AbbVie 2012 Annual Report Download - page 133

decisions are guided by some specific, objective measures, the Committee, in consultation with its
independent compensation consultant, also considers, at both the Company and individual levels, a
combination of objective and subjective measures in the overall assessment of performance and the pay
decisions that result from that assessment. Discussion of the decision-making criteria for each
component follows.
Peer Group
To provide the appropriate context for executive pay decisions for 2012, the Abbott compensation
committee, in consultation with its independent compensation consultant, assessed market practices and
pay levels of two designated groups of high-profile companies. In addition to competing for executive
talent, the peer companies also operate complex business operations with significant global reach.
Accordingly, the comparison groups for setting targets for compensation included the following two
global reference groups:
1. Primarily, direct health care competitors, including: Amgen Inc., Bristol-Myers Squibb
Company, Eli Lilly and Company, GlaxoSmithKline, Johnson & Johnson, Merck & Company, Inc.,
Novartis AG and Pfizer Inc.
2. Secondarily, to supplement performance and compensation data from our direct peer
group, a group of global, diversified high performing companies with a five-year average return on
equity of 18 percent or higher and similar to Abbott in terms of size and/or scope of operations.
The 2012 group included: 3M Company, Bristol-Myers Squibb Company, Caterpillar Inc., The
Coca-Cola Company, Colgate-Palmolive Company, General Dynamics Corporation, General
Mills, Inc., H.J. Heinz Company, Kellogg Company, Kimberly-Clark, McDonald’s Corporation,
Merck & Company, Inc., PepsiCo, Inc. and The Procter & Gamble Company.
AbbVie’s peer groups are based on the peer groups used by Abbott. While the Committee expects
to review these groups over time, it believes the peer groups described above are appropriate for
making executive pay comparisons.
Base Pay
Base pay targets must be competitive with the market from which talent is obtained. Generally,
base pay targets are set in a manner that references the median of the health care comparison group as
an initial benchmark, but may be adjusted upon secondary reference to the high-performing group.
Specific pay rates, however, are based on an executive’s profile, performance, experience, unique skills
and internal equity with others at AbbVie. Once the rate of pay is set in this manner either at hire or
upon promotion or transfer, subsequent changes in pay, including salary increases, when appropriate,
are based on the executive’s performance, the job he or she is performing or assuming, internal equity
and the Company’s operating budget. In this sense, base pay is performance-based as well as aligned
with the individual’s relative performance and contributions.
Annual Bonus
In 2012, AbbVie’s named executive officers participated in one of Abbott’s annual bonus programs.
The discussion of the named executive officers’ compensation in this proxy statement includes an
examination of the goals and outcomes under the Abbott bonus program in which they participated in
2012.
Going forward, all of AbbVie’s named executive officers will participate in the AbbVie 2013
Performance Incentive Plan (‘‘PIP’’). The PIP is intended to comply with the requirements of Internal
Revenue Code Section 162(m) for performance-based compensation.
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