AbbVie 2013 Annual Report Download - page 141

shared by all named executive officers in any given year. Measurable goals apply to all named executive
officers, reflecting their specific areas of responsibility.
Most named executive officers also carry strategic and leadership-oriented goals, which require
qualitative, subjective assessment of their progress during the year. Finally, the process allows for
Committee discretion, since many goals, especially for certain positions, cannot be reduced to
formulaic, numerical targets, or anticipated in advance. By definition, therefore, short-term incentives
directly tie named executive officers’ pay to both Company and individual results, allowing for
Committee discretion to address unforeseen developments. In the aggregate, short-term incentives
should be paid roughly at target when results substantially meet expectations, below target if results do
not substantially meet expectations, and above target if results substantially exceed expectations.
Long-Term Incentives
AbbVie’s long-term incentives serve two primary purposes: first, they directly align the largest
component of named executive officer pay with stockholders’ interests; and second, they help ensure
successful long-term performance through effective focus and retention of executive talent.
Named executive officers’ interests are directly aligned with those of stockholders in two ways.
First, through direct stock ownership, named executive officers benefit from the results they create for
other stockholders. Second, the levels of awards named executive officers receive vary, by plan design
and each named executive officer’s individual performance, as reviewed by the Committee. The
Committee considers various measures it believes align with an increase in stockholder returns, or with
operating and strategic results that help drive stockholder value creation. Awards are further
differentiated based on each named executive officer’s leadership and specific contribution to long-term
strategic results. Accordingly, there is a compelling and direct link between named executive officers’
long-term incentives and Company results and stockholder return.
Effective focus and retention of executive talent are a result of the emphasis placed on long-term
incentives within the broader rewards framework. In 2013, long-term incentives comprised roughly
two-thirds of total compensation for AbbVie’s named executive officers.
For awards in 2013, AbbVie granted non-qualified stock options and performance-vesting restricted
shares to named executive officers. All awards were granted under the AbbVie 2013 Incentive Stock
Program.
Benefits
As with all AbbVie employees, named executive officers are provided certain employment and
post-employment benefits. Benefits are an important part of retention and capital preservation for all
employees, helping to protect against the impact of unexpected catastrophic loss of health and/or
earnings potential, as well as providing a means to save and accumulate for retirement or other
post-employment needs.
Say-on-Pay and Say-on-Frequency Vote
The Committee annually evaluates the Company’s compensation policies and programs to ensure
alignment with short- and long-term interests of our stockholders, evolving market practices and other
relevant factors. The Committee considers whether the performance criteria and corresponding
objectives appropriately balance objective performance and the quality of that performance, the
relationship between performance and incentive plan payouts, the mix of short- and long-term
incentives, and whether the overall structure and application of the incentive plans encourages
appropriate behavior.
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