AbbVie 2013 Annual Report Download - page 144

regarding target or reference levels of appropriate long-term incentives by individual, the Committee
determines grants for each named executive officer based on its objective and subjective assessment of
performance, and progress against strategic milestones, as well as external factors which may have
affected the individual’s and/or company’s performance.
It is important to note that while the Committee may target pay levels for a group of named
executive officers or a specific named executive officer at, higher than, or below a certain performance
percentile that the independent compensation consultant may forecast, the actual awards are made
without knowledge of the actual long-term incentive awards of competitors for the current performance
period because some elements of competitors’ actual performance and their actual compensation
awards for the current performance period are unknown at the time of award. The independent
compensation consultant’s long-term incentive information always reflects prior performance periods, so
it is impossible at the time of the award determination to predict precisely where actual pay decisions
will place AbbVie’s named executive officers relative to others.
Awards for 2013 were based on the goals of AbbVie’s long-term incentive program, the
Committee’s assessment of business performance, each individual’s relative performance against his or
her pre-determined goals, current outstanding awards held by the named executive officers and the
recommendation of the independent compensation consultant to the Committee. After contemplating
these factors, the Committee delivered long-term incentive awards to the named executive officers that
were intended, in the aggregate, to reward for performance between the median and the 75th percentile
of the Health Care Companies group.
Applying these standards, the Committee determined the equity award value for each named
executive officer and made the awards reported in the ‘‘Summary Compensation Table’’ and the ‘‘2013
Grants of Plan-Based Awards’’ table. Further, AbbVie determined in 2013, based on market practice,
advice from the Committee’s independent compensation consultant and recommendations of
institutional stockholders, that the long-term incentive awards for named executive officers should be in
the form of 25 percent stock options and 75 percent performance-vesting shares.
AbbVie’s policy with respect to its annual equity award for all eligible employees, including the
named executive officers, is to grant the award and set the grant price at the same time each year, at
the Committee’s regularly scheduled February meeting. These meeting dates generally are the third
Thursday of February and are scheduled two years in advance.
AbbVie’s 2013 annual grant was dated and the grant price set on February 14, 2013. AbbVie’s
practice for setting the grant price is the average of the highest and lowest trading prices of a common
share on the date of the grant (rounded up to the next even penny). The grant price for the 2013
annual grant was set at $35.88. The high, low and closing prices of an AbbVie common share on
February 14, 2013 were $36.73, $35.01 and $36.57, respectively.
In establishing criteria for performance-vesting shares, the Committee considers the
recommendation of its independent compensation consultant, and the fact that the secondary
comparison of the High-Performing Companies group is generally defined by five-year average return
on equity of 18 percent or greater.
Accordingly, performance-vesting shares granted in 2013 may vest over a period of up to five years,
with not more than one-third of the award vesting in any one year, dependent upon the company
achieving an annual return on equity threshold of 18 percent from continuing operations adjusted for
specified items as described in the quarterly earnings releases. If the thresholds are met in three of the
five years, 100 percent of the performance-vesting shares will vest. If the thresholds are missed in all
five years, 100 percent of the performance-vesting shares will be forfeited. Outstanding restricted shares
receive dividends at the same rate as all other stockholders.
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