AbbVie 2014 Annual Report Download - page 152

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Compensation Committee Report
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The compensation committee of the board of directors is primarily responsible for reviewing, approving and
overseeing AbbVie’s compensation plans and practices, and works with management and the committee’s independent
compensation consultant to establish AbbVie’s executive compensation philosophy and programs. The committee
reviewed and discussed the Compensation Discussion and Analysis with management and recommended to the board of
directors that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
E. Liddy, Chairman, R. Austin, G. Tilton, and F. Waddell
Compensation Risk Assessment
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During 2014, in collaboration with the compensation committee’s independent compensation consultant, AbbVie
conducted an in-depth risk assessment of its compensation policies and practices, including those related to executive
compensation programs for NEOs. The risk assessment included a quantitative and qualitative analysis of AbbVie’s
executive compensation programs and broader employee incentive compensation plans. AbbVie also considered how
these programs compare, from a design perspective, to programs maintained by other companies. Based on this
assessment, it was determined that AbbVie’s executive compensation programs are balanced and appropriately incent
employees, and any risks arising from the compensation policies and practices are not reasonably likely to have a
material adverse effect on AbbVie. The following factors were among those considered in making this determination:
• AbbVie’s compensation structure contributes to a corporate culture that encourages our NEOs to regard
AbbVie as a long-term employer. For example, equity awards vest over multi-year periods, which encourages
NEOs to consider the long-term impact of their decisions and align their interests with those of AbbVie’s
stockholders.
• AbbVie’s annual incentive program is based on multiple performance measures, balancing earnings
achievement with other factors. Since earnings are a key component of stock price performance, this aspect
of AbbVie’s compensation plan also promotes alignment with stockholder interests.
• AbbVie does not include certain pay design features that may have the potential to encourage excessive
risk-taking, such as: over-weighting toward annual incentives, highly leveraged payout curves, unreasonable
thresholds or dramatic changes in payout opportunity at certain performance levels that may encourage
inappropriate short-term business decisions to meet payout thresholds. In addition, effective for 2015, the
committee has placed a limit of 200% of target on any awards made under the NEO short-term incentive
plan.
• AbbVie’s long-term incentive program focuses NEOs on longer-term operating performance and stockholder
returns. In 2014, AbbVie’s NEOs received roughly two-thirds of their total direct compensation in the form
of long-term incentives (25% of which are stock options that vest over a multi-year period, and 75% of
which are performance-vested awards that vest over a period of up to five years with not more than one-
third of the award vesting in any one year).
• AbbVie makes equity awards and sets grant prices at the same time each year, at the compensation
committee’s regularly scheduled meeting in February. In addition, AbbVie does not award discounted stock
options or immediately vesting equity awards.
• AbbVie has robust stock ownership guidelines for its senior executives, which promotes alignment with
stockholder interests, and other good governance equity practices such as anti-hedging and anti-pledging
policies.
32 2015 Proxy Statement
EXECUTIVE COMPENSATION