UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
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Preliminary Proxy Statement
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Soliciting Material Pursuant to Section 240.14a-12
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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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2018 Proxy Statement and Notice of Annual Meeting of Stockholders
Robert A. Bradway Chairman of the Board, Chief Executive Officer and President | ||
Amgen Inc. One Amgen Center Drive Thousand Oaks, CA 91320-1799 |
April 11, 20188, 2019
Dear Fellow Stockholder:
You are invited to attend the 20182019 Annual Meeting of Stockholders, or Annual Meeting, of Amgen Inc. to be held on Tuesday, May 22, 2018,21, 2019, 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 advanced the largest early pipeline in Amgen’s historyMission and set the stage for continued innovation in the years to come. Our products span six therapeutic areas – cardiovascular, oncology/hematology, neuroscience, inflammation, nephrology, and bone health – and 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:Our strategy is clear – in six focused therapeutic areas weWe seek to develop innovativemedicines that address important unmet medical needs in the fight against serious illness. OurThis objective is the central underpinning of our strategy which includes an integrated set of activities we are pursuing to strengthen our competitive position in our industry. In addition to our significant commitment to innovative research and development and the commercialization of the medicines we make, we are developing branded biosimilars which utilize our industry-leading biologics manufacturing skills. We are doing this while investing for long-term growth, deploying next-generation biomanufacturing facilities, expanding our global geographic reach, deploying next-generation biomanufacturing facilities, improving drug delivery systems, adheringand building on our recent transformation successes to more efficiently bring our discoveries out of the lab and to patients worldwide. While investing in all these activities, we have simultaneously maintained a disciplined approach to capital allocation through which we invest in our future while investing foralso returning capital to stockholders. The consistent, strong execution of our strategy results in solving complex problems in biotechnology that benefit patients, building a long-lasting business, and generating long-term growth, and transforming Amgenstockholder value.
Execution on Our Strategy in 2018: We launched several medicines, includingAimovig®*, the first calcitonin gene-related peptide (CGRP) inhibitor approved for the future.preventive treatment of migraine in adults,Parsabiv®, for secondary hyperparathyroidism, and our first two biosimilars, KANJINTI™ (biosimilar trastuzumab (Herceptin®)) andAMGEVITA™(biosimilar adalimumab (HUMIRA®)), in Europe. Recognizing the urgent need presented by cardiovascular disease, we also took significant actions in 2018 to address affordability challenges for patients who would benefit fromRepatha® (our medicine to dramatically reducelow-density lipoprotein (bad) cholesterol), making it available in the U.S. at a 60% reduction from the medicine’s original list price. We advanced our early oncology pipeline. We also broke ground on our new next-generation biomanufacturing plant in Rhode Island in 2018. This new plant will be the first of its kind in the U.S. and will use our proven next-generation biomanufacturing capabilities to reliably supply medicines and meet the need of every patient, every time. In the Compensation Discussion and Analysis section of this proxy, we further discuss our progress against our strategic priorities in 2018.
Our Transformation:2018 was the capstone year for 2017 againsta set of ambitiousnon-GAAP financial commitments we made to our stockholders five years ago, including earnings per share growth, operating margin improvement, and return of capital. As we previously reported, we met and exceeded these objectives. In 2017, we had consistent, strong executiontargets. The larger goal of our strategy and remained focused on generating long-term stockholder value and built on a strong record of delivering superior returnstransformation, however, was to enhance our stockholders. A clear measure ofability to compete. And here too, we’ve made great progress. Over the past five years, we launched nine new products, including in two new therapeutic areas, expanded our success is theglobal presence to approximately 100 countries, generated our largest ever number of innovative andfirst-in-class molecules in our pipeline, reduced our development cycle time by an average of approximately 36 months, expanded our industry-leading human genetics capabilities, established a biosimilars business, and deployed a first of its kind, highly-efficient, next-generation biologics manufacturing capability. While our transformation is not complete, we’re in a much better position than ever before to serve patients reached and helped by our medicines throughout the world.to deliver long-term growth.
Stockholder Engagement:We are also guided by the perspectives of our stockholders as expressed through direct engagement with us throughout the year and at our Annual Meeting. Since our 20172018 annual meeting of stockholders, in addition to our outreach by our executives and Investor Relations department to our investors owning approximately 58% of our outstanding shares, we have engaged in governance-focused outreach activities and discussions with the governance teams for stockholders comprising approximately 52%53% of our outstanding shares. Topics discussed included our business and financial performance, our environmental, sustainability, and governance andprograms, executive compensation programs, including the(including its direct link to our business strategy,strategy), and our corporate responsibility and sustainability initiatives.product pricing. Feedback received during these meetings is shared with the full Board of Directors and informedinforms Board decisions. The conversations heldWe are eager to continue this valuable dialogue with our stockholders are beneficial, and we look forward to continuing our dialogueinvestors 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, I will discuss recent developments during the past year, the substantial progress we made on our strategic priorities for 2017,2018, and respond to comments and 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 22.21. As a final note, and also on behalf of the Board of Directors, I would like to thank David Baltimore and François de CarbonnelFrank Herringer, who areis not standing forre-election, for theirhis years of wise counsel and guidance for Amgen.
Sincerely,
Robert A. Bradway
Chairman of the Board,
Chief Executive Officer and President
*Jointly | developed in collaboration with Novartis AG. |
Amgen Inc. One Amgen Center Drive Thousand Oaks, California 91320-1799 |
Notice of Annual Meeting of Stockholders
To be Held on May 22, 201821, 2019
To the Stockholders of Amgen Inc.:
Date and Time: | Tuesday, May | |||
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 | |||
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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| 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 11, 20188, 2019
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Table of Contents
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Proxy Statement Summary | 1 | |||
Item 1—Election of Directors | ||||
Corporate Governance | ||||
16 | ||||
18 | ||||
Process for Selecting Directors, Director Qualifications, and | ||||
21 | ||||
Governance Committee Processes and Procedures for Considering and Determining Director Compensation | 22 | |||
22 | ||||
23 | ||||
23 | ||||
Our Environmental Sustainability and Social Responsibility Efforts | 24 | |||
25 | ||||
26 | ||||
27 | ||||
Item 2—Advisory Vote to Approve Our Executive Compensation | ||||
Executive Compensation | ||||
Compensation Discussion and Analysis | ||||
ï 20182019 Proxy Statement
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Proxy Statement Summary
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This summary contains highlights about our Company and the upcoming 20182019 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.
20182019 Annual Meeting of Stockholders
Date and Time: | Tuesday, May | |
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
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Our Board Vote Recommendation
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Item 1:
| Election of
| FOR each Director Nominee
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Item 2:
| Advisory Vote to Approve Our Executive Compensation (page
| FOR
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Item 3:
| Ratification of Selection of Independent Registered Public Accountants (page
| FOR
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How to Vote
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•By Telephone: You may submit a proxy by telephone by following the instructions on the website referred to in the Notice, proxy card, or voting instruction form mailed to you. You will need the control number that appears on your Notice, proxy card, or voting instruction form. | ||
•By Mail: If you received a full paper set of materials, date and sign your proxy card or voting instruction form and mail it in the enclosed, postage-paid envelope. If you received a Notice, you may request a proxy card by following the instructions on your Notice. You do not need to mail the proxy card if you are voting by Internet or telephone. | ||
•In Person: If you plan to attend the Annual Meeting,you will need an admittance ticketand proof of ownership of our Common Stock as of the close of business on March 22, 2019. 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). Please read “INFORMATION CONCERNING VOTING AND SOLICITATION—Attendance at the Annual Meeting.” Even if you intend to attend the Annual Meeting, we encourage you to submit your proxy in advance of the Annual Meeting. |
ï 20182019 Proxy Statement 1
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Proxy Statement Summary
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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 1312 Nominees to the Board of Directors (Page 7)6)
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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| 55
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| 2011
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| C
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| M
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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
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| M
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| C
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| C
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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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| 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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Nominee | Independent | 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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| ✓
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| 64
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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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| 56
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| 2011
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| C
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| M
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Brian J. Druker
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| ✓
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| 63
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| 2018
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| M
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| M
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Robert A. Eckert
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| ✓
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| 64
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| 2012
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| M
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| M
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| C
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| C
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Greg C. Garland
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| ✓
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| 61
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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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| ✓
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| 73
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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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| ✓
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| 58
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| 2009
|
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| M
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| M
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| |||||||||||||||||||||||
Charles M. Holley, Jr.
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| ✓
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| 62
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| 2017
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| C
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| M
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| M
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| ||||||||||||||||||||
Tyler Jacks
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| ✓
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| 58
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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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| ✓
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| 63
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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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| ✓
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| 70
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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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| ✓
|
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| 70
|
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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. |
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Corporate Governance Highlights and Best Practices
* | For our director nominees. |
2 ï 20182019 Proxy Statement
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Proxy Statement Summary
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We Have Implemented Governance Best 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:
Effective Board Leadership and Independent Oversight |
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✓ |
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Highly Independent Board – |
✓ | Strong Refreshment Practices With |
✓ | Annual Anonymous Board and Committee Evaluation Process( |
✓ | All Directors Meet Our Board of Directors Guidelines for Director Qualifications and Evaluations(Appendix A) |
✓ | Robust Lead Independent Director Role(page |
✓ |
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Corporate Responsibility and Compliance Committee(page 23) |
✓ | Enterprise Risk Management Program and Annual Detailed Compensation Risk Analysis – overseen by Board and Compensation and Management Development Committee, respectively(pages 16-17 and 26-27) | |||
Focus on Stockholder Rights | ✓ Proxy Access(pages ✓ Majority Voting Standard for Director Elections(pages 14 and 97) ✓ Stockholders* May Act By Written Consent(page 15) ✓ Stockholders* Have a Right to Call Special Meetings (15% threshold requirement)(page 15) ✓ No Supermajority Vote Provisions in Certificate of Incorporation or Bylaws(page 15) ✓ No Poison Pill(page 15) | |||
History of Transparency and Accountability | ✓ Significant Stock Ownership Requirements for Officers and Directors(pages 62 and 84) ✓ Regular Engagement With Stockholders to Seek Feedback (page 41) ✓ We Continue to Seek Mechanisms to Lower the Cost Burden on Society of Serious Diseases ✓ We Have Demonstrated our Commitment to Environmentally Responsible Operations, Improving Patient Access to Medicines, Science Education, and our Community (page 24) |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE
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* | Who meet the requirements set forth in our Amended and Restated Bylaws. |
ï 20182019 Proxy Statement 3
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Proxy Statement Summary
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Item 2: Advisory Vote to Approve Our Executive
Compensation (Page 27)28)
20172018 Total Target Total Direct Compensation Mix
We pay forA significant majority of each Named Executive Officer’s, or NEOs, compensation is at-risk and dependent on our performance and pay outcomes reflect the achievementsexecution 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
80% of our annual long-term incentive, or LTI, equity award grants are performance-based, aligning compensation with long-term value creation for our stockholders. Three-year performance units comprise 50% of our LTI equity award grants for the 2016-2018 performance period and the goal design and all measurement targets are established at the beginning of the three-year performance period. Our 2016-2018 performance units were earned for a performance period ending December 31, 2018, based on our overallthe Company’s performance in 2017 compared toon three equally weighted annualnon-Generally Accepted Accounting Principles, ornon-GAAP, operating measures of earnings per share, or EPS, growth, operating margin, and operating expense as measured against thepre-established Company performance goalstargets for each of our annual cash incentive award program, we achieved 115% of our target bonus opportunity.the three years.
* |
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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 20182019 Proxy Statement
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Proxy Statement Summary
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20172018 Performance AgainstPre-Established Goals and Measures
2017 Annual Cash Incentive Program
Goal
| Weighting
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% of Target
| ||||
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%
| ||
2. Progress Innovative Pipeline
| ||||||
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
| ||||||
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
| ||||
Performance Units | 50% | 93.4% | ||||
(2015-2017 performance period)
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2018 Annual Cash Incentive Program
| 2016-2018 Long-Term Incentive Performance Award Payout
| |||||||
Goal
| Weighting
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% of Target Earned
| ||||||
Financial Performance
| ||||||||
Revenues
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| 30%
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| 224.7%
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Non-GAAP Net Income(1)
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| 30%
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| 186.5%
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Progress Innovative Pipeline
| ||||||||
Advance Early Pipeline
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| 5%
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| 113.9%
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Execute Key Clinical Studies and Regulatory Filings
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| 20%
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| 120.8%
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Deliver Annual Priorities
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Execute Critical Launches and Long-Term Commercial Objectives
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| 10%
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| 71.3%
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Achieve Transformation Objectives
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| 5%
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| 124.2%
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Final Score
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| Achieved 166.6%
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(1) |
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(2) | The operating measures of the 2016-2018 performance units were based onnon-GAAP financial results for 2016, 2017, and 2018 as reported and reconciled inAppendix B, except that operating measures were further adjusted for the impacts of Hurricane Maria as prescribed by the terms of the 2016-2018 performance goals document. For this purpose, operating expense was reduced by $147 million ($0.16 in EPS) for 2017 and increased by $21 million ($0.03 in EPS) for 2018. |
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.
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ï 2018 Proxy Statement 5
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Item 3: Ratification of Selection of Independent Registered Public Accountants (Page 86)91)
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, 2018.2019.
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.
| ||||
Item 4: Stockholder Proposal (Page 88)
Stockholders have informed the Company that they intend to present a proposal at our Annual Meeting.
The proposal relates to the request 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 Board has thoroughly considered the proposal and believes that it is NOT in the Company’s or stockholders’ best interests for the reasons identified starting on page 89 of the proxy statement, which include the following:
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6 ï 20182019 Proxy Statement 5
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Item 1 — Election of Directors
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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 1413 authorized directors serving on our Board. Wanda M. Austin was appointed to serve on our Board effective December 11, 2017. Based upon the recommendation of our Governance and Nominating Committee, the Board has nominated each ofthedirectornomineessetforthbelowto stand forre-election, or in theeach caseofDr. AustinandBrianJ.Drukertostandforinitialelectionby ourstockholders,ineachcasefor aone-yeartermexpiringatour2019 2020 annualmeetingofstockholdersanduntilhisorhersuccessoriselected andqualified,oruntilhisorherearlierretirement,resignation,
disqualification, removal, or death. David Baltimore and François de CarbonnelFrank C. Herringer will retire from our Board and havehas not been nominated forre-election at the 20182019 Annual Meeting of Stockholders, or Annual Meeting.
The Board has fixed the authorized number of directors at 1312 to be effective as of the close of the Annual Meeting and the election by stockholdersofthenomineesstandingforelection.Eachnomineehasagreedto 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, the proxies will be voted in favor of the election of a substitute nominee or nominees standing for election. proposed by the Board or, alternatively, the number of directors may be reduced accordingly by the Board. 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.
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.”
Nominees to the Board
Nominee | Age | Director Since | Audit | Governance and Nominating | Executive | Compensation and Management Development | Equity Award | Corporate Responsibility and Compliance | ||||||||||||
Wanda M. Austin
|
| 63
|
|
| 2017
|
| M
| M
| ||||||||||||
Robert A. Bradway
|
| 55
|
|
| 2011
|
| C
| M
| ||||||||||||
Brian J. Druker(1)
|
| 62
|
|
| Initial Election
|
| ||||||||||||||
Robert A. Eckert
|
| 63
|
|
| 2012
|
| M
| M
| C
| C
| ||||||||||
Greg C. Garland
|
| 60
|
|
| 2013
|
| C
| M
| M
| M
| ||||||||||
Fred Hassan
|
| 72
|
|
| 2015
|
| M
| M
| ||||||||||||
Rebecca M. Henderson
|
| 57
|
|
| 2009
|
| M
| M
| ||||||||||||
Frank C. Herringer
|
| 75
|
|
| 2004
|
| M
| M
| M
| |||||||||||
Charles M. Holley, Jr.
|
| 61
|
|
| 2017
|
| C
| M
| ||||||||||||
Tyler Jacks
|
| 57
|
|
| 2012
|
| M
| M
| ||||||||||||
Ellen J. Kullman
|
| 62
|
|
| 2016
|
| M
| M
| ||||||||||||
Ronald D. Sugar
|
| 69
|
|
| 2010
|
| M
| M
| C
| |||||||||||
R. Sanders Williams
|
| 69
|
|
| 2014
|
| M
| M
|
Nominee | Independent | Age | | Director Since |
| Audit | | Governance and Nominating |
| Executive | | Compensation and Management Development |
| | Equity Award |
| | Corporate Responsibility and Compliance | ||||||||||||||||||||
Wanda M. Austin
|
| ✓
|
|
| 64
|
|
| 2017
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Robert A. Bradway
|
| 56
|
|
| 2011
|
|
| C
|
|
| M
|
| ||||||||||||||||||||||||||
Brian J. Druker
|
| ✓
|
|
| 63
|
|
| 2018
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Robert A. Eckert
|
| ✓
|
|
| 64
|
|
| 2012
|
|
| M
|
|
| M
|
|
| C
|
|
| C
|
| |||||||||||||||||
Greg C. Garland
|
| ✓
|
|
| 61
|
|
| 2013
|
|
| C
|
|
| M
|
|
| M
|
|
| M
|
| |||||||||||||||||
Fred Hassan
|
| ✓
|
|
| 73
|
|
| 2015
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Rebecca M. Henderson
|
| ✓
|
|
| 58
|
|
| 2009
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Charles M. Holley, Jr.
|
| ✓
|
|
| 62
|
|
| 2017
|
|
| C
|
|
| M
|
|
| M
|
| ||||||||||||||||||||
Tyler Jacks
|
| ✓
|
|
| 58
|
|
| 2012
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Ellen J. Kullman
|
| ✓
|
|
| 63
|
|
| 2016
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Ronald D. Sugar
|
| ✓
|
|
| 70
|
|
| 2010
|
|
| M
|
|
| M
|
|
| C
|
| ||||||||||||||||||||
R. Sanders Williams
|
| ✓
|
|
| 70
|
|
| 2014
|
|
| M
|
|
| M
|
|
“C” | indicates Chair of the committee. |
“M” | indicates member of the committee. |
|
6 ï 20182019 Proxy Statement 7
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Item 1 — Election of Directors
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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.biotechnology. 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.
Experience / Skills Austin Bradway Druker Eckert Garland Hassan Henderson 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
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 20182019 Proxy Statement 7
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Item 1 — Election of Directors
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NAMED 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.
Wanda M. Austin
Director since: 2017
Age:
Committees: • Audit • Corporate Responsibility and Compliance Other Public Company Boards: • Chevron Corporation
|
Wanda M. Austin has served as a director of the Company since
Dr. Austin has served as an Adjunct Research Professor at the University of Southern California’s Viterbi School of Engineering since 2007. She is theco-founder of MakingSpace, Inc., where she serves as a motivational speaker on STEM education. Dr. Austin has been a director of Chevron Corporation, a petroleum, exploration, production and refining company, since 2016, serving on its Board Nominating and Governance Committee and chairing its Public Policy Committee. Dr. Austin is a trustee of the University of Southern | |||
California and previously served on the boards of directors of the National Geographic Society and the Space Foundation. Dr. Austin received an undergraduate degree from Franklin & Marshall College, a master’s degree from the University of Pittsburgh, and a doctorate from the University of Southern California. She is a member of the National Academy of Engineering.
Qualifications
The Board concluded that Dr. Austin should serve on the Board based on her leadership and management experience as a chief executive officer, her extensive background in science, technology, and government affairs in a highly regulated industry, and her public board experience. |
Robert A. Bradway
Director since:2011
Age:
Committees: • Equity Award • Executive (Chair)
Other Public Company Boards: • The Boeing Company
|
Robert A. Bradway has served as our director since 2011 and Chairman of the Board since 2013. Mr. Bradway has been our President since 2010 and Chief Executive Officer since 2012. From 2010 to 2012, Mr. Bradway served as our Chief Operating Officer. Mr. Bradway joined Amgen in 2006 as Vice President, Operations Strategy and served as Executive Vice President and Chief Financial Officer from 2007 to 2010. Prior to joining Amgen, he was a Managing Director at Morgan Stanley in London where, beginning in 2001, he had responsibility for the firm’s banking department and corporate finance activities in Europe.
Mr. Bradway has been a director of The Boeing Company, an aerospace company and manufacturer of commercial airplanes, defense, space and securities systems, since 2016, serving on its Audit and Finance | |||
since 2014 and on the advisory board of the Leonard D. Schaeffer Center for Health Policy and Economics at that university since 2012. Mr. Bradway holds a bachelor’s degree in biology from Amherst College and a master’s degree in business administration from Harvard Business School.
Qualifications
The Board concluded that Mr. Bradway should serve on the Board based on his thorough knowledge of all aspects of our business, combined with his leadership and management skills having previously served as our President and Chief Operating Officer and as our Chief Financial Officer. |
8 ï 20182019 Proxy Statement 9
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Item 1 — Election of Directors
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Brian J. Druker
Director since:
Age:
Committees: • Audit • Corporate Responsibility and Compliance
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Brian J. Druker
Dr. Druker has served on the scientific advisory boards of Aptose Biosciences Inc., a biotechnology company, since 2013, and Grail, Inc., a |
Dr. Druker has received numerous awards, including the Lasker-DeBakey Clinical Research Award in 2009, the Japan Prize in Healthcare and Medical Technology in 2012, |
Qualifications
The Board concluded that Dr. Druker should serve on the Board based on his extensive scientific research and expertise leading an important academic institution, conducting highly significant research in the area of oncology, and directly managing the care of cancer patients.
Robert A. Eckert
Lead Independent Director
Director since:2012
Age:
Committees: • Compensation and Management • Equity Award (Chair) • Executive • Governance and Nominating
Other Public Company Boards: • Levi Strauss & Co. •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 2014. Mr. Eckert was the Chief Executive Officer of Mattel, Inc., a toy design, manufacture and marketing company, having held this position from 2000 through 2011, and its Chairman of the Board from 2000 through 2012. He was President and Chief Executive Officer of Kraft Foods Inc., a consumer packaged food and beverage company, from 1997 to 2000, Group Vice President from 1995 to 1997, President of the Oscar Mayer Foods Division from 1993 to 1995 and held various other senior executive and other positions from 1977 to 1992.
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 also has served as a director of Levi Strauss & Co., a jeans and casual wear manufacturer, since 2010, serving as Chair of the Compensation Committee and a member of the Nominating, Governance and Corporate Citizenship Committee. Levi Strauss & Co. was a privately-held company until March 2019 when it became publicly traded. Mr. Eckert was a director of Smart & Final Stores, Inc., a warehouse store, from 2013 until 2014 prior to it becoming a publicly-traded company. |
Qualifications
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 20182019 Proxy Statement 9
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Item 1 — Election of Directors
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Greg C. Garland
Director since:2013
Age:
Committees: • Compensation and Management Development • Equity Award • Executive • Governance and Nominating (Chair)
Other Public Company Boards: • 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 2012. Mr. Garland chairs the Executive Committee of Phillips 66.(1) Prior to Phillips 66, Mr. Garland served as Senior Vice President, Exploration and Production, Americas of ConocoPhillips from 2010 to 2012. He was President and Chief Executive Officer of Chevron Phillips Chemical Company (now a joint venture between Phillips 66 and Chevron) from 2008 to 2010 and Senior Vice President, Planning and Specialty Chemicals from 2000 to 2008. Mr. Garland served in various positions at Phillips Petroleum Company from 1980 to 2000. Mr. Garland is a member of the Engineering Advisory Council for Texas A&M University. Mr. Garland received an undergraduate degree from Texas A&M University.
Qualifications
The Board concluded that Mr. Garland should serve on our Board because of Mr. Garland’s experience as a chief executive officer and his over 30 years of international experience in a highly regulated industry. | |||
(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
Director since:2015
Age:
Committees: • Audit • Compensation and Management
Other Public Company Boards: • Intrexon Corporation
Audit Committee financial expert |
Fred Hassan is
Mr. Hassan has been a director of | |||
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. from 2013 to 2014. Mr. Hassan received an undergraduate degree from Imperial College of Science and Technology, University of London and a |
Qualifications
The Board concluded that Mr. Hassan should serve on the Board based on his global experience as a public company chief executive officer, his particular knowledge and experience in the healthcare and pharmaceutical industries, including overseeing businesses with significant research and development operations, his diversified financial and business expertise, as well as prior public company board experience. Given his financial and leadership experience, Mr. Hassan has been determined to be an Audit Committee financial expert by our Board.
10 ï 20182019 Proxy Statement 11
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Item 1 — Election of Directors
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Rebecca M. Henderson
Director since: 2009
Age:
Committees: • Audit • Corporate Responsibility and Compliance Other Public Company Boards: • 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 |
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.
|
| |
Qualifications
The Board concluded that |
12 ï 2018 Proxy Statement
|
Charles M. Holley, Jr.
Director since:2017
Age:
Committees: • Audit (Chair) • Corporate Responsibility and Compliance • Executive
Audit Committee financial expert
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Charles M. Holley, Jr. is the former Executive Vice President and Chief Financial Officer forWal-Mart Stores, Inc., or Walmart, where he served from 2010 to 2015 and as Executive Vice President between January 1, 2016 and January 31, 2016. Prior to this, Mr. Holley served as Executive Vice President, Finance and Treasurer of Walmart from 2007 to 2010. From 2005 to 2006, he served as Senior Vice President. Prior to that, Mr. Holley was Senior Vice President and Controller from 2003 to 2005. Mr. Holley served various roles inWal-Mart International from 1994 through 2002. Prior to this, Mr. Holley served in various roles at Tandy Corporation. He spent more than ten years with Ernst & Young LLP. Mr. Holley is an Independent Senior Advisor, U.S. CFO Program, at Deloitte LLP, a privately-held provider of audit, consulting, tax, and advisory services, since 2016.
Mr. Holley serves on the Advisory Council for the McCombs School of Business at the University of Texas at Austin and the University of Texas Presidents’ Development Board. |
Qualifications
The Board concluded that Mr. Holley should serve on the Board based on his experience as a chief financial officer of a global public company, his financial acumen, and his management and leadership skills. Given his financial and leadership experience, Mr. Holley has been determined to be an Audit Committee financial expert by our Board. |
ï 2019 Proxy Statement 11
Item 1 — Election of Directors |
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 2009, serving on its Strategy and Finance Committee and scientific advisory board and chairing its Science and Technology Committee. In 2006, heco-founded T2 Biosystems, Inc., a biotechnology company, and served on its scientific advisory board until 2013. Dr. Jacks has served on the scientific advisory board of SQZ Biotech, a privately-held biotechnology company, since 2015. | |||
Advisory Board, which advises and assists the Director of the National Cancer Institute with respect to the National Cancer Program, in 2011 and served as Chair until 2016. In 2016, Dr. Jacks was named to a blue ribbon panel of scientists and advisors established as a working group of the National Cancer Advisory Board and served asco-Chair advising the Cancer MoonshotSM Task Force. Dr. Jacks was a director of MIT’s Center for Cancer Research from 2001 to 2007 and received numerous awards including the Paul Marks Prize for Cancer Research and the American Association for Cancer Research Award for Outstanding Achievement. He was elected to the National Academy of Sciences as well as the National Academy of Medicine in 2009 and received the MIT Killian Faculty Achievement Award in 2015. Dr. Jacks received an undergraduate degree from Harvard University and his doctorate from the University of California, San Francisco.
|
ï 2018 Proxy Statement 13Qualifications
The Board concluded that Dr. Jacks should serve on the Board based on his extensive scientific expertise relevant to our industry, including his broad experience as a cancer researcher, pioneering uses of technology to study cancer-associated genes, and service on several scientific advisory boards and membership in the National Cancer Advisory Board.
|
Ellen J. Kullman
Director since: 2016
Age:
Committees: • Audit • Governance and Nominating
Other Public Company Boards: • Dell Technologies Inc. •Goldman Sachs Group, Inc. • United Technologies Corporation
Audit Committee financial expert
|
Ellen J. Kullman is the former President, Chair and Chief Executive Officer of E.I. du Pont de Nemours and Company, or DuPont, a science and technology-based company, where she served from 2009 to 2015. Prior to this, Ms. Kullman served as President of DuPont from 2008 to 2009. From 2006 through 2008, she served as Executive Vice President of DuPont. Prior to that, Ms. Kullman was Group Vice President, DuPont Safety and Protection. Ms. Kullman has been a director of United Technologies Corporation, a technology products and services company, since 2011, and lead director since 2018, serving on its
Ms. Kullman has also served as a director of Carbon3D, Inc., a privately-held 3D printing company, since 2016. Ms. Kullman has served on the Board of Trustees of Northwestern University since 2016 and on the Board of Overseers of Tufts University School of Engineering since 2006. She served as Chair of theUS-China Business Council from 2013 to 2015. In 2016, Ms. Kullman joined the |
|
Qualifications
The Board concluded that Ms. Kullman should serve on the Board based on her lengthy global experience as a public company chief executive officer and board chair, her management and leadership skills, and her experience with scientific operations, all of which provide valuable insight into the operations of our Company. Given her leadership and financial experience, Ms. Kullman has been determined to be an Audit Committee financial expert by our Board.
12 ï 2019 Proxy Statement
Item 1 — Election of Directors |
Ronald D. Sugar
Director since:2010
Age:
Committees: • Corporate Responsibility and Compliance (Chair) • Executive • Governance and Nominating
Other Public Company Boards: • 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 Committee. Dr. Sugar has been a director of Apple Inc., a manufacturer and seller of, among other things, personal computers, mobile communication and media devices, since 2010, chairing the Audit and Finance Committee. Dr. Sugar has been a director of Air Lease Corporation, an aircraft leasing company, since 2010, chairing the Compensation Committee and serving on the Nominating and Corporate Governance Committee. Since 2010, he has been a senior advisor to Ares Management LLC, a privately-held asset manager and registered investment advisor. In 2014, Dr. Sugar joined the Temasek Americas Advisory Panel of Temasek Holdings (Private) Limited, a privately-held investment company based in Singapore. Dr. Sugar is a member of the National Academy of Engineering, trustee of the University of Southern California, member of the UCLA Anderson School of Management Board of | |||
Qualifications
The Board concluded that Dr. Sugar should serve on our Board because of Dr. Sugar’s board and senior executive-level expertise, including his experience as chief executive officer and board chair of a large, highly regulated, public company and his insight in the areas of operations, government affairs, science, technology and finance. |
14 ï 2018 Proxy Statement
|
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 the President Emeritus of Gladstone Institutes, anon-profit biomedical research enterprise, having served in this position since 2018, and was the Chief Executive Officer of Gladstone Foundation, anot-for-profit organization supporting the Gladstone Institutes
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, |
Qualifications
The Board concluded that Dr. Williams should serve on the Board because of his broad medical and scientific background, including his leadership roles in domestic and academic science settings, his deep experience in cardiology, oversight of governance of multi-hospital healthcare provider systems, leadership and development of international medical programs in Asia, and prior industry board experience.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE ABOVE 1312 NAMED NOMINEES.
ï 20182019 Proxy Statement 1513
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Corporate Governance
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Board of Directors Corporate Governance Highlights
Our Board of Directors, or Board, is governed by our Amgen Board of Directors 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 robust responsibilities and authorities as discussed below. Robert A. Eckert currently serves as our lead independent director. |
• | 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 |
• | 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. |
• |
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• | Director Retirement Age. |
• | 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 |
• | Regular Board and Committee Evaluations. The Board and the Audit, Compensation, Compliance, and Governance Committees each have an annual evaluation process. We provide more information regarding the Board and committee evaluations on |
• | 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 |
• | Management Succession Oversight. Our Board oversees CEO and senior management succession planning. Directors engage with potential CEO and senior management successors at Board and |
16 14 ï 20182019 Proxy Statement
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Corporate Governance
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committee meetings. Our Board also establishes steps to address succession to respond to unexpected vacancies in the event of an emergency. |
Stockholder 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 |
• | Written Consent. Our Amgen Inc. Restated |
• | Special Meetings. Our Bylaws permit stockholders to request that the Company 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. |
• | NoSupermajorityVoteProvisionsinCertificateofIncorporationor Bylaws. We have a simple majority voting standard to amend our Certificate of Incorporation and |
• | No Poison Pill. We do not have a shareholder rights plan, or poison pill. |
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.
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.
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 annually as the lead independent director effective since the 2016 Annual Meeting and wasre-elected by our Board on March 7, 20182019 to continue to serve as lead independent director subject to hisre-election to the Board by our stockholders at the 2019 Annual Meeting.
In such position, theThe lead independent director serves as a meansis an additional conduit 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 annual self-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 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 annual self-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.
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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 annual 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.
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.
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 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 priorities 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 and safety, supply and quality, value and access, sales and promotion, business development, as well as protecting our assets (financial, intellectual
property, and 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 and management 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.
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.
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While theThe Board has the ultimate oversight responsibility for the risk management process. The Board discusses enterprise risks with our senior management on a regular basis, including as a part of its annual strategic planning process, variousannual budget review and approval, capital plan review and approval, and through reviews of compliance issues in the applicable committees of our Board, as appropriate. At each regular meeting, or more frequently as needed, the Board receives and considers reports from each of the committees set forth below, which reports may provide additional detail on risk management issues and management’s response. Important categories of risk are structuredassigned to oversee specific risks, as follows:appropriate Board committees that report back to the full Board:
Committee
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Governance and Nominating | • ��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. Also oversees Board and committee evaluations and Board succession. | |||
Audit | • Oversees financial risk, such as capital risk, tax risk, financial compliance risk and internal controls over financial | |||
Compensation and Management Development | • Evaluates whether the right management talent is in place and oversees succession planning. Also oversees our compensation policies and practices and incentive program administration and design, including whether such policies, practices, and incentive programs balance risk-taking and rewards in an appropriate manner as discussed further below, align with stockholders’ interests, and are consistent with emerging best practices.
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Corporate Responsibility and Compliance | • Overseesnon-financial compliance risk, such as regulatory risks associated with the requirements of the Federal health care program, Food and Drug Administration, and
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Oversight of Cybersecurity—Key Priority.The Compliance Committee receives regular updates on projects to strengthen our cybersecurity, major risk areas, and the Company’s approach to address such risks, and the emerging threat landscape. We have safeguards in place to help protect against unauthorized access to, use or disclosure of our information and data, and dedicated executives whose teams advise on risks and assess the effectiveness of our controls.
Oversight of Pricing—Key Priority. The Compliance Committee receives regular updates on pricing and access. We are committed to producing safe and effective therapies that can be appropriately accessed by the patients who need them most, including 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;
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 policy makers, 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.
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At each regular meeting,Codes of Ethics and Business Conduct
Our Board has adopted two codes of business conduct and ethics, one that applies to our Board and a second that applies to all our staff and others conducting business on our behalf, including our executive officers and Board. Annual training on the global code of conduct is required and our Board participates in such training. We also have a code of ethics for senior financial officers. To view our codes of
business conduct and ethics, please visit our website atwww.amgen.com. We intend to disclose any future amendments to certain provisions of our codes of business conduct and ethics, or more frequently as needed, the Board considers reports from eachwaivers of the committees set forth above, which reports may provide additional detailsuch provisions, applicable to our directors and executive officers on risk management issues and management’s response.our website. There were no waivers of any of our codes of business conduct or code of ethics in 2018.
The Board held seven11 meetings in 20172018 and all of the directors attended at least 75% of the total number of meetings of the Board and committeesonwhichtheyserved.WandaM.Austin Brian J. Druker was appointed to the Board effective in December 2017at our 2018 annual meeting of stockholders, or 2018 Annual Meeting, and attended all meetings of the Board and committees on
which shehe served after thedate of her
his appointment. It is the Company’s policy that all current directors attend our annual meetings of stockholders barring unforeseen circumstances or irresolvable conflicts. ThirteenEach of the then-current members of the Boardour directors were present at our 2017 annual meeting of stockholders, or 20172018 Annual Meeting.
Ourannualmeetingofstockholdersprovidesanopportunityeachyear 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 20172018 Annual Meeting, please see page 3841 of our Compensation Discussion and Analysis.
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TheBoardhasfour key standing committees: Governance Committee; Audit Committee; Compliance Committee; and Compensation Committee. The Compensation Committee has delegated certain responsibilitiestoanEquityAwardCommittee.Inaddition,anExecutive CommitteeoftheBoardhasallofthepowersandauthorityofthe Board has all of the powers and authority of the Board inthemanagementofourbusinessandaffairs,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.
Incorporation. The Executive Committee did not meet in 2017.2018. 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.
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Process for Selecting Directors, 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 withregularly and reports to the Board on 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 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 its 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.
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Continuous Board Refreshment
The Board, led by the Governance Committee, has an ongoing process for identifying, evaluating and selecting directors.
Independent Search Firms Stockholders Independent Directors Candidate Pool Sourced, Maintained, and Updated Consider Guidelines for Director Qualifications and Evaluations (Appendix A) Consider skills matrix Consider diversity Review independence and potential conflicts Meet candidates Select Directors 5 new directors since 2015 Recommend Candidates to the Board Review by full Board
Regular Board and Committee Evaluations
Our Governance Committee leads an annual evaluation process of the Board and its committees. The Board and the Audit, Compensation, Compliance, and Governance Committees each complete an annual assessment focusing on their roles, effectiveness, and fulfillment of fiduciary duties.
1. Commence Annual Anonymous Evaluations Formal annual anonymous evaluations of the full Board as well as the Audit, Compensation, and Governance Committees are compiled and distributed Overseen by the Governance Committee 2. Evaluation and Assessment Directors provide feedback regarding Board and applicable committee: Composition and structure Role and effectiveness Fulfillment of fiduciary duties Meetings and materials Interaction with management 3. Review The lead independent director speaks with each member of the Board for one-on-one discussions Each committee and the full Board conduct separate discussions in executive session 4. Incorporation of Feedback Follow-up items are addressed at subsequent Board and committee meetings
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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.
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The Audit, Compensation, Compliance, and Governance Committees each completed their assessments in October 20172018 for further evaluationbytheGovernanceCommitteeinDecember2017. 2018. TheBoard completeditsevaluationinDecember2017. 2018. 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 is and Frank J. Biondi, Jr.David Baltimore and Judith C. Pelham,François de Carbonnel, who served as directors during part of 2017,2018, were independent during 20172018 under The NASDAQ Stock Marketing listing standards 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, donations,orgrantsinvolvedanamountthat(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, or (ii) exceeded $10,000 with respect to professional or consulting services provided by entities at which 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 the 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.
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 the independent directors (or their immediate family members) 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, payment of fees and expenses relating to repair and maintenance, transportation, utilities, clinical trials, research and development and training, sponsorship of healthcare programs and conferences, financial management, investment advisory and consulting services, and reimbursement of business-related expenses incurred by our staff members (such as for transportation and food purchases).
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Drs. Austin, Baltimore, Druker, Henderson, Jacks, and Williams currently serve as professors for universities to which Amgen has made payments for certain business transactions such as symposiums, conferences and exhibits, postdoctoral research programs, clinical trials, training and research and development, software licenses and maintenance, as well as for grants.
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None of the directors directly or indirectly provides any professional or consulting services to us and none of the 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.
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Governance Committee Processes and Procedures for Considering and Determining Director Compensation
The Governance Committee has the authority to evaluate and make recommendations to our Board regarding 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 2017 and no 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 FW Cook, |
The Governance Committee has authority to delegate any of these functions to a subcommittee of its members. No delegation of this authority was made in 2017.2018.
Current Members: Charles M. Holley, Jr.* (Chair)
Wanda M. Austin Brian J. Druker (since
Fred Hassan* Rebecca M. Henderson Frank C. Herringer* Tyler Jacks Ellen J. Kullman*
*Audit Committee financial expert
Others Who Served in
Number of Meetings Held in
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.
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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. | |||||||
Oversight of the Independent Registered Public Accountants The Audit Committee: • Auditor Selection. Evaluates the qualifications and performance of our independent registered public accountants each year and determines whether to re-engage the current independent registered public accountants. • Audit Partner Selection. Directly involved in the selection of the lead engagement partner through an interview process. • Audit Firm Evaluation. Considers the quality and efficiency of the services provided, the independent registered public accountants’ technical expertise and knowledge of our operations and industry. • Audit Services. Pre-approves services. | ||||||||
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Amgen’s Compliance Program is designed to promote ethical business conduct and ensure compliance with applicable laws and regulations. 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 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 Officer, who reports to the CEO, oversees the ongoing operations of the compliance program.
Codes of Ethics and Business Conduct
Our Board has adopted two codes of business conduct and ethics, one that applies to our directors and a second that applies to our directors and all of our staff members, including our executive officers. We also have a code of ethics for senior financial officers. To view our codes of business conduct, please visit our website atwww.amgen.com. We intend to disclose any future amendments to
certain provisions of our codes of business conduct and ethics, or waivers of such provisions, applicable to our directors 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 2017.
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Our Environmental Sustainability and Social Responsibility Efforts
Environmental Sustainability
We have demonstrated our commitment to environmentally responsible operations by reducing our impact on the environment in multiple areas of our global business.
Progress Toward Targets. Our 2020 sustainability targets are set in areas where we can make the most progress in reducing our environmental impact and business costs, including targets for reductions in fleet and facilities carbon, waste, and water use.
Reducing Carbon Through Energy Conservation. Our carbon reduction strategy focuses on eliminating energy use, increasing energy efficiency, and increasing the proportion of energy used from renewable and alternative sources.
Innovation in Operations. Our next-generation biomanufacturing facility in Singapore dramatically reduces the scale and costs of making biologics, vastly reduces water and energy use, while maintaining a reliable, high-quality, compliant supply of medicines. We earned placementbroke ground on a next-generation biomanufacturing plant in the Dow Jones Sustainability World Index for the fourth yearU.S. 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 at2018.
www.amgen.com/responsibilityUnited Nations Global Compact.. Further, weWe are a signatory to the United Nations Global Compact, a voluntary initiative based on commitments to implement universal sustainability principles and take steps to support United Nations goals.
Accolades and Where to Find Further Information.In 2018, we earned placement on the Dow Jones Sustainability World Index for the fifth year in a row and on the North America Index for the sixth year in a row. Our Responsibility Highlights Report is available online atwww.amgen.com/responsibility.
Social Responsibility
Improving Patient Access to Medicines.Amgen is committed to assisting patients with no or limited drug coverage to access the medicines they need. We provide patient support and education programs and help patients in financial need access our medicines. Amgen Safety Net Foundation supports qualifying patients in the U.S. who might go without important medicines because of financial barriers, by providing our medicines at no cost. In 2018, Direct Relief, a leadingnon-governmental organization, distributed Amgen-donated medicines in a number of developing countries for patients in need.
We also partner with payers to share risk and accountability for health outcomes, and help patients access the medicines 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.
Science Education.Through ourThe Amgen Foundation, Inc., 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. TheSince inception, the Amgen Foundation has contributed approximatelymore than $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 impact of Hurricane Maria. Moreover, through what is now a twelve-year, $50sixteen-year, $74 million commitment from the Amgen Foundation, the Amgen Scholars Program makes it possible for young scientists across the globe to engage in cutting-edge research experiences and learn more about biotechnology and drug discovery. Additionally, the Amgen Foundation supports the Amgen Biotech Experience, an innovative science education program that empowers high school and middle school teachers to bring biotechnology into their classrooms.
Our Community.We have provided support following devastating disasters, including immediate relief for victims of Hurricanes Florence and Michael and devastating wildfires in Southern California, as well as a mass shooting in the community of Thousand Oaks, California, the location of our Company headquarters. We also continue to provide support for reconstruction efforts in Puerto Rico following Hurricane Maria.
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Compensation Committee Processes and Procedures for Considering and Determining Executive Compensation in 20172018
With respect to our CEO, byCompensation Committee Determination of Compensation.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.
Values and Components.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.
During 2017, the Compensation Committee engaged Cook & Co. 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, are 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.
Officers.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.
Executive Sessions.The Compensation Committee generally holds executive sessions (with no members of management present, unless requested by the Compensation Committee) at its regular meetings.
Delegation of Authority.The Compensation Committee has authority to delegate any of theits functions described above to a subcommittee of its members. No delegation of this authority was made in 2017.2018.
Independent Compensation Consultant. The Compensation Committee continued to engage FW Cook, 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
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of our executive compensation programs relative to market practice. FW Cook 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 FW Cook and whether any conflicts of interest exist. After review and consultation with FW Cook, the Compensation Committee has determined that FW Cook is independent and there is no conflict of interest resulting from retaining FW Cook currently or during the year ended December 31, 2018. In performing its analysis, the Compensation Committee considers the factors set forth in the SEC rules and The NASDAQ Stock Market listing standards.
Peer Group Review. 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 FW Cook, 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, are based on reports prepared by management from information contained in compensation surveys and proxy statements. FW Cook provides the Compensation Committee with market data, an annual report on the compensation levels and practices of our peer group, and recommendations for the CEO position.
Compensation Risk Management.In cooperation with management, FW Cook assesses the potential risks arising from our compensation policies and practices as discussed more fully below.
Annual Risk Management Assessment.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.
Results of Risk Management Assessment.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.
Factors That Discourage Excessive Risk-Taking.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:
• | Mix of Incentives.Our 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 need to position the Company for longer-term success. |
• | Company-wide Results.Company-wide results are the most important factor in determining the amount of an annual cash incentive award, one of our mix of incentives, for each of our staff members. |
• | Emphasis on Long-Term Performance. We cap short-term incentives and make long-term incentive, or LTI, equity awards a component of compensation for nearly all of our full-time staff members. In particular, the CEO and the other 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 ensure that a significant portion of their compensation is associated with long-term, rather than short-term, outcomes, which aligns these individuals’ interests with those of our stockholders. |
• | Equity Award Grant Practices.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 equity grants to the third business day after our announcement of quarterly earnings. |
• | Robust Stock Ownership and Retention Guidelines.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 (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. |
• | Comprehensive Performance Evaluations. 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. |
• | Discretion to Reduce Awards.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. |
• | Recoupment Provisions.We have recoupment provisions that expressly allow the Compensation Committee or management, as |
26 ï 2019 Proxy Statement
Corporate Governance |
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. |
• | 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 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. |
• | No Hedging or Pledging. Our Insider Trading Policy prohibits pledging or purchasing of our Common Stock on margin and hedging the economic risk of our Common Stock. |
Following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of 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 20,60021,516 individuals) recorded in our global systems as of November 1, 2017.December 31, 2018. Total direct compensation included base salary (wages earned based onrecorded in our payroll records)records as of December 31, 2018), annual cash incentive awards earned for the period (and target sales incentive awards for our sales force), and the
annual grant value of long-term incentive, or LTI equity awards during 2017.2018. Earnings of our staff members
outside of the U.S. were converted to U.S. dollars using the currency exchange rate as of November 1, 2017.December 31, 2018. Nocost-of-living adjustments were made. We then determined the annual total compensation of our median employee for 20172018 which was $132,930.$131,375. As disclosed in the “Summary Compensation Table” appearing on page 64,67, our CEO’s annual total compensation for 20172018 was $16,899,789.$18,555,266. Based on the foregoing, the ratio of the annual total compensation of our CEO to that of the median staff member was 127141 to 1.
ï 2018 Proxy Statement 25
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For information on the determination of executive compensation, please see “Compensation Committee Processes and Procedures for Considering and Determining Executive Compensation Risk Management
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 practices2018” above and our Company performance goals, our compensation policiesCompensation Discussion and practices do not present risks that are reasonably likely to have a material adverse effectAnalysis beginning 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:page 33.
Our 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 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 annual cash incentive award for each of our staff members. Additionally, we cap short-term incentives and make LTI equity awards a component of compensation for nearly all of our full-time staff members. In particular, the CEO and the other 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 ensure 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 equity grants to 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 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.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and discussions, recommendedtotheBoardofDirectors thattheCompensationDiscussionandAnalysisbeincludedinthe
Company’s 20182019 Annual Meeting proxy statement and incorporated by reference into the Company’s Annual Report on Form10-K for the year ended December 31, 2017.2018.
Compensation Committee of the Board of Directors
Robert A. Eckert, Chairman
Greg C. Garland
Fred Hassan
Tyler Jacks
26 ï 20182019 Proxy Statement 27
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Item 2 — Advisory Vote to Approve Our Executive Compensation
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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 3233 through 63)66) and related compensation tables and the narrative in this proxy statement (pages 6467 through 78)83).
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-andshort- and long-term measurable performance.
Drive implementation of our business strategy and positionby positioning 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
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✓ | A substantial majority of NEO compensation is performance-based andat-risk |
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✓ | Recoupment in the case of misconduct causing serious financial or reputational damage |
✓ | Clawback policy tied to financial restatement |
✓ | Robust stock ownership and retention guidelines |
✓ | Minimum vesting periods for equity compensation |
✓ | 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 target equity) |
✓ | Independent compensation consultant |
What we don’t do
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× | No hedging or pledging |
× | 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 |
28 ï 2018 Proxy Statement 27
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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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30%
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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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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 20182019 Proxy Statement
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Item 2 — Advisory Vote to Approve Our Executive Compensation
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2018 Executive Compensation Was Aligned With Our Strategy and Performance
As discussed more fully in our Compensation Discussion and Analysis starting on page 33, a significant majority of each NEO’s compensation isªat-risk We Deliveredand dependent on Our Financial Performance Goals.our performance and execution of our strategic priorities.
LTI Equity Award Allocation | 2018 Total Target Direct Compensation Mix | |
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2018 Performance AgainstPre-Established Goals and Measures
2018 Annual Cash Incentive Program
| 2016-2018 Long-Term Incentive Performance Program
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Goal
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Financial Performance
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Revenues
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Non-GAAP Net Income(1)
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Progress Innovative Pipeline
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Advance Early Pipeline
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Execute Key Clinical Studies and Regulatory Filings
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Deliver Annual Priorities
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Execute Critical Launches and Long-Term Commercial Objectives
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Achieve Transformation Objectives
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Final Score
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| Achieved 166.6%
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* | Mr. Gordon and Dr. Reese are not included in the pie chart because they commenced their roles as executive officers of our Company on September 3, 2018, and July 26, 2018, respectively. |
(1) | Non-Generally Accepted Accounting Principles, ornon-GAAP, net income |
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.
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In 2018, the CHMP(4) of the EMA(5) adopted a positive opinion for the Marketing Authorization to include similar indications.
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ï 20182019 Proxy Statement 29
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Item 2 — Advisory Vote to Approve Our Executive Compensation
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Biosimilars Portfolio Developments.2018 Alignment of Pay with Performance
Our strategy includes a series of integrated activities to strengthen our long-term competitive position in the industry. Key 2018 activities that align our NEO pay with performance and support the execution of our strategic priorities are summarized below.
We delivered strong financial performance.
Revenues were $23.7 billion in 2018, an increase of 4% from 2017, driven primarily by product sales growth.
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We realized benefits from ongoing transformation initiatives along with increased investment in both research and development and our launch products.
We delivered aone-year total shareholder return of 15% and a five-year return of 93%, outperforming our peer group and the Standard & Poor’s 500 Index over both time periods.
Total Shareholder Return
Our quarterly 2018 dividend of $1.32 per share represented a 15 percent increase from the quarterly dividend for 2017.
During 2018, we repurchased $17.9 billion of our Common Stock and paid dividends totaling $3.5 billion, resulting in our returning a total of $21.4 billion of capital to our stockholders through stock repurchases and dividends.
We progressed our pipeline.
We develop innovative and biosimilar medicines that address unmet medical needs to treat serious illnesses. In 2018, we launched two innovative products, two biosimilars, and generated a significant number of innovative andfirst-in-class molecules in our portfolio.
We launched four medicines in 2018.
v | Innovative Medicines Launched.We launched two important innovative products in 2018 in the |
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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.
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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.
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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
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Performance Units
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93.4% | ||
(2015-2017 performance period)
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30 ï 20182019 Proxy Statement
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Item 2 — Advisory Vote to Approve Our Executive Compensation
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v | Biosimilars Launched.We also launched two important biosimilars outside the U.S. in 2018: |
• | KANJINTI™ (biosimilar trastuzumab (Herceptin®)) launched in Europe for the treatment of HER2-positive metastatic breast cancer, HER2-positive early breast cancer, and HER2-positive metastatic adenocarcinoma of the stomach or gastroesophageal junction. |
• | AMGEVITA™ (biosimilar adalimumab (HUMIRA®)) launched in Europe for the treatment of inflammatory diseases, includingmoderate-to-severe rheumatoid arthritis, psoriatic arthritis, severe active ankylosing spondylitis,moderate-to-severe chronic plaque psoriasis,moderate-to-severe Crohn’s disease, andmoderate-to-severe ulcerative colitis. |
We advanced our early pipeline with approximately 20 unique oncology assets in development.
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,We initiated 10first-in-human studies, including for small-cell lung cancer, obesity, glioblastoma, relapsed/refractory diffuse largeb-cell lymphoma, mantle cell lymphoma and continuing in 2017follicular lymphoma, multiple myeloma, acute myeloid leukemia,non-hodgkins lymphoma, 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.cardiovascular disease.
While retaining mostIn the oncology pipeline, we are advancing approximately 20 early-stage product candidates in therapeutic indications ranging from solid tumors (including small-cell lung cancer) and hematological malignancies (including multiple myeloma and acute myeloid leukemia). We have designed these development programs to rapidly establishproof-of-concepts and generate data to support our move into the pivotal phase so that we may get these innovative therapies to patients as quickly as possible.
We executed key clinical studies and regulatory filings.
v | Innovative Portfolio Developments. We executed key clinical studies and regulatory filings forKYPROLIS®,XGEVA®,BLINCYTO®, andNplate® in oncology, forRepatha® in cardiovascular disease, fortezepelumab(1) in inflammatory disease, and forProlia® andEVENITY™(2)* in bone health. |
v | Biosimilar Portfolio Developments. In our biosimilars portfolio,MVASI™(3) (biosimilar bevacizumab (Avastin®)) was approved in Europe, we submitted applications in the U.S. and Europe forABP 710 (biosimilar infliximab (REMICADE®)), andABP 798(3) (biosimilar rituximab (RITUXAN®)) met its primary endpoint in our Phase 1/Phase 3 study. |
We delivered on our annual priorities to execute critical launches and long-term commercial objectives.
Revenue growth (4%) benefited from double-digit, volume-driven sales growth from a number of our innovative medicines that address unmet medical needs to treat serious illnesses, including Repatha in cardiovascular disease, Prolia in osteoporosis, and KYPROLIS in cancer.
We realized our 2014-2018 commitments to investors and our transformation objectives.
2018 was the elementscapstone year for a set of the 2016-2018 performance period goal design, the Compensation and Management Development Committee, or Compensation Committee, replacedambitiousnon-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 additioncommitments we made tonon-GAAP our stockholders five years ago, including earnings per share andnon-GAAPgrowth, operating margin)margin improvement, and return of capital that we met and exceeded through significant transformation and process improvement efforts. The benefits of our transformation continues in the third yearproductivity capabilities we have embedded into our business to reallocate resources to our pipeline and growth opportunities, putting us in a better position to serve patients and deliver long-term growth.
We invested for long-term growth while returning substantial capital to our stockholders.
In 2018, we invested $3.7 billion in research and development and $738 million in capital expenditures.
Between 2011 and 2018, we have increased our global presence to approximately 100 countries from 50.
Next-generation biomanufacturing plants require a smaller manufacturing footprint and offer greater environmental benefits, including reduced consumption of water and energy and lower levels of carbon emissions. In 2018, we successfully operated our next-generation manufacturing facility in Singapore and broke ground on a next-generation biomanufacturing plant in Rhode Island. This new plant will be the 2017-2019 performance period is designedfirst of its kind in the U.S. and will use our proven next-generation biomanufacturing capabilities to supportmanufacture our transformation strategic priorityproducts while maintaining a reliable, high-quality, compliant supply of medicines to deliver an efficient, disciplined business model beyond 2018.continue our commitment to meet the need of every patient every time.
(1) | Jointly developed in collaboration with AstraZeneca plc. |
(2) | Jointly developed in collaboration with UCB. *Trade name provisionally approved in U.S. |
(3) | Jointly developed in collaboration with Allergan plc. |
ï 2019 Proxy Statement 31
Item 2 — Advisory Vote to Approve Our Executive Compensation |
Positive 20172018 Say on Pay Vote Outcome and Engagement With Our Stockholders
In 2017,2018, we received approximately 95% stockholder support on our sayonpayadvisoryvote.Consistentwithourbroaddirectstockholder outreach over the past several years, since our 20172018 annual meeting of stockholders, in addition to our outreach by our executives and our InvestorRelationsdepartmentto our investors owning approximately 58% of our outstanding shares, wehaveengaged in governance-focusedoutreachactivitiesanddiscussionswith stockholders
stockholders comprising approximately 52%53% of our outstanding shares. The compensation-related feedback is reviewed by our Compensation and Management Development Committee, or Compensation Committee. We have made a number ofIn 2018, the predominant feedback from investors with respect to our compensation changes in response to past discussionsand governance practices was that they are satisfied with our stockholderscompensation program and have implemented the compensation best practices discussed below.governance practices. For more detail regarding our stockholder engagement, see page 38.41.
Board Recommends a Vote “FOR” Our Executive Compensation
Our Board of Directors, or 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 20192020 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.
32 ï 20182019 Proxy Statement 31
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Compensation Discussion and Analysis
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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 2017 below.
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32 ï 2018 Proxy Statement
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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, neuroscience, inflammation, nephrology, and bone health. Our strategy in these therapeutic areas includes a series of integrated activities to strengthen our long-term competitive position in the industry. These activities include the following strategic priorities:
Our Strategic Priorities
Key 2017 activities that align our NEO pay with performance and support the execution of these strategic priorities are summarized in the following pages.
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ï 20182019 Proxy Statement 33
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Compensation Discussion and Analysis
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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 2018 below.
Name | Title | |
Robert A. Bradway | Chairman of the Board, Chief Executive Officer and President | |
Anthony C. Hooper | Former Executive Vice President, Global Commercial Operations (through September 3, 2018) | |
Murdo Gordon | Executive Vice President, Global Commercial Operations | |
Sean E. Harper | Former Executive Vice President, Research and Development (through July 26, 2018) | |
David W. Meline | Executive Vice President and Chief Financial Officer | |
David M. Reese | Executive Vice President, Research and Development | |
Jonathan P. Graham | Senior Vice President, General Counsel and Secretary |
Planned Succession – Executive Officer Changes in 2018
In 2018, as part of our planned executive succession and to address retirements, we announced transition plans for two Executive Vice Presidents. Sean Harper retired from the role of Executive Vice President, Research and Development on July 26, 2018, after serving in this role since 2012 and for 16 years with Amgen. David Reese, then our Senior Vice President, Translational Sciences and Oncology, was promoted to the role of Executive Vice President, Research and Development, effective July 26, 2018. Dr. Reese joined Amgen in 2005 and has served in a variety of leadership roles since that time. Dr. Harper remained employed with us in anon-executive officer capacity to assist in the transition until January 2019.
Anthony Hooper retired from the role of Executive Vice President, Global Commercial Operations on September 3, 2018, after serving in this role since 2011. Murdo Gordon joined us as our Executive Vice President, Global Commercial Operations, effective September 3, 2018, from Bristol-Myers Squibb Company where he served as Chief Commercial Officer since 2016 and, prior to that, head of worldwide markets. Mr. Hooper continues to be employed in anon-executive officer capacity to assist in the transition, as well as to lead and execute on several corporate strategic objectives.
34 ï 2019 Proxy Statement
Compensation Discussion and Analysis |
Our strategy includes a series of integrated activities to strengthen our long-term competitive position in the industry. Select 2018 activities that support the execution of our strategic priorities and align our NEO pay with performance are summarized below and discussed further in the following pages.
Our Strategic Priorities
Select 2018 Activities | Description | |||||||||||
Innovative Medicines | •Launched: –Aimovig®(1) (migraine) –Parsabiv® (nephrology) • Progressed pipeline: –10 investigational –10 first-in-human studies | Our research and development strategy is aimed at advancing differentiated,best-in-class orfirst-in-class molecules that deliver large effect sizes against serious illnesses. Our focus on developing innovative, “breakaway” medicines to address important unmet needs guides how we allocate resources across internal and external program possibilities. This results in a productive balance of internal development and external programs and collaborations reflected in our current product portfolio and pipeline. | ||||||||||
Branded Biosimilars | • Launched: – KANJINTI™ – AMGEVITA™ • 3 biosimilars in Phase 3 | We believe our deep experience in biologics development and unparalleled capabilities in biotechnology manufacturing make the emerging biosimilars market attractive and position us for leadership. | ||||||||||
Transforming Amgen for the Future | • Met and exceeded 2014-2018 • Embedded productivity | We have improved our business and operating model through significant transformation and process improvement efforts. We have driven research and development efficiency through productivity initiatives. Among these programs, we reduced our development cycle time by an average of approximately 36 months, reduced the time it takes to bring new medicines to market, reengineered internal processes to make them more efficient, and explored new technologies with the potential to further enhance the value we deliver to patients. Further, the benefits of our transformation continue in the productivity capabilities we have embedded in our business to reallocate resources to our pipeline and growth opportunities. | ||||||||||
Capital Allocation and Investing for Long-Term Growth | • $17.9B in stock repurchases • $3.5B of dividends – 15% per share dividend | We recognize that stockholders who support investment in developing innovative medicines require an appropriate return on the capital they commit to Amgen. In 2018, we returned $21.4 billion in capital to our stockholders, consisting of $17.9 billion in stock repurchases and $3.5 billion of dividends. | ||||||||||
Global Geographic Reach | • Presence in ~100 countries | We are leveraging our global presence to deliver the potential of our products to patients globally. Amgen medicines are now available to patients in approximately 100 countries worldwide. | ||||||||||
Next-Generation Biomanufacturing | • Broke ground on U.S. | Next-generation biomanufacturing plants, such as our Singapore facility licensed in 2017, require a smaller manufacturing footprint and offer greater environmental benefits, including reduced consumption of water and energy and lower levels of carbon emissions. Our new plant being built in Rhode Island will be the first of its kind in the U.S. and will use these proven next-generation biomanufacturing capabilities. | ||||||||||
Improved Drug Delivery Systems | • Invested in delivery devices to enhance patient experience, including our SureClick® autoinjector | Biologic medicines are, for the most part, injected subcutaneously or administered intravenously. Innovations that make the delivery of our medicines easier and less costly are good for patients and have positive economic benefits to the healthcare system. They also offer important opportunities for differentiation and contribute to our life cycle management strategies for our mature brands. |
(1) | Jointly developed in collaboration with Novartis AG. |
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Compensation Discussion and Analysis |
Aligning Pay With Performance and Execution of Our Strategic Priorities
A significant majority of each NEO’s compensation is dependentearned based 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 95%+ 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).time. In 2017,2018, we made significant progress on our 20172018 performance goals and advancing our strategic priorities, which facilitatefacilitating execution ofon our strategy.strategy, and mission to serve patients.
Annual Cash Incentive Program Results
Our 2018 annual cash incentive compensation program is tied directly to our performance based onpre-established financial goals of revenues andnon-GAAP net income(1), and operating performance goals of progressing our pipeline and delivering on annual priorities, which were designed to drive execution of strategic priorities. Our 2018 results and the weighting of the goals are as follows: Goal Weighting % of Target Financial Performance Revenues 224.7% Non-GAAP Net Income(1) 186.5% Progress Innovative Pipeline Advance Early Pipeline 113.9% Execute Key Clinical Studies and Regulatory Filings 120.8% Deliver Annual Priorities Execute Critical Launches and Long-Term Commercial Objectives 71.3% Achieve Transformation Objectives 124.2% Final Score The above-target results under our 2018 incentive program reflect our successes against our strategic priorities as outlined below. |
Goal | Weighting
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% of Target | ||||
Financial Performance
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Revenues
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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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Progress Innovative Pipeline
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Execute Key Clinical Studies and Regulatory Filings
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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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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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| 90.4%
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Composite Score
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| Achieved 115.0%
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1. Our financial performance was strong.
Revenues were $23.7 billion in 2018, an increase of 4% from 2017, primarily driven by product sales growth.
• | Ournon-GAAP net income(1)also grew |
Revenues were $22.8 billion in 2017,We delivered a slight decrease from 2016 despite increased competition for manyone-year total shareholder return, or TSR, of 15% and a five-year return of 93%, outperforming 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.peer group and the Standard & Poor’s 500 Index, or S&P 500, over both time periods.
Total Shareholder Return
2. We progressed our pipeline.
We develop innovative and biosimilar medicines in six focused therapeutic areas that meetaddress unmet medical needs in addressingto treat serious illnesses. In 2018, we launched two innovative products, two biosimilars, and generated a significant number of innovative andfirst-in-class molecules in our portfolio. (For complete information of all ofregarding our materialsignificant pipeline advancements, please refer to our Form10-K for the year ended December 31, 2017.2018.)
Pipeline Launches.
We launched two important innovative products in 2018 in the U.S. in two different therapeutic areas:
Aimovig (migraine), the first calcitonin gene-related peptide (CGRP) inhibitor approved for the preventive treatment of migraine in adults. Migraine is a debilitating condition that continues to have a significant lasting impact on the lives of patients and society at large. In 2017,2018, we have progressed important products and product candidates in all six of our therapeutic areas.served more than 150,000 patients with Aimovig.
Bone Health Therapeutic Area
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(1) | Non-Generally Accepted Accounting Principles, ornon-GAAP, net income for purposes of the |
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INNOVATIVE MEDICINES
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Cardiovascular Therapeutic Area
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):
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Also during 2017, we performed additional analyses of the cardiovascular outcomes study that demonstrated that reducing LDL cholesterol levels with Repatha also reduced:
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Oncology Therapeutic Area
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ï 2018 Proxy Statement 35
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Neuroscience Therapeutic Area
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Inflammation Therapeutic Area
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Nephrology Therapeutic Area
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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:
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3. We delivered on our annual priorities to execute critical launches and long-term commercial objectives and realize our transformational objectives.
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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.
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Our clinical development program has delivered results in support of KYPROLIS as a backbone therapy for multiple myeloma.
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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
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Branded Biosimilars INNOVATIVE MEDICINES Improved Drug Delivery Systems
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36 ï 20182019 Proxy Statement
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Compensation Discussion and Analysis
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• | KANJINTI (biosimilar trastuzumab (Herceptin®)) launched in Europe for the treatment of HER2- positive metastatic breast cancer, HER2-positive early breast cancer, and |
• | AMGEVITA(biosimilar adalimumab (HUMIRA®)) launched in markets across Europe for the treatment of inflammatory diseases, includingmoderate-to-severe rheumatoid arthritis, psoriatic arthritis, severe active ankylosing spondylitis,moderate-to-severe chronic plaque psoriasis,moderate-to-severe Crohn’s disease, andmoderate-to-severe ulcerative colitis. |
We advanced our early pipeline with approximately 20 unique oncology assets in development.
In the oncology pipeline, we are advancing approximately 20 early-stage product candidates in therapeutic indications ranging from solid tumors (including small-cell lung cancer) and hematological malignancies (including multiple myeloma and acute myeloid leukemia). We have designed these development programs to rapidly establishproofs-of-concept and generate data to support our move into the pivotal phase so that we may get these innovative therapies to patients as quickly as possible.
We executed key clinical studies and regulatory filings.
In Oncology:
• | ForKYPROLIS® (our medicine for patients |
- | The FDA(1)and the European Commission approved label variations for KYPROLIS to include the ENDEAVOR(2) study results (showing a KYPROLIS and dexamethasone regimen reduced the risk of death by 21 percent and increased overall survival by 7.6 months versus Velcade and dexamethasone) and to include the final overall survival data from the Phase 3 ASPIRE(3) study (showing KYPROLIS, lenalidomide and dexamethasone (KRd) significantly reduced the risk of death by 21 percent and extended overall survival by 7.9 months versus lenalidomide and dexamethasone alone). |
- | The FDA approved our supplemental NDA(4)to allow a once-weekly dosing option. |
• | ForXGEVA® (our medicine for the prevention of fractures and other skeletal-related events), in 2018 the FDA and the European Commission approved expanded indications for the prevention of skeletal-related events in patients with multiple myeloma. |
• | ForBLINCYTO® (our medicine for patients with acute lymphoblastic leukemia, or ALL), in 2018: |
- | The European Commission granted a full marketing authorization based on the overall survival data from the Phase 3 TOWER study in adult patients with Philadelphia chromosome-negative relapsed or refractoryB-cell precursor ALL and approved expanded indications for BLINCYTO as a monotherapy for the treatment of pediatric patients with Philadelphia chromosome-negative CD19 positiveB-cell precursor ALL. In January 2019, the European Commission also approved an expanded indication to include certain adult patients who have small traces of malignant cells remaining after treatment of their Philadelphia chromosome-negative CD19 positiveB-cell precursor ALL. |
- | In Japan, the Ministry of Health, Labour and Welfare granted marketing authorization approval for use of BLINCYTO(5) to treat relapsed or refractoryB-cell precursor ALL. |
- | The FDA approved (under accelerated approval) the supplemental BLA(6) for the treatment of certain adults and children who have small traces of malignant cells remaining after treatment of theirB-cell precursor ALL. |
• | ForNplate® (our medicine to treat low blood platelet counts), in 2018 the FDA approved a supplemental BLA for the treatment of certain pediatric patients with immune thrombocytopenia, or ITP, and accepted a supplemental BLA filing to enable the treatment of adult patients with ITP who have had ITP for 12 months or less. |
In Cardiovascular Disease:
Cardiovascular disease is the costliest disease for society today. In 2017, capitalizingthe 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 social and financial burden of this disease is projected to rise rapidly. In 2018, we continued to advance our cardiovascular disease program to address this unmet need.
• | ForRepatha® (our medicine for patients who are unable to get theirlow-density lipoprotein, or LDL, (bad) cholesterol under control): |
- | The European Commission approved a new Repatha indication for adults with established atherosclerotic cardiovascular disease (myocardial infarction, stroke, or peripheral arterial disease) to reduce cardiovascular risk by lowering LDL cholesterol levels. |
- | In China, the National Medical Products Administration approved Repatha as the first PCSK9 inhibitor in China for adults with established atherosclerotic cardiovascular disease to reduce the risk of myocardial infarction, stroke, and coronary revascularization. |
(1) | U.S. Food and Drug Administration. |
(2) | RandomizEd, OpeN Label, Phase 3 Study of Carfilzomib PlusDExamethAsoneVs Bortezomib Plus DexamethasOne in Patients withRelapsed Multiple Myeloma. |
(3) | CArfilzomib, Lenaldidomide, and DexamethaSone versus Lenalidomide and Dexamethasone for the treatment ofPatIents withRelapsed Multiple MyEloma. |
(4) | New Drug Application. |
(5) | Developed in Japan by Amgen Astellas BioPharma K.K., our joint venture with Astellas Pharma Inc. |
(6) | Biologics License Application. |
ï 2019 Proxy Statement 37
Compensation Discussion and Analysis |
In Inflammatory Disease:
Respiratory disease is one of the leading causes of death in the world.
• | Fortezepelumab(1) (our medicine being developed for asthma), in 2018 the FDA granted Breakthrough Therapy Designation in patients with severe asthma without an eosinophilic phenotype supported by our Phase 2b trial data showing a significant reduction in the annual asthma exacerbation rate compared with placebo in a broad population of severe asthma patients. A Phase 3 study of this molecule is enrolling. |
In Bone Health:
Osteoporotic fractures are a significant medical problem for patients, often require hospitalization, and can be very expensive to treat. In 2018, we continued to invest in bone health:
• | ForProlia® (our medicine for patients with osteoporosis), both the FDA and European Commission approved a new indication for the treatment of glucocorticoid-induced osteoporosis in adult patients at high risk of fracture. |
• | ForEVENITY™(2)* (our investigational medicine for patients with osteoporosis): |
- | In January 2019, the Japanese Ministry of Health, Labour and Welfare granted a marketing authorization for the treatment of osteoporosis in men and postmenopausal women at high risk of fracture. |
- | We resubmitted a BLA to the FDA adding two additional Phase 3 trial results and, in January 2019, the FDA Bone, Reproductive and Urologic Advisory Committee (BRUDAC) voted to recommend approval of EVENITY for the treatment of osteoporosis in postmenopausal women at high risk for fracture. |
In Biosimilars:
Our deep experience in biologics development and capabilities in biotechnology manufacturing is an important contributor to our success in the emerging biosimilars market. In our biosimilars portfolio in 2018, we had the following progress in our clinical studies and regulatory filings:
• | The EMA(3) approvedMVASI™(4) (biosimilar bevacizumab (Avastin®)) for the treatment of five types of cancer. |
• | We submitted a BLA to the FDA forABP 710 (biosimilar infliximab (REMICADE®)) and, in January 2019, we submitted a Marketing Authorization Application to the EMA. |
• | In January 2019, our Phase 1/Phase 3 study forABP 798(4) (biosimilar rituximab (RITUXAN®)) evaluating the pharmacokinetics, |
efficacy, and safety compared to rituximab in patients withmoderate-to-severe rheumatoid arthritis met its primary endpoint. |
3. We delivered on our expansion activities,annual priorities to execute critical launches and long-term commercial objectives.
Revenue growth (4%) benefited from double-digit, volume-driven sales growth from a number of our innovative medicines that address unmet medical needs in serious illnesses, including Repatha in cardiovascular disease, Prolia in osteoporosis, and KYPROLIS in cancer.
Repatha worldwide sales increased 72% in 2018, but this growth fell short of our aspirations due to access and affordability challenges in a competitive market. Given the gravity of the impact of cardiovascular disease, we secured 80 country product launches.took significant actions to address these challenges for patients who would benefit from Repatha.
- | Efforts to Improve Access.To address access challenges, Amgen has offered payers significant rebates on Repatha in exchange for improved patient access. |
- | Action to Increase Affordability.We established new National Drug Codes to make Repatha available in the U.S. at a 60% lower list price to address affordability for patients, particularly those on Medicare. |
We realized our 2014-2018 commitments to investors and our transformation objectives.
Our commitment2018 was the capstone year for a set of ambitiousnon-GAAP financial commitments we made to improve our businessstockholders five years ago, including earnings per share, or EPS, growth, operating margin improvement, and operating modelreturn of capital that we met and exceeded through significant transformation and process improvement efforts announcedefforts. The benefits of our transformation continue in 2014 delivered resultsthe productivity capabilities we have embedded in 2017. These transformation and process improvement efforts across Amgen are continuing tore-shape the expense base and enable usour business to reallocate resources to fund many of our pipeline and growth opportunities that deliver valueputting us in a better position to serve patients and deliver long-term growth.
We invested for long-term growth while returning substantial capital to our stockholders.
Between 2011 and 2018, we have increased our global presence to approximately 100 countries from 50. In 2018, we also marked the milestone of securing our first product approval in China (Repatha) and received the first approval in the world for EVENITY in Japan.
(1) | Jointly developed in collaboration with AstraZeneca plc. |
(2) | Jointly developed in collaboration with UCB. Developed in Japan by Amgen Astellas BioPharma K.K., our joint venture with Astellas Pharma Inc. *Trade name provisionally approved in U.S. |
(3) | European Medicines Agency. |
(4) | Jointly developed in collaboration with Allergan plc. |
38 ï 2019 Proxy Statement
Compensation Discussion and Analysis |
Our next-generation biomanufacturing plant incorporates multiple innovative technologies and can be built in less time and operate at one half of the operating costs of a traditional plant. Next-generation biomanufacturing plants have a smaller manufacturing footprint and offer greater environmental benefits, including reduced consumption of water and energy and lower levels of carbon emissions. In 2018, we successfully operated our next-generation manufacturing facility in Singapore and broke ground on our U.S. facility.
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Since 2014, we
We have realized approximately $1.5 billionbuilt leading patient- and provider-friendly device capabilities, and continue to invest in such products. Innovations that make the delivery of transformationour medicines easier and process improvement savings. These savings were reinvested in product launches, clinical programsless costly are good for patients, have positive economic benefits to the healthcare system, offer important opportunities for differentiation, and external business development. Consequently, net savings in the same period have not been significant.
Throughcontribute to our next-generation biomanufacturing capability, as well as other efforts to optimizelife cycle management strategies for our fixed capital infrastructure, we are on track to meet our 2018 goal of reducing our facility footprint by 23%.
In 2017, we also made strong progress on other strategic priorities:mature brands.
• | Our SureClick® autoinjector allows patients the convenience of self-administering Aimovig monthly without a doctor’s visit. |
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Our strong cash flows and balance sheet allowed continued investment for long-term growth in 2018 through internal research and development ($3.7 billion), capital expenditures ($738 million), and external business development transactions, while simultaneously providing substantial returns to stockholders.
In 2017,2018, whileinvesting $3.6$3.7 billion in
research and development and$738 million in capital expenditures, we alsoreturned $6.5$21.4 billion of capital to our stockholders ($3.417.9 billion in dividendsstock repurchases and ~18.5 million shares
in stock repurchases)$3.5 billion of dividends)
Annual Dividend Increases
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We increased our quarterly dividend per share 15% over 20162017 (to $1.15$1.32 per share for 2017)2018).
On December 22, 2017, Our dividend per share increased 371% since the U.S. enacted the Tax Cuts and Jobs Act, or the 2017 Tax Act, resulting in our having global access to our $41.7 billion balance of cash, cash equivalents and marketable securities as of December 31, 2017. Based on our confidence 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.
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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 was approved for certain commercial scale production by multiple regulatory agencies, including the FDA and the EMA. At this facility, next-generation biomanufacturing vastly reduces water use and energy use, in turn, significantly reducing our carbon footprint. We are leveraging our global presence to deliver the potentialinception of our products to patients globally.dividend in 2011.
We announcedrepurchased approximately $17.9 billion of our shares, including a tender offer to repurchase $10 billion in shares.
Performance Under Our Long-Term Incentive Program
Our long-term incentive, or LTI, 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, aligning compensation with value creation for our stockholders. Performance units comprise 50% of our LTI equity award grants. For 2016-2018, the goal design and all measurement targets were established at the beginning of this three-year performance period and were earned based on our performance on the three equally weightednon-GAAP operating measures of EPS growth, operating margin, and operating expense as measured against each of thepre-established annual targets for each of the three years. Thesenon-GAAP operating measures were chosen to drive performance in alignment with, and focus our executives on, our 2014-2018 investor commitments discussed earlier. At the end of the performance period on December 31, 2018, that we will investthe operating measure percentages were averaged, resulting in greater manufacturing capacity to supporta total operating measures score of 115.4% driven by our strong EPS growth and improved operating margins over 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.period.
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
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ï 20182019 Proxy Statement 3739
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Compensation Discussion and Analysis
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Performance Under Our
Long-Term Incentive Program
Our long-term incentive,The total operating measures score is then increased 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, thus aligning compensation with value creation for our stockholders. Our performance units for the three-year performance period ending January 30, 2018 were earneddecreased based on our relative total shareholder return, or TSR.TSR performance as compared to the companies in the S&P 500. Our beginning stock price and ending stock price for purposes of the 2015-2017strong TSR 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 $186.61, respectively), representinga three-year TSR of 30%.
Payout under our LTI performance award program for our 2015-2017 performance period at 93.4% reflects our three-year TSRperformance at the 46.7th percentileranking (65.2%) relative to the TSRs of the companies in the Standard & Poor’s 500 Index, or S&P 500 for this performance period.over the three year
The 2015-2017 performance period is the last LTIresulted in a TSR modifier of +30.3% and a payout of 145.7% of target performance unit program that is earned based solely on our relative TSR performance. Commencing in 2016, and continuing in 2017 and 2018, our outstanding LTI performance awards are earned based on our financial performance as determined under annual financial measures equally weighted with the resulting average earnout percentage increased or decreased by our relative TSR performance against the companies in the S&P 500 for the performance period that commences with the grant date and continues through December 31units granted. All of the last year of the relevant three-yearoperating performance period. The annual financial performance goals for each of the three years in the performance period are established at the commencement of the three-year performance period.measure results shown below were determined on anon-GAAP basis.
2016-2018 Operating Measures Score (Operating Measure Percentages 50 – 150% with linear
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Operating Measures Percentages are Equally Weighted for Each of the Three Years
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Non-GAAP(1) Operating Measures
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2016-2018
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EPS Growth ($) |
137.0% ($11.65)
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128.8% ($12.74) |
142.9% ($14.37) |
136.2% | ||||
Operating Margin (%) |
128.6% (52.3%)
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134.7% (54.2%) |
106.6% (52.5%) |
123.3% | ||||
Operating Expense (in billions)
| 94.4% ($11.54) | 115.6% ($11.04) | 50.0% ($11.91) | 86.7% | ||||
120.0%
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126.4% |
99.8% |
115.4% |
2016-2018 S&P 500 Relative TSR Modifier | ||||||||||
Payout for Performance Relative to S&P 500 TSR Percentage | ||||||||||
Amgen TSR³ 75th percentile = 50% (Maximum) | Actual Amgen TSR = 65.2 percentile resulting in a 30.3% score | |||||||||
Amgen TSR = 50th percentile= 0% (Target) | ||||||||||
Amgen TSR£ 25th percentile =-50% (Minimum) | ||||||||||
TSR Measurement Points = Average daily closing price of stock for the first 20 trading days beginning on the grant date (May 3, 2016) and the last 20 trading days of the performance period. |
Payout no greater than 0% (target) if Amgen’s TSR is less than 0. |
Final 2016-2018 Performance Period Calculation 2016-2018 Non-GAAP(1) Operating Measures EPS Growth (1/3rd) Operating Margin (1/3rd) Operating Expense (1/3rd) 115.4% 2016-2018 Amgen Relative TSR Performance 30.3% Final Payout 145.7%
(1) | The operating measures of the 2016-2018 performance units were based onNon-GAAP financial results for 2016, 2017, and 2018 as reported and reconciled inAppendix B, except that operating measures were further adjusted for the impacts of Hurricane Maria as prescribed by the terms of the 2016-2018 performance goals document. For this purpose, operating expense was reduced by $147 million ($0.16 in EPS) for 2017 and increased by $21 million ($0.03 in EPS) for 2018. |
40 ï 2019 Proxy Statement
Compensation Discussion and Analysis |
Positive 20172018 Say on Pay Vote Outcome and Engagement With Our Stockholders
In 2017,2018, we received approximately 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 20172018 annual meeting of stockholders, in addition to our outreach by our executives and our Investor Relations department to our investors owning approximately 58% of our outstanding shares, we have engaged in governance-focused outreach activities and discussions with stockholders owning approximately 52%53% of our outstanding shares. These discussions have been valuable and informative and we will
will continue to engage with our stockholders to further enhance our understanding of the perspectives of our investors.
In 2017,2018, 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. We are pleased with our say on pay results and stockholder feedback, and will continue to engage with our stockholders to be sure we understand and address any concerns.
Long-Term Incentive Equity Award Design Changes in 2018
Annual Meeting
In 2018, the Compensation and Management Development Committee, or Compensation Committee, evaluated potential performance award goal designs for the 2018-2020 performance period (January 1, 2018 to December 31, 2020) to take into account discussions with our stockholders and to continue to drive operating performance and discipline. Our LTI performance units have annual operating performance measures and goals that are established at the beginning of Stockholders Executive compensation website available year-round that invites stockholders to provide feedback directly tothe three year performance period. For the 2018-2020 performance period, the Compensation Committee www.amgen.com/executivecompensation Post-Proxy Filingdecided to retain the threenon-GAAP operating measures of EPS growth, operating margin, and operating expense for Annual Meeting Post-Annual Meeting Targeted outreachthe annual 2018 operating measures to investors requestingremain consistent with the 2018 annual performance measures of the 2017-2019 performance period.follow-uppre-proxy filing or related to key issues •Discuss vote outcomes •Consider existing governanceFor the second and compensation practices in lightthird years (2019 and 2020) of feedback Year-Round Stockholder Outreach and EngagementPre-Proxy Filing for Annual Meeting •Compensation-related feedback reviewed bythe 2018-2020 performance period, the Compensation Committee •Governance-related feedback reviewedselected EPS growth and Return on Invested Capital, or ROIC(which are two of the threenon-GAAP operating measures used for2019 of the 2017-2019 performance period). The Compensation Committee retained EPS growth to incentivize continued focus on investor commitments and delivering stockholder value, and added ROIC to emphasize our goal of remaining disciplined in our management of the business and use of capital as we move beyond our 2014-2018 investor commitments discussed earlier. Our performance
against the operating measure targets are calculated for each year of the 2018-2020 performance period and these operating measure percentages 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 Governance Committee •Insights from investors providedan increase or decrease of up to 30 percentage points based on how our TSR ranks relative to the full Board •Appropriate committeesTSRs of the companies in the S&P 500 over the performance period. The Compensation Committee determined to reduce the TSR modifier from 50 to 30 percentage points for the 2018-2020 performance period to rebalance the weighting of this period’s goal design in favor of the operating measures to further emphasize the Company’s operational priorities while maintaining alignment of our performance with the long-term value created for our stockholders. The Compensation Committee also retained the requirement that the TSR modifier cannot exceed target (100%) regardless of our relative TSR performance if our absolute TSR over the performance period is less than 0. This feature provides a greater tie to stockholders’ interests and Board (as necessary) evaluate potential changesinvestment experience. A detailed depiction of the 2018-2020 performance period goal design can be found in light of stockholder feedback“Performance Award Goal Design for the 2018-2020 Performance Period—2018-2020 Performance Period Goal Design and Award Calculation.”
38 ï 2019 Proxy Statement 41
Compensation Discussion and Analysis |
Our 2018 Compensation Program Highlights and Objectives
Total Target Direct Compensation Focuses on “At Risk” Compensation (90% for our Chief Executive Officer, or CEO, and 83% for our other NEOs) |
2018 Total Target Direct Compensation Mix 76% 14% 10% 90% At Risk CEO 90% pay at risk 75% performance based 17% 17% 66% 83% At Risk other NEOs* 83% pay at risk 69% performance based Purpose LTI Equity Awards Provide a direct link to the creation of stockholder value and execution on our strategy Align NEO's interests with stockholders Foster long-term focus and retention Annual Cash Incentives Measure NEO's performance against pre-established Company performance goals Align all staff members around the same Company performance goals as all such annual cash incentive awards are based on these goals Motivate NEOs to meet or exceed our Company performance goals to drive annual performance and position us for longer-term success via our strategy Base Salary Provides a degree of financial certainty that helps us retain talent Recognizes competitive market conditions and/or rewards individual performance through periodic increases LTI Equity Award Allocation: 80% Performance Based 50% Performance Units 30% Stock Options 20% Restricted Stock Units All preceding pie charts are calculated using (i) the "Salary" column from the "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 3 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, restricted stock units, or 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.
* | Mr. Gordon and Dr. Reese are not included in the pie chart because they commenced their roles as executive officers of our Company on September 3, 2018, and July 26, 2018, respectively. |
42 ï 2019 Proxy Statement
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Compensation Discussion and Analysis
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LTI Equity Award Design Changes in 2017Awards (“At Risk”)
• | Performance Units (50%). Performance units are rights to earn shares of our Common Stock based on pre-established performance goals achieved over a performance period of generally three years. The Compensation Committee establishes the performance award goal design at the beginning of each three-year period of the performance award program. The number of performance units earned is determined by our performance as measured against the pre-established performance goals at the end of the performance period. 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 (30%). Aligned with stockholder interests as they only have value if the Company’s stock price increases after grant. |
• | Restricted Stock Units (20%). Designed to encourage retention and long-term value creation. |
– | Stock options and RSUs generally vest over four years 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 2016-2018 Performance Period The performance units for the 2016-2018 performance period were earned based on the Company’s performance on three pre-established equally weighted annual non-GAAP operating measures(1) (EPS growth, operating margin, and operating expense) as measured against the pre-established targets for each of the three years. At the end of this performance period, the operating measures were averaged resulting in the total operating measures score of 115.4%. This score was then modified based on our three-year TSR performance of +30.3% (at the 65.2% percentile relative to the TSRs of the companies in the S&P 500 for this performance period)(2). These calculations resulted in a payout of 145.7% of target performance units granted. |
In 2017, the CompensationAnnual Cash Incentive Awards (“At Risk” and Management Development Committee, or Compensation Committee, constructed the 2017-2019 performance period award goal designDesigned to take into account feedback from dialogue withDrive Execution of Our Strategic Priorities)
Our Compensation Committee annually approves Company performance goals that are designed to focus our staff on delivering on our financial performance and operational objectives and to support our 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 made to our NEOs using the Compensation Committee’s negative discretion under the EIP generally based on the Company’s performance against the pre-established Company performance goals. |
Our annual cash incentive awards are earned based on achieving financial performance, operational objectives that drive near- and long-term growth, stockholder value, and support our strategy. In 2018, we established annual Company performance goals that also serve to support our longer-term strategy. These performance goals are composed of revenues (30%), non-GAAP net income(3) (30%), and a number of operational measures supporting “Progress Innovative Pipeline” (25%) (composed of “Advance Early Pipeline” (5%) and “Execute Key Clinical Studies and Regulatory Filings” (20%)) and “Deliver Annual Priorities” (15%) (composed of “Execute Critical Launches and Long-Term Commercial Objectives” (10%) and “Achieve Transformation Objectives” (5%)). Based on our overall performance in 2018 compared to these pre-established Company performance goals, we paid annual cash incentive awards at 166.6% of target bonus opportunity. |
Base Salaries (the smallest component of compensation for 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 (orNEOs)
• | Based on data provided to the Compensation Committee, including recommendations of Frederic W. Cook & Co., or FW Cook, the Compensation Committee’s independent consultant, the Compensation Committee provided no base salary increases to its NEOs in 2018 consistent with our market positioning and reflective of our continued exercise of financial discipline. |
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.
(1) | The operating measures of the 2016-2018 performance units were based onnon-GAAP financial results for 2016, 2017, and 2018 as reported and reconciled inAppendix B, except that operating measures were further adjusted for the impacts of Hurricane Maria as prescribed by the terms of the 2016-2018 performance goals document. For this purpose, operating expense was reduced by $147 million ($0.16 in EPS) for 2017 and increased by $21 million ($0.03 in EPS) for 2018. |
(2) | Based on our average daily closing price of a share of our Common Stock for the first 20 trading days beginning on the grant date (May 3, 2016) and last 20 trading days of the performance period. |
(3) | Non-GAAP net income for purposes of the 2018 Company performance goals of our annual cash incentive award program is reported and reconciled inAppendix B. |
ï 20182019 Proxy Statement 3943
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Compensation Discussion and Analysis
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Our 2017 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 2018 Proxy Statement
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LTI Equity Awards (“At Risk”)
Performance Units (50%). The Compensation Committee establishes the performance award goal design at the commencement of each three-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 (30%). Aligned with stockholder interests as they only have value if the Company’s stock price increases after grant.
Restricted Stock 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 2015-2017 Performance Period
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Annual Cash Incentive Awards (“At Risk” and Designed to Drive Execution of Our Strategic Priorities)
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.
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Base Salaries (the smallest component of compensation for our NEOs)
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.
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ï 2018 Proxy Statement41
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Our Compensation and Governance Best Practices |
What we do
✓ | Majority of compensation is performance-based:A substantial majority of NEO compensation is performance-based andat-risk. |
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✓ | 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. |
✓ | 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. |
✓ | Robust stock ownership and retention guidelines: We have a six times base salary ownership requirement for our CEO. Our Executive Vice Presidents and Senior Vice Presidents have three times and two times base salary ownership requirements, respectively. 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. Compliance with this policy is assessed annually and all executive officers, including our NEOs, who were expected to meet such guidelines by December 31, 2018, were in compliance. |
✓ | 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 control:We do not have “single-trigger” equity vesting acceleration upon a change of control for RSUs and stock options and do not provide taxgross-ups on change of control payments. |
✓ | Performance-based equity: Our LTI equity award grants are primarily (80%) performance-based. |
✓ | Independent compensation consultant: The Compensation Committee retained and sought advice from FW Cook to assist the Compensation Committee in its review and determination of executive compensation. |
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 taxgross-ups:We do not provide taxgross-ups, except for business-related payments such as reimbursement of certain relocation expenses on behalf of newly-hired and current executives who agree to relocate to work on the Company’s behalf.
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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 equivalents accrue on our performance units and RSUs, but are paid out in shares of our Common Stock only when and to the extent the underlying award is earned and vested. Stock options do not have dividend equivalent rights.
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× | No defined benefit pension or supplemental executive retirement plan (SERP) benefits or “above market” interest on deferred compensation. |
42 44 ï 20182019 Proxy Statement
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Compensation Discussion and Analysis
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How Compensation Decisions Are Made For Our Named Executive Officers
Roles and Responsibilities
Compensation Committee Composed solely of independent directors and reports to the Board
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• Evaluates the performance of our CEO within the context of the financial and operational performance of the Company.
• Determines and approves compensation packages for our CEO, other NEOs, Executive Vice Presidents, Senior Vice Presidents, and Section 16 officers (collectively, “Senior Management”).
• Reviews and approves all compensation programs in which our NEOs participate.
• Oversees the development and effective succession planning of our CEO and other members of Senior Management annually.
• Exercises the sole authority to select, retain, replace, and/or obtain advice from compensation consultants, legal counsel, and other outside advisors and assesses the independence of each such advisor, taking into consideration the factors set forth in the Securities and Exchange Commission, or SEC, rules and The NASDAQ Stock Market listing standards.
• Oversees the Board’s relationship with and response to stockholders on executive compensation matters and the Compensation Discussion and Analysis.
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Consultant to the Compensation Committee Frederic W. Cook & Co., Inc., Independent consultant retained directly by the Compensation Committee
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• Regularly attends Compensation Committee meetings, including meeting in executive session with the Compensation Committee.
• Provides advice and studies on the appropriateness and competitiveness of our compensation program relative to market practice for our NEO compensation.
• Provides advice and studies on our equity programs.
• Provides advice on the selection of our peer group.
• Consults on executive compensation trends and developments.
• Consults and makes recommendations, when requested, on various compensation matters and compensation program designs and practices to support our business strategy and objectives.
• Coordinates and reviews the appropriateness of market data compiled by management.
• Works with management to assess the potential risks arising from our compensation policies and practices.
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CEO Assisted by the Senior Vice President, Human Resources and other Company staff members |
• Conducts performance reviews of the other NEOs and makes recommendations to the Compensation Committee with respect to compensation of Senior Management other than himself.
• Provides recommendations on the development of and succession planning for the members of Senior Management other than himself.
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Management reviews the Company’s compensation programs CEO conducts performance reviews for the other NEOs and recommends Senior Management compensation to the Compensation Committee Compensation Committee evaluates the CEO’s performance within the context of the financial and operational performance of the company Cook & Co. advises the Compensation Committee regarding the appropriateness of Amgen’s NEO compensation and compensation programs relative to market practice Compensation Committee reviews and approves all NEO compensation and compensation programs in which our NEOs participate and oversees succession planning for our senior management
ï 20182019 Proxy Statement 4345
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Compensation Discussion and Analysis
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Use of Independent Compensation Committee Consultant
To assist the Compensation Committee in its review and determination of executive compensation, the Compensation Committee retained and sought advice from FW Cook, & Co., an independent consultant. George B. Paulin, the Chairman of FW Cook, & Co., worked directly with the Compensation Committee in the roles and undertaking the responsibilities previously described in “How Compensation Decisions Are Made For Our Named Executive Officers” and specifically in 20172018 provided consultation regarding regulatory updates, selection of our peer group, consultation on market competitiveness for our LTI equity award practices, competitive practice for CEO compensation, and general market practices for NEO compensation.
On a periodic basis, the Company purchases proprietary executive compensation survey data from FW Cook & Co. to inform the Compensation Committee’s decisions, but does not engage FW Cook & Co. for any other services to the Company. During 2017,2018, the Compensation Committee, as in past years, had responsibility for engaging FW Cook & Co. and directed the nature of the activity and interchange of data between FW Cook & Co. and management. In addition, during 2017, the Governance Committee engaged Cook & Co. to provide advice regarding director compensation. Cook & Co. reported directly to the Governance Committee in its evaluation of director compensation.
The Compensation Committee recognizes the unique demands of our industry, including its complex regulatory and reimbursement environment, and the challenges of running an enterprise focused on the discovery, development, manufacture, and commercialization of innovative treatmentsmedicines to address serious illness. The Compensation Committee believes that these unique demands require executive talent that has significant industry experience as well as, for certain key functions, specific scientific expertise to oversee research and development activities and the complex manufacturing requirements for biologic products. Further, the Compensation Committee believes that these very particular skills and capabilities limit the pool of talent from which we can recruit and also cause our employees to be highly valued and sought after in our industry.
On an annual basis, FW Cook & Co. reviews our peer group with the Compensation Committee to determine whether itthe peer group remains appropriate. FW Cook recommended adding Regeneron Pharmaceuticals, Inc. to the peer group for 2018 because this company fully satisfies the objective criteria for inclusion described in the following chart and, as such, is appropriate for executive compensation benchmarking. Based in part on these recommendations from FW Cook, & Co., as well as a review of the objective criteria, described in the following chart, the Compensation Committee determined that no changes were necessary in 2017 asadded Regeneron Pharmaceuticals, Inc. to the peer group remained appropriate and continued to meet the criteria.for 2018.
44 46 ï 20182019 Proxy Statement
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Compensation Discussion and Analysis
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How We Establish Our Peer Group
Biotechnology and pharmaceutical companies with which we compete for executive talent. | ||||
Objective Criteria Considered
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(Companies in blue also list Amgen as a peer)
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• GICS codes of biotechnology (352010) and pharmaceuticals (352020);
• 12-month average market capitalization between 0.25 and 4.0x that of Amgen’s average market capitalization for the same period(1);
• Trailing four-quarter revenues between 0.25 and 4.0x that of Amgen’s revenues(1);
• Non-U.S. peers limited to those commonly identified as a “peer of peers”;
• Competitors for executive talent;
• Companies of comparable scope and complexity;
• Competitors for equity investor capital;
• Companies that identify us as their direct peer; and
• Companies with similar pay practices. |
• AbbVie Inc.
• Allergan plc
• AstraZeneca plc
• Biogen Inc.
• Bristol-Myers Squibb Company
• Celgene Corporation
• Eli Lilly and Company
• Gilead Sciences, Inc.
• GlaxoSmithKline plc
• Johnson & Johnson
• Merck & Co., Inc.
• Novartis AG
• Pfizer Inc.
• Regeneron Pharmaceuticals, Inc. • Roche Holding AG
• Sanofi S.A. |
(1) | For purposes of the |
| 2017 Revenues(b) | ||||||||
Amgen | $127 billion |
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| $23 billion |
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Relative Peer Group Position | 3rd Quartile (above median) |
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(a) | Represents the12-month average market capitalization as of May 31, 2018. |
(b) | Represents revenues for the trailing four quarters ended March 31, 2018. Revenues for GlaxoSmithKline plc, Roche Holding AG, and Sanofi S.A. were converted into U.S. dollars using |
Our market capitalization as of July 28, 2017 (the date on which the Compensation Committee considered our peer group) was as follows:
$B Market Capitalization 355 J&J 221 Novartis 217 Roche 198 Pfizer 175 Merck 127 Amgen 121 Sanofi 112 Abbvie 105 Celgene 99 Gilead 98 GSK 91 Eli Lilly 91 BMS 85 Allergan 74 Astra Zeneca 61 Biogen Position shown as of July 28, 2017 Currency in USD
ï 2018 Proxy Statement 45
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Peer Group Data Sources
Our primary data sources for evaluating all elements of compensation forourCEOisdatacompiledby FW Cook &Co.fromSECfilingsofourpeer group, including for the 25th, 50th, and 75th percentiles of the specific compensation elements paid to CEOs in our peer group (and the 85th percentile for LTI equity awards).group. For our other NEOs, our primary data sources for evaluating all elements of compensation are the Willis Towers Watson Pharmaceutical Human Resources Association ExecutiveCompensationSurvey,orPHRASurvey,whichprovides peer company pharmaceuticaldata,augmentedbytheavailabledatafrom proxystatementsfiledwiththeSECfor biotechnology companies in our peer group. The Executive Vice President, Global Commercial Operations role is well-matched in the PHRA Survey. However, the role is not consistently well-represented in the peer group proxy statements
peer group.and, as a result, to reflect the scope and criticality of the role, is instead benchmarked to the second highest paid named executive officers in such filings. Solely for the determination of LTI equity awards, we also provide data from the FW Cook & Co. Survey of Long-Term Incentives (Cook & Co.(FW Cook Survey). Based on this data, the Compensation Committee is presented with a comparison of each NEO on a position or pay rank basis with an analysis of each element of direct compensation for such NEO at the 50th and 75th percentile of the peer group. Because PHRA Survey and proxy statement data is only available for the previous calendar year, consistent with generally accepted practice, base pay data is aged forward to the current year based on expected salary movement. Annual cash incentive award and LTI equity award market data are not adjusted for aging.
The “Market Median” is determined for our CEO and our other NEOs based on the prior year’s compensation and is reviewed by the Compensation Committee to inform compensation decisions made in March of each year as follows:
Market Median
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CEO(compiled by
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Other NEOs
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• 50th percentile of each compensation element paid to CEOs in our peer group in the previous year from proxy statements. |
• Average of the 50th percentile of each compensation element of our peer group from the PHRA Survey
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ï 2019 Proxy Statement 47
Compensation Discussion and Analysis |
Elements of Compensation and Specific Compensation Decisions
Described below are our three primary elements of executive compensation in order of magnitude: LTI equity awards; annual cash incentive awards; and base salaries.
Long-Term Incentive Equity Awards
Our compensation program aims to achieve the appropriate balance of compensation elements relative to the responsibilities of our staff members, with the result that the largest proportion of compensation for our CEO and the other NEOs is in the form of LTI equity awards that are risk-based and closely aligned with the creation of long-term stockholder value. Equity-basedFor 2018, equity-based compensation represents 75%76% of our CEO’s target compensation and 64%66% of target compensation for our
other NEOs.NEOs, and 50% of annual equity awards are in the form of performance units. In addition, while being mindful of stockholder dilution (see below), we also grant LTI equity awards each year to nearly all of our staff members worldwide to increase individualstaff awareness of how our performance impacts stockholder value. We believe that our capacity to grantpractice of granting equity-based compensation broadly has been a significant factor in achievingadvancing our strategic priorities by aligning all of our staff members’ (including our NEOs’) interests with those of our stockholders, rewarding execution of our strategy, and stock price appreciation, aligning our NEOs’ and staff members’ interests with stockholders and fostering long-term focus, and enhancing retention.
46 ï 2018 Proxy Statement
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Company ContinuesWe Continue to Exercise Discipline in the Grant of Long-Term Incentive Equity Awards – Awards—Monitoring Dilution and Annual Equity Usage
Our compensation philosophy, practices, and approach balance the use of equity to align employeesstaff members with our stockholders while being mindful of the level of dilution that our stockholders experience. Annually, LTI equity award grant guidelines are established for each job level within the Company targeting the 50th percentile of our peer group for levels for which equity data is broadly available. For certain lower job levels where data is not as comprehensive, we have developed guidelines that trendin-line with available data and consider internal equity. The Compensation Committee also sets an annual LTI equity award budget at approximately the 50th percentile of our peer group. TheFurther, the Compensation Committee periodicallyannually reviews the Shareholder Value Transfer (SVT) associated with the proposed aggregate LTI equity award grants to ensure that our SVT is aligned with our peer group practices because, while the Compensation Committee supports adelivery of broad-based equity planawards to aligndrive alignment of our staff members with our stockholders, the Compensation Committee also strives to limit the amount of stockholder dilution to that amount which stockholdersinvestors would expect to experience with our peer group. We regularly review dilution and the rates at which we grant LTI equity awards and the resulting potential dilutive effect has decreased over the last five years and is consistent with thatmembers of our peer group.
As illustrated, the resulting dilutive effect has been trending downward to essentially flat over the past seven years.
Long-Term Incentive Equity Award CompositionMix
As part of its annual evaluation of our LTI equity award practices, the Compensation Committee reviewed our LTI equity award mix with FW Cook & Co. and maintainedelected to maintain the currentprevious year’s LTI equity award allocation.allocation for 2018 given itspay-for-performance alignment.
LTI Equity Award Allocation
On a value basis, in 2017For 2018, 80% of our annual equity award value continued to be delivered in the form ofas performance-based LTI equity awards consisting of 50% in the form of performance units (earned at the end of a generally three-year performance period) and 30% in the form of stock options. Time-vested RSUs, designed to incentivizefoster retention, continued to make upcomprise the remaining 20% of value. Both our stock options and our time-vested RSUs generally vest over four years with(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.date). The delay in the commencement of vesting further emphasizesfurthers the long-termlonger-term performance focusemphasis of our LTI equity award program and enhances retention.
The Compensation Committee believes that this equity award mix presents a balanced approach to executive LTI equity awards and is well aligned with stockholder interests and pay for performance.
amgen historical outstanding potential dilution (% shares outstanding)
48 ï 20182019 Proxy Statement 47
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Compensation Discussion and Analysis
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Value of 2018 Long-Term Incentive Equity Awards
Granted to Named Executive Officers in 2017
2017 Annual Long-Term Incentive Equity Awards
Based on a review of Company and executive performance and market data, the Compensation Committee determined to grant the following LTI equity awardsaward grant values to our CEO and the other NEOs in March 2017,2018, with an effective grant date of May 1, 2017,April 27, 2018, the third business day after the announcement of our first quarter 20172018 earnings results. Forresults (with the exception of Mr. Gordon who joined the Company in September 2018). (For more information regarding the determination of the Market Median, see “How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously discussed.)
Named Executive Officer | Performance Units(1) ($) | Stock Options ($) | Restricted Stock Units ($) | Total Equity Value Granted ($) | 2016 Market Median ($) | Difference vs. Market Median Over/ (Under) (%) | Performance Units(1) ($) | Stock Options ($) | Restricted Stock Units ($) | Total Equity Value Granted ($) | 2017 Market Median ($) | Difference vs. Market Median Over/ (Under) (%) | ||||||||||||||||||||||||||||||||||||
Robert A. Bradway
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| 6,000,000
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| 3,600,000
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| 2,400,000
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| 12,000,000
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| 11,500,000
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| 4.3
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| 6,250,000 | 3,750,000 | 2,500,000 | 12,500,000 | 11,000,000 | 13.6 | ||||||||||||||||||||||||
Anthony C. Hooper
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| 2,000,000
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| 1,200,000
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| 800,000
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| 4,000,000
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| 3,981,529
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| 0.5
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| 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 3,993,938 | 0.2 | ||||||||||||||||||||||||
Murdo Gordon(2) | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper
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| 1,850,000
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| 1,110,000
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| 740,000
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| 3,700,000
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| 3,701,010
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| 0
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| 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 3,740,699 | 6.9 | ||||||||||||||||||||||||
David W. Meline
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| 1,750,000
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| 1,050,000
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| 700,000
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| 3,500,000
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| 3,409,511
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| 2.7
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| 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 3,555,907 | 12.5 | ||||||||||||||||||||||||
David M. Reese(3) | 450,000 | 270,000 | 180,000 | 900,000 | n/a | n/a | ||||||||||||||||||||||||||||||||||||||||||
Jonathan P. Graham
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| 1,250,000
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| 750,000
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| 500,000
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| 2,500,000
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| 2,614,622
|
|
| (4.4
| )
| 1,400,000 | 840,000 | 560,000 | 2,800,000 | 2,583,298 | 8.4 |
(1) | The |
(2) | Mr. Gordon commenced employment with the Company effective September 3, 2018. For a description of thenew-hire LTI equity awards granted to Mr. Gordon in connection with the commencement of his employment, see the subsection “Initial Hire and Promotion Equity Awards” below. |
(3) | Dr. Reese was appointed as Executive Vice President, Research and Development, effective July 26, 2018. Prior to that date, and at the time that the 2018 annual LTI equity awards were granted, Dr. Reese served as Senior Vice President, Translational Sciences and Oncology and the grant amounts reflect his level as a Senior Vice President. A Market Median was not available for this position. The table excludes the promotional RSU award with a cash value of $2,400,000 granted on November 2, 2018. See the subsection “Initial Hire and Promotion Equity Awards” below for more details. |
Based on the March 20172018 Compensation Committee review of the market data, the Compensation Committee awarded Mr. Bradway a 20172018 LTI equity award grant valued at $12$12.5 million, which is approximately 9%4% higher than the value of his grant in 20162017 of $11$12 million and slightly13.6% above the Market Median (4.3%) to increase the proportionreward Mr. Bradway for strong performance and continued and consistent leadership of the CEO’s compensation “at risk” (resultingCompany in his total direct compensation at approximately the Market Median). After considering the effecta year of the 2017 LTI equity award grant on Mr. Bradway’s target total direct compensation,transition. In making its decision, the Compensation Committee determinednoted that awarding a grant value for 2017 LTI equity slightly above the Market Median had declined because of leadership turnover at a number of companies in our peer group while peer group LTI equity awards for CEOs who had remained in place had increased by 10%. Further, Mr. Bradway’s total target annual cash compensation was appropriate as itslightly below the Market Median. The Compensation Committee’s determination of the appropriateness of the grant value awarded to Mr. Bradway also took into account that delivery of this value in the form of LTI equity awards (as opposed to an increase in cash compensation) ensures the substantial majority of Mr. Bradway’s compensation is “at risk” andrisk,” performance-based, and also achievedfocused on the intent of the Compensation Committee for the CEO’s target total direct compensation to increase over time to approximate the Market Median. At the time Mr. Bradway was promoted to the role of CEO in May 2012, the Compensation Committee targeted Mr. Bradway’s total direct compensation below the Market Median to enable Mr. Bradway’s compensation to grow over time subject to his performance and advancement in his role as CEO.longer-term.
The March 20172018 Compensation Committee review of the market data also supported increased 2017resulted in granting Mr. Hooper the same LTI equity award values for Executive Vice President rolesvalue that he had received in 2017 as this aligned him with the Market Median. For Dr. Harper and Mr. Meline, after reviewing their total target annual cash compensation against the Market Median and noting that both were below the Market Median (see the subsection “Total Target Annual Cash Compensation” below), and to promote internal equity, the Compensation Committee decided to increase Dr. Harper’s and Mr. Meline’s LTI equity award grant values had increased for these roles among our peer group. While the from $3.7 million and $3.5 million, respectively, in 2017, to $4 million in 2018. The
Compensation Committee believesconcluded that internal equity is an important consideration for building a team approach,these increases in reviewing the market data, the Compensation Committee noted the higher LTI equity award values (as opposed to increases in cash compensation) were appropriate because they address the difference in total target annual cash compensation from the Market Median value for the Executive Vice President, Research and
Development role. As a result, the Compensation Committee approved a higher grant value for Dr. Harper that was matched target their target total annual direct compensation closer to the Market Median for his role of Executive Vice President, Researchwith compensation that is substantially “at risk,” performance-based, and Development. Thefocused on the longer-term. Further, the Compensation Committee also determined that anto increase of approximately 5.7% (from $3.5 million in 2016) was appropriate, not only because of its Market Median competitiveness, but also because of the scope and span of Dr. Harper’s responsibility and the level of importance of his role to the Company. Messrs. Hooper’s and Meline’s LTI equity award grant for 2017 remained unchanged from 2016 as it still approximated the Market Median. Mr. Graham’s LTI equity award value from $2.5 million in 2017 to $2.8 million in 2018 to reflect the breadth and duration of Mr. Graham’s experience in the role of General Counsel at large public companies.
Initial Hire and Promotion Equity Awards
To induce Mr. Gordon to join us and to provide long-term incentives that are in alignment with stockholder interests, a performance unit award valued at $3.5 million was granted with substantially the same terms and conditions as the existing performance award goal design described above for the 2018-2020 performance period except for modifications to address Mr. Gordon’s September 2018 start date. The performance period for Mr. Gordon’s performance unit award began on Mr. Gordon’s equity award grant was increased from $2.3date (November 2, 2018—the third business day after third quarter 2018 earnings) for purposes of calculating relative TSR and excluded the 2018 operating measures given Mr. Gordon’s late 2018 start date. We also agreed to provide Mr. Gordon with RSUs valued at $6.4 million to $2.5 millioncompensate Mr. Gordon for equity forfeited as a result of leaving his previous employer, to more closely approximateinduce him to join the Market Median for his role, but remains slightly less than Market Median for his position.
Performance Units (50%Company, and to provide long-term incentives that tie a significant portion of LTI Equity Awards)
Performance units are rightsMr. Gordon’s compensation to earn shares of our Common Stock, based onpre-established performance goals achieved over a performance period of generally three years. The number of performance units earned is determined by our performance as measured against thepre-established performance goals at the end of the related performance period. Each performance unit earned entitles the participant to one share of our Common Stock. Given the design of our performance award program, there is no guarantee of any value realized from grants of performance units.
48 ï 2018 Proxy Statement
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Performance Award Program—Performance Units Earned for the 2015-2017 Performance Period
Performance units for the 2015-2017 performance period, which ended January 30, 2018, were earned, certified and converted into shares of Common Stock in March 2018 based on an earned payout percentage of 93.4% resulting from the Company’s three-year TSR of 30% ranking in the 46.7th percentile relative to the TSRs of the
companies in the S&P 500 as of the beginning of the performance period (January 30, 2015). 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 $186.61, respectively). During the same period, the Company’s market capitalization also increased by approximately 20%.
2015-2017 Performance Period Program Design
Payout Calculation for the 2015-2017 Performance Period
2015-2017 Performance Period Performance Units Earned
Our actual performance results (the 46.7th percentile, or below the median) for the 2015-2017 performance period that ended January 30, 2018 resulted in the following number of shares of Common Stock being earned under our performance award program for this performance period. Each earned performance unit converted to one share of Common Stock upon the payout date of March 23, 2018.
Named Executive Officer | | Performance Units Value Granted (Target) ($) |
| | Number of Performance Units Granted (#) |
| | Number of Shares of our Common (#) |
| |||
Robert A. Bradway
|
| 8,160,000
|
|
| 51,179
|
|
| 51,766
|
| |||
Anthony C. Hooper
|
| 2,800,000
|
|
| 17,561
|
|
| 17,762
|
| |||
Sean E. Harper
|
| 2,400,000
|
|
| 15,052
|
|
| 15,224
|
| |||
David W. Meline
|
| 2,400,000
|
|
| 15,052
|
|
| 15,224
|
| |||
Jonathan P. Graham
|
|
| (2)
|
|
| (2)
|
|
| (2)
|
|
|
200% 150% 100% 50% 0% Threshold Target Maximum Achieved 93.4% Linear interpolation throughout performance zone 0%ile 25th%ile Median 75th – 100th %ile Performance Zone 0% 50% 100% 150% Target Award (Performance Units Granted) Relative Total Shareholder Return Multiplier (Amgen vs. S&P 500) Maximum (150%) payout for performance at and above the 75th percentile. Target (100%) payout for median, or 50th percentile, TSR performance. 50% payout for 25th percentile TSR performance. Final Payout 93.4% of Target Liner interpolation throughout performance zone
ï 20182019 Proxy Statement 49
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Compensation Discussion and Analysis
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of our stock in alignment with our stockholders’ interests. These RSUs were also granted on November 2, 2018, and, to better align with the value of the equity forfeited, will vest over three years beginning on the first anniversary of the equity award grant date through the third anniversary (at a rate of 35%, 35%, and 30% each year), contingent upon Mr. Gordon being actively employed at the time of each vesting date.
In connection with Dr. Reese’s promotion to Executive Vice President, Research and Development, in July 2018, the Compensation Committee granted Dr. Reese a promotion RSU award with a cash value of $2.4 million. This grant was intended to bring Dr. Reese’s annual grant morein-line with Market Median for his new position. These RSUs were granted on November 2, 2018, and will vest over four years in two equal tranches of 33% on the second and third anniversary of the grant date with the remaining 34% vesting on the fourth anniversary of the grant date. To promote his retention and given that Dr. Reese has satisfied the age and service requirements for retirement eligibility, the terms of our RSU equity award agreement providing for continued vesting after retirement were eliminated from this grant. Thus, in the event of Dr. Reese’s retirement prior to vesting, these promotional RSUs will be forfeited.
Performance Award Program—Performance Units Granted in 2016Earned for the 2016–20182016-2018 Performance Period
The Compensation Committee approvedPerformance units for the 2016-2018 performance period, performance award goal design that contained relative TSR as a modifierwhich ended December 31, 2018, were earned, certified, and had the following annualconverted into shares of Common Stock in March 2019. Thenon-GAAP operating performance measures(1) of EPS growth, operating margin, and operating expense were chosen to drive operational performance in alignment with, and increase performance hurdles:
|
|
|
The three operating measures are weighted equally(one-third per measure) and calculated againstpre-established targets for each year in the 2016-2018 performance period. All operating goals (for each year) were established at the commencement of the three-year
performance period.focus our executives on, our 2014-2018 investor commitments discussed earlier. At the end of the performance period, the final averageearned percentages from our performance for the three years under eachnon-GAAP operating measure were averaged and the resulting earned operating measure percentages for each of the three years aremeasures were averaged, resulting in a total operating measures score that can range from 50% to 150% for maximum performance. The total operating measuresof 115.4%. This score iswas then modified up or down by up to 50 percentage points based on our strong three-year TSR performance ranking (65.2%) relative to the TSRs of the companies in the S&P 500 from the grant date of May 3, 2016 through the end of thefor this performance period, (the relative TSR modifier) resulting in a TSR modifier of +30.3% and a payout range of 0% to 200%145.7% of target awardsperformance units granted. The TSR modifier is limited to target (zero, or no increase) where our absolute TSR is less than zero to limit reward in acalculation methodology for the 2016-2018 performance period in which we perform better thandesign is depicted on the S&P 500 for the period but investors do not recognize stock price growth.
The 2016-2018 performance awards have a performance period that commences on January 1, 2016 and ends on December 31, 2018.following page.
(1) |
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50 ï 20182019 Proxy Statement
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Compensation Discussion and Analysis
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2016-2018 Performance Period PerformanceGoal Design and Award Goal Calculation
All operating goals (for each year) aremeasures were established in early 2016 at the commencement
beginning of the three-year performance period.period
2018 Operating Measures and Performance
Non-GAAP(1) Operating Measures | Minimum (50%) | Target (100%) | Intermediate (125%) | Maximum (150%) | 2018 Performance | |||||||||||||||||||||||
| EPS Growth ($) | 142.9% ($14.37) | ||||||||||||||||||||||||||
£$11.15 | $12.25 | $13.80 | ³$14.60 | |||||||||||||||||||||||||
Operating Margin (%) | 106.6% (52.5%) | |||||||||||||||||||||||||||
£48% | 52% | 54% | ³58% | |||||||||||||||||||||||||
Operating Expense (in billions) | 50.0% ($11.91B) | |||||||||||||||||||||||||||
³$11.5B | $10.9B | – | £$10.3B | |||||||||||||||||||||||||
|
99.8%
| |||||||||||||||||||||||||||
2016-2018 Operating Measures Score (Operating Measure Percentages 50 – 150% with linear | ||||||||
Operating Measures Percentages are Equally Weighted for Each of the Three Years | ||||||||
Non-GAAP(1) Operating Measures | 2016(2) | 2017(2) | 2018 | 2016-2018 Average Operating Measures | ||||
EPS Growth ($) | 137.0% ($11.65) | 128.8% ($12.74) | 142.9% ($14.37) | 136.2% | ||||
Operating Margin (%) | 128.6% (52.3%) | 134.7% (54.2%) | 106.6% (52.5%) | 123.3% | ||||
Operating Expense (in billions) | 94.4% ($11.54) | 115.6% ($11.04) | 50.0% ($11.91) | 86.7% | ||||
120.0%
|
126.4%
|
99.8%
|
115.4%
|
2016-2018 S&P 500 Relative TSR Modifier
| ||||||||||
Payout for Performance Relative to S&P 500 TSR Percentage | ||||||||||
Amgen TSR³75th percentile = 50% (Maximum) | Actual Amgen TSR = 65.2 percentile – resulting in a +30.3% TSR modifier | |||||||||
Amgen TSR = 50th percentile = 0% (Target) | ||||||||||
Amgen TSR£25th percentile =-50% (Minimum) | ||||||||||
TSR Measurement Points = Average daily closing price of stock for the first 20 trading days from the grant date (May 3, 2016) and the last 20 trading days of the performance period. |
Payout no greater than 0% (target) if Amgen’s TSR is less than 0. |
Final 2016-2018 Performance Period Calculation 2016-2018 Non-GAAP(1) Operating Measures EPS Growth (1/3rd) Operating Margin (1/3rd) Operating Expense (1/3rd) 115.4% 2016-2018 Amgen Relative TSR Performance 30.3% Final Payout 145.7%
(1) |
|
(2) | Our targets for our 2016 and 2017 |
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 $10.7
ï 20182019 Proxy Statement 51
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Compensation Discussion and Analysis
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Performance Award Goal Design—Performance Units Granted in 2017Earned for 2016-2018 Performance Period
Our actual performance of 145.7% for the 2016-2018 performance period resulted in the following number of shares of Common Stock being earned under our performance award program for this performance period. Each earned performance unit converted to one share of Common Stock upon the payout date of March 22, 2019.
Named Executive Officer | Performance Units Value Granted (Target) ($) | Number of Performance Units Granted (#) | Number of Shares of our Common (#) | |||||||||
Robert A. Bradway | 5,500,000 | 32,246 | 50,962 | |||||||||
Anthony C. Hooper | 2,000,000 | 11,726 | 18,532 | |||||||||
Murdo Gordon(2) | n/a | n/a | n/a | |||||||||
Sean E. Harper | 1,750,000 | 10,260 | 16,215 | |||||||||
David W. Meline | 1,750,000 | 10,260 | 16,215 | |||||||||
David M. Reese | 400,000 | 2,345 | 3,706 | |||||||||
Jonathan P. Graham | 1,150,000 | 6,742 | 10,655 |
(1) | Includes dividend equivalents earned on these amounts rounded down to the nearest whole number of shares (excluding fractional shares paid in cash). |
(2) | Mr. Gordon commenced employment with the Company after the participants for the 2016-2018 performance period had been determined and, as such, he did not receive any performance units for the 2016-2018 performance period. For a description of thenew-hire LTI equity awards granted to Mr. Gordon in connection with the commencement of his employment, see the subsection “Initial Hire and Promotion Equity Awards” above. |
Outstanding Performance Units—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 approvedconstructed 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 elementsbe similar to that 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.design. For the first and second years of the 2017-2019 performance period, the Compensation Committee retained the three annualnon-GAAP operating measures:measures of EPS growth, operating margin, and operating expense used for the 2016-2018 performance period as they continued to drive performance in alignment with, and focus our executives on, our 2014-2018 investor commitments discussed earlier.
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|
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For the third year of thisthe 2017-2019 performance period (2019), the Compensation Committee replacednon-GAAP operating expense withnon-GAAP return on invested capital, or ROIC. The Compensation Committee’s replacement ofnon-GAAP operating expense with
non-GAAP ROIC was made in part in response to stockholder feedback, and is
designedas well as to support our transformation strategic priority to deliver2014-2018 investor commitments and our goal of delivering an efficient, disciplined business model beyond 2018 with focused management of our return on deployment of invested capital.2018.
The operating performance measures were chosen to:
Drive operating performance inTo create greater alignment with our operatingstockholders’ interests, the Compensation Committee also retained the requirement that the TSR modifier could not effect a payout greater than target if our absolute TSR over the performance commitments to stockholders through 2018;period was less than 0.
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 targetscalculation methodology 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 scoredesign is substantially similar to 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 500depicted above for the period but investors do not recognize stock price growth.2016-2018 performance units. The performance metrics and their weightings, as well as our actual performance for the completed annual operating measurement periods of 2017 and 2018 are set forth on the following page.
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52 ï 20182019 Proxy Statement
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Compensation Discussion and Analysis
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2017-2019 Performance Period PerformanceGoal Design and Award Goal Calculation
All operating goals (for each year) aremeasures were established in early 2017 at the commencement
beginning of the three-year performance period.period
2018 Operating Measures and Performance
Non-GAAP(1) Operating Measures | Minimum (50%) | Target (100%) | Intermediate (125%) | Maximum (150%) | 2018 Performance | |||||||||||||||||||||||
| EPS Growth ($) | 142.9% ($14.37) | ||||||||||||||||||||||||||
£$11.15 | $12.25 | $13.80 | ³$14.60 | |||||||||||||||||||||||||
Operating Margin (%) | 106.6% (52.5%) | |||||||||||||||||||||||||||
£48% | 52% | 54% | ³58% | |||||||||||||||||||||||||
Operating Expense (in billions) | 50.0% ($11.91B) | |||||||||||||||||||||||||||
³$11.5B | $10.9B | – | £$10.3B | |||||||||||||||||||||||||
|
99.8% | |||||||||||||||||||||||||||
2017-2019 Operating Measures Score (Operating Measure Percentages 50 – 150% with linear | ||||||||||
Operating Measures Percentages are Equally Weighted for Each of the Three Years | ||||||||||
Non-GAAP(1) Operating Measures | 2017(2) | 2018 | 2019 | 2017-2019 Average Operating Measures | ||||||
EPS Growth ($) |
1/3rd | 133.8% ($12.74) | 142.9% ($14.37) |
Pre-established and to be disclosed(3) | TBD | |||||
Operating Margin (%) |
1/3rd | 114.5% (54.2%) | 106.6% (52.5%) | TBD | ||||||
Operating Expense Years 1 & 2 (in billions) |
1/3rd | 107.0% ($11.04) | 50.0% ($11.91) | Not Applicable for 2019 | TBD | |||||
ROIC Year 3 | Not Applicable for 2017 and 2018 |
Pre-established and to be disclosed(3) | ||||||||
118.4%
|
99.8%
|
TBD
|
TBD
|
2017-2019 S&P 500 Relative TSR Modifier
|
Payout for Performance Relative to S&P 500 TSR Percentage |
Amgen TSR³ 75th percentile = 50% (Maximum) |
Amgen TSR = 50th percentile = 0% (Target) |
Amgen TSR£ 25th percentile = -50% (Minimum) |
TSR Measurement Points = Average daily closing price of stock for the first 20 trading days beginning on the grant date and the last 20 trading days of the performance period. |
Payout no greater than 0% (target) if Amgen’s TSR is less than 0. |
2018 Targets(2)
Final 2017-2019 Performance Period Calculation 2017-2019 Non-GAAP(1) Operating Measures EPS Growth (1/3rd) Operating Margin (1/3rd) Operating Expense ROIC (1/3rd) 2017-2019 Amgen Relative TSR Performance Final Payout Multiplier (0-200% of target)
(1) |
|
(2) | Our targets for our 2017 performance were disclosed under the 2017-2019 performance |
(3) | 2019 targets are pre-established and to be disclosed. Such 2019 targets are not being disclosed at this time as |
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 20182019 Proxy Statement 53
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Compensation Discussion and Analysis
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Change to Performance Award Goal Design—Design for the 2018–2020 Performance Period
As discussed previously, the Compensation Committee evaluated potential performance award goal designs for the 2018-2020 performance period at its December 2017 and March 2018 meetings, with input from management and FW Cook. The Compensation Committee constructed the 2018-2020 performance period (January 1, 2018 to December 31, 2020) goal design to be similar to that of the 2017-2019 performance period goal design with 2018 annual operating measures remaining the same, while retaining EPS growth and adding ROIC as the other operating measure for 2019 and 2020 of
the 2018-2020 performance period. These two performance measures are also included among the threenon-GAAP operating measures used for 2019 of the 2017-2019 performance period. The TSR modifier was rebalanced for the 2018-2020 performance period from 50 to 30 percentage points. The Compensation Committee retained the requirement that the TSR modifier could not effect a payout greater than target if our absolute TSR over the performance period was less than 0. See “Long-Term Incentive Equity Award Design Changes in 2018” for a full description of the rationale for the performance award goal design for the 2018-2020 performance period. The calculation for the 2018-2020 performance period goal design also is depicted on the following page.
54 ï 2019 Proxy Statement
Compensation Discussion and Analysis |
2018-2020 Performance Period Goal Design and Award Calculation
All operating measures were established in early 2018 at the
beginning of the three-year performance period
2018 Operating Measures and Performance
Non-GAAP(1) Operating Measures | Minimum (30%) | Low (65%) | Target (100%) | High (135%) | Maximum (170%) | 2018 Performance | ||||||||||||||||||||||||||||
| EPS Growth ($) | 132.7% ($14.40) | ||||||||||||||||||||||||||||||||
£$10.60 | $11.40
| $12.95 | $14.50 | ³$15.30 | ||||||||||||||||||||||||||||||
Operating Margin (%) | 105.4% (52.6%) | |||||||||||||||||||||||||||||||||
£46% | 48%
| 52% | 56% | ³58% | ||||||||||||||||||||||||||||||
Operating Expense (in billions) | 30.0% ($11.89B) | |||||||||||||||||||||||||||||||||
³$11.8B | –
| $11.2B | – | £$10.6B | ||||||||||||||||||||||||||||||
|
89.4%
| |||||||||||||||||||||||||||||||||
2018-2020 Operating Measures Score (Operating Measure Percentages 30 – 170% with linear | ||||||||
Operating Measures Percentages are Equally Weighted for Each of the Three Years | ||||||||
Non-GAAP(1) Operating Measures | 2018 | 2019 | 2020 | 2018-2020 Average Operating Measures | ||||
Operating Margin (%) Year 1 | 105.4% (52.6%) | Not Applicable for 2019 | Not Applicable for 2020 | TBD | ||||
Operating Expense Year 1 (in billions) | 30.0% ($11.89) | TBD | ||||||
EPS Growth ($) Years 1, 2, and 3 | 132.7% ($14.40) | Pre-established and to be disclosed(2) | TBD | |||||
ROIC Years 2 and 3 (in billions) | Not Applicable for 2018 | TBD | ||||||
89.4%
|
TBD
|
TBD
|
TBD
|
2018-2020 S&P 500 Relative TSR Modifier |
Payout for Performance Relative to S&P 500 TSR Percentage |
Amgen TSR³75th percentile = 30% (Maximum) |
Amgen TSR = 50th percentile = 0% (Target) |
Amgen TSR£25th percentile = -30% (Minimum) |
TSR Measurement Points = Average daily closing price of stock for the first 20 trading days beginning on the grant date and the last 20 trading days of the performance period. |
Payout no greater than 0% (target) if Amgen’s TSR is less than 0. |
Final 2018-2020 Performance Period Calculation 2018-2020 Non-GAAP(1) Operating Measures 2018 2019 and 2020 EPS Growth EPS Growth Operating Margin ROIC Operating Expense 2018-2020 Amgen Relative TSR Performance
(1) | The 2018non-GAAP operating measures (EPS growth, operating margin, and operating expense) with respect to the 2018-2020 performance period are as reported and reconciled inAppendix B. |
(2) | 2019 and 2020 targets arepre-established and to be disclosed. Such 2019 and 2020 targets are not being disclosed at this time as they are competitively sensitive. |
ï 2019 Proxy Statement 55
Compensation Discussion and Analysis |
Performance Award Goal Design for the 2019–2021 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 2018-20202019-2021 performance period (January 1, 20182019 to December 31, 2020)2021) with input from management and FW Cook & Co. at its December 20172018 and March 20182019 meetings. TheBased on such evaluations, the Compensation Committee constructeddesigned the 2018-2020goals for the 2019-2021 performance period performance award goal design to leverage the current design of the Company’s performance awards, retaining a combination of operating measures and the relative TSR modifier. The Compensation Committee retained the samenon-GAAP operating measures (EPS growth, operating margin, and operating expense) for the first yearbe similar to that of the 2018-2020 performance period as isgoal design, retaining the operating measures ofnon-GAAP EPS and ROIC used for 2018 in the 2017-2019 performance period. For the second and thirdlast two years of the 2018-2020 performance period for the Compensation Committee movedentire 2019-2021 performance period to twonon-GAAP operating measures (EPS growth and ROIC), reflectingreflect our continued focus on remaining operationally disciplined in our management of the business as we move beyond our 2018 operating performance investor commitments.and use of capital. The operating measures ofnon-GAAP EPS growth and ROIC are weighted equally in each year(one-third per measure for 2018 andone-half per measure for 2019 and 2020)measure) and are measured against established targets pre-established for each year inof the 2018-2020 performance period; all such operating goal targets are establishedperiod at the commencementbeginning of thethis 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 believesretained the requirement that rebalancing the weighting in favor of the operating measures relative to the TSR modifier further emphasizes the Company’s operational prioritiescould not effect a payout greater than target if our absolute TSR 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 iswas less than zero, the TSR modifier shall not add any percentage points notwithstanding our ranking.0.
Stock Options
Stock 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 at the Compensation Committee’s election. Stock options do not have dividend equivalent rights.
Plan Minimum Vesting Period of One Year; 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 20182019
In March 2018,2019, the Compensation Committee reviewed the LTI equity award grant values proposed to be granted to NEOs in 2018.2019. The Compensation Committee approved an increase in Mr. Bradway’s LTI equity award from $12$12.5 million to $12.5$14 million to reward Mr. Bradway for strong performance and excellent leadership of the Company in a year of transition for the Company.since 2012. In making its decision, the Compensation Committee noted that, while the Market Median for CEO pay had declined because of turnover in leadership at a numberfour of our peer group companies, while LTI awards for CEOs who had remained in place at peer companies were increased by 10%.among continuing incumbents the Market Median increased. The Compensation Committee granted Mr. Hooper the same LTI equity award value that he had received in 2017 as this aligned him with the Market Median. The Compensation Committee determined to increaseMessrs. Gordon and Meline and Dr. Harper’s and Mr. Meline’sReese each an LTI equity award grant value from $3.7 million and $3.5 million, respectively, in 2017 toof $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 positionedposition their respective total target total direct compensation closer to the Market Median for their respective roles. The Compensation Committee did not grant LTI equity awards for 2019 to Dr. Harper or Mr. Hooper as Dr. Harper left the Company in January 2019 and Mr. Hooper retired from the role of Executive Vice President, Global Commercial Operations in 2018 (although he remains with the Company to assist in the transition to Mr. Gordon as well as to lead and execute on several corporate strategic objectives). In continued recognition of Mr. Graham’s tenure and diversity of experience in the role of General Counsel at large public companies, the Compensation Committee granted Mr. Graham the same LTI equity award value ($2.8 million) that he had received in 2018. The Compensation Committee concluded that the LTI equity award values granted were appropriate because they recognize and reward strong execution by our executives with compensation that is substantially “at risk,” performance-based, and focused on the longer-term.
54 56 ï 20182019 Proxy Statement
|
Compensation Discussion and Analysis
|
|
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 as in effect in 2017. This year, and in the past, actual awards under the EIP are determined by the Compensation Committee using theirits negative discretion under the EIP, based on the composite final score of thepre-established 2018 Company performance goals for the year designed to advance our strategic priorities.goals. In evaluating and confirming this approach, the Compensation Committee also considers the contributions of each participant’s role to our success during the year. For 2018, each of our NEOs was a participant in the EIP, with the exception of Mr. Gordon, whose award was made under our Global Management Incentive Plan, or GMIP, since he commenced employment in September 2018 and, as such, was not eligible to participate in the EIP.
In March 2017,2018, the Compensation Committee determined 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 2018 Company performance goals and the weightings and percentages payable for threshold, target, and maximum performance.
For 2017,Target Annual Cash Incentive Award Opportunity
After review of market data, the Compensation Committee determined that Mr. Bradway’s target annual cash incentive award opportunity would remain 150% of base salary in 2018 and the target annual cash incentive award opportunity for each of ourthe returning Executive Vice President NEOs would also remain the same in 2018 as it was for 2017 (100% of base salary). Consistent with the target annual cash incentive award opportunity previously established for the other Executive Vice Presidents, Mr. Gordon’s target annual cash incentive award opportunity (under the GMIP) was set at 100% of base salary as part of his September 2018 offer letter based on the Market Median for his position and for internal consistency. Dr. Reese’s target annual cash incentive award opportunity was increased from 65% to 100% of base salary in connection with his promotion to Executive Vice President, Research and Development, based on the Market Median for his position and for internal consistency. Mr. Graham’s target annual cash incentive award opportunity as a participant inSenior Vice President was increased from 80% of base salary to 90% of base salary to align with that of the Market Median for his role.
The maximum award under 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,As discussed previously, both historically and in 2017,2018, 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 final score under our GMIP as applied to the participant’s target annual cash incentive award foropportunity to determine actual awards.
Target Incentive Opportunity
The target annual cash incentive award opportunity for each of our NEOs remained the same in 2017 as it was for 2016. Mr. Bradway’s target annual cash 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 2017 also remained at 100% of base salary. As a Senior Vice President,
Mr. Graham's target annual cash incentive award opportunity of 80% of base salary was also maintained for 2017 as it aligned with the Market Median for his role.
20172018 Company Performance Goals
The 20172018 Company performance goals under our GMIP approved by the Compensation Committee were:
“Deliver Results” goals (60%):
- | “Revenues” and“Non-GAAP Net Income(2)” are equally focused ontop- and bottom-line growth and were assigned the largest |
“Progress Innovative Pipeline” goals (25%):
- | “ |
“Deliver Annual Priorities” goals (15%):
- | “ |
- | “ |
While all of the goals measure single–yearsingle-year performance, taken as a whole, they are intended to positively position us for both near- and longer-term success, delivery onsupport our strategic priorities, and create stockholder value. There are no payouts for below-threshold performance on the two financialany of our Company performance goals. Threshold performance on our “Progress Innovative Pipeline” goals results in 50% earned for those metrics. MeasurementsCertain 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 an annual cash compensation)incentive award). Maximum performance under each metric results in earning 225% of target annual cash incentive award opportunity for that metric. Thus, maximum performance under all metrics would result in 225% of target annual cash incentive award opportunity being earned. 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) |
|
(2) | Non-GAAP net income for purposes of the |
ï 20182019 Proxy Statement 5557
|
Compensation Discussion and Analysis
|
|
20172018 Company Performance Goals and Results
The table below illustrates the goals established, the weighting of each goal, the goals established and our actual performance for 2017.2018. No amounts can be earned for below thresholdbelow-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 (60% weighting)
|
|
Weighted Score Achieved 68.2%
|
| Deliver Results (60% weighting) |
|
|
Weighted Score Achieved 123.4% |
| ||||||||||||||||||||||||||||||||
Financial Goals (60%) ($ In Millions)
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Weighting
|
|
|
Achieved
|
|
| Weighting |
|
| Threshold |
|
| Target |
|
| Maximum |
|
| Achieved |
| ||||||||||
Revenues |
|
$21,085 |
|
|
$22,525 |
|
|
$24,325 |
|
|
30% |
|
|
$22,849 110.6% |
|
|
30% |
|
|
$20,580 |
|
$ |
21,990 |
|
|
$23,750 |
|
|
$23,747 224.7% |
| ||||||||||
Non-GAAP Net Income(1) | $8,000 | $8,890 | $9,955 | 30% | | $9,246 116.8% |
| 30% | $7,815 | $8,685 | $9,725 | | $9,573 186.5% |
|
Progress Innovative Pipeline (25% weighting)
|
Weighted Score Achieved 34.7%
| Progress Innovative Pipeline (25% weighting) |
Weighted Score Achieved 29.9% | |||||||||||||||||
Goals
|
Results
|
Weighting
|
Achieved
| Weighting | Results | 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% |
|
5% |
|
• We generated a total of eight product teams (formed when a molecule has been judged to have the potential to be safe and effective in humans). |
|
113.9% |
| ||||||||||
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 advanced two programs through theearly-to-late stage portal. | |||||||||||||||||||
• We did not meet our launch timelines for Parsabiv and EVENITY. | • We initiated 10first-in-human studies, including for small-cell lung cancer, obesity, glioblastoma, relapsed/refractory diffuse largeb-cell lymphoma, mantle cell lymphoma and follicular lymphoma, multiple myeloma, acute myeloid leukemia,non-hodgkins lymphoma, and cardiovascular disease. | |||||||||||||||||||
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% | |||||||||||||||||
• We established access to a new large population for genetic analysis and initiated genotyping and sequencing. | ||||||||||||||||||||
Execute Key Clinical Studies and Regulatory Filings | 20% | • We achieved selected clinical activity milestones for KYPROLIS, BLINCYTO, Nplate, IMLYGIC, and ABP 710 (biosimilar infliximab (REMICADE®)). | 120.8% | |||||||||||||||||
• We completed regulatory filings for Aimovig, XGEVA (skeletal related events in multiple myeloma), Repatha, BLINCYTO, EVENITY (U.S. submission), and KYPROLIS. | ||||||||||||||||||||
Deliver Annual Priorities (15% weighting) | Deliver Annual Priorities (15% weighting) |
Weighted Score Achieved 13.3% | ||||||||||||||||||
Goals | Weighting | Results | Achieved | |||||||||||||||||
Execute Critical Launches and Long-Term Commercial Objectives |
|
10% |
|
• We set aspirational internal goals to focus our entire Company on delivering on the promise of three important medicines, Prolia, KYPROLIS, and Repatha. While all three products delivered double-digit, volume-driven growth, we did not meet all of our aspirational goals. |
|
71.3% |
| |||||||||||||
Achieve Transformation Objectives | 5% | • We established six transformation initiatives with specific savings targets established for each activity across corporate functions and operations to drive additional savings across the Company, advance internal productivity, and further our full potential initiatives. For this program, we realized approximately $368 million in gross savings that we reinvested in the business including product launches and research and development activities(2).
| 124.2% |
|
|
Achieved
|
|
(1) | Non-GAAP net income for purposes of the |
(2) | Net operating expense savings in the same period were not significant. |
56 58 ï 20182019 Proxy Statement
|
Compensation Discussion and Analysis
|
|
20172018 Annual Cash Incentive Awards
As shown in the table above, our performance against the 20172018 Company performance goals yielded a composite final score of 115%166.6% and the Compensation Committee awarded actual annual cash incentive awards under the EIP to our NEOs based on this composite final score. No further discretion was employed.
Named Executive Officer |
Target Opportunity | Target 2017 Award($) | Actual 2017 Award($)(1) | Target Opportunity (% of Base Salary) | Target 2018 Award($) | Actual 2018 Award($)(1) | ||||||||||||||||||
Robert A. Bradway
|
| 150
|
|
| 2,333,077
|
|
| 2,683,000
|
|
| 150 |
|
| 2,340,000 |
|
| 3,898,000 |
| ||||||
Anthony C. Hooper
|
| 100
|
|
| 1,049,769
|
|
| 1,207,000
|
|
| 100 |
|
| 1,053,000 |
|
| 1,754,000 |
| ||||||
Murdo Gordon(2) |
| 100 |
|
| 307,692 |
|
| 513,000 |
| |||||||||||||||
Sean E. Harper
|
| 100
|
|
| 970,308
|
|
| 1,116,000
|
|
| 100 |
|
| 974,000 |
|
| 1,623,000 | |||||||
David W. Meline
|
| 100
|
|
| 970,308
|
|
| 1,116,000
|
|
| 100 |
|
| 974,000 |
|
| 1,623,000 | |||||||
David M. Reese |
| 80 | (3) |
| 548,154 |
|
| 913,000 | ||||||||||||||||
Jonathan P. Graham
|
| 80
|
|
| 745,785
|
|
| 858,000
|
|
| 90 |
|
| 841,500 |
|
| 1,402,000 |
|
(1) | Calculated in accordance with the |
(2) | Mr. Gordon’s award waspro-rated for the number of days he was employed in 2018. |
(3) | Dr. Reese’s target annual cash incentive award opportunity was increased from 65% to 100% of base salary in connection with his promotion to Executive Vice President, Research and Development, effective as of July 26, 2018. The target opportunity is apro-rated bonus target based on the number of days at each target level before and after the effective date of his promotion. |
Sign-On and Promotional Bonuses
To replace the value of Mr. Gordon’s 2018 bonus with his previous employer which was forfeited upon him leaving his position and to induce Mr. Gordon to accept our offer, we agreed to provide Mr. Gordon with a $2 millionsign-on bonus.
In connection with Dr. Reese’s promotion to Executive Vice President, Research and Development, the Compensation Committee approved a promotional lump sum payment of $300,000 to Dr. Reese.
2019 Company Performance Goals
In March 2018,2019, the Compensation Committee established Company performance goal categoriesgoals for 20182019 performance under our GMIP as follows:
| ||
60% |
Deliver Results | |
• Revenues (30%)
• Non-GAAP Net Income (30%) | ||
|
Progress Innovative Pipeline | |
• Execute Key Clinical Studies and Regulatory Filings (20%)
• Advance Early Pipeline | ||
|
Deliver Annual Priorities | |
• Execute Critical Launches and Long-Term Commercial Objectives
• Achieve |
The Compensation Committee increased the weighting for “Advance Early Pipeline” (from 5% in 2018 to 10% in 2019) to focus the
Company on progressing our programs in development. To provide for the shift of focus towards advancing our early pipeline, the Compensation Committee decreased the weighting for “Execute Critical Launches and Long-Term Commercial Objectives” (from 10% to 5%). The Compensation Committee replaced “Achieve Transformation Objectives” with “Achieve Productivity Objectives” to reflect our movement beyond the 2014-2018 investor commitments and our focus on productivity to support continued reinvestment in opportunities (such as our early pipeline) while striving to maintain appropriate expense discipline.
In March 2018,2019, the Compensation Committee reviewed the target incentive award opportunity for each NEO. Mr. Graham’sNEO and determined that the existing target annual cash incentive award opportunity was increased from 80% of base salary to 90% of base salary to align with the Market Median for his role.each NEO remains appropriate. No changes were made to the target incentive award opportunity for any other NEO.
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 ofCommittee reviews 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 other such other factors deemed relevant. Further, the Compensation Committeerelevant, and 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,(other than himself), 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 for each position and environmentalmarket conditions to determine each NEO’s base salary. No increase in base salary is automatic or guaranteed. For more information on how decisions are made, see
ï 2019 Proxy Statement 59
Compensation Discussion and Analysis |
“How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously described.
In March 2017,2018, the Compensation Committee reviewed the market competitiveness of each NEO’s base salary employed at the time based on Market Median data and such executive officer’s performance, experience and other qualifications, as well as the Company’s overall
performance. In light of our decision in 2018 to not provide salary increases to our employees at the executive director and officer levels (except in exceptional circumstances) to be consistent with the market for talent as well as with our continuing exercise of financial discipline, the Compensation Committee decided to provide no base salary increases to our NEOs.
2018 Base Salary Market Position
The 2018 base salaries as in effect at the end of 2018 and the Market Median position as reviewed by the Compensation Committee in March 2018 are shown in the table below:
Named Executive Officer | 2017 Base Salary ($) | Increase (%) | 2018 Base Salary ($) | 2017 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||||||||
Robert A. Bradway |
| 1,560,000 |
|
| 0 |
|
| 1,560,000 |
|
| 1,513,000 |
|
| 3.1 |
| |||||
Anthony C. Hooper |
| 1,053,000 |
|
| 0 |
|
| 1,053,000 |
|
| 1,030,952 |
|
| 2.1 |
| |||||
Murdo Gordon(1) |
| n/a |
|
| n/a |
|
| n/a |
|
| n/a |
|
| n/a |
| |||||
Sean E. Harper |
| 974,000 |
|
| 0 |
|
| 974,000 |
|
| 1,025,975 |
|
| (5.1 | ) | |||||
David W. Meline |
| 974,000 |
|
| 0 |
|
| 974,000 |
|
| 1,018,030 |
|
| (4.3 | ) | |||||
David M. Reese(2) |
| 500,000 |
|
| 0 |
|
| 500,000 |
|
| n/a |
|
| n/a |
| |||||
Jonathan P. Graham |
| 935,000 |
|
| 0 |
|
| 935,000 |
|
| 931,759 |
|
| 0.3 |
|
(1) | Mr. Gordon commenced employment with us in September 2018. His base salary was set at $1,000,000 based on the Market Median for his position and for internal consistency. For further description of the base salary provided to Mr. Gordon in connection with the commencement of his employment, see the subsection “Offer Letter—Mr. Gordon” below. |
(2) | At the time that the base salaries were determined in March 2018, Dr. Reese served as Senior Vice President, Translational Sciences and Oncology and a Market Median was not available. His base salary for 2018 was initially set at $500,000, reflecting his base salary for 2017. Dr. Reese was promoted to Executive Vice President, Research and Development, effective July 26, 2018, and the Compensation Committee increased Dr. Reese’s base salary by approximately 90% to $950,000 to reflect his new responsibilities and to bring him closer to the Market Median for his new position. |
2019 Base Salary Adjustments
In March 2019, the Compensation Committee reviewed the market competitiveness of each NEO’s base salary based on Market Mediana review of market data and such executive officer’s performance, experience and other qualifications, as well as the Company’s overall performance. Based onIn alignment with the data providedbase salary increases made to staff members generally, the Compensation Committee including recommendationsincreased Mr. Bradway’s base salary by 2.6% and each of Cook & Co., an overall merit increasethe other NEOs remaining as executive officers with the Company (Messrs. Gordon, Meline, and Graham and Dr. Reese) by 2.5%.
Total Target Annual Cash Compensation
Total target annual cash is the sum of 2% was recommended forthe NEO’s base salary and target annual cash incentive award. The Compensation Committee believes that reviewing our NEOs, adjustedNEOs’ total target annual cash compensation in addition to align with the Market Median for each position.element of compensation provides a useful check in making compensation decisions.
In March 2018, the Compensation Committee reviewed total target annual cash compensation for each NEO compared to the market data and historical total target annual cash compensation figures as depicted below. The Compensation Committee approved a 2017noted such total target annual cash compensation was generally below the Market Median with the exception of Messrs. Hooper and Graham, who were slightly above the Market Median as the Market Median for both Messrs. Hooper’s and Graham’s positions had declined in prior years. The Compensation Committee took these metrics into account and elected to increase the value of LTI equity awards to Mr. Meline and Dr. Harper for 2018 to bring their target total annual direct compensation (composed of base salary, increase of 2% for Mr. Bradway based on recommendations from Cook & Co., to raise his base salary nearertarget annual cash incentive award, and target LTI equity award) closer to the Market Median, for his position, while managing hisin lieu of increasing total target total annual cash compensation, to approximateresulting in compensation that is more “at risk” and performance-based. For more information regarding the determination of Market Median and continuing to retain the substantial majority of his compensation as “at risk” and performance-based, and generally consistent with the increase to other senior executives. Dr. Harper and Mr. Meline each received base salary increases of 2.5% to raise their base salaries nearer to the Market Median for their respective positions. Messrs. Hooper and Graham each received a base salary increase of 2% for 2017 consistent with the increase to other senior executives.peer group data reviewed, see “How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously described.
60 ï 20182019 Proxy Statement 57
|
Compensation Discussion and Analysis
|
|
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
|
|
2018 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 such executive officer’s performance, experience and other qualifications, as well as the Company’s overall performance. In light of the Company’s decision to provide no salary increases to its executive directors and officers (except in exceptional circumstances) to be consistent with the market for talent as well as with our continuing exercise of financial discipline, the Compensation Committee decided to provide no base salary increases to 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
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 2017, the Compensation Committee reviewed target total annual cash compensation for each NEO comparing it to the market 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 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 totalTotal target annual cash compensation reviewed by the Compensation Committee in March 20172018 prior to the compensation changes being made are shown in the table below:
Named Executive Officer | 2016 Amgen Target Total Annual Cash ($) | 2016 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | 2017 Amgen Target Total Annual Cash ($) | 2017 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | ||||||||||||||||||
Robert A. Bradway
|
| 3,825,000
|
|
| 3,750,000
|
|
| 2.0
|
|
| 3,900,000 |
|
| 3,959,000 |
|
| (1.5 | ) | ||||||
Anthony C. Hooper
|
| 2,064,000
|
|
| 2,195,771
|
|
| (6.0
| )
|
| 2,106,000 |
|
| 2,073,699 |
|
| 1.6 |
| ||||||
Murdo Gordon(1) |
| n/a |
|
| n/a |
|
| n/a |
| |||||||||||||||
Sean E. Harper
|
| 1,900,000
|
|
| 1,965,625
|
|
| (3.3
| )
|
| 1,948,000 |
|
| 2,116,330 |
|
| (8.0 | ) | ||||||
David W. Meline
|
| 1,900,000
|
|
| 1,979,256
|
|
| (4.0
| )
|
| 1,948,000 |
|
| 2,063,871 |
|
| (5.6 | ) | ||||||
David M. Reese(2) |
| 825,000 |
|
| n/a |
|
| n/a |
| |||||||||||||||
Jonathan P. Graham
|
| 1,650,600
|
|
| 1,546,353
|
|
| 6.7
|
|
| 1,776,500 |
|
| 1,690,870 |
|
| 5.1 |
|
58 ï 2018 Proxy Statement
(1) |
| Mr. Gordon commenced employment with the Company after the March 2018 compensation decisions were made. For a description of total target annual cash compensation provided to Mr. Gordon in connection with the commencement of his employment, see the subsection “Offer Letter—Mr. Gordon” below. |
(2) | Dr. Reese was appointed as Executive Vice President, Research and Development, effective July 26, 2018. Prior to that date, and at the time that the 2018 compensation decisions were determined, Dr. Reese served as Senior Vice President, Translational Sciences and Oncology and a Market Median was not available for that role. |
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.
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 allocationincentivize optimal deployment of our human resources in the best interestsupport of the Company.Company’s strategy. 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 Companyus and are at the Company’sour request, and in certain new hire situations. We do not provide taxgross-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) that 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
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.
ï 2019 Proxy Statement 61
Compensation Discussion and Analysis |
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 alignaligning the interests of our executives and stockholders and mitigatemitigating potential compensation-related risk. Since December 2015, ourOur guidelines require that each officer who has not met their ownership requirements 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.
ï 2018 Proxy Statement 59
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Stock Ownership Guidelines Requirements
The stock ownership guidelines for 20172018 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 currenta given 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.us. As of October 20, 2017,November 9, 2018, the effective date of our executive certifications, all executive officers, including our NEOs, who were expected to meet such guidelines, were in compliance. Messrs. Gordon, Meline, and Graham commenced employment with our Company on September 3, 2018, July 21, 2014, and July 13, 2015, and have until 2023, 2019, and 2020, respectively, to meet their guidelines. Dr. Reese was promoted from a Senior Vice President to an Executive Vice President on July 26, 2018 and has until 2021 to comply with the new ownership level associated with the Executive Vice President role.
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 margin; or (iv) entering into any derivative, hedging, or similar transactions with respect to our Common Stock.
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,Senior 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.Committee and the relevant new hire, promotion, or other date.
62 ï 2019 Proxy Statement
Compensation Discussion and Analysis |
Tally Sheets
The Compensation Committee annually reviews tally sheets for each NEO, setting forth all components of compensation, 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, theThe 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.CEO, and use the information provided by these tally sheets to make such determination. 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 2017.2018.
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
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Non-Direct Compensation and Payouts in Certain Circumstances
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 Companyus 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. GrahamGordon
Mr. GrahamGordon, who commenced employment as our SeniorExecutive Vice President, General Counsel and SecretaryGlobal Commercial Operations, effective July 13, 2015. HisSeptember 3, 2018, is currently subject to an offer letter contains severance protectionthat was negotiated in connection with his hiring. The terms that are payable only ifof the offer letter were approved by the Compensation Committee. Mr. Graham is terminated other than for cause that expire on July 13, 2018. ForGordon’s offer letter included our standard relocation assistance to facilitate Mr. Gordon’s relocation from New Jersey to California with a qualifying termination that occurs before July 13, 2018,temporary housing allowance of an additional 60 days (for a total of 120 days) and up to $12,000 per month. We agreed to provide Mr. Graham would be entitled toGordon with a cash payment equal to a multiple of two times annual base salary plusof $1 million, and a target annual cash incentive award (currently 90%opportunity of 100% of base salary, each of which was targeted at the Market Median and such target annual cash incentive award opportunity is consistent with that of each of the other Executive Vice Presidents. We also agreed to provide Mr. Gordon with a $2 millionsign-on bonus to replace the value of Mr. Gordon’s 2018 bonus with his previous employer which was forfeited upon him leaving his current position and to induce Mr. Gordon to accept our offer. We also agreed to provide Mr. Gordon with RSUs valued at $6.4 million. To align with the
value being replaced, this grant will vest over three years beginning on the first anniversary of the grant date through the third anniversary at a rate of 35%, 35%, and 30% each year, respectively, contingent upon Mr. Gordon being actively employed with us through each vesting date. We also agreed to provide Mr. Gordon with performance units valued at $3.5 million which vest at the end of the performance period (November 2, 2018 to December 31, 2020) contingent upon Mr. Gordon being actively employed through the vesting date to further induce Mr. Gordon to join our Company. The Compensation Committee concluded that these LTI equity award values were appropriate because they provide compensation that is focused on the longer-term to compensate Mr. Gordon for equity forfeited as a result of his leaving his previous employer, to induce him to join the Company, and to provide long-term incentives that tie a significant portion of Mr. Gordon’s compensation to the value of our stock in alignment with our stockholders’ interests. See “Initial Hire and Promotion Equity Awards” above for a full description of the LTI equity awards provided to Mr. Gordon. To compensate for Mr. Gordon’s forfeiture of certain pension benefits at his previous employer, Mr. Gordon was also provided with a contribution to his Deferred Compensation Plan of $1 million which will vest at a rate of 33%, 33%, and 34% each year through the third anniversary of his date of employment with us as long as Mr. Gordon remains actively and continuously employed by us. We also agreed to reimburse Mr. Gordon for any claim resulting from Mr. Gordon’s employment with us due to any recoupment from Mr. Gordon by his previous employer for previously earned compensation (up to $2 million). Mr. Gordon’s offer letter provides for cash severance protection for three years following his employment date equal to two year’s annual base salary)salary and target annual cash incentive award, plus up to 18 months of COBRA(1) medical and dental coverage paid for by us. As discussed above, benefits of this type are often provided to officer-level candidates to provide an incentive to them to join our Company by reducing the risk of making such a job change. These severance benefits expire on September 3, 2021, and are payable only if Mr. Gordon is terminated other than for “cause.”
(1) | The Consolidated Omnibus Budget Reconciliation Act of 1985. |
ï 2019 Proxy Statement 63
Compensation Discussion and Analysis |
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 1,6131,581 U.S. staff members (as of December 31, 2017)2018), 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,” 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 any 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
(or target performance for the operating measures if the change inof control occurs in the first year of a performance period). If the change of control occurs 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 based on the 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 April 2017May 2018, using a samplecomparator group of 14 companies chosen soby Amgen as
|
ï 2018 Proxy Statement 61
|
to have the greatest representation from our representative of its 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 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.
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
64 ï 2019 Proxy Statement
Compensation Discussion and Analysis |
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
(excluding Puerto Rico) staff members. 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 Retiree Medical Savings Account 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.
Taxes and Accounting Standards
Tax Deductibility Under Section 162(m) of the Internal Revenue Code
We maintain certain incentive compensation programs that are intendedOn December 22, 2017, the Tax Cuts and Jobs Act, or Tax Reform Act, was signed into law for taxable years beginning after December 31, 2017. The Tax Reform Act made a number of significant changes 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,Internal Revenue Code Section 162(m). Section 162(m) placedplaces a $1,000,000$1��million limit on the amount of compensation that we may deduct for income tax purposes for any year with respect to compensation paid to “covered employees.”
Prior to the Tax Reform Act, covered employees included the executive who servesserved as our CEO atyear-end, and any of our three other most highly compensated employees who serveserved as executive officers, atyear-end, other than our Chief Financial Officer. The $1,000,000$1 million limit did not apply, however, to performance-based compensation, as defined under Section 162(m). Our 2017 executive compensation program, which was implemented prior to the enactment of the Tax Reform Act, was 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 performance-based compensation. DueRSUs did not qualify for the performance-based exception.
For tax years beginning after December 31, 2017, the Tax Reform Act revised the definition of covered employee to competitiveinclude an executive officer of a publicly held corporation who holds the positions of either principal executive officer, or other factors,PEO, or principal financial officer, or PFO, at any time during the Compensation Committee may decidetax year, as well as an executive officer whose total compensation for the tax year is required to be reported to shareholders under the Securities Exchange Act of 1934 by reason of such employee being among the three highest compensated officers for the taxable year (excluding the PEO and PFO), regardless of whether the executive officer is serving at year end. In addition, if an individual is a covered employee for a tax year beginning after December 31, 2016, the individual remains a covered employee for all future years. As a result of the changes to the definition of covered employee, the total number of covered employees in certain circumstances2018 is higher than in 2017 and can be expected to grow in future years due to the “once a covered employee, always a covered employee” rule.
exceedIn addition to changing the deductibility limit underdefinition of covered employee, the Tax Reform Act also eliminated the exception for performance-based compensation.
A transition rule applies to grandfather compensation which is provided pursuant to a written binding contract that was in effect on November 2, 2017, and which is not modified in any material respect on or after such date. An Internal Revenue Service notice has clarified that plans that permit negative discretion do not qualify for grandfathering to the extent that exercise of negative discretion could reduce the compensation. Under the transition rule, compensation related to exercise of stock options issued on or before November 2, 2017, and compensation earned with respect to performance units granted prior to November 2, 2017, should qualify for grandfathering, provided that such contracts are not materially modified after that date. However, our annual cash bonus compensation for the 2017 year that was paid in March 2018 does not qualify for grandfathering since it was performance-based compensation that provided for negative discretion.
Because the performance-based compensation exception was eliminated, compensation grants that we made in 2018 to each covered employee that would have previously qualified for the exception, including stock options, performance units, and annual cash bonuses, will be included in calculation of the amount that is paid to the covered employee that is not deductible to the extent such compensation exceeds the $1 million limit. The cash tax impact for 2018 of compensation not being deductible due to the 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 2017 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 2017 of the RSUs not being performance-basedlimit is approximately $2.3$4.2 million, assuming the Company’s U.S. combined effective tax rate for 2017.2018.
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
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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
ï 2019 Proxy Statement 65
Compensation Discussion and Analysis |
example, the Compensation Committee 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.
66 ï 20182019 Proxy Statement 63
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Executive Compensation Tables
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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.
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Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||
Performance Units and Restricted Stock Units | Stock Options | EIP/GMIP | ||||||||||||||||||||||||||||||
Robert A. Bradway Chief Executive Officer and President
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2018 2017 2016 |
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1,566,000 1,555,962 1,531,731 |
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0 0 0 |
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8,749,818 8,399,812 7,699,723 |
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3,749,994 3,599,974 3,299,994 |
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3,898,000 2,683,000 3,650,000 |
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591,454 661,041 668,553 |
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18,555,266 16,899,789 16,850,001 |
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Anthony C. Hooper Former Executive Vice President, Global Commercial Operations
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2018 2017 2016 |
|
|
1,057,050 1,050,173 1,031,788 |
|
|
0 0 0 |
|
|
2,799,925 2,799,937 2,799,874 |
|
|
1,199,995 1,199,973 1,199,995 |
|
|
1,754,000 1,207,000 1,639,000 |
|
|
254,489 295,467 294,528 |
|
|
7,065,459 6,552,550 6,965,185 |
| ||||||||
Murdo Gordon(6) Executive Vice President, Global Commercial Operations
|
|
2018 |
|
|
330,769 |
|
|
2,000,000 |
|
|
9,899,861 |
|
|
0 |
|
|
513,000 |
|
|
1,336,604 |
|
|
14,080,234 |
| ||||||||
Sean E. Harper Former Executive Vice President, Research and Development
|
|
2018 2017 2016 |
|
|
977,746 970,769 946,246 |
|
|
0 0 0 |
|
|
2,799,925 2,589,867 2,449,925 |
|
|
1,199,995 1,110,000 1,049,986 |
|
|
1,623,000 1,116,000 1,502,000 |
|
|
234,212 269,731 264,885 |
|
|
6,834,878 6,056,367 6,213,042 |
| ||||||||
David W. Meline Executive Vice President and Chief Financial Officer
|
|
2018 2017 2016 |
|
|
977,746 970,769 946,733 |
|
|
0 0 0 |
|
|
2,799,925 2,449,878 2,449,925 |
|
|
1,199,995 1,049,990 1,049,986 |
|
|
1,623,000 1,116,000 1,503,000 |
|
|
260,102 271,651 268,821 |
|
|
6,860,768 5,858,288 6,218,465 |
| ||||||||
David M. Reese(7) Executive Vice President, Research and Development
|
|
2018 |
|
|
697,500 |
|
|
300,000 |
|
|
3,029,787 |
|
|
269,966 |
|
|
913,000 |
|
|
129,019 |
|
|
5,339,272 |
| ||||||||
Jonathan P. Graham(8) Senior Vice President, General Counsel and Secretary
|
|
2018 2017 2016 |
|
|
938,596 932,577 916,789 |
|
|
0 0 1,000,000 |
|
|
1,959,878 1,749,939 1,609,898 |
|
|
839,983 749,997 689,990 |
|
|
1,402,000 858,000 1,165,000 |
|
|
204,901 231,695 1,038,668 |
|
|
5,345,358 4,522,208 6,420,345 |
|
(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 |
64 ï 20182019 Proxy Statement 67
|
Executive Compensation Tables
|
|
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%
measures are performance conditions, as defined under ASC 718. The values shown in this table and the “Grants of Plan-Based Awards” table are based on probable outcomes of these performance conditions. 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 170% 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 30% earnout, for total earned payout of 200% of performance units granted. |
Fair Value of Performance Units for the 2017-2019 Performance Period | ||||||||||||||||
Fair Value of Performance Units for the 2018-2020 Performance Period | Fair Value of Performance Units for the 2018-2020 Performance Period | |||||||||||||||
Name | Based on the Maximum Performance Regarding the 2017-2019 Operating Performance Measures | Based on the Maximum Performance Regarding the Operating Performance Measures and Maximum Payout for the TSR Modifier | Based on the Maximum Performance Regarding the 2018-2020 Operating Performance Measures | Based on the Maximum Performance Regarding the Operating Performance Measures and Maximum Payout for the TSR Modifier | ||||||||||||
Robert A. Bradway
|
|
$8,999,665
|
|
|
$11,999,673
|
|
| $10,624,727 |
|
| $12,499,879 |
| ||||
Anthony C. Hooper
|
|
2,999,829
|
|
|
3,999,891
|
|
| $3,399,739 |
|
| $3,999,871 |
| ||||
Murdo Gordon |
| $5,949,902 |
|
| $6,999,955 |
| ||||||||||
Sean E. Harper
|
|
2,774,810
|
|
|
3,699,747
|
|
| $3,399,739 |
|
| $3,999,871 |
| ||||
David W. Meline
|
|
2,624,738
|
|
|
3,499,770
|
|
| $3,399,739 |
|
| $3,999,871 |
| ||||
David M. Reese |
| $764,748 |
|
| $899,725 |
| ||||||||||
Jonathan P. Graham
|
|
1,874,915
|
|
|
2,499,887
|
|
| $2,379,949 |
|
| $2,799,985 |
|
(3) | For |
(4) | Reflects amounts that were earned under our Executive Incentive Plan, or EIP, for |
(5) | See the subsection “All Other Compensation—Perquisites and Other Compensation” immediately following these footnotes. |
(6) | Mr. Gordon was hired to serve as Executive Vice President, Global Commercial Operations effective September 3, 2018. This table reflects his compensation earned beginning on that date. The amount shown for Mr. |
(7) |
|
(8) | The amount shown in the bonus column for 2016 is the second of two installments due to Mr. Graham as asign-on bonus to replace thepro-rata value of Mr. Graham’s 2015 bonus at his previous employer, which was forfeited upon his leaving, and to induce Mr. Graham to accept |
All Other Compensation—Perquisites and Other Compensation
Perquisites. The amounts reported reflect the aggregate incremental cost of perquisites and other personal benefits provided to our NEOs and are included in the “All Other Compensation” column of the “Summary Compensation Table.” The following table sets forth the perquisites provided to our NEOs in 2017.2018.
Personal Use of Company Aircraft(1) | Personal Use of Company Car and Driver(2) | Personal Financial Planning Services | Other(3) | Personal Use of Company Aircraft(1) | Personal Use of Company Car and Driver(2) | Personal Financial Planning Services | Moving and Relocation Expenses(3) | Other(4) | ||||||||||||||||||||||||||||||||||||||||
Name | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Total($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Tax Gross- Up($) | Aggregate Incremental Cost($) | Total($) | ||||||||||||||||||||||||||||||||||||
Robert A. Bradway
|
|
111,098
|
|
|
3,866
|
|
|
15,000
|
|
|
10,539
|
|
|
140,503
|
|
| 88,884 |
|
| 4,091 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 59,179 |
|
| 167,154 |
| ||||||||||||
Anthony C. Hooper
|
|
805
|
|
|
1,455
|
|
|
15,000
|
|
|
9,330
|
|
|
26,590
|
|
| 0 |
|
| 805 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 12,684 |
|
| 28,489 |
| ||||||||||||
Murdo Gordon |
| 0 |
|
| 0 |
|
| 3,904 |
|
| 213,287 |
|
| 94,381 |
|
| 1,955 |
|
| 313,527 |
| |||||||||||||||||||||||||||
Sean E. Harper
|
|
0
|
|
|
0
|
|
|
15,000
|
|
|
7,500
|
|
|
22,500
|
|
| 0 |
|
| 0 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,212 |
|
| 25,212 |
| ||||||||||||
David W. Meline
|
|
90
|
|
|
2,388
|
|
|
15,000
|
|
|
6,842
|
|
|
24,320
|
|
| 24,237 |
|
| 1,365 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,500 |
|
| 51,102 |
| ||||||||||||
David M. Reese |
| 0 |
|
| 0 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,500 |
|
| 25,500 |
| |||||||||||||||||||||||||||
Jonathan P. Graham
|
|
90
|
|
|
40
|
|
|
15,000
|
|
|
6,842
|
|
|
21,972
|
|
| 0 |
|
| 79 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,522 |
|
| 25,601 |
|
(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, |
68 ï 2019 Proxy Statement
Executive Compensation Tables |
which include |
(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. |
(3) | Mr. Gordon agreed to relocate from New Jersey to Thousand Oaks, California to serve as Executive Vice President, Global Commercial Operations in September 2018. The incremental cost of certain relocation benefits that were provided to Mr. Gordon in 2018 in connection with his relocation in accordance with our relocation policies, include: |
(a) | $93,488 for costs to sell his previous residence and purchase his new residence; |
(b) | $34,610 for costs to relocate household goods; |
(c) | $63,855 for costs for temporary housing; |
(d) | $21,334 for reimbursed relocation-related travel expenses and miscellaneous other relocation expenses; and |
(e) | $94,381 for taxgross-up payments on moving and relocation benefits provided. |
(4) (a) | Other expenses for Mr. Bradway reflect our payment of the required filing fee of $45,000 incurred by Mr. Bradway under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or HSR Act, as approved by the Compensation and Management Development Committee, or Compensation Committee. During 2018, Mr. Bradway submitted filings under the HSR Act based on his then-current and anticipated future holdings of Amgen Common Stock approaching the reporting threshold under the HSR Act. The Compensation Committee reviewed the legal requirements under the HSR Act. Based on this review, the Compensation Committee approved that the payment of the HSR Act filing fee be made by the Company on Mr. Bradway’s behalf because the stock giving rise to the reporting requirements was granted as part of Mr. Bradway’s compensation for services to the Company and such requirements were triggered because of Mr. Bradway’s election to continue to hold such stock. Mr. Bradway was responsible for any taxes due as a result of the Company paying the HSR Act filing fee and was not provided a taxgross-up payment. |
(b) | Other expenses also include Company contributions tonon-profit charities designated by the executive in the amount of $9,984 for Messrs. Bradway and Hooper and $10,000 for Drs. Harper and Reese and Messrs. Meline and Graham. |
(c) | Other expenses also include executive physicals, gifts, personal expenses on business travel, and expenses related to guests accompanying the NEOs on business travel. |
Other Compensation. The following table sets forth compensation for our NEOs in 2018 incurred in connection with our 401(k) Retirement and Savings Plan, or 401(k) Plan, our NDCP, and our Supplemental Retirement Plan, or SRP. These amounts, along with the perquisites and other compensation discussed above, are included in the “All Other Compensation” column of the “Summary Compensation Table.” See “Nonqualified Deferred Compensation” below for a description of these plans.
Name | Company Contributions to 401(k) Retirement and Savings Plan($) |
Company Credits to Non-Qualified |
Company Credits to Supplemental Retirement Plan($) | Total($) | ||||||||||||
Robert A. Bradway |
| 27,500 |
|
| 0 |
|
| 396,800 |
|
| 424,300 |
| ||||
Anthony C. Hooper |
| 27,500 |
|
| 0 |
|
| 198,500 |
|
| 226,000 |
| ||||
Murdo Gordon |
| 19,808 |
|
| 1,000,000 |
|
| 3,269 |
|
| 1,023,077 |
| ||||
Sean E. Harper |
| 27,500 |
|
| 0 |
|
| 181,500 |
|
| 209,000 |
| ||||
David W. Meline |
| 27,500 |
|
| 0 |
|
| 181,500 |
|
| 209,000 |
| ||||
David M. Reese |
| 27,500 |
|
| 0 |
|
| 76,019 |
|
| 103,519 |
| ||||
Jonathan P. Graham |
| 27,500 |
|
| 0 |
|
| 151,800 |
|
| 179,300 |
|
ï 20182019 Proxy Statement 6569
|
Executive Compensation Tables
|
|
|
Other Compensation. The following table sets forth compensation for our NEOs in 2017 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 and Savings Plan($) | Company Credits to Supplemental Retirement Plan($) | Total($) | |||||||||
Robert A. Bradway
|
|
27,000
|
|
|
493,538
|
|
|
520,538
|
| |||
Anthony C. Hooper
|
|
27,000
|
|
|
241,877
|
|
|
268,877
|
| |||
Sean E. Harper
|
|
27,000
|
|
|
220,231
|
|
|
247,231
|
| |||
David W. Meline
|
|
27,000
|
|
|
220,331
|
|
|
247,331
|
| |||
Jonathan P. Graham
|
|
27,000
|
|
|
182,723
|
|
|
209,723
|
|
Grants of Plan-Based Awards
The following table sets forth summary information regarding all grants of plan-based awards made to our NEOs for the year ended December 31, 2017.2018. All of our equity based awards were granted under the Amgen Inc. 2009 Equity Incentive Plan, as amended.
Estimated Future Payouts |
Estimated Future | All Other Stock Awards: Number of Shares of Stock or Units(#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | Exercise ($/Sh) | Grant Date Fair Value of Stock and Option Awards($) |
Estimated Future Payouts |
Estimated Future | All Other | All Other (#)(6) | Exercise ($/Sh) | Grant Date | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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/GMIP | Performance Units | RSUs | Stock Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert A. Bradway | 3/7/17 | 3/7/17 | (2) | (2) | 11,702,500 | 3/7/18 | 3/7/18 | (3) | (3) | 11,966,250 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | (3) | 33,543 | 67,086 | 5,999,836 | (6) | 4/27/18 | 3/7/18 | (4) | 33,107 | 66,214 | 6,249,939 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | 14,760 | 2,399,976 | (7) | 4/27/18 | 3/7/18 | 14,087 | 2,499,879 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/1/17
|
|
| 3/7/17
|
|
| 130,718
|
|
| 162.60
|
|
| 3,599,974
| (8)
|
| 4/27/18
|
|
| 3/7/18
|
|
| 108,444
|
|
| 177.46
|
| 3,749,994 | (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony C. Hooper | 3/7/17 | 3/7/17 | (2) | (2) | 7,021,500 | 3/7/18 | 3/7/18 | (3) | (3) | 7,179,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | (3) | 11,181 | 22,362 | 1,999,945 | (6) | 4/27/18 | 3/7/18 | (4) | 10,594 | 21,188 | 1,999,935 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | 4,920 | 799,992 | (7) | 4/27/18 | 3/7/18 | 4,508 | 799,990 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/1/17
|
|
| 3/7/17
|
|
| 43,572
|
|
| 162.60
|
|
| 1,199,973
| (8)
|
| 4/27/18
|
|
| 3/7/18
|
|
| 34,702
|
|
| 177.46
|
| 1,199,995 | (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Murdo Gordon | 9/3/18 | (2) | 9/3/18 | (2) | (3) | 307,692 | (2) | 692,307 | (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/2/18 | 7/20/18 | (4) | 17,699 | 35,398 | 3,499,977 | (10) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/2/18
|
|
| 7/20/18
|
|
| 34,213
|
| 6,399,884 | (8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 3/7/17 | 3/7/17 | (2) | (2) | 7,021,500 | 3/7/18 | 3/7/18 | (3) | (3) | 7,179,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | (3) | 10,342 | 20,684 | 1,849,874 | (6) | 4/27/18 | 3/7/18 | (4) | 10,594 | 21,188 | 1,999,935 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | 4,551 | 739,993 | (7) | 4/27/18 | 3/7/18 | 4,508 | 799,990 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/1/17
|
|
| 3/7/17
|
|
| 40,305
|
|
| 162.60
|
|
| 1,110,000
| (8)
|
| 4/27/18
|
|
| 3/7/18
|
|
| 34,702
|
|
| 177.46
|
| 1,199,995 | (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David W. Meline | 3/7/17 | 3/7/17 | (2) | (2) | 7,021,500 | 3/7/18 | 3/7/18 | (3) | (3) | 7,179,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | (3) | 9,783 | 19,566 | 1,749,885 | (6) | 4/27/18 | 3/7/18 | (4) | 10,594 | 21,188 | 1,999,935 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | 4,305 | 699,993 | (7) | 4/27/18 | 3/7/18 | 4,508 | 799,990 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/1/17
|
|
| 3/7/17
|
|
| 38,126
|
|
| 162.60
|
|
| 1,049,990
| (8)
|
| 4/27/18
|
|
| 3/7/18
|
|
| 34,702
|
|
| 177.46
|
| 1,199,995 | (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David M. Reese | 3/7/18 | 3/7/18 | (3) | (3) | 4,786,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/27/18 | 3/7/18 | (4) | 2,383 | 4,766 | 449,863 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/2/18 | 5/21/18 | 12,830 | 2,399,980 | (8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/27/18 | 3/7/18 | 1,014 | 179,944 | (8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18
|
|
| 3/7/18
|
|
| 7,807
|
|
| 177.46
|
| 269,966 | (9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jonathan P. Graham | 3/7/17 | 3/7/17 | (2) | (2) | 4,681,000 | 3/7/18 | 3/7/18 | (3) | (3) | 4,786,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | (3) | 6,988 | 13,976 | 1,249,944 | (6) | 4/27/18 | 3/7/18 | (4) | 7,416 | 14,832 | 1,399,992 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/1/17 | 3/7/17 | 3,075 | 499,995 | (7) | 4/27/18 | 3/7/18 | 3,155 | 559,886 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/1/17
|
|
| 3/7/17
|
|
| 27,233
|
|
| 162.60
|
|
| 749,997
| (8)
|
| 4/27/18
|
|
| 3/7/18
|
|
| 24,291
|
|
| 177.46
|
| 839,983 | (9) |
(1) | Reflects the date on which the grants were approved by the Compensation |
(2) | Because Mr. Gordon commenced employment with us in September 2018, he received apro-rata 2018 award under the Global Management Incentive Plan, or GMIP, as he was not an employee when participants in the EIP were determined. Amounts shown represent his target and maximum opportunity under the GMIP afterpro-rating based on his hire date. |
(3) | Represents awards to our NEOs made under our EIP (except for Mr. Gordon) whose award was made under our GMIP since Mr. Gordon commenced employment on September 3, 2018, and was not eligible to participate in the EIP. For our EIP participants, the “maximum” amounts shown in the table above reflect the largest possible payments under our EIP for the |
Our 2018 Company performance goals were financial and operating performance goals weighted as follows: (1) Deliver Results (60%)—30% Revenues and 30%Non-GAAP Net Income (as reported and reconciled in Appendix B); (2) Progress Innovative Pipeline (25%); and (3) Deliver Annual Priorities (15%). There are no payouts for below-threshold performance on any of our Company performance goals. Threshold performance on our “Progress Innovative Pipeline” goals results in 50% earned for those metrics. Certain measurements of performance for the non-financial metrics are more subjective in nature and could result in a very small payout percentage (less than 1% of an annual cash incentive award) and, as such, no threshold amounts are shown in the table. The 2018 Company performance goals derived target and maximum payout levels, which are based on a multiple of salary, are shown in the table below. Maximum performance under all of the performance metrics results in 225% of target being earned. The actual amounts awarded under our Company performance goals are based on achievement of 166.6% performance against target and |
66 70 ï 20182019 Proxy Statement
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Executive Compensation Tables
|
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards($) | Non-Equity Compensation($) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards($) | Non-Equity Compensation($) | |||||||||||||||||||||||||||||
Name | Threshold | Target | Maximum | Actual | Threshold | Target | Maximum | Actual | ||||||||||||||||||||||||
Robert A. Bradway
|
|
—
|
|
|
2,333,077
|
|
5,249,423
|
2,683,000
|
| — |
|
| 2,340,000 |
|
| 5,265,000 |
|
| 3,898,000 |
| ||||||||||||
Anthony C. Hooper
|
|
—
|
|
|
1,049,769
|
|
2,361,980
|
1,207,000
|
| — |
|
| 1,053,000 |
|
| 2,369,250 |
|
| 1,754,000 |
| ||||||||||||
Murdo Gordon |
| — |
|
| 307,692 |
|
| 692,307 |
|
| 513,000 |
| ||||||||||||||||||||
Sean E. Harper
|
|
—
|
|
|
970,308
|
|
2,183,193
|
1,116,000
|
| — |
|
| 974,000 |
|
| 2,191,500 |
|
| 1,623,000 |
| ||||||||||||
David W. Meline
|
|
—
|
|
|
970,308
|
|
2,183,193
|
1,116,000
|
| — |
|
| 974,000 |
|
| 2,191,500 |
|
| 1,623,000 |
| ||||||||||||
David M. Reese |
| — |
|
| 548,154 |
|
| 1,233,347 |
|
| 913,000 |
| ||||||||||||||||||||
Jonathan P. Graham
|
|
—
|
|
|
745,785
|
|
1,678,016
|
858,000
|
| — |
|
| 841,500 |
|
| 1,893,375 |
|
| 1,402,000 |
|
Reflects estimated payouts regarding performance units granted during |
|
All performance units accrue dividend equivalents deemed reinvested in shares and that are payable in shares only to the extent and when the underlying performance units are earned. For more information, see “Elements of Compensation and Specific Compensation Decisions—Long-Term Incentive Equity Awards” in our Compensation Discussion and Analysis. All 2018non-GAAP operating measures with respect to the 2018-2020 performance period discussed above are reported and reconciled in Appendix B. |
Reflects the RSUs granted during |
Reflects the |
Reflects the grant date fair values of performance units granted |
Reflects the grant date fair values of RSUs granted during |
Reflects the grant date fair values of stock options granted during |
(10) | Reflects the grant date fair value of performance units granted to Mr. Gordon for the 2018-2020 performance period determined in accordance with ASC 718, based on the number of performance units granted multiplied by: (i) 100% which is the operating measures percentage earnout based on the probable outcomes of financial |
ï 20182019 Proxy Statement 6771
|
Executive Compensation Tables
|
|
performance measures over the three-year performance period as of the grant date; and (ii) the grant date fair value per unit of $197.75, which reflects the impact of the TSR modifier of $10.69 per share, which is a market condition. The grant date fair value per unit was calculated using a payout simulation model with the following key assumptions: risk-free interest rate of 2.9%; volatility of the price of our Common Stock of 21.6%; the closing price of our Common Stock on the grant date of $187.06 per share; volatilities of the prices of the stocks of the Reference Group; and the correlations of returns of our Common Stock and the stocks of the Reference Group to simulate TSRs and their resulting impact on the payout percentages based on the contractual terms of the performance units. |
Outstanding Equity Awards at Fiscal Year End
The following table sets forth summary information regarding the outstanding equity awards at December 31, 20172018 granted to each of our NEOs.