AbbVie 2013 Annual Report Download - page 142

The Committee also considers the perspectives of stockholders through the Say-on-Pay advisory
vote. In May 2013, stockholders expressed support for AbbVie’s Say-on-Pay proposal with 95.7% of
votes cast in favor of the compensation paid to the named executive officers. We consider this vote a
positive endorsement of our executive compensation practices and decisions. Despite this positive
result, the Committee, its independent compensation consultant and management continue to examine
our compensation practices in light of competitive practices and will make changes the Committee
believes are appropriate. In addition, we routinely engage with our investors to understand their
perspectives on their investment in AbbVie, including our executive compensation practices. All of
these factors are important in determining whether the company’s compensation programs are
appropriately balanced between defining and incentivizing performance, encouraging appropriate
behavior, and retaining executive talent. In the aggregate, they strongly align our compensation policies
and programs with our stockholders’ best interests.
The Committee also recommended, and the board of directors adopted, an annual advisory vote of
stockholders on executive compensation, which reflects the preference expressed by stockholders in
2013 with respect to the frequency of the Say-on-Pay vote.
How Executive Pay Decisions Are Made
The vast majority of pay decisions at AbbVie are performance-based. Specific goals and targets are
the foundation of our pay-for-performance process and this section describes how they apply to each
pay component. It is important to note, however, that while our pay process is based on a
comprehensive, multi-level review, it is not entirely formulaic. Some goals can be measured objectively
against pre-determined financial results. Others take the form of the Committee’s subjective assessment
of success and progress against strategic objectives or leadership behaviors, which cannot be scored by
numeric or formulaic application of measurable criteria. Consequently, while final pay 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 pay component follows.
Peer Group
To provide the appropriate context for executive pay decisions for 2013, the Committee, in
consultation with its independent compensation consultant, assessed market practices and pay levels of
two designated groups of comparable companies. In addition to competing for executive talent, the
peer companies also operate complex business operations with significant global reach. The comparison
groups for setting targets for compensation for 2013 were as follows:
Health Care Companies High-Performing Companies
Amgen, Inc. 3M Company
Bristol-Myers Squibb Company Bristol-Myers Squibb Company
Eli Lilly and Company Caterpillar Inc.
GlaxoSmithKline plc The Coca-Cola Company
Johnson & Johnson Colgate-Palmolive Company
Merck & Company, Inc. General Dynamics Corporation
Novartis AG General Mills, Inc.
Pfizer Inc. H.J. Heinz Company
Kellogg Company
Kimberly-Clark
McDonald’s Corporation
Merck & Company, Inc.
PepsiCo Inc.
The Procter & Gamble Company
19