier than six months following our NEO’s termination of employment. Vesting. Participants in the 401(k) Plan are immediately vested in participant and Company contributions and related earnings and losses on such amounts. Participants in the SRP are immediately vested in contributions that are made with respect to amounts the participants deferred under the NDCP and related earnings and losses on such amounts, and are fully vested in the remainder of their accounts upon the earlier of: (i) three continuous years of their service to us; (ii) termination of their employment on or after their normal retirement date (as defined in the 401(k) Plan); (iii) their disability (as defined in the 401(k) Plan); (iv) their
70
Nonqualified Deferred Compensation Plan
Our NDCP allows participants to defer receipt of a portion of their eligible compensation to a future date, with an opportunity to earntax-deferred returns on the deferrals. Members of our Board of Directors, or Board, and our U.S.- and Puerto Rico-based staff members at the director level or above, who include our NEOs, are eligible to participate in this plan. Our NEOs may participate in this plan on the same basis as the other participants in the plan. Contributions. Participants who are staff members may elect to defer up to a maximum of 50% of their eligible base salary, up to a maximum of 100% of their annual cash incentive award and up to 100% of sales commissions.Non-employee members of our Board may defer all or a portion of their fees, including retainers and meeting fees. In addition, we may, in our sole discretion, contribute additional amounts to any participant’s account at any time, such as contributingsign-on bonuses to the accounts of newly-hired staff members or for retention purposes. Distributions. Participants may elect to receive distributions as a lump sum or, for balances in excess of a de minimis amount, in annual installments for up to ten years. For most participants, distributions commence in the first or second year following the participant’s termination of employment. For our NEOs, Section 409A of the Internal Revenue Code generally requires that distributions may not occur earlier than six months following our NEO’s termination of employment.
Vesting. Participants are at all times 100% vested in the amounts that they elect to defer and related earnings and losses on such amounts. As part of his initial hire package, and to replace the forfeiture of certain pension benefits at his former employer, we contributed $1,600,000 to Mr. Meline’s NDCP account. This contribution and related earnings and losses thereon vest at the rate of 12.5% per year from 2015 through 2022 as long as Mr. Meline remains continuously employed by us, which vesting accelerates upon a change of control consistent with the terms of the NDCP. As part of his initial hire package and to replace forfeiture of certain benefits at his former employer and to induce Mr. Graham to accept the Company’s offer of employment, Mr. Graham was provided with a contribution to his NDCP account of
Investment Options Under the Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan
The investment options under the SRP and the NDCP and their annual rates of return for The Target Retirement Portfolios are designed to provide anall-in-one investment option for creating a diversified portfolio. Each portfolio is an asset allocation strategy built around a combination of investments from the plan’s investment options (provided below) and is adjusted over time to gradually become more conservative as the target maturity date of the portfolio approaches. We retain the right to change, at our discretion, the available investment options.
Potential Payments Upon Termination or Change of Control
Change of Control Severance Plan Our Amended and Restated Change of Control Severance Plan, or Change of Control Severance Plan, provides a lump sum payment and certain other benefits for each participant in the plan who separates from employment with us in connection with a change of control. Our Compensation Committee periodically reviews the terms of the Change of Control Severance Plan, which was originally adopted in 1998, to ensure it is aligned with current governance best practices. If a change of control occurs and a participant’s employment is terminated by us other than for cause or disability or by the participant for good reason within two years after the change of control, a participant under the Change of Control Severance Plan would be entitled to:
a lump sum cash payment in an amount equal to:
a benefits multiple of one or two based on the participant’s position (each of our NEOs has a benefits multiple of two); and
the sum of (i) the participant’s annual base salary immediately prior to termination or, if higher, immediately prior to the change of control, plus (ii) the participant’s targeted annual cash incentive award for the year in which the termination occurs;
if, as a result of the participant’s termination of employment, the participant becomes entitled to, and timely elects to continue, healthcare (including any applicable vision benefits) and/or dental coverage under Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, Company-paid group health and dental insurance continuation coverage for the participant and his or her dependents under COBRA until the earlier of (i) the expiration of a participant’s eligibility for coverage under COBRA or (ii) the expiration of the18-month period immediately following the participant’s termination (whichever occurs earlier);
fully-vested benefits accrued under our 401(k) Plan and our SRP;
either alump-sum cash payment or a contribution to our SRP, as determined by us in our sole discretion, in an amount equal to the sum of (1) the product of $2,500 and the participant’s benefits multiple and (2) the product of (x) 10%, (y) the sum of (i) the participant’s annual base salary as in effect immediately prior to the participant’s termination or, if higher, as in effect immediately prior to the change of control, plus (ii) the participant’s targeted annual cash incentive award for the year in which the termination occurs (which equals the participant’s annual base salary multiplied by the participant’s target annual cash incentive award percentage, each as in effect immediately prior to the termination or, if higher, as in effect immediately prior to the change of control) and (z) the benefits multiple; and
indemnification and, if applicable, directors’ and officers’ liability insurance provided by us for four years following the participant’s termination (each of our NEOs would receive such liability insurance benefits, which would result in no additional cost to us). No taxgross-up payments are provided under the Change of Control Severance Plan. If all payments or benefits received under the Change of Control Severance Plan or any other plan, arrangement or agreement would cause the participant to be subject to excise tax, then the payments will be reduced to the extent necessary to avoid the excise tax, provided that the reduced payments, net of federal, state and local income taxes, are greater than the payments without such reduction, net of federal, state and local income taxes and excise tax. The plan provides that the benefits described above would be provided in lieu of any other severance benefits that may be payable by us (other than accrued vacation and similar benefits otherwise payable to all staff members upon a termination). The plan also provides that the benefits described above may be forfeited if the participant discloses our confidential information or solicits or offers employment to any of our staff members during a period of years equal to the participant’s benefits multiple following the participant’s termination. The plan is subject to automaticone-year extensions unless we notify participants no later than November 30 that the term will not be extended. If a change of control occurs
during the term of the plan, the plan will continue in effect for at least 24 months following the change of control. Prior to a change of control, we can amend the plan at any time. After a change of control, the plan may not be terminated or amended in any way that adversely affects a participant’s interests under the plan, unless the participant consents in writing. “Change of Control” is defined in the plan as the occurrence of any of the following:
any person, entity or group has acquired beneficial ownership of 50% or more of (i) our then outstanding common shares or (ii) the combined voting power of our then outstanding securities entitled to vote in the election of directors;
individuals making up the incumbent Board (as defined in the plan) cease for any reason to constitute at least a majority of our Board;
immediately prior to our consummation of a reorganization, merger or consolidation with respect to which persons who were the stockholders of the Company immediately prior to such transaction do not, immediately thereafter, own more than 50% of the then outstanding shares of the reorganized, merged or consolidated company entitled to vote generally in the election of directors;
a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company; or
any other event which the incumbent Board (as defined in the plan), in its sole discretion, determines is a change of control. “Cause” is defined in the plan as (i) conviction of a felony or (ii) engaging in conduct that constitutes willful gross neglect or willful 72
gross misconduct in carrying out the participant’s duties, resulting in material economic harm to us, unless the participant believed in good faith that the conduct was in, or not contrary to, our best interests. “Disability” under the plan is determined based on our long-term disability plan as is in effect immediately prior to a change of control. “Good reason” is defined in the plan as (i) an adverse and material diminution of a participant’s authority, duties or responsibilities, (ii) a material reduction in a participant’s base salary, (iii) an increase in a participant’s daily commute by more than 100 miles roundtrip or (iv) any other action or inaction by the Company that constitutes a material breach of the agreement under which the participant provides services. In order to terminate with “good reason,” a participant must provide written notice to the Company of the existence of the condition within the required period, the Company must fail to remedy the condition within the required time period and the participant must then terminate employment within the required time period. Long-Term Incentive Equity Awards Stock Options and Restricted Stock Units Our stock plans (or the related grant agreements approved for use under such stock plans) provide for accelerated vesting or continued vesting of unvested stock options and RSUs in the circumstances described below. Qualifying Termination in Connection with a Change of Control. Unvested stock options and RSUs will vest in full in connection with a Change of Control (as defined in the stock plans or related grant agreements approved for use under such stock plans) only if and when, within 24 months following the Change of Control, the grantee’s employment is involuntarily terminated other than for “cause” or “disability,” and, in the case of staff members subject to the Change of Control Severance Plan, voluntarily terminated with “good reason” (as each is defined in the grant agreements). Death or Disability. In general, unvested stock options and RSUs granted in calendar years prior to the year death or disability occurs vest in full upon the occurrence of such event. For unvested stock options and RSUs granted in the calendar year death or disability occurs, apro-rata amount of these stock options and RSUs immediately vests based on the number of completed months of employment during the calendar year such event occurs. Under our stock plans, a disability has the same meaning as under Section 22(e)(3) of the Internal Revenue Code and occurs where the disability has been certified by either the Social Security Administration, the comparable government authority in another country with respect tonon-U.S. staff members or an independent medical advisor appointed by us. Retirement.
schedule following the retirement of the holder if the holder has been continuously employed for at least ten years and is age 55 or older or is age 65 or older, regardless of service (a retirement-eligible participant) with RSUs granted in 2018, any unvested RSUs will vest in full in the event of death following such holders’ retirement from the Company. If a retirement-eligible participant receives a grant of stock options or RSUs in the calendar year such retirement occurs, the participant will vest in apro-rata amount of the award he or she would be otherwise entitled to based upon the number of complete months of employment during the calendar year such retirement occurs. Holders have the lesser of five years from the date of retirement or the remaining period before expiration to exercise any vested stock options. Performance Units
Change of Control. With respect to grants of outstanding performance units,
Death or Disability. For all performance unit grants made in calendar years prior to the year death or disability occurs, the participant will be paid the full amount of the award he or she would be otherwise entitled to, if any, as determined at the end of the performance period. For a performance unit grant made in the calendar year in which death or disability occurs, a participant will be paid apro-rata amount of the award he or she would otherwise be entitled to, if any, as determined at the end of the performance period, based upon the number of complete months of employment in the calendar year such event occurs.
Retirement. In the event of retirement of a participant who is a retirement-eligible participant, for performance unit grants made in calendar years prior to the year in which retirement occurs, the participant will be paid the full amount of the award he or she would be otherwise entitled to, if any, as determined at the end of the performance period. If a retirement-eligible participant receives a performance unit grant in the calendar year such retirement occurs, the participant will be paid apro-rata amount of the award he or she would be otherwise entitled to, if any, as determined at the end of the performance period, based upon the number of complete months of employment during the calendar year such retirement occurs. Mr.
We entered into an offer letter with Mr. Graham in connection with his initial hiring as Senior Vice President, General Counsel and Secretary effective July 13, 2015, which provides for limited severance benefits in the event of termination of employment by us, other than for cause. Specifically, the offer letter provides for severance protection for three years following the hire date equal to two years of base salary and target bonus, as defined, plus up to 18 months of COBRA medical and dental coverage paid by us. Benefits of this type are sometimes provided to officer-level candidates in order to provide an incentive to them to join the Company by reducing the risk of making such a job change. These severance benefits will expire on July 13, 2018, the third anniversary of the commencement of his employment with the Company. For purposes of the offer letters, “cause” is defined as: (i) unfitness for service, inattention to or neglect of duties, or incompetence; (ii) dishonesty; (iii) disregard or violation of the policies or procedures of the Company; (iv) refusal or failure to follow lawful directions of the Company; (v) illegal, unethical or immoral conduct; or (vi) breach of our Proprietary Information and Inventions Agreement. Estimated Potential Payments The tables below set forth the estimated current value of payments and benefits: (i) to each of our NEOs upon a change of control, upon a qualifying termination within two years following a change of control, or upon death or
Estimated Payments to Robert A. Bradway
Estimated Payments to Anthony C. Hooper
Estimated Payments to Sean E. Harper
Estimated Payments to David W. Meline
Estimated Payments to Jonathan P. Graham
The compensation program for ournon-employee directors is intended to be competitive and fair so that we can attract the best talent to our Board of Directors, or Board, and recognize the time and effort required of a director given the size and complexity of our operations. In addition to cash compensation, we provide equity grants and have stock ownership guidelines to align the directors’ interests with all of our stockholders’ interests and to motivate our directors to focus on our long-term growth and success. Directors who are our employees are not paid any fees for serving on our Board or for attending Board meetings. In October 2017, the Governance and Nominating Committee, or Governance Committee, reviewed our director compensation. The Governance Committee hired Frederic W. Cook & Co., Inc., or Cook & Co., as an independent consultant to the Governance Committee to advise on director compensation. Cook & Co. provided detailed competitive comparisons against our peer group and recommended no changes to our director compensation levels. Based on this review and recommendation by Cook & Co., the Governance Committee recommended to the Board that no changes be made to the compensation levels for directors.
Cash Compensation. Eachnon-employee director receives an annual cash retainer of $100,000. In addition, chairs of the four key standing committees receive an additional $20,000 annual retainer as follows: (i) Audit Committee; (ii) Compensation and Management Development Committee; (iii) Corporate Responsibility and Compliance Committee; and (iv) Governance and Nominating Committee. The lead independent director receives an additional $35,000 annual retainer. Directors are not additionally compensated for Board meeting attendance. Directors are compensated $2,000 for each committee meeting they attend ($1,000 for telephonic attendance). Directors are also compensated for attending meetings of committees of which they are not members or special meetings if they are invited to attend by the Chairman of the Board or the committee chair. Directors are entitled to reimbursement of their expenses incurred in connection with attendance at Board and committee meetings and conferences with our senior management. We make taxgross-up payments to our directors to reimburse them for additional income taxes imposed when we are required to impute income on perquisites that we provide. Equity Incentives. Under the provisions of our revised Director Equity Incentive Program, eachnon-employee director receives an automatic annual grant of restricted stock units, or RSUs, on the third business day after the release of our first fiscal quarter earnings, with a grant date fair market value of $200,000, based on the closing price of our Common Stock on the grant date (rounded down to the nearest whole number). The RSUs vest immediately, and the director may choose to defer receipt of the shares. Directors that elect to defer receipt of the shares accrue dividend equivalents on the vested RSUs during the deferral period. A director may also elect to receive deferred RSUs in lieu of up to 100% of his or her cash compensation. Deferred Compensation and Other Benefits. Non-employee directors are eligible to participate in the Nonqualified Deferred Compensation Plan, or NDCP, that we maintain for our staff members (see “Nonqualified Deferred Compensation” in our Executive Compensation Tables above for more information). Earnings under this plan are market-based—there are no “above market” or guaranteed rates of returns. Through The Amgen Foundation, Inc., the Company maintains a charitable contributions matching gift program for all eligible staff members andnon-employee directors. Our directors participate in the program on the same terms as our staff members. The Amgen Foundation, Inc. matches, on adollar-for-dollar basis, qualifying donations made by directors and staff members to eligible organizations, up to $20,000 per person, per year. Separate and in addition to this ongoing annual program, The Amgen Foundation, Inc. matches, on adollar-for-dollar basis, donations to specified disaster relief organizations, up to $20,000 per deployment per person. Guests of our Board members are occasionally invited to Board events, and we may pay or reimburse travel expenses and may provide transportation on our aircraft for both the director and his or her guest. Director Stock Ownership Guidelines. Allnon-employee directors are expected to hold the equivalent of five times the Board annual cash retainer (currently $500,000) in our Common Stock while serving as anon-employee director. Allnon-employee directors are expected to comply with the stock ownership guidelines on or before December 31st of the calendar year in which the fifth anniversary of their first date of election by stockholders or the Board falls. For purposes of the Board stock ownership guidelines, issued and outstanding shares of our Common Stock held beneficially or of record by thenon-employee director, issued and outstanding shares of our Common Stock held in a qualifying trust (as defined in the guidelines) and vested RSUs that are deferred will count towards satisfying the stock ownership guidelines. All directors with compliance
dates that were on or prior to December 31, Board members are subject to our insider trading policy that prohibits them from engaging in short sales with respect to the Company’s securities, purchasing or pledging the Company’s stock on margin or entering into any hedging, derivative or similar transactions with respect to the Company’s securities.
Director Compensation Table
The following table shows compensation of thenon-employee members of our Board for
Security Ownership of Directors and Executive Officers The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of March 23, 2018 by: (i) each current director and nominee; (ii) our Named Executive Officers, or NEOs (as specified on page 32); and (iii) all of our current directors and executive officers as a group. There were 668,270,489 shares of our Common Stock outstanding as of March 23, 2018. None of our directors, nominees, NEOs or executive officers, individually or as a group, beneficially owns greater than 1% of our outstanding shares of Common Stock.
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Security Ownership of Certain Beneficial Owners The following table shows the number of shares of our Common Stock owned by each person or entity known to the Company to be the beneficial owners of more than 5% of our Common Stock as of March 23, 2018, based on a review of publicly available statements of beneficial ownership filed with the Securities and Exchange Commission, or SEC, on Schedules 13D and 13G through March 23, 2018.
Ratification of Selection of Independent Registered Public Accountants The Audit Committee of the Board of Directors, or Board, has selected Ernst & Young LLP, or Ernst & Young, as our independent registered public accountants for the fiscal year ending December 31, 2018, and the Board has directed that management submit this selection for ratification by the stockholders at our 2018 Annual Meeting of Stockholders, or Annual Meeting. Ernst & Young has served as our independent registered public accounting firm and has audited our financial statements since the Company’s inception in 1980. The Audit Committee periodically considers whether there should be a rotation of our independent registered public accountants. Each year, the Audit Committee evaluates the qualifications and performance of the Company’s independent registered public accountants and determines whether tore-engage the current independent registered public accountants. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent registered public accountants, their technical expertise and knowledge of our operations and industry. Based on this evaluation,the members of the Audit Committee believe that the continued retention of Ernst & Young as our independent registered public accountants is in the best interests of the Company and its stockholders. In conjunction with the mandated rotation of Ernst & Young’s lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of Ernst & Young’s new lead engagement partner. The process for selection of Ernst & Young’s lead engagement partner involves a meeting between the Audit Committee’s chairperson and the candidate, as well as an assessment by the full Audit Committee and management. A representative of Ernst & Young is expected to be present at the Annual Meeting and will have an opportunity to make a statement and respond to appropriate questions. Stockholder ratification of the selection of Ernst & Young as our independent registered public accountants is not required by the Amgen Inc. Restated Certificate of Incorporation, the Amended and Restated Bylaws of Amgen Inc., or otherwise. However, the Board is submitting the selection of Ernst & Young to the stockholders for ratification because we believe it is a matter of good corporate governance practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Ernst & Young, but still may retain them. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in our best interests and that of our stockholders. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. 86
Audit Committee Report
The Audit Committee has reviewed and discussed with management the Company’s audited consolidated financial statements as of and for the year ended December 31, The Audit Committee has also discussed with Ernst & Young LLP, or Ernst & Young, the matters required to be discussed by the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. The Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young required by the applicable requirements of the PCAOB regarding Ernst & Young’s communication with the Audit Committee concerning independence and has discussed with Ernst & Young their independence. Based on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements referred to above be included in the Company’s Annual Report onForm 10-K for the year ended December 31,
Audit Committee of the Board of Directors
Wanda M. Austin François de Carbonnel Fred Hassan Rebecca M. Henderson
Tyler Jacks Ellen J. Kullman
Independent Registered Public Accountants
The following table presents fees for professional services provided or to be provided by Ernst & Young for audits of the years ended December 31,
Included in Audit fees above are professional services associated with the integrated audit of our consolidated financial statements and our internal control over financial reporting and the statutory audits of various subsidiaries of the Company. Audit-Related fees are primarily attributable to audits of our affiliated companies and our retirement plans. The Audit Committee has considered whether the Audit-Related services provided by Ernst & Young are compatible with maintaining that firm’s independence. The Audit Committee has approved all audit and permissiblenon-audit services prior to such services being provided by Ernst & Young. The Audit Committee, or the Chairman of the Audit Committee who has been granted authority by the Audit Committee, approves each audit ornon-audit service prior to the engagement of Ernst & Young for such service. Each such service approved by the Chairman of the Audit Committee is presented to the entire Audit Committee at a subsequent meeting.
The Company’s Annual Report on Form10-K for fiscal
exhibits, by writingto: Investor Relations, Senior Manager, Amgen Inc., One Amgen Center Drive, Thousand Oaks, CA 91320-1799, or contact Investor Relations by telephone at(805) 447-1060 or emailat investor.relations@amgen.com. The Company’s Annual Report on Form10-K is also available online on the Company’s website atwww.amgen.com. A list of exhibits is included in the Form10-K and exhibits are available from the Company upon payment to the Company of the cost of furnishing them.
Stockholder Proposal Certain stockholders andco-filers have informed the Company that they intend to present the proposal set forth below at our 2018 Annual Meeting of Stockholders, or Annual Meeting. If the stockholders (or their respective “qualified representative” as determined under applicable law and our Amended and Restated Bylaws of Amgen Inc., or Bylaws) are present at the Annual Meeting and properly submit the proposal for a vote, then the stockholder proposal will be voted upon at the Annual Meeting. Pursuant to Rule14a-8(l)(1) of the Securities Exchange Act of 1934, as amended, the Company will provide the name, address and number of shares of our Common Stock held by each of the proponents of the stockholder proposal set forth below promptly upon receipt of a written or oral request. Requests should be submitted to the Company’s Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799 or805-447-1000. In accordance with the Federal securities laws, the stockholder proposal and supporting statement is presented below as submitted by the stockholders, are quoted verbatim and are in italics. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the supporting statement. FOR THE REASONS STATED IN THE BOARD OF DIRECTOR’S, OR BOARD, RESPONSE, WHICH FOLLOWS THE STOCKHOLDER PROPOSAL, THE BOARD STRONGLY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST” THE STOCKHOLDER PROPOSAL. Stockholder Proposal RESOLVED, that shareholders of Amgen Inc. (“Amgen”) urge the Compensation Committee (the “Committee”) to report annually to shareholders on the extent to which risks related to public concern over drug pricing strategies are integrated into Amgen’s incentive compensation policies, plans and programs (together, “arrangements”) for senior executives. The report should include, but need not be limited to, discussion of whether incentive compensation arrangements reward, or not penalize, senior executives for adopting pricing strategies, or making and honoring commitments about pricing, that incorporate public concern regarding the level or rate of increase in prescription drug prices; and considering risks related to drug pricing when allocating capital. SUPPORTING STATEMENT As long-term investors, we believe that senior executive incentive compensation arrangements should reward the creation of sustainable long-term value. To that end, it is important that those arrangements align with company strategy and encourage responsible risk management. A key risk facing drug companies is potential backlash against high prices. Public outrage over drug prices and their impact on patient access may force price rollbacks and harm corporate reputation. Investigations regarding pricing of prescription medicines may bring about broader changes. (E.g.,https://democrats-oversight.house.gov/news/press-releases/cummings- We are encouraged by Amgen’s willingness to experiment with outcomes-based pricing for new cholesterol-lowering drug Repatha. (http://www.wbur.org/commonhealth/2017/05/03/amgen-repatha-refund-promise-harvard-pilgrim) We are concerned, however, that the 88
incentive compensation arrangements applicable to Amgen’s senior executives may not encourage them to take actions that result in lower short-term financial performance even when those actions may be in Amgen’s best long-term financial interests. Amgen uses revenue andnon-GAAP net income, along with product-related goals, as metrics for the annual bonus, and earnings per share (EPS) as one of the metrics for long-term incentive awards. (2017 Proxy Statement, at 58, 62) A recent Credit Suisse analyst report stated that “US drug price rises contributed 100% of industry EPS growth in 2016” and characterized that fact as “the most important issue for a Pharma investor today.” The report identified Amgen as a company where net price increases accounted for at least 100% of net income growth in 2016. (Global Pharma and Biotech Sector Review: Exploring Future US Pricing Pressure, Apr. 18, 2017, at 5) In our view, excessive dependence on drug price increases is a risky and unsustainable strategy, especially when price hikes drive large senior executive compensation payouts. For example, coverage of the skyrocketing cost of Mylan’s EpiPen noted that a 600% rise in Mylan’s CEO’s total compensation accompanied the 400% EpiPen price increase. (See,e.g., https://www.nbcnews.com/business/consumer/mylan-execs-gave-themselves-raises-they-hiked-epipen-prices-n636591;https://www.wsj.com/articles/epipen-maker-dispenses-outsize-pay- The disclosure we request would allow shareholders to better assess the extent to which compensation arrangements encourage senior executives to responsibly manage risks relating to drug pricing and contribute to long-term value creation. We urge shareholders to vote for this Proposal. Board Response to the Stockholder Proposal The Board of Directors recommends a vote “AGAINST” the Stockholder Proposal. We are committed to unlocking the potential of biology for patients suffering from serious illnesses by discovering, developing, manufacturing and delivering innovative human therapeutics.Our mission is to serve patients. We focus on areas of high unmet medical need and leverage our expertise to strive for solutions that improve health outcomes and dramatically improve people’s lives. The Board’s recommendation to vote “AGAINST” the Stockholder Proposal is based on the following reasons: The proposal’s underlying subject matter is our drug pricing and capital allocation decisions. Such decisions are integral to our ordinary course operations and the proposed report would put us at a competitive disadvantage and be unduly burdensome while not providing meaningful additional information to stockholders.Making the best pricing decisions for each of the Company’s products in each of its geographies and allocating capital incorporate a number of risk and benefit decisions that are fundamental to management’s ability to run the Company on aday-to-day basis. Such decisions are made carefully and purposefully by the Company’s management and our Board and require a deep knowledge of the Company’s business and operations—information to which the Company’s stockholders do not have access. Further, in the examples cited by the proponent, it appears that the proponent envisions that the Company justifies its business decisions regarding specific pricing decisions for each of our products on aproduct-by-product basis to the Company’s competitive disadvantage. We already have policies and procedures that delineate our overall approaches to the pricing of our medicines and have made these policies and procedures freely available to our stockholders and the general public through our publicly accessible website located atwww.amgen.com. Accordingly, it would be burdensome on the Company to generate a separate annual report that attempted to assess “the extent to which risks related to public concern over drug pricing strategies” are integrated into our compensation policies. We already provide public disclosure regarding the factors that are integrated into our incentive compensation policies and the risks related to compensation.Our annual cash and long-term equity incentive programs are designed to provide compensation that is based on our financial, operating, and stock price performance. Further, our Compensation Discussion and Analysis section of this proxy statement discusses the performance goals and payouts under our short- and long-term incentive programs and the reasons the Compensation Committee selected the goals and incentive program design at length. Amgen uses financial measures as part of its compensation program includingnon-Generally Accepted Accounting Principles earnings per share, or EPS, as a metric for the long-term performance awards component of our executive compensation. That the proponent was able to successfully derive the components of our compensation program, including EPS, from our 2017 Proxy Statement in its statement shows that we already provide detailed discussion on this topic. Further, EPS is measured across three years and comprises justone-third of our performance award operating measures and such awards are modified by the total shareholder return such that actions over three years that are damaging to the Company’s reputation and performance would reduce such long-term performance award payouts. Revenues, net income and EPS all benefit from higher product sales driven by demand composed of a mix of units and price. Thus, consideration of how we price our products is already reflected in the financial metrics used in our executive compensation decisions. Moreover, we already provide disclosure regarding our “compensation policies and practices as they relate to risk management.” As discussed in this proxy statement and in our 2017 Proxy Statement, our management, working with the Compensation Committee’s independent compensation consultant, conducts an annual assessment of the Company’s compensation policies and practices for material
risks to the Company. As we disclose in this proxy statement under “CORPORATE GOVERNANCE—Compensation Risk Management,” we believe that our compensation policies and practices do not present risks that are reasonably likely to have a material adverse effect on our Company. Further, the Company has disclosed in this proxy statement and in our 2017 Proxy Statement the recoupment provisions that expressly allow the Compensation Committee or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an employee has earned an annual cash incentive award or the amount of any such award – employee misconduct that gives rise to the concerns identified by the proponent, including pricing decisions that create “public outrage over drug prices”, that destroy value, or that “harm corporate reputation” would be subject to such consideration. Moreover, our Board of Directors oversees the Company’s Enterprise Risk Management program to identify, monitor and mitigate enterprise risks as more fully discussed in this proxy statement under CORPORATE GOVERNANCE – The Board’s Role in Risk Oversight. Our Board discusses enterprise risks with the Company’s senior management multiple times during the year, including the specific areas of pricing, value and access and sales. All members of our Compensation Committee participate in such oversight and discussion and bring such awareness and understanding to their evaluation of executive compensation program design and results. Our annual report on Form10-K explains that the Company’s competitive position may be impacted by price and reimbursement, among other factors, and identifies the risks that the Company could face as a result of intense public scrutiny of the price of drugs, heightened control over product pricing and patient access by government and private payers and/or changes to U.S. federal reimbursement policy resulting from legislative or regulatory action, including addressing potential consequences to the Company of specific federal and state pricing and reimburse policy actions. Further, we routinely discuss significant pricing trends in our Management Discussion & Analysis section, or MD&A, of our Form10-Qs and10-Ks. For example, in our 2016 annual report on Form10-K’s MD&A, we reported, for Enbrel, that “[i]n 2017, we expect intensifying competition and relatively little benefit from net selling price changes.” These disclosures demonstrate that the Company already provides the disclosure called for by the proposal and that management is behaving in an informed manner with respect to managing the business for the longer-term and is keeping investors appropriately informed. We remain focused on delivering breakthrough treatments for unmet medical needs and are committed to working with the entire healthcare community to ensure continued innovation and enable patient access to needed medicines.We do this by: Investing billions of dollars annually in research and development; Developing more affordable therapeutic choices in the form of high-quality and reliably-supplied biosimilars; Pricing our medicines to reflect the value they provide; Partnering with payers to share risk and accountability for health outcomes; Providing patient support and education programs and helping patients in financial need access our medicines; and Working with policymakers, patients and other stakeholders to establish a sustainable healthcare system with access to affordable care and where patients and their healthcare professionals are the primary decision makers. The medicines we bring to market are discovered through complex, time-consuming, and resource-intensive processes that carry a high risk of failure. Even after a medicine is approved, its value evolves over time. We continue to invest in studies, new indications, formulations and delivery methods of our currently approved molecules to expand the number of people we can help and to make our therapies easier and more convenient to take. This ongoing innovation requires significant continuing investment. Our innovative medicines and healthcare solutions improve patient productivity, longevity, and quality of life, while helping to reduce healthcare costs, such as medical spending, hospital costs and physician office visit expenditures, and societal costs. With that in mind, we price our medicines to reflect their ability to reduce the burden of diseases for individuals and society by improving health outcomes. The rising costs of disease, not medicines, threaten the future sustainability of our healthcare system and our management is keenly aware of the effect that the price of our products has on our relationship with patients and other stakeholders. Ensuring that patients have access to our medicines is critical to Amgen. We have evolved our manufacturing processes in an effort to drive down costs and developed advanced new technologies to engage patients and providers to ensure optimal value is derived from our products. Furthermore, we support a number of programs to improve patient access through reimbursement support services, patient resources and financial assistance programs, such as our Amgen Safety Net Foundation, our charitable patient assistance program.We are committed to helping patients who are uninsured, underinsured and in financial need access the medicines they need. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE STOCKHOLDER PROPOSAL. 90
Certain Relationships and Related
Under our written Approval of Related Party Transactions policy, a Securities and Exchange Commission, or SEC, related party transaction (as defined below) may be consummated or may continue only if the Audit Committee approves or ratifies the transaction in accordance with the guidelines set forth in the policy. The policy applies to: (1) any person who is, or at any time since the beginning of our last fiscal year was, a member of our Board of Directors, or Board, one of our executive officers or a nominee to become a member of our Board; (2) any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; (3) any immediate family member, as defined in the policy, of, or sharing a household with, any of the foregoing persons; and (4) any firm, corporation or other entity in which any of the foregoing persons is employed, or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest. All potential related party transactions are presented to the Audit Committee for its consideration and, if the Audit Committee deems it appropriate, approval. The Audit Committee considers all relevant facts and circumstances available to it, including the recommendation of management. No member of the Audit Committee participates in any review, consideration or approval of any related party transaction involving such member or any of his or her immediate family members, except that such member is required to provide all material information concerning the related party transaction to the Audit Committee. Related party transactions may be preliminarily entered into by management subject to ratification by the Audit Committee; provided that if ratification shall not be forthcoming, management shall make all reasonable efforts to cancel or annul such transaction. At each scheduled meeting of the Audit Committee, management is required to update the Audit Committee as to any material changes to any approved or ratified related party transaction. A “SEC Related Party Transaction” is defined in the policy as a transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships (including but not limited to any indebtedness or guarantee of indebtedness) between us and any of the persons listed in the first paragraph of this section. A related party transaction also includes any material amendment or modification to an existing related party transaction. The Audit Committee has excluded each of the following related party transactions under the terms of our Approval of Related Party Transactions policy:
In deciding whether to approve or ratify a related party transaction, the Audit Committee will consider the following factors:
Whether the terms of the transaction are (i) fair to the Company and (ii) at least as favorable to the Company as would apply if the transaction did not involve a related party; Whether there are demonstrable business reasons for the Company to enter into the transaction;
Whether the transaction would impair the independence of an outside director; and
Whether the transaction would present an improper conflict of interest for any director or executive officer, taking into account the size of the transaction, the overall financial position of the related party, the direct or indirect nature of the related party’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Audit Committee deems relevant.
Transactions with Related Persons
Keith Jones, who is thebrother-in-law of Brian M. McNamee, an executive officer of the Company for a portion of 2017, is employed by us as Marketing Director, and previously served as National and each valued at
Information Concerning Voting and Solicitation General The enclosed proxy is solicited on behalf of the Board of Directors, or Board, of Amgen Inc., a Delaware corporation, for use at our 2018 Annual Meeting of Stockholders, or Annual Meeting, to be held on Tuesday, May 22, 2018, at 11:00 A.M., local time, or at any continuation, postponement or adjournment thereof, for the purposes discussed in this proxy statement and in the accompanying Notice of Annual Meeting of Stockholders and any business properly brought before the Annual Meeting. Amgen Inc. may also be referred to as Amgen, the Company, we, us or our in this proxy statement. Proxies are solicited to give all stockholders of record an opportunity to vote on matters properly presented at the Annual Meeting. The Annual Meeting will be held at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362. Pursuant to the rules adopted by the Securities and Exchange Commission, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials, or Notice, to certain of our stockholders of record, and we are sending a paper copy of the proxy materials and proxy card to other stockholders of record who we believe would prefer receiving such materials in paper form. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar Notice. Stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the Notice and on the website referred to in the Notice, including an option to request paper copies on an ongoing basis. We intend to make this proxy statement available on the Internet and to mail the Notice, or to mail the proxy statement and proxy card, as applicable, on or about April 11, 2018 to all stockholders entitled to notice of and to vote at the Annual Meeting. Important Notice Regarding the Availability of Proxy Materials for the 2018 Stockholder Meeting to Be Held on May 22, 2018. This proxy statement, our 2017 annual report and our other proxy materials are available at: www.astproxyportal.com/ast/Amgen. At this website, you will find a complete set of the following proxy materials: notice of 2018 Annual Meeting of Stockholders; proxy statement; 2017 annual report and form proxy card. You are encouraged to access and review all of the important information contained in the proxy materials before submitting a proxy or voting at the meeting. What Are You Voting On? You will be entitled to vote on the following proposals at the Annual Meeting: The election of the 13 director nominees named herein to serve on our Board for a term of office expiring at the 2019 annual meeting of stockholders; The advisory vote to approve our executive compensation; The ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2018; One stockholder proposal, if properly presented; and Any other business as may properly come before the Annual Meeting. Who Can Vote The Board has set March 23, 2018 as the record date for the Annual Meeting. You are entitled to notice and to vote if you were a stockholder of record of our Common Stock, $.0001 par value per share, or Common Stock, as of the close of business on March 23, 2018. You are entitled to one vote on each proposal for each share of Common Stock you held on the record date. Your shares may be voted at the Annual Meeting only if you are present in person or your shares are represented by a valid proxy. Difference Between a Stockholder of Record and a “Street Name” Holder If your shares are registered directly in your name in the records of the Company’s transfer agent, you are considered the stockholder of record with respect to those shares. If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares. However, you are still considered to be the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot submit a proxy or vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares using the methods described below. Shares Outstanding and Quorum At the close of business on March 23, 2018, there were 668,270,489 shares of our Common Stock outstanding and entitled to vote at the Annual Meeting. The presence of the holders of a majority of the outstanding shares of our Common Stock entitled to vote constitutes a quorum, which is required to hold and conduct business at the Annual Meeting. Shares are counted as present at the Annual Meeting if: You are present in person at the Annual Meeting; or Your shares are represented by a properly authorized and submitted proxy (submitted by mail, by telephone or over the Internet). If you are a record holder and you submit your proxy, regardless of whether you abstain from voting on one or more matters, your shares 92
will be counted as present at the Annual Meeting for the purpose of determining a quorum. If your shares are held in “street name,” your shares are counted as present for purposes of determining a quorum if your broker, bank, trust or other nominee submits a proxy covering your shares. Your broker, bank, trust or other nominee is entitled to submit a proxy covering your shares as to certain “routine” matters, even if you have not instructed your broker, bank, trust or other nominee on how to vote on those matters. Please see the subsection “If You Do Not Specify How You Want Your Shares Voted” below. In the absence of a quorum, the Annual Meeting may be adjourned, from time to time, by the chairman of the meeting or by the vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. Voting Your Shares You may vote by attending the Annual Meeting and voting in person or by submitting a proxy. The method of voting by proxy differs (1) depending on whether you are viewing this proxy statement on the Internet or receiving a paper copy and (2) for shares held as a record holder and shares held in “street name.” Shares Held as a Record Holder. If you hold your shares of Common Stock as a record holder and you are viewing this proxy statement on the Internet, you may submit a proxy over the Internet by following the instructions on the website referred to in the Notice previously mailed to you. You may request paper copies of the proxy statement and proxy card by following the instructions on the Notice. If you hold your shares of Common Stock as a record holder and you are reviewing a paper copy of this proxy statement, you may submit a proxy over the Internet or by telephone by following the instructions on the proxy card, or by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in thepre-addressed, postage-paid envelope provided to you. Shares Held in Street Name. If you hold your shares of Common Stock in street name, you will receive a Notice from your broker, bank, trust or other nominee that includes instructions on how to vote your shares. Your broker, bank, trust or other nominee may allow you to deliver your voting instructions over the Internet and may also permit you to submit your voting instructions by telephone. In addition, you may request paper copies of the proxy statement and proxy card from your broker by following the instructions on the Notice provided by your broker, bank, trust or other nominee. The Internet and telephone voting facilities will close at 11:59 P.M., Eastern Time, on May 21, 2018. Stockholders who submit a proxy through the Internet or telephone should be aware that they may incur costs to access the Internet or telephone, such as usage charges from telephone companies or Internet service providers and that these costs must be borne by the stockholder. Stockholders who submit a proxy by Internet or telephone need not return a proxy card or the form forwarded by your broker, bank, trust or other holder of record by mail. YOUR VOTE IS VERY IMPORTANT. You should submit your proxy even if you plan to attend the Annual Meeting. Voting in Person If you plan to attend the Annual Meeting and wish to vote in person, you may request a ballot at the Annual Meeting.Please note that if your shares are held of record by a broker, bank, trust or other nominee, and you decide to attend and vote at the Annual Meeting, your vote in person at the Annual Meeting will not be effective unless you present a legal proxy, issued in your name from the record holder (your broker, bank, trust or other nominee). Even if you intend to attend the Annual Meeting, we encourage you to submit your proxy in advance of the Annual Meeting. Please see the important instructions and requirements below regarding “Attendance at the Annual Meeting.” Changing Your Vote As a stockholder of record, if you submit a proxy, you may revoke that proxy at any time before it is voted at the Annual Meeting. Stockholders of record may revoke a proxy by (i) delivering a written notice of revocation to the attention of the Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, (ii) duly submitting a later-dated proxy over the Internet, by mail or by telephone or (iii) attending the Annual Meeting in person and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy. If your shares are held in the name of a broker, bank, trust or other nominee, you may change your voting instructions by following the instructions of your broker, bank, trust or other nominee. If You Receive More Than One Proxy Card or Notice If you receive more than one proxy card or Notice, it means you hold shares that are registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or, if you submit a proxy by telephone or the Internet, submit one proxy for each proxy card or Notice you receive. How Will Your Shares Be Voted Stockholders of record as of the close of business on March 23, 2018 are entitled to one vote for each share of our Common Stock held on all matters to be voted upon at the Annual Meeting. All shares entitled to vote and represented by properly submitted proxies received before the polls are closed at the Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in accordance with the instructions indicated on those proxies.YOUR VOTE IS VERY IMPORTANT. If You Do Not Specify How You Want Your Shares Voted As a stockholder of record, if you submit a signed proxy card or submit your proxy by telephone or Internet and do not specify how you want your shares voted, the proxy holder will vote your shares: FOR the election of the 13 nominees listed in this proxy statement to serve on our Board for a term of office expiring at the 2019 annual meeting of stockholders; FOR the advisory vote to approve our executive compensation;
FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2018; and AGAINST the one stockholder proposal for an annual report on the extent to which risks related to public concern over drug pricing strategies are integrated into our executive incentive compensation. A “brokernon-vote” occurs when a nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner and the nominee does not have discretionary authority to vote the shares. If you hold your shares in street name and do not provide voting instructions to your broker or other nominee, your shares will be considered to be brokernon-votes and will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote. Shares that constitute brokernon-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum, but will not be considered entitled to vote on the proposal in question. Brokers generally have discretionary authority to vote on the ratification of the selection of Ernst & Young LLP as our independent registered public accountants. Brokers, however, do not have discretionary authority to vote on the election of directors to serve on our Board, the advisory vote to approve our executive compensation, or on the stockholder proposal. In their discretion, the proxy holders named in the proxy are authorized to vote on any other matters that may properly come before the Annual Meeting and at any continuation, postponement or adjournment thereof. The Board knows of no other items of business that will be presented for consideration at the Annual Meeting other than those described in this proxy statement. In addition, other than the stockholder proposal described in this proxy statement, no other stockholder proposal or nomination (that was not subsequently withdrawn or excluded) was received on a timely basis, so no such matters may be brought to a vote at the Annual Meeting. Inspector of Election and Counting of Votes All votes will be tabulated as required by Delaware law, the state of our incorporation, by the inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and brokernon-votes. Shares held by persons attending the Annual Meeting but not voting, shares represented by proxies that reflect abstentions as to one or more proposals and brokernon-votes will be counted as present for purposes of determining a quorum. Election of Directors.We have a majority voting standard for the election of directors in an uncontested election, which is generally defined as an election in which the number of nominees does not exceed the number of directors to be elected at the meeting. In the election of directors, you may either vote “for,” “against” or “abstain” for each nominee. Cumulative voting is not permitted. Under our majority voting standard, in uncontested elections of directors, such as this election, each director must be elected by the affirmative vote of a majority of the votes cast by the shares present in person or represented by proxy. A “majority of the votes cast” means that the number of votes cast “for” a director nominee exceeds the number of votes cast “against” the nominee. For these purposes, abstentions will not count as a vote “for” or “against” a nominee’s election and thus will have no effect in determining whether a director nominee has received a majority of the votes cast. Brokers do not have discretionary authority to vote on this proposal. Brokernon-votes will have no effect on the election of directors as brokers are not entitled to vote for or against a nominee without instruction from the beneficial owner. If a director nominee is an incumbent director and does not receive a majority of the votes cast in an uncontested election, that director will continue to serve on the Board as a “holdover” director, but must tender his or her resignation to the Board promptly after certification of the election results of the stockholder vote. The Governance and Nominating Committee of the Board will then recommend to the Board whether to accept the resignation or whether other action should be taken. The Board will act on the tendered resignation, taking into account the recommendation of the Governance and Nominating Committee, and the Board’s decision will be publicly disclosed within 90 days after certification of the election results of the stockholder vote. A director who tenders his or her resignation after failing to receive a majority of the votes cast will not participate in the recommendation of the Governance and Nominating Committee or the decision of the Board with respect to his or her resignation. Management Proposals (Advisory Vote to Approve Our Executive Compensation and Ratification of Ernst & Young LLP) and Stockholder Proposal For an Annual Report on the Extent To Which Risks Related to Public Concern Over Drug Pricing Strategies are Integrated Into Our Executive Incentive Compensation.The approval of the advisory vote to approve our executive compensation, the ratification of the selection of Ernst & Young LLP, and the approval of the stockholder proposal, if properly presented at the Annual Meeting, each require the affirmative votes of the holders of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter. Abstentions will have the same effect as votes “against” each proposal. Because brokers have discretionary authority to vote on the ratification of the selection of Ernst & Young LLP, we do not expect any brokernon-votes in connection with the ratification. Brokers do not have discretionary authority to vote on the advisory vote to approve our executive compensation or on the stockholder proposal for an annual report on the extent to which risks related to public concern over drug pricing strategies are integrated into our executive incentive compensation. Brokernon-votes, therefore, will have no effect on the advisory votes to approve our executive compensation or on the stockholder proposal as brokers are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner. Solicitation of Proxies We will bear the entire cost of solicitation of proxies, including preparation, assembly and mailing of this proxy statement, the proxy, the Notice and any additional information furnished to stockholders. 94
Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding shares of our Common Stock in their names that are beneficially owned by others to forward to those beneficial owners. We may reimburse persons representing beneficial owners for their costs of forwarding the solicitation materials to the beneficial owners. Original solicitation of proxies may be supplemented by telephone, facsimile, electronic mail or personal solicitation by our directors, officers or staff members. No additional compensation will be paid to our directors, officers or staff members for such services. In addition, we have retained D.F. King & Co. to assist in the solicitation of proxies for a fee of approximately $150,000 plus distribution costs and other costs and expenses. A list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder for any purpose germane to the Annual Meeting during ordinary business hours at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California, 91320-1799 for the ten days prior to the Annual Meeting and also at the Annual Meeting. Attendance at the Annual Meeting To attend the Annual Meeting, you will need an admittance ticket and proof of ownership of our Common Stock as of the close of business on March 23, 2018. If you have received a paper copy of the proxy statement, to receive an admittance ticket you will need to complete and return the postage-paid reply card included in this proxy statement. If you received electronic delivery of this proxy statement, you will receive ane-mail with instructions for obtaining an admittance ticket. If you are viewing the proxy statement over the Internet, please follow the instructions indicated on the website referred to in the Notice. Each stockholder is entitled to one admittance ticket. Directions to attend the Annual Meeting will be sent with your admittance ticket and are available at the website referred to in the Notice andwww.astproxyportal.com/ast/Amgen. You must bring certain documents with you to be admitted to the Annual Meeting. The purpose of this requirement is to help us verify that you are actually a stockholder of the Company. Please read the following rules carefully, because they specify the documents that you must bring with you to the Annual Meeting to be admitted. The items that you must bring with you differ depending upon whether or not you were a record holder of our Common Stock as of the close of business on March 23, 2018. See “Difference Between a Stockholder of Record and a ‘Street Name’ Holder” previously discussed. All persons must bring a valid personal photo identification (such as a driver’s license or passport). If you are a record holder, at the Annual Meeting, we will check your name for verification purposes against our list of record holders as of the close of business on March 23, 2018. If a broker, bank, trust or other nominee was the record holder of your shares of Common Stock as of the close of business on March 23, 2018, then in addition to the applicable items above, you must also bring to the Annual Meeting: Proof that you owned shares of our Common Stock as of the close of business on March 23, 2018; and If you intend to vote at the Annual Meeting, the executed proxy naming you as the proxy holder, signed by the broker, bank, trust or other nominee who was the record holder of your shares of Common Stock as of the close of business on March 23, 2018. Examples of proof of ownership include the following: (1) an original or a copy of the voting information form from your bank or broker with your name on it; (2) a letter from your bank or broker stating that you owned shares of our Common Stock as of the close of business on March 23, 2018; or (3) a brokerage account statement indicating that you owned shares of our Common Stock as of the close of business on March 23, 2018. If you are a proxy holder for a stockholder of the Company who owned shares of our Common Stock as of the close of business on March 23, 2018, then you must also bring to the Annual Meeting: The executed proxy naming you as the proxy holder, signed by a stockholder of the Company who owned shares of our Common Stock as of the close of business on March 23, 2018.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, or Exchange Act, requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities (collectively, Reporting Persons), to file reports of ownership and changes in ownership with the Securities and Exchange Commission, or SEC. Copies of the Section 16 reports are also required to be supplied to the Company and such reports are available on our website atwww.amgen.com. Based solely on our review of the reports filed by Reporting Persons and written representations from certain Reporting Persons that no other reports were required for those persons, during the year ended December 31,
Stockholder Proposals for the
Stockholder Proposals and Director Nominees for Inclusion in our Proposals Pursuant to Rule14a-8. Pursuant to Rule14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in our proxy statement and for consideration at our Director Nominations Pursuant to Our Bylaws.Our Amended and Restated Bylaws of Amgen Inc., or Bylaws, permit an eligible stockholder, or group of up to 20 eligible stockholders, owning Amgen stock continuously for at least three years and shares representing an aggregate of at least 3% of our outstanding shares, to nominate and include in Amgen’s proxy materials director nominees constituting up to the greater of 20% of the Board or two directors, provided that the stockholder(s) and nominee(s) satisfy the requirements of the Bylaws (“Proxy Access”). To nominate a director pursuant to Proxy Access at the procedures, information requirements, qualifications and conditions set forth in our Bylaws. A fully compliant nomination notice must be received by us no earlier than November more than seventy days after the anniversary date of the Stockholder Proposals and Nominees Brought at the Business Proposals and Nominations Pursuant to our Bylaws.To nominate a director or bring any other business before the stockholders at the
Oaks, California 91320-1799 no earlier than January You may write to our Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, to deliver the notices discussed above and for a copy of the relevant Bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates pursuant to our Bylaws. Also, our Bylaws are filed with the SEC as an exhibit to our Exchange Act reports and can be accessed through the SEC’s EDGAR system. 96
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (such as brokers and banks) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” is also permissible under the General Corporation Law of the State of Delaware and potentially means extra convenience for stockholders and cost savings for companies. This year, a number of brokers and banks with account holders who areourstockholderswillbehouseholdingour proxy materials. A single NoticeofAnnualMeetingof Stockholders or proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or bank that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your broker or bank. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications should contact their broker or bank.
No Incorporation by Reference
To the extent that this proxy statement is incorporated by reference into any other filing by us under the Securities Act of 1933 or the Exchange Act, the sections of this proxy statement entitled “Audit Committee Report” or “Compensation Committee Report” to the extent permitted by the rules of the SEC will not be deemed incorporated, unless specifically provided otherwise in such filing. In addition, references to our website are not intended to function as a hyperlink and the information contained on our website is not intended to be part of this proxy statement. Information on our website, other than our proxy statement, Notice of Annual Meeting of Stockholders and form of proxy, is not part of the proxy soliciting material and is not incorporated herein by reference.
Disclaimer
This proxy statement contains statements regarding future individual and Company performance targets and Company performance goals. These targets and Company performance goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.
Forward-Looking Statements
This proxy statement contains forward-looking statements that are based on No forward-looking statement can be guaranteed and actual results may differ materially from those we project. Our results may be affected by our ability to successfully market both new and existing products domestically and internationally, clinical and regulatory developments involving current and future products, sales growth of recently launched products, competition from other products including biosimilars, difficulties or delays in manufacturing our products and global economic conditions.
become subject to significant sanctions. Further, while we routinely obtain patents for our products and technology, the protection offered by our patents and patent applications may be challenged, invalidated or circumvented by our competitors, or we may fail to prevail in present and future intellectual property litigation. We perform a substantial amount of our commercial manufacturing activities at a few key facilities, including in Puerto Rico, and also depend on third parties for a portion of our manufacturing activities, and limits on supply may constrain sales of certain of our current products and product candidate development. In addition, we compete with other companies with respect to many of our marketed products as well as for the discovery and development of new products. Discovery or identification of new product candidates cannot be guaranteed and movement from concept to product is uncertain; consequently, there can be no guarantee that any particular product candidate will be successful and become a commercial product. Further, some raw materials, medical devices and component parts for our products are supplied by sole third-party suppliers. Certain of our distributors, customers and payers have substantial purchasing leverage in their dealings with us. The discovery of significant problems with a product similar to one of our products that implicate an entire class of products could have a material adverse effect on sales of the affected products and on
products and to integrate the operations of companies we have acquired may not be successful.
Other Matters
The Board knows of no matters other than those listed in the attached Notice of Annual Meeting of Stockholders that are likely to be brought before the Annual Meeting. However, if any other matter properly comes before the Annual Meeting, the persons named on the enclosed proxy card will vote the proxy in accordance with their best judgment on such matter. By Order of the Board of Directors
Jonathan P. Graham Secretary April
Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations
These guidelines set forth (1) the minimum qualifications that the Governance and Nominating Committee of the Board of Directors (the “Committee”) of Amgen Inc. (“Amgen”) believes are important for directors to possess, and (2) a description of the Committee’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders. These guidelines are only guidelines and may be waived and/or changed by the Committee and/or the Board of Directors as appropriate. 1. Candidate Qualifications In seeking individuals to join the Board of Directors or to fill director vacancies on the Board of Directors, the Committee considers the following to be minimum qualifications that a candidate must possess:
Demonstrated breadth and depth of management and leadership experience, preferably in a senior leadership role in a large or recognized organization;
Financial and/or business acumen or relevant industry or scientific experience;
Integrity and high ethical standards;
Sufficient time to devote to Amgen’s business as a member of the Board;
Ability to oversee, as a director, Amgen’s business and affairs for the benefit of Amgen’s stockholders;
Ability to comply with the Board’s Code of Conduct; and
Demonstrated ability to think independently and work collaboratively. In addition, the Committee may consider the following where necessary and appropriate:
A candidate’s independence, as defined by The NASDAQ Stock Market, Inc.;
A candidate’s ability to satisfy the composition requirements for the Audit Committee and the Compensation and Management Development Committee;
Maintaining a Board that reflects diversity; and
The Board’s overall size, structure and composition. 2. Candidate Identification and Evaluation Process (a) For purposes of identifying nominees for the Board of Directors, the Committee relies on professional and personal contacts of the Committee, other members of the Board of Directors and senior management, as well as candidates recommended by independent search firms retained by the Committee from time to time. The Committee also will consider candidates recommended by stockholders. Any director nominations submitted by stockholders will be evaluated in the same manner that nominees suggested by Board members, management or other parties are evaluated. (b) In evaluating potential candidates, the Committee will determine whether the candidate is qualified for service on the Board of Directors by evaluating the candidate under the guidelines set forth above and by determining if any individual candidate suits the Committee’s and the Board of Director’s overall objectives at the time the candidate is being evaluated.
Reconciliations of GAAP toNon-GAAP Measures
Amgen Inc.
( (Unaudited)
B-2
Amgen Inc. GAAP toNon-GAAP Reconciliations (In millions, except per share data) (Unaudited) The following table presents the computations for GAAP andnon-GAAP diluted EPS.
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SAMPLE Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy Card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney-in-fact, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. JOHN SMITH 1234 MAIN STREET APT. 203 NEW YORK, NY 10038 ANNUAL MEETING OF STOCKHOLDERS OF AMGEN INC. May
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