AbbVie 2013 Annual Report Download - page 150

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executive compensation and benefit programs appropriately incentivize employees and any risks arising
from its 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 named
executive officers to regard AbbVie as a career employer. For example, AbbVie sponsors a
defined benefit pension plan. Equity awards (discussed in more detail below) also vest over
multi-year periods. Both programs encourage AbbVie’s named executive officers to consider the
long-term impact of their decisions and align their interests with those of AbbVie’s stockholders.
• AbbVie’s annual incentive program places an appropriate weighting on earnings achievement by
balancing it 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’s long-term incentive program focuses named executive officers on longer-term
operating performance and stockholder returns. In 2013, AbbVie’s named executive officers
received roughly two-thirds of their total compensation in the form of long-term equity
incentives (25% of which are stock options that vest over a multi-year period, and 75% of which
are performance 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’s named executive officers do not receive any of
their long-term incentive compensation in cash.
• 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.
• AbbVie’s compensation committee has the ability to exercise downward discretion in
determining annual incentive plan payouts. In 2013, the compensation committee exercised its
discretion to deliver annual incentive plan awards below the maximum amounts allowable
according to the plan formula.
• AbbVie requires mandatory training on its code of conduct and policies and procedures to
educate its employees on appropriate behaviors and the consequences of taking inappropriate
actions.
• 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.
This assessment was discussed with the compensation committee and its independent compensation
consultant.
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