UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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◻ | Definitive Proxy Statement |
◻ | Definitive Additional Materials |
◻ | Soliciting Material under §240.14a-12 |
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Notice of 2023 |
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To the stockholders of our company:
You are cordially invited to attend the 2023 Annual Meeting of Stockholders to be held on May 5, 2023, where we will be voting on the below matters. You will be able to attend the Annual Meeting, vote, and submit questions via live webcast by visiting www.virtualshareholdermeeting.com/ABBV2023.
Items of business
| ● | To elect three directors to hold office until the 2026 Annual Meeting or until their successors are elected. |
| ● | To ratify the appointment of Ernst & Young LLP as AbbVie’s independent registered public accounting firm for 2023. |
| ● | To vote on an advisory basis on the approval of executive compensation. |
| ● | To vote on a management proposal to eliminate supermajority voting. |
| ● | To consider any other matters that may properly come before the meeting, including four stockholder proposals, if presented during the meeting. |
Your vote is important.
Internet
Mail
Telephone
At the virtual meeting | The Annual Meeting of Stockholders of AbbVie Inc. (the “Annual Meeting”) will be held on Friday, May 5, 2023 at 9:00 a.m. CT. This year’s Annual Meeting will be a virtual meeting of stockholders. | ||||||
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DATE AND TIME: Friday, May 5, 2023 | WHERE: Via live webcast online at | ADMISSION: Stockholders of record at the close of business on March 6, 2023 are entitled to notice of and to vote at the annual meeting. | |||||
Thank you for your continued support of and interest in the company. | |||||||
By Order of the Board of Directors, | |||||||
Perry C. Siatis | |||||||
Secretary March __, 2023 | |||||||
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RATIFICATION OF ERNST & YOUNG LLP AS ABBVIE’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 71 |
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SAY ON PAY—ADVISORY VOTE ON THE APPROVAL OF EXECUTIVE COMPENSATION | 74 |
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PROXY SUMMARY
About the Meeting
The accompanying proxy is solicited on behalf of the Board of Directors for use at the Annual Meeting of Stockholders. This summary highlights selected information in the proxy statement. Please review the entire proxy statement and the AbbVie 2022 Annual Report before voting. The voting items expected to be proposed at the meeting are listed below along with the board’s voting recommendations. |
| 2023 Annual Meeting of Stockholders Information |
Date and Time: Friday, May 5, 2023 at 9:00 a.m. CT | ||
Place: Via live webcast online at www.virtualshareholdermeeting.com/ABBV2023 | ||
Record Date: March 6, 2023 | ||
Proposal 1: Election of Directors | FOR | |||
Robert J. Alpern | Melody B. Meyer | Frederick H. Waddell | ||
Each of the nominees has the skills and experience necessary to fulfill his or her oversight role with respect to AbbVie’s business and culture. See pages 13-18 for more information about the qualifications of our directors. |
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Proposal 2: Ratification of Independent Auditor | FOR
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Ernst & Young LLP has served as our independent auditor since 2013. The board and the audit committee believe it is in the best interests of the company and its stockholders to retain Ernst & Young LLP as the company’s independent auditor. See page 71 for more information. | ||||
Proposal 3: Say on Pay – Advisory Vote on Executive Compensation | FOR
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AbbVie’s compensation program aligns executive interests with the drivers of long-term, sustainable growth. Our program balances short- and long-term strategic objectives and directly links compensation to stockholder value. See pages 31-70 for more information. | ||||
Proposal 4: Management Proposal to Eliminate Supermajority Voting | FOR
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AbbVie is again seeking stockholder approval to eliminate supermajority voting thresholds in our charter and by-laws. See pages 75-76 for more information. | ||||
Stockholder Proposals | ||||
Proposal 5: | Stockholder Proposal on Simple Majority Vote | AGAINST | ||
Proposal 6: | Stockholder Proposal on Political Spending | AGAINST | ||
Proposal 7: | Stockholder Proposal on Lobbying | AGAINST | ||
Proposal 8: | Stockholder Proposal on Patent Process | AGAINST | ||
Who We Are
~ 50,000 | In more than 70 countries, AbbVie employees are working every day to advance health solutions for people around the world. | |||
AbbVie is a global, research-based biopharmaceutical company. Since our inception in 2013, we have focused on taking on tough health challenges to make a real difference in people’s lives. In the past 10 years, we’ve invested $55 billion to research, develop, and discover new medicines and solutions. We target diseases with significant unmet need where we can improve the standard of care with innovative new therapies. We are constantly working to create solutions that go beyond treating the illness to have a positive impact on patients’ lives, on societies, and on science itself. Over the last decade, we have expanded to approximately 50,000 employees who are focused every day on making a remarkable impact that lasts. Globally, our employees represent diverse backgrounds and perspectives, and our company values treating everyone equally, with dignity and respect, which we believe allows us to achieve our best. At AbbVie, we care deeply for patients and customers, their families, our employees, and our communities. We strive to do the right thing, pursuing the highest standards in quality, compliance, safety, and performance. Our products help patients in over 175 countries around the world. We have a comprehensive product portfolio that has leadership positions in key therapeutic areas of immunology, hematologic oncology, neuroscience, aesthetics, and eye care. Our commitment to health does not stop with our medicines. Each day, we work to deliver sustainable solutions that improve the health of our business and the health of humankind. | ||||
Launched in | ||||
Millions | ||||
AbbVie’s Principles are foundational: | ||||||||
Transforming Lives We inspire hope and transform lives every day. We make decisions based on our deep caring and compassion for people, delivering a lasting impact to our patients, their families, our employees and the community. |
| Acting with Integrity We strive to always do the right thing. With uncompromising integrity at the heart of everything we do, we pursue the highest standards in quality, compliance, safety and performance. |
| Driving Innovation |
| Embracing Diversity & Inclusion We treat everyone equally, with dignity and respect. Around the world, our employees embrace diverse backgrounds and perspectives, which allows us all to achieve our best. |
| Serving the Community We are proud to serve and support the community and do our part to protect the environment. We make a remarkable impact that's felt within healthcare and beyond. |
Our Business Performance
AbbVie has delivered robust financial results since our launch in 2013
Adjusted Net Revenues |
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| TSR |
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+13.4% | +613% | +18.8% | ||||
compound annual growth rate* | 10-year total stockholder return | compound annual growth rate* | ||||
Adjusted R&D Investment | Approvals | Development Pipeline | ||||
$55BN | 25 | >80 | ||||
cumulative since inception** | major product or indication approvals | active clinical and device programs*** | ||||
Market Capitalization Increase | Quarterly Dividend Increase | |||||
+$232BN | +270% | The measures set forth in this table were calculated as of 12/31/2022. * Net revenues and diluted earnings per share are adjusted to exclude certain specified items and are non-GAAP measures, which are reconciled in Appendix B. ** Adjusted R&D investment reflects adjusted non-GAAP R&D expense, acquired IPR&D and milestones expense, and Calico collaboration expense and is a non-GAAP measure, which is reconciled in Appendix B. *** In development individually or under collaboration or license agreements. | ||||
added significant stockholder value | raised to $1.48 per share from $0.40 per share at inception |
AbbVie has demonstrated strong financial execution with a double-digit compound annual growth rate (CAGR) for both adjusted net revenues and adjusted diluted earnings per share (EPS) as an independent company.
Adjusted Net Revenues* | Adjusted EPS* | |||
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*Net revenues and diluted earnings per share are adjusted to exclude certain specified items and are non-GAAP measures, which are reconciled in Appendix B.
2023 Proxy Statement | 
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2022 Highlights
Strong operational execution
| ● | Net revenues of $58.1BN, an increase of 3.3% on a reported basis and 5.1% operationally. |
| ● | Delivered operating margin of 31.2% on a GAAP basis or 52.0% of net revenues on an adjusted basis. |
| ● | Reported diluted EPS of $6.63 on a GAAP basis and adjusted diluted EPS of $13.77, up 16.4%. |
| ● | Generated operating cash flow of $24.9BN. |
Advancing new medicines with an innovative R&D pipeline
| ● | Achieved regulatory approvals for several new products or major indications, including Skyrizi for the treatment of adults with moderately to severely active Crohn’s disease (CD), Rinvoq for the treatment of adults with moderately to severely active ulcerative colitis who have had an inadequate response or intolerance to one or more tumor necrosis factor blockers, and Vraylar as an adjunctive therapy to antidepressants for the treatment of major depressive disorder in adults. |
| ● | Submitted regulatory applications for additional key development programs, including Rinvoq for the treatment of adult patients with moderately to severely active CD, epcoritamab for the treatment of adult patients with relapsed/refractory large B-cell lymphoma, and ABBV-951 for the treatment of motor fluctuations in patients with advanced Parkinson’s disease. |
Total Stockholder Return (TSR)
AbbVie has a track record of robust total stockholder returns. Since inception, AbbVie’s TSR ranks in the top tier of its named peers and surpasses the cumulative total returns of the Standard & Poor’s 500 Index and the NYSE Arca Pharmaceutical Index, as shown in the tables below.
1-Year | 3-Year | 5-Year | 10-Year | |||||
+24% | +110% | +111% | +613% |
AbbVie’s Relative TSR Performance | ||||||||||||
Versus Peer Group (Multi-Year) | Versus Select Indices (10-Year) | |||||||||||
2022 |
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3rd place out of 10 | ||||||||||||
3 Years | ||||||||||||
2nd place out of 10 | ||||||||||||
5 Years | ||||||||||||
3rd place out of 10 | ||||||||||||
2nd place out of 10 | ||||||||||||
AbbVie’s peer group above includes: Amgen, Inc; Bristol-Myers Squibb Company; Eli Lilly and Company; Gilead Sciences, Inc.; GlaxoSmithKline plc; Johnson & Johnson; Merck & Company, Inc; Novartis AG; and Pfizer Inc. TSR measured as of 12/31/22.
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| 2023 Proxy Statement
Our Governance Highlights
Our board of directors is committed to strong corporate governance tailored to meet the needs of AbbVie and its stockholders to enhance long-term stockholder value. Each year, AbbVie completes a robust investor engagement program with governance investment teams. Our engagements in 2022 included discussions on (1) AbbVie’s environmental, social, and governance (ESG) strategy and initiatives, (2) AbbVie’s equity, equality, diversity, and inclusion programs and disclosures, (3) AbbVie’s processes and disclosures related to its political expenditures and lobbying activities, (4) AbbVie’s executive compensation programs, and (5) AbbVie’s board composition and leadership structure, including the responsibilities of our lead independent director. AbbVie also engages each year with each of its stockholders who submit proposals for the annual meeting.
Each year, the board reviews feedback from our investor engagements and discusses opportunities to improve AbbVie’s governance practices. The following chart summarizes some of the governance practices that the board has adopted over the past several years as a result of dialogue with our stockholders:
Topic: | Actions taken by our board: | |
Stockholder Voting Rights | approved a management proposal to eliminate supermajority voting (Item 4) to seek stockholder approval to amend the company’s Amended and Restated Certificate of Incorporation to provide for a simple majority of shares outstanding for all provisions previously subject to a supermajority provision and previously submitted the same proposal from 2018 to 2022 as well as a declassification management proposal from 2016 to 2018 | |
Proxy Access | approved and implemented in 2016 a proxy access by-law provision, as further detailed in the company’s By-Laws | |
Lead Independent Director Role | increased disclosures in this proxy statement on board leadership structure, including specific factors the board considers when assessing the current structure significantly expanded disclosure on the lead independent director responsibilities in the 2019 and 2018 proxy statements, to better inform our stockholders on the robust leadership that the role provides appointed the lead independent director to all committees in 2019, further strengthening his active leadership role | |
Board Skills Disclosure | updated our director biographies in this proxy statement to include additional skills of interest to our stockholders, such as cybersecurity experience shared our board skills matrix beginning in 2016 | |
Environmental, Social, and Governance (ESG) Disclosures | increased our disclosures on board risk oversight in this proxy statement enhanced our website disclosures on political contributions in 2022 and 2023, including a description of the process used to determine such contributions expanded the discussion of board oversight of executive succession planning and company culture in the 2022 proxy statement issued a TCFD aligned report, starting in 2022 and a SASB aligned report, starting in 2021 disclosed detailed data on the diversity of AbbVie’s U.S. workforce by publishing AbbVie’s EEO-1 report on our website starting in 2020 expanded the description of AbbVie’s clawback policy, starting in the 2019 proxy statement added board diversity data, starting in the 2019 proxy statement |
2023 Proxy Statement | 5
Additional highlights of our governance practices include: | ||||
Director independence ✓ Ten of AbbVie’s eleven directors are independent and regularly meet in executive session ✓ Since our inception, we have had a lead independent director with robust responsibilities ✓ All members of our audit, compensation, nominations and governance, and public policy and sustainability committees are independent | Stockholder rights ✓ Adopted a proxy access By-Law provision for 3%/3 years ✓ We do not have a stockholder rights plan or “poison pill” ✓ Our directors are elected by a majority vote of our stockholders for uncontested elections, and we have a resignation policy if the director fails to receive a majority of the votes cast | Board and executive accountability ✓ Annual executive succession planning, including an assessment of the diversity of executive candidates ✓ Minimum stock ownership guidelines are in place for the CEO and other NEOs ✓ We have a related person transaction policy to ensure appropriate oversight ✓ We hold an annual say-on-pay advisory vote on executive compensation | ||
Board composition and effectiveness ✓ Our governance guidelines restrict the number of boards our directors may serve on to prevent overboarding ✓ Annual board and committee self-assessments and annual board succession planning ✓ For inclusion on the board, the nominations and governance committee considers diversity of race, ethnicity, gender, age, and geography, together with other voluntarily identified diversity criteria | Clawback and anti-hedging and anti-pledging policies ✓ The Board has broad authority to recover incentive plan awards ✓ Directors and executive officers are prohibited from buying or selling any financial instruments designed to hedge or offset any decrease in the market value of AbbVie equity securities they hold ✓ Directors and executive officers are prohibited from pledging AbbVie stock as collateral for a loan | Other ESG practices ✓ ESG and equity, equality, diversity, and inclusion (EEDI) goals are incorporated into our executive compensation programs for all executives ✓ We are guided by strong ethics programs and supplier guidelines ✓ We disclose our corporate political contributions, our trade association memberships, and oversight process on our website and expanded these disclosures in 2022 and 2023 | ||
Board Response to 2022 Termination Pay Proposal
At AbbVie’s 2022 stockholder meeting, the termination pay stockholder proposal received 50.098% support. As a result of this vote outcome, we prioritized discussing this proposal with our stockholders during our summer and fall 2022 engagements. We reached out to stockholders representing over 40% of our outstanding shares requesting to engage on the termination pay proposal and other topics, and conducted engagements via phone or video conference with over 30% of our outstanding shares, including over 15% of our outstanding shares that voted in favor of the termination pay proposal. Our primary goal was to gather feedback on actions the board was considering in response to the passing proposal. Prior to the stockholder meeting, AbbVie had a policy that, in the event of a change in control, NEOs were not eligible for a cash lump sum payment in excess of 3.00 times an NEO’s annual salary and bonus. There was no exception mechanism. In response to the proposal, the board sought shareholder feedback on two potential changes to this policy: (1) capping the potential cash lump sum payment at 2.99 times an NEO’s annual salary and bonus and (2) adding a requirement for stockholder ratification if an exception were to be made to the cap.
Following overwhelmingly positive feedback from stockholders, the board adopted these two changes at its October 2022 meeting. No investor we engaged with requested the inclusion of equity in the cap calculation. Several investors specifically cited AbbVie’s double-trigger treatment of equity in a change in control as best practice and an additional mitigating factor, which the company agreed with in light of competitive market practice.
6 | 2023 Proxy Statement
Our ESG Highlights
As a research-driven global biopharmaceutical company, we apply the same high standards and rigor to the medicines and solutions we pursue, to how we operate our business. We recognize that our company and our industry hold a unique opportunity to make a real difference in people’s lives—not just the breakthroughs we deliver, but also the responsible paths we take to achieve them. We advance environmental, social, and governance (ESG) initiatives that contribute to the sustainable growth of our company so that we can create positive impact for generations to come. Our leaders are stewards of our ESG mission, and our people are committed to putting people, communities, and our world first in our research, innovations, and collaborations. In 2022, we continued to advance our ESG framework and governance. We also took meaningful actions to deliver sustainable solutions that improve the health of our business and society.
Our ESG Framework |
Our ESG Framework is built around three foundational pillars that align with our enterprise goals and principles. These are based on an analysis of our material issues, taking into account the topics of most interest and relevance to our company and our stakeholders—including our patients and patient organizations, employees, investors, regulators & government, payers & providers, suppliers, and nonprofit partners. Collaboration with stakeholders is critical to our success. We value building engaging and long-term relationships with all of our partners and stakeholders.
We discover and deliver innovative medicines that solve serious health issues and enhance people’s lives by pushing the boundaries of innovation, putting people and patients first, creating high-quality therapeutic solutions and ensuring their safety, efficacy, and accessibility. | We unlock the full potential of diverse and talented teams—and partners—to deliver today and into the future. We do this by attracting and retaining the best talent, embracing diversity of thought and through collaboration. We know that when we unlock the full potential of our people and our partners, we accelerate innovation, enhance people’s lives, and meet our business objectives. | We innovate with integrity and intention to advance long-term patient health and business resiliency. We ensure that we are prepared for the future by operating a sustainable, agile business model and governance structure that anticipates and evolves in a dynamic industry and society. We are unwavering in assuring supply of innovative medicines to patients and life enhancing products to customers. |
Our Material Drivers |
Product Innovation We strive to make a remarkable impact on patients and drive sustainable growth by consistently discovering and delivering innovative medicines that address serious health issues and advance people’s lives. Patient Access and Patient Affordability We believe everyone who needs our medicines should be able to get them. | Human Capital Management We believe purposeful work drives meaningful change. We nurture diverse talents to solve the most complex health challenges and create remarkable impacts on people’s lives. Business Ethics We act with integrity in everything we do. | Patient Health and Engagement We continuously strive to improve health outcomes for patients around the world. Product Quality and Safety We are committed to delivering safe and effective, quality products and medicines through robust quality systems. |
2023 Proxy Statement | 7
We also prioritize Environmental Sustainability within and beyond AbbVie to support our patients, people, and planet. Our environmental sustainability strategy is focused on reducing our environmental footprint, growing sustainably by inspiring innovation, and engaging our workforce to steward sustainability.
Our ESG Governance |
AbbVie’s board of directors and executive leadership team regularly review, and advise on, ESG topics to advance AbbVie’s business sustainability and impact on society. To further strategic and enterprise-aligned delivery on AbbVie’s ESG Framework, we maintain an ESG Council, chaired by our Senior Vice President, Corporate Responsibility, Brand and Communications, and composed of senior-level leaders from across the company. The ESG Council’s purpose is to champion business sustainability and mitigate business risks by monitoring, reviewing, and recommending actions to the ESG Council Chair, other members of the executive leadership team, and AbbVie’s CEO. The ESG Council Chair may also present certain recommendations of the ESG Council from time to time to the board of directors as appropriate.
The ESG Council meets regularly and maintains sub-committees that are aligned to AbbVie’s material drivers. With this governance in place, AbbVie is well-positioned to recognize ESG opportunities and advance its ESG objectives.
ESG Action Report |
In 2022, we further strengthened our ESG Action Report by enhancing transparency of our ESG strategies and efforts. Published in May 2022, the 2021 ESG Action Report includes detailed commentary about our approach, actions, and commitments across material drivers; over 70 KPIs showing our progress (a 60% increase in KPIs from our previous report); and ESG-related recognitions of our efforts. The report highlights several key actions, including AbbVie achieving its 2025 scope 1 and 2 carbon reduction target four years ahead of schedule, progress against our EEDI strategy, and advancements in product innovation. The ESG Action Report also outlines our alignment with United Nations Sustainable Development Goals (SDGs) and the Sustainability Accounting Standards Board (SASB) Index. The full ESG Action Report can be found at https://www.abbvie.com/content/dam/abbvie-dotcom/uploads/PDFs/societal-impact/abbvie-esg-action-report.pdf
8 | 2023 Proxy Statement
Below are select 2022 ESG highlights across several of our material areas.
Product Innovation ✓ $7.1 billion in adjusted research & development investment in 2022* ✓ 4 major product or indication approvals in 2022 ✓ 3 programs granted a designation by at least one major regulatory authority to expedite development or review in 2022 | Patient Access and Patient Affordability ✓ Over 198,000 U.S. patients provided medicine at no cost through our patient assistance program in 2022 ✓ Published “Pricing & Access of Our Innovative Medicines” detailing our global approach to pricing and access on AbbVie.com | Human Capital Management ✓ 57% of employees in STEM-related positions are women ✓ 37% of U.S. employees are members of underrepresented populations ✓ Our industry-leading U.S. parental leave policies provide up to 12 weeks paid leave, which can be used incrementally and in phases, plus an additional 6 or 8 weeks paid medical leave following delivery | ||
Environmental Sustainability ✓ Submitted our SBTi science-based targets in 2022, using 2021 as our baseline year – targets awaiting approval from SBTi ✓ Continued to surpass our 2025 scope 1 and 2 carbon emissions targets in advance of original target dates ✓ Published our first report aligning with the Task Force on Climate-Related Financial Disclosures | Patient Health and Engagement ✓ Offered more than 500 patient support programs worldwide for patients who have started treatment on AbbVie medicines – each program being tailored to country and disease-specific needs ✓ Over $39 million in grants and over 200,000 patients and healthcare providers reached through independent education grants in 2022 | Business Ethics ✓ All employees received AbbVie’s annual training on our Code of Business Conduct and conflicts of interest training ✓ Employees in relevant functions also received mandatory training on topics such as anti-corruption, recognizing and reporting safety information, product promotion, and interactions with healthcare providers and patient groups ✓ Robust response to the Ukraine crisis, including donating $1 million to nonprofit partners for medical care and supplies for Ukraine and Ukrainian refugees ✓ Published “Our Position on Tax” – a description of AbbVie’s approach to taxes | ||
*Adjusted research and development investment is a non-GAAP measure, which is reconciled in Appendix B.
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External Recognition as a Leading Company |
Our work hasn’t gone unnoticed. We’ve been honored to receive some of the most prestigious ratings and recognitions in our industry. And we’ve received more than 40 Great Place to Work® and Top Employer rankings globally. For more information, visit https://news.abbvie.com/media-resources/fact-sheets/abbvie-ratings-and-recognition-fact-sheet.htm
Workplace & Diversity | Environmental, Social | ||||||
✓ Great Place to Work’s World’s Best Workplaces™ – Included for six consecutive years ✓ 2022 DiversityInc “Top 50 Companies for Diversity” – Included for nine consecutive years ✓ Seramount “100 Best Companies” – #1 in 2022; Included for nine consecutive years ✓ FORTUNE 100 Best Companies to Work For® – Included for five consecutive years ✓ Human Rights Campaign Corporate Equality Index – Scored 100% for seven consecutive years ✓ Disability:IN Best Places to Work for Disability Inclusion | ✓ Dow Jones Sustainability World and North America Indices ✓ Top Biotech sector score in the S&P Global Corporate Sustainability Assessment ✓ Ecovadis Corporate Social Responsibility Assessment Gold Medal ✓ FTSE4GoodIndex ✓ AbbVie ranked on the 2022 Purpose Power Index ✓ 3BL Media “100 Best Corporate Citizens” | ||||||
10 | 2023 Proxy Statement
Executive Compensation Highlights
The compensation committee has designed and implemented an executive compensation program in which a substantial majority of named executive officer (NEO) compensation at AbbVie is performance-based. |
The goals of our compensation program are to:
1 | Align executive interests with the drivers of stockholder returns and profitable growth | 2 | Support achievement of the company’s primary business goals to have a remarkable impact on patients’ lives | 3 | Attract and retain world-class executives whose talents and contributions sustain the growth in long-term stockholder value |
When determining NEO compensation, the committee first considers the median of the competitive marketplace (as derived primarily from the Health Care Peer Group approved by the committee) as an initial benchmark for assessing compensation. The committee then takes into account the company’s overall performance against the financial, operating and strategic objectives that were established at the start of the performance period. Finally, specific pay determinations are made for each NEO based on individual performance against goals and contributions to the short- and long-term performance of the company.
Key components and design of our executive compensation program:
Three primary components make up AbbVie’s executive pay program: base salary, short-term incentives, and long-term incentives. The structure of each component is tailored to serve a specific function and purpose. The following is a summary of the key components of our compensation program.
Element | Type | Primary | Key Characteristics | |||||
Base Salary | Fixed | Attract & retain top talent | Individual salaries are established relative to market median based on each NEO’s individual performance, skills, experience, and internal equity, as well as the company’s annual operating budget | |||||
Short-Term Incentives | At-Risk | Encourage achievement of company’s primary business goals | Plan utilizes non-GAAP financial goals as well as an assessment of individual performance against strategic objectives: — Income before taxes — Platform revenue — Operating margin — Return on assets — Strategic and leadership goals | |||||
Long-Term Incentives | At-Risk | Align NEO interests with stockholders | Long-term incentive annual awards are granted in the form of: — Performance shares and performance vested restricted stock units (80% of NEO’s LTI award) — Non-qualified stock options (20% of NEO’s LTI award) | |||||
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INFORMATION CONCERNING DIRECTOR NOMINEES
What am I voting on and how should I vote? | You are being asked to elect three Class II directors at the Annual Meeting. The board of directors recommends you vote “FOR” each of the nominees set forth below. |
The board of directors consists of three classes currently comprised of four directors in Class I, three directors in Class II, and four directors in Class III. Directors of one class are elected each year for a term of three years. The Class II directors are presented for re-election to hold office until the expiration of their term at the 2026 annual meeting of stockholders and until their successors are elected and qualified or until their earlier death or resignation. All of the nominees are currently serving as directors.
Directors are elected by stockholders if a majority of the votes cast are “for” a director’s re-election at the Annual Meeting, excluding abstentions and broker non-votes. For more information on the director majority vote standard, see AbbVie’s By-Laws as listed as an exhibit to AbbVie’s 2022 Annual Report on Form 10-K.
12 | 2023 Proxy Statement
Nominees (Class II)
| Robert J. Alpern, M.D. Director Since: 2013 Age: 72 Committees: Nominations & Governance and Public Policy and Sustainability Primary Occupation: Ensign Professor of Medicine and Physiology, Professor of Internal Medicine and Cellular and Molecular Physiology, and Former Dean of Yale School of Medicine |
Business Experience: Dr. Alpern is Ensign Professor of Medicine and Physiology and Professor of Internal Medicine and Cellular and Molecular Physiology at Yale School of Medicine. Dr. Alpern served as the Dean of Yale School of Medicine and Ensign Professor of Medicine and Professor of Internal Medicine at Yale School of Medicine from June 2004 to January 2020. From July 1998 to May 2004, Dr. Alpern was the Dean of The University of Texas Southwestern Medical Center. Dr. Alpern served on the board of Yale-New Haven Hospital from October 2005 to January 2020. Dr. Alpern also serves as a director of Abbott Laboratories and Tricida, Inc. | |
Key Contributions to the Board: | |
· Through his position as Ensign Professor of Medicine and Physiology, Professor of Internal Medicine and Cellular and Molecular Physiology, as well as his previous service as Dean of Yale School of Medicine, Dean of The University of Texas Southwestern Medical Center, and on the board of Yale-New Haven Hospital, Dr. Alpern contributes valuable insights to the board through his medical and scientific expertise and his knowledge of the health care environment and the scientific nature of AbbVie’s key research and development initiatives. | |
| Melody B. Meyer Director Since: 2017 Age: 65 Committees: Audit and Public Policy and Sustainability Primary Occupation: Retired President, Chevron Asia Pacific Exploration and Production |
Business Experience: Ms. Meyer served as president of Chevron Asia Pacific Exploration and Production Company from March 2011 to April 2016. She previously served as president of Chevron Energy Technology Company from 2008 to 2011. Ms. Meyer held various leadership roles in global and U.S. locations during her thirty-seven year career at Chevron and retired in 2016. Ms. Meyer is president of Melody Meyer Energy, LLC, a private consulting firm, a position she has held since June 2016. Ms. Meyer is also a director at bp p.I.c. and NOV, Inc. | |
Key Contributions to the Board: | |
· As a result of her tenure at Chevron, Ms. Meyer has acquired operational, management, strategic planning, and financial expertise with extensive global experience and provides an informed perspective to the board on financial and operational matters faced by a complex international company. She also brings substantial experience related to long-term capital projects and environmental, health, safety, and sustainability matters. Her experience spans multiple jurisdictions, including developing markets in Asia and Africa. Ms. Meyer has long been active in promoting the advancement of women in energy and provides the board with strong human capital management oversight experience. | |
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| Frederick H. Waddell Director Since: 2013 Age: 69 Committees: Audit and Compensation Primary Occupation: Former Chairman of the Board and Chief Executive Officer of Northern Trust Corporation and The Northern Trust Company |
Business Experience: Mr. Waddell served as chairman of the board of Northern Trust Corporation and The Northern Trust Company from November 2009 until his retirement in January 2019. He previously served as chief executive officer from 2008 through 2017, as president from 2006 to 2011 and again from October to December 2016, and chief operating officer from 2006 to 2008. Mr. Waddell is also a director of International Business Machines Corporation. | |
Key Contributions to the Board: | |
· As former chairman and chief executive officer of Northern Trust Corporation and The Northern Trust Company, Mr. Waddell contributes broad financial services experience with a strong record of leadership in a highly regulated industry. Having begun his role as CEO at Northern Trust during the 2008 recession, Mr. Waddell has substantial experience overseeing a company’s strategic priorities during changing economic conditions. Through his role as a director at IBM since 2017, Mr. Waddell has garnered significant information technology and security experience. | |
Class III—Directors whose terms expire in 2024
| Roxanne S. Austin Director Since: 2013 Age: 62 Committees: Compensation Primary Occupation: President, Austin Investment Advisors |
Business Experience: Ms. Austin is president of Austin Investment Advisors, a private investment and consulting firm, and chairs the U.S. Mid-market Investment Advisory Committee of EQT Partners. Previously, Ms. Austin also served as the president and chief executive officer of Move Networks, Inc., a provider of Internet television services. Ms. Austin served as president and chief operating officer of DIRECTV, Inc. Ms. Austin also served as executive vice president and chief financial officer of Hughes Electronics Corporation and as a partner of Deloitte & Touche LLP. Ms. Austin is also a director of Crowdstrike, Inc., Freshworks, Inc., and Verizon Communications Inc. Ms. Austin previously served as a director of Abbott Laboratories from 2000 to 2022, Teledyne Technologies, Inc. from 2006 to 2021, Target Corporation from 2002 to 2020, and Telefonaktiebolaget LM Ericsson from 2008 to 2016. | |
Key Contributions to the Board: | |
· Through her extensive management and operating roles, including her financial roles, Ms. Austin contributes significant oversight and leadership experience to the board, including financial expertise and knowledge of financial statements, corporate finance, and accounting matters. Ms. Austin also provides substantial cybersecurity and other information technology expertise, as a result of her role as a director at Crowdstrike, Inc., a cybersecurity technology company, and former director at Target Corporation, among other roles. | |
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| Richard A. Gonzalez Director Since: 2013 Age: 69 Primary Occupation: Chairman of the Board and Chief Executive Officer, AbbVie Inc. |
Business Experience: Mr. Gonzalez is the chairman and chief executive officer of AbbVie, a position he has held since 2013. He served as Abbott’s executive vice president of the pharmaceutical products group from July 2010 to December 2012, and was responsible for Abbott’s worldwide pharmaceutical business, including commercial operations, research and development, and manufacturing. He also served as president, Abbott Ventures Inc., Abbott’s medical technology investment arm, from 2009 to 2011. Mr. Gonzalez joined Abbott in 1977 and held various management positions before briefly retiring in 2007, including: Abbott’s president and chief operating officer; president, chief operating officer of Abbott’s Medical Products Group; senior vice president and president of Abbott’s former Hospital Products Division; vice president and president of Abbott’s Health Systems Division; and divisional vice president and general manager for Abbott’s Diagnostics Operations in the United States and Canada. | |
Key Contributions to the Board: | |
· As a result of his service since 2013 as AbbVie’s chairman and chief executive officer and his more than 30-year career at Abbott, Mr. Gonzalez has developed valuable business, management, and leadership experience, as well as extensive knowledge of AbbVie and its global operations. · Mr. Gonzalez’s experience and knowledge enable him to contribute to AbbVie’s board key insights into strategic, management, and operational matters. | |
| Rebecca B. Roberts Director Since: 2018 Age: 70 Committees: Nominations & Governance and Public Policy and Sustainability Primary Occupation: Retired President of Chevron Pipe Line Company |
Business Experience: Ms. Roberts served as president of Chevron Pipe Line Company from 2006 until her retirement in 2011. She previously served as the president of Chevron Global Power Generation from 2003 to 2006, in addition to various technical and management positions during her thirty-six year career with Chevron. Ms. Roberts began her career as a chemist and research scientist. Ms. Roberts currently serves on the board of directors at Black Hills Corporation and MSA Safety Incorporated. Ms. Roberts served as a director of Enbridge, Inc. from 2015 to 2018. | |
Key Contributions to the Board: | |
· Ms. Roberts brings management, business development, operational, environmental and safety, marketing, and strategy development expertise with a scientific background and extensive global experience at Chevron. · She provides an informed perspective to the board on regulatory and operational matters faced by a complex international company. She also has broad experience across a range of geographies, including Asia, Europe, and Central America. | |
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| Glenn F. Tilton Director Since: 2013 Age: 74 Committees: Audit, Compensation, Nominations & Governance, and Public Policy and Sustainability Primary Occupation: Retired Chairman and Chief Executive Officer of the UAL Corporation Lead Independent Director |
Business Experience: Mr. Tilton was chairman of the Midwest for JPMorgan Chase & Co. from 2011 until his retirement in 2014. From October 2010 to December 2012, Mr. Tilton also served as the non-executive chairman of the board of United Continental Holdings, Inc. From September 2002 to October 2010, he served as chairman, president and chief executive officer of UAL Corporation, and chairman and chief executive officer of United Air Lines, Inc., its wholly owned subsidiary. Prior to becoming the vice chairman of Chevron Texaco following the merger of Texaco Inc. and Chevron Corp., Mr. Tilton enjoyed a 30-year multi-disciplinary career with Texaco Inc., culminating in his election as chairman and chief executive officer. Mr. Tilton is also a director of Abbott Laboratories and Phillips 66. Mr. Tilton also served on the board of directors of Lincoln National Corporation from 2002 to 2007, of TXU Corporation from 2005 to 2007, of Corning Incorporated from 2010 to 2012, and of United Continental Holdings, Inc. from 2010 to 2012. | |
Key Contributions to the Board: | |
· As chairman of the Midwest for JPMorgan Chase & Co. and having previously served as non-executive chairman of the board of United Continental Holdings, Inc., and chairman, president, and chief executive officer of UAL Corporation and United Air Lines, vice chairman of Chevron Texaco and as interim chairman of Dynegy, Inc., Mr. Tilton acquired strong management experience overseeing complex multinational businesses operating in highly regulated industries, as well as expertise in finance and capital markets matters. He also acquired deep knowledge of governance, environmental, and other ESG matters. · His experience as non-executive chairman of the board of United Continental Holdings, Inc. also enhances his contributions as AbbVie’s lead independent director, including his ability to effectively lead core board processes such as self-evaluations, succession planning, and executive sessions. | |
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Class I—Directors whose terms expire in 2025
| William H.L. Burnside Director Since: 2013 Age: 71 Committees: Audit and Nominations & Governance Primary Occupation: Retired Senior Vice President and Director at The Boston Consulting Group |
Business Experience: Mr. Burnside is a retired senior vice president and director at The Boston Consulting Group (BCG), where he currently serves as an advisor. Prior to becoming managing partner of BCG’s Los Angeles office in 1987, he worked in BCG’s London and Chicago offices, servicing clients in telecommunications, media, defense, financial services, and manufacturing. | |
Key Contributions to the Board: | |
● Through his experience with The Boston Consulting Group, Mr. Burnside contributes knowledge and understanding of corporate finance and capital markets matters to the board, as well as global and domestic strategic advisory experience across a broad base of industries. He provides an informed perspective to the board on financial forecasting and planning, mergers and acquisitions, human capital management, marketing, and risk planning. | |
| Thomas C. Freyman Director Since: 2020 Age: 68 Committees: Audit and Compensation Primary Occupation: Retired Executive Vice President, Finance and Administration, Abbott Laboratories |
Business Experience: Mr. Freyman served as a director at Allergan from 2018 to 2020, when AbbVie acquired Allergan plc. Mr. Freyman previously served as executive vice president, finance and administration at Abbott Laboratories from 2015 until his retirement in 2017. He previously served at Abbott as chief financial officer and executive vice president, finance and was first appointed chief financial officer and senior vice president, finance in 2001. Mr. Freyman previously served as a director of Tenneco Inc. from 2013 to 2022 and Hanger, Inc. from 2017 to 2022. | |
Key Contributions to the Board: | |
· Mr. Freyman’s extensive experience as a leader in the healthcare industry, knowledge of the Allergan businesses, and expertise in complex accounting and financial issues provides the board with significant global industry experience, continuity in oversight of the Allergan businesses, and finance and risk expertise, including related to financial planning. As a result of his previous role as a director at Tenneco Inc., a global automotive products manufacturer, Mr. Freyman also has extensive manufacturing and environmental, health, and safety oversight experience. | |
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| Brett J. Hart Director Since: 2016 Age: 53 Committees: Nominations & Governance and Public Policy and Sustainability Primary Occupation: President, United Airlines Holdings, Inc. |
Business Experience: Mr. Hart is the president of United Airlines Holdings, Inc. (UAL) and United Airlines, Inc. He served as executive vice president and chief administrative officer between March 2019 and May 2020, executive vice president, chief administrative officer and general counsel between May 2017 and March 2019, and as executive vice president and general counsel between February 2012 and May 2017. Mr. Hart also served as acting chief executive officer of UAL and United Airlines, Inc. from October 2015 to March 2016. From December 2010 to February 2012, he served as senior vice president, general counsel and secretary of UAL, United and Continental. From June 2009 to December 2010, Mr. Hart served as executive vice president, general counsel and corporate secretary at Sara Lee Corporation. | |
Key Contributions to the Board: | |
· In his role leading United Airlines Holdings, Inc.’s operations, including safety, government affairs, regulatory, legal, and environmental sustainability teams, among other functions, Mr. Hart has a broad set of skills critical to oversight of a complex international business in a highly regulated industry like AbbVie. These skills include operational and strategic acumen with expertise in risk management, ESG, climate change, legal strategic matters, government and regulatory affairs, corporate governance, and compliance. | |
| Edward J. Rapp Director Since: 2013 Age: 65 Committees: Audit and Nominations & Governance Primary Occupation: Retired Group President for Resource Industries of Caterpillar Inc. |
Business Experience: Mr. Rapp served as the Caterpillar Inc. group president for resource industries from 2014 until his retirement in mid-2016. He previously served at Caterpillar as group president based in Singapore in 2013 and 2014 and as the chief financial officer from 2010 to 2013, and he was named a group president in 2007. He also serves as a director of Xos, Inc. He is currently a member of the University of Missouri College of Business Advisory Board. Mr. Rapp previously served as a director of FM Global. | |
Key Contributions to the Board: | |
· As a result of his tenure as group president and chief financial officer at Caterpillar Inc., Mr. Rapp has acquired management, operational, and financial expertise with extensive global experience and provides the board with an informed perspective on financial and operational matters faced by a complex international company. · Mr. Rapp brings experience with business operations in numerous geographies, including Asia, Africa, and Europe, which provides a strong international perspective for AbbVie’s business across over 175 countries. As a result of his role on the board of Xos, Inc., a manufacturer of zero-emission commercial vehicles, Mr. Rapp has gained substantial experience in climate change and emissions oversight. | |
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
The board of directors held eight meetings in 2022. The average attendance of all directors at board and committee meetings in 2022 was ninety-eight percent, and each director attended at least seventy-five percent of the total number of board meetings and meetings of the committees of which he or she served. AbbVie encourages its board members to attend the annual stockholder meeting. All but one of AbbVie’s directors attended the 2022 annual stockholder meeting.
The board has determined that each of the following individuals is independent in accordance with the New York Stock Exchange (NYSE) listing standards: Dr. Alpern, Ms. Austin, Mr. Burnside, Mr. Freyman, Mr. Hart, Ms. Meyer, Mr. Rapp, Ms. Roberts, Mr. Tilton, and Mr. Waddell. To determine independence, the board applied the AbbVie Inc. director independence guidelines. The board also considered whether a director has any other material relationships with AbbVie or its subsidiaries and concluded that none of these directors had a relationship that impaired the director’s independence. This included consideration of the fact that some of the directors are officers or serve on boards of companies or entities to which AbbVie sold products or made contributions or from which AbbVie purchased products and services during the year. This also included consideration of the fact that two directors serve on the board of Abbott Laboratories (Abbott), AbbVie’s former parent. In making its determination, the board relied on both information provided by the directors and information developed internally by AbbVie.
The board has determined that the current leadership structure, in which the offices of chairman of the board and chief executive officer are held by one individual with a board appointed lead independent director, ensures the appropriate level of oversight, independence, and responsibility is applied to all board decisions, including risk oversight, and is in the best interests of AbbVie and its stockholders. The lead independent director is chosen annually by and from the independent members of the board of directors. The board regularly reviews its leadership structure and effectiveness. In determining its present leadership structure, the board weighed numerous factors, such as:
| ● | The qualifications of the lead independent director and performance in the role, including stockholder votes in favor of re-election. Mr. Tilton’s extensive leadership skills as a non-executive chair, as well as former CEO and chair at large, publicly traded companies, and the depth of his current and past experience as a director at other publicly traded companies ensure that he is able to exercise effective independent leadership over AbbVie’s board, including in relationship to risk oversight. When he was most recently up for re-election, Mr. Tilton received nearly 90% of votes in favor. |
| ● | The performance of the company under the current leadership structure. As discussed elsewhere in this proxy statement, under the leadership of Mr. Gonzalez, AbbVie has established an outstanding track record of performance. |
| ● | The performance and evaluation of Mr. Gonzalez in his roles as CEO and Chair, including stockholder votes in favor of Mr. Gonzalez’s re-election. When he was most recently up for re-election, Mr. Gonzalez received nearly 94% of votes in favor. |
| ● | The specific needs and circumstances of AbbVie during a given time period. Since inception as a new public company in 2013, AbbVie has been preparing for the loss of exclusivity of its largest product in the U.S. in 2023. Moreover, AbbVie continues to integrate the Allergan business following the acquisition in 2020. Particularly during these transitions, the board feels that continuity and accountability of the leadership structure should remain consistent. |
| ● | Investor feedback on this topic. At the most recent stockholder meeting, the stockholder proposal to mandate an independent chair was voted against by nearly 70% of the shares voted. Investors have also expressed support for our current leadership structure through our stockholder engagement program. |
| ● | Practices at peer companies and trends across the S&P 500. AbbVie benchmarks peer companies and their leadership structures on an ongoing basis and also monitors the external landscape in terms of the number of S&P 500 companies that utilize independent chairs. |
As publicly disclosed during 2022, the board currently intends to ask Mr. Gonzalez to remain as chair for a period of transition once he elects to retire as CEO.
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Our Lead Independent Director has robust and well-defined responsibilities that provide our board with significant leadership and oversight: | |
✓ leads the CEO succession planning process ✓ facilitates communication with the board and presides over regularly conducted executive sessions of the independent directors or sessions where the chair of the board is not present ✓ reviews and approves matters, such as schedule sufficiency, and, where appropriate, information provided to other board members ✓ serves as the liaison between the chair of the board and the independent directors ✓ has the authority to call meetings of the independent directors ✓ leads the board’s evaluation of the CEO ✓ leads the annual board and committee evaluation process, including discussing evaluations with each director individually | ✓ reviews and guides agenda items for board meetings ✓ encourages effective director participation by fostering an environment of open dialogue and constructive feedback among independent directors ✓ involved in selection and interviewing of new board members ✓ if requested by major stockholders, ensures that he or she is available for consultation and direct communication as needed ✓ if required, represents independent board members externally, including in communications with stockholders and other stakeholders ✓ performs such other duties as the board may determine from time to time |
All directors are encouraged to, and in fact do, consult with the chairman on each of the above topics, as well. The lead director, and each of the other directors, communicates regularly with the chairman of the board and chief executive officer regarding appropriate agenda topics and other board related matters. All directors, including the lead independent director, are tasked with ensuring the board appropriately exercises its risk management responsibilities and facilitate further discussion of risk matters in executive session as they deem necessary.
AbbVie directors have backgrounds that when combined provide a portfolio of experience and knowledge that serve AbbVie’s governance and strategic needs. Director nominees are considered based on a range of criteria including broad-based business knowledge and relationships, prominence and excellent reputations in their primary fields of endeavor, as well as a global business perspective and commitment to good corporate citizenship, diversity, and ability to commit sufficient time and attention to the activities of the board. They must have demonstrated experience and ability that is relevant to the board’s oversight role with respect to AbbVie’s business and affairs. They must also be able and willing to represent the stockholders’ economic interests and satisfy their fiduciary duties to stockholders without conflicts of interest. For more details on director qualifications, please see Exhibit A to AbbVie’s Governance Guidelines.
Each year, the board and its committees conduct detailed self-evaluations covering topics such as board and committee leadership structure, composition and effectiveness, quality of board and committee materials and discussions, priority agenda items, schedule sufficiency, and board processes. To ensure candid feedback, the evaluations are anonymous. The full board, led by the lead independent director, discusses the evaluation reports to determine what, if any, actions or improvements should be undertaken in the near-term and long-term. The board, committee, and CEO evaluations are discussed in executive session to allow for additional candid discussion. In 2020, AbbVie engaged an independent firm to review the board and committee self-evaluation materials, in order to ensure the self-evaluation process reflects current best practices. Committee chairs are elected annually.
Each director’s biography includes the particular experience and qualifications that led the board to conclude that the director should serve on the board and how their qualifications add to the mix of skills on the board. The directors’ biographies are in the section of this proxy statement captioned “Information Concerning Director Nominees.”
The following table highlights our directors’ skills and experience. The skills identified below are considered by the nominations and governance committee to be the most relevant to the board’s oversight role with respect to
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AbbVie’s business and affairs and to drive our culture of innovation and responsibility. The specific importance of each skill also is noted.
Such skills include, among others:
Healthcare Industry | Relevant to an industry understanding and review of our business and strategy for continued innovation. | |
Leadership | For a board that can successfully advise and oversee the company’s business performance and represent stockholders’ interests. | |
Global Business and Strategy | For oversight of a complex global organization like AbbVie to successfully advise and oversee the strategic development and direction of the company. | |
Corporate Governance and Public Company Board | Ensuring directors have the background and knowledge to perform oversight and governance roles. | |
Finance or Accounting | Enabling our directors to analyze our financial statements, oversee our capital structure, and consider financial transactions. | |
Government Relations and Regulatory | For an understanding of the complex regulatory and governmental environment in which our business operates. |
ALPERN | AUSTIN | BURNSIDE | FREYMAN | GONZALEZ | HART | MEYER | RAPP | ROBERTS | TILTON | WADDELL | ||
Healthcare | ● | ● | ● | ● | ● | |||||||
Leadership | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |
Global Business | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |
Corporate Governance & Public Company Board | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | |
Finance or Accounting | ● | ● | ● | ● | ● | ● | ● | ● | ||||
Government Relations & Regulatory | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
Board Oversight Responsibilities
The board has risk oversight responsibility for AbbVie and administers this responsibility both directly and with assistance from its committees. The board reviews enterprise risks and discusses them with our senior management on a regular basis. These risks include those the company faces over various time horizons. Among the risks are those that are specific to AbbVie’s business and circumstances (e.g., pipeline advancement
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and significant product loss of exclusivity), those that are specific to AbbVie’s industry (e.g., manufacturing and regulatory compliance and healthcare industry dynamics such as pricing and patient access), and those faced by large, complex, multinational companies generally (e.g., tax policy). Specific relevant risk topics are reviewed and escalated to the board or relevant committee at nearly all board meetings throughout the year. The charters of the committees provide a framework for the types of risks to be reviewed at each committee and reported on to the full board. The focus of the board’s oversight varies based on the type and timing of the risk being discussed. For example, for a long-term risk, the board focuses on advance planning.
AbbVie has a comprehensive enterprise risk management (ERM) program with risk management embedded within the operations of the company, clear accountability at the senior leadership level, and oversight by the board. The audit committee oversees ERM. Through risk owners and the internal disclosure committee, there is a routine assessment of material risks to the company. Updates, if any, are provided to the board or its committees together with updated public disclosures, when relevant. In light of the regular assessment of risk, the board or risk owner may consult with outside advisors to evaluate the risk landscape and anticipate trends. As the company grows, relevant risk management topics may be added, such as following a large acquisition.
Acting with integrity is one of the foundational AbbVie Principles, and overseeing the company’s compliance program is a key activity for the board. AbbVie’s Chief Ethics and Compliance Officer, who reports to the Executive Vice President, General Counsel and Secretary, regularly presents to the board and committees on compliance matters.
Management succession planning is a key responsibility and area of focus for the board. The full board regularly reviews both short- and long-term succession plans for the CEO and other executive officers. This review, for which the lead independent director takes a leadership role, includes a discussion of the skillset needed for these executive roles, the timeline for any potential executive transitions, the leadership pipeline and their development plans, and the diversity of the leadership pipeline. Directors regularly interact with succession candidates. The board also reviews its own succession planning, including for committee chairs and the lead independent director.
The board oversees AbbVie’s culture, employee engagement, and overall management of human capital. This oversight ensures that AbbVie is attracting, developing, and retaining best in class employees dedicated to making a remarkable impact on patients’ lives around the world. Examples of this oversight include (1) reviewing results of the biennial all employee survey, which assesses topics like employee engagement, inclusion, agility in processes, ethical decision making, and other issues critical to the company’s culture, (2) oversight of the company’s equity, equality, diversity, and inclusion strategy, (3) oversight of employee health and safety data and priorities, (4) reviewing the company’s commitment to pay equity and results from the equity analysis to ensure this commitment is met, and (5) oversight of the company’s ESG strategy, including the human capital management components. The board also interacts with employees at various levels of seniority, not solely on the executive leadership team, which facilitates a better understanding of the company’s culture.
The board is actively involved in reviewing AbbVie’s privacy, cybersecurity, and other information technology risks and opportunities and discusses these topics on a regular basis. The board and its committees also regularly review other environmental, social, and governance (ESG) topics, including across all of AbbVie’s material ESG drivers. For more details about committee responsibilities and oversight, please see the committee discussion on pages 23-25.
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Board Diversity
AbbVie is committed to diversity in its workforce and on its board of directors. AbbVie serves patients in over 175 countries and across many different diseases. A diverse workforce and a diverse board are critical to bringing innovative new medicines to patients and to meeting their unique needs. In particular, diverse perspectives strengthen the oversight of AbbVie’s business. | 27% | 18% |
Diversity, including diversity of race, ethnicity, gender, age, and geography is an integral factor in identifying prospective directors. In the process of identifying nominees to serve as a member of the board of directors, the nominations and governance committee considers the existing board’s diversity and assesses the effectiveness of the recruitment process in achieving a diverse board. The board has engaged a third-party search firm to aid in its preparation for future recruitment and refreshment activities. Although the board remains confident in its current composition, including the skillset of the current directors, the board takes its own succession planning seriously and seeks to identify a pipeline of potential new director candidates on an ongoing basis. As part of this process, the board is endeavoring to improve the gender diversity of the board by the 2024 annual stockholder meeting. More details about our workforce diversity efforts are available in the ‘‘Our ESG Highlights’’ section of this proxy statement. | ||
Committees of the Board of Directors
Audit Committee
Members | Key Characteristics and Responsibilities | Meetings in 2022: 6 | |||
W. Burnside T. Freyman (Chair) M. Meyer E. Rapp G. Tilton F. Waddell | ✓ The audit committee is governed by a written charter. The charter sets forth the purposes of the audit committee, identifies qualifications required for the audit committee members, and describes the committee’s authority and responsibilities. ✓ The audit committee assists the board of directors in fulfilling its oversight responsibility with respect to AbbVie’s accounting and financial reporting practices and the audit process, the quality and integrity of AbbVie’s financial statements, including a review of significant accounting policies, the independent auditors’ qualifications, independence, and performance, the performance of AbbVie’s internal audit function and internal auditors, certain areas of legal and regulatory compliance, and enterprise risk management. The audit committee is directly responsible for the appointment, fees, retention, and oversight of the work of AbbVie’s independent auditors. ✓ The audit committee also reviews information security and technology risks, including cybersecurity. ✓ Each of the members of the audit committee is financially literate, as required of audit committee members by the NYSE, and the independence requirements set forth in Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). ✓ The board of directors has determined that Mr. Freyman, Mr. Rapp, Mr. Tilton, and Mr. Waddell, are each individually, an ‘‘audit committee financial expert.’’ | ||||
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Compensation Committee
Members | Key Characteristics and Responsibilities | Meetings in 2022: 4 | |||
R. Austin (Chair) T. Freyman G. Tilton F. Waddell | ✓ The compensation committee is governed by a written charter. The charter sets forth the purposes of the compensation committee, identifies qualifications required for the compensation committee members, and describes the committee’s authority and responsibilities. ✓ This committee assists the board of directors in carrying out the board’s responsibilities relating to the compensation of AbbVie’s executive officers and directors. The compensation committee annually reviews the compensation paid to the directors and gives its recommendations to the full board regarding both the amount of director compensation that should be paid and the allocation of that compensation between equity-based awards and cash. ✓ In recommending director compensation, the compensation committee takes into account director fees paid by companies in AbbVie’s Health Care Peer Group and reviews any arrangement that could be viewed as indirect director compensation. The processes and procedures used for the consideration and determination of executive compensation are described in the ‘‘Compensation Discussion and Analysis’’ section of this proxy statement. ✓ The committee also reviews, approves, and administers the incentive compensation plans in which the AbbVie executive officers participate and all of AbbVie’s equity-based plans. It may delegate the responsibility to administer and make grants under these plans to management, except to the extent that such delegation would be inconsistent with applicable law or regulations or with the listing rules of the New York Stock Exchange. ✓ The compensation committee has the sole authority, under its charter, to select, retain and/or terminate independent advisors who may assist the committee in carrying out its responsibilities. ✓ The compensation committee reviews and discusses with management and its independent compensation advisor potential risks associated with AbbVie’s compensation policies and practices as discussed in the ‘‘Compensation Risk Assessment’’ section of this proxy statement. Each member of the committee qualifies as a ‘‘non-employee director’’ for purposes of Rule 16b-3 under the Exchange Act. | ||||
Beginning in June 2022, the committee engaged Semler Brossy as its independent compensation consultant. Prior to this time, the committee had engaged Compensation Advisory Partners (CAP) as its independent compensation consultant. The independent compensation consultant provides counsel and advice to the committee on executive and non-employee director compensation matters. The consultant, and its principal, report directly to the chair of the committee. The principal meets regularly, and as needed, with the committee in executive sessions, with direct access to the committee chair during and between meetings. The committee determines what variables it will instruct its independent compensation consultant to consider, including: peer groups against which performance and pay should be examined, metrics to be used in incentive plans to assess AbbVie’s performance, competitive short- and long-term incentive practices in the marketplace, and compensation levels relative to market benchmarks. The committee negotiates and approves all fees paid to its independent compensation consultants for these services. AbbVie did not engage Semler Brossy or CAP to perform any other services during 2022 while serving as the independent compensation consultant.
Based on an assessment of internally developed information and information provided by Semler Brossy and CAP, the committee has determined that neither consultant raised a conflict of interest. A copy of the compensation committee report is included in the ‘‘Compensation Committee Report’’ section of this proxy statement.
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Nominations and Governance Committee
Members | Key Characteristics and Responsibilities | Meetings in 2022: 4 | |
R. Alpern W. Burnside B. Hart E. Rapp (Chair) R. Roberts G. Tilton | ✓ The nominations and governance committee is governed by a written charter. The charter sets forth the purposes of the nominations and governance committee, identifies qualifications required for the nominations and governance committee members, and describes the committee’s authority and responsibilities. ✓ This committee assists the board of directors in identifying individuals qualified to become board members and recommends to the board the nominees for election as directors at the next annual meeting of stockholders, recommends to the board the persons to be elected as executive officers of AbbVie, recommends to the board the corporate governance guidelines applicable to AbbVie, oversees the evaluation of the board and management, and serves in an advisory capacity to the board and the chairman of the board on matters of organization, management succession plans, major changes in the organizational structure of AbbVie, and the conduct of board activities. ✓ The process used by this committee to identify a nominee to serve as a member of the board of directors depends on the qualities being sought, as described on pages 20-21. ✓ From time to time, AbbVie engages an executive search firm to assist the committee in identifying individuals qualified to be board members. | ||
Public Policy and Sustainability Committee
Members | Key Characteristics and Responsibilities | Meetings in 2022: 4 | |||
R. Alpern B. Hart (Chair) M. Meyer R. Roberts G. Tilton | ✓ The public policy and sustainability committee is governed by a written charter. The charter sets forth the purposes of the public policy and sustainability committee, identifies qualifications required for the public policy and sustainability committee members, and describes the committee’s authority and responsibilities. ✓ This committee assists the board of directors in fulfilling its oversight responsibility with respect to AbbVie’s public policy, certain areas of legal and regulatory compliance, governmental affairs, healthcare compliance, social responsibility, and sustainability and environmental matters that affect or could affect AbbVie. ✓ Other topics within the committee’s purview include but are not limited to ethics and compliance matters, government and regulatory trends relevant to AbbVie’s business, political contributions, and corporate philanthropy. | ||||
Executive Committee
The executive committee members are Mr. Gonzalez, chair, Ms. Austin, Mr. Freyman, Mr. Hart, Mr. Rapp, and Mr. Tilton. This committee may exercise all of the authority of the board in the management of AbbVie, except for matters expressly reserved by law for board action.
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COMMUNICATING WITH THE BOARD OF DIRECTORS
Stockholders and other interested parties may communicate with the board of directors by writing a letter to the chairman of the board, to the lead director, or to the independent directors c/o AbbVie Inc., 1 North Waukegan Road, AP34, North Chicago, Illinois 60064, Attention: corporate secretary. The corporate secretary regularly forwards to the addressee all letters other than mass mailings, advertisements, and other materials not relevant to AbbVie’s business. In addition, directors regularly receive a log of all correspondence received by the company that is addressed to a member of the board and may request any correspondence on that log.
26 | 2023 Proxy Statement
DIRECTOR COMPENSATION
AbbVie employees are not compensated for serving on the board or board committees. AbbVie’s non-employee directors are compensated for their service under the AbbVie Non-Employee Directors’ Fee Plan and the AbbVie Amended and Restated 2013 Incentive Stock Program. As described in “Committees of the Board of Directors—Compensation Committee,” director compensation is reviewed annually by the compensation committee with the independent compensation consultant, including a review of director compensation against AbbVie’s Health Care Peer Group, and a recommendation is then provided to the full board.
The following table sets forth the non-employee directors’ 2022 compensation.
Change in | ||||||||||||||||||
Pension Value | ||||||||||||||||||
and |
| |||||||||||||||||
Nonqualified |
| |||||||||||||||||
Fees | Restricted | Deferred |
| |||||||||||||||
Earned or | Stock Unit | Option | Compensation | All Other |
| |||||||||||||
Paid in Cash | Awards | Awards | Earnings | Compensation | Total | |||||||||||||
Name |
| ($)(1) |
| ($)(2) |
| ($)(3) |
| ($)(4) |
| ($)(5) |
| ($) | ||||||
R. Alpern | 117,917 | 214,948 | 0 | 32,081 | 25,000 | 389,946 | ||||||||||||
R. Austin | 140,833 | 214,948 | 0 | 0 | 29,807 | 385,588 | ||||||||||||
W. Burnside | 126,250 | 214,948 | 0 | 0 | 17,500 | 358,698 | ||||||||||||
T. Freyman | 145,833 | 214,948 | 0 | 0 | 20,000 | 380,781 | ||||||||||||
B. Hart | 140,833 | 214,948 | 0 | 0 | 25,000 | 380,781 | ||||||||||||
E. Liddy(6) | 47,917 | 0 | 0 | 0 | 21,500 | 69,417 | ||||||||||||
M. Meyer | 126,250 | 214,948 | 0 | 0 | 25,706 | 366,904 | ||||||||||||
E. Rapp | 149,167 | 214,948 | 0 | 0 | 25,476 | 389,591 | ||||||||||||
R. Roberts | 117,917 | 214,948 | 0 | 0 | 25,706 | 358,571 | ||||||||||||
G. Tilton | 176,250 | 214,948 | 0 | 0 | 27,739 | 418,937 | ||||||||||||
F. Waddell | 126,250 | 214,948 | 0 | 0 | 25,000 | 366,198 | ||||||||||||
| (1) | Under the Non-Employee Directors’ Fee Plan as in effect as of May 6, 2022, non-employee directors earned $120,000 per year for service as a director and $25,000 per year for service as a chair of a board committee, other than the chair of the audit committee. The chair of the audit committee received $30,000 per year for service as chair of that committee and the other members of the audit committee received $10,000 per year as a committee member. The lead director received $50,000 in 2022 for service in that role. The non-employee director and committee fees are earned monthly for each calendar month or portion thereof that the director holds the position, excluding the month in which the director is first elected to the position. |
Fees earned under the AbbVie Non-Employee Directors’ Fee Plan are, at the director’s election, paid in cash, delivered in the form of vested non-qualified stock options (based on an independent appraisal of their fair value), deferred until retirement (as an unfunded AbbVie obligation), or paid currently into an individual grantor trust established by an eligible director. The distribution of deferred fees and amounts held in a director’s grantor trust generally commences at the later of when the director reaches age 65 or upon retirement from the board of directors. Fees deposited in a trust may be credited to a stock equivalent account that earns the same return as if the fees were invested in AbbVie stock or to a guaranteed interest account. If necessary, AbbVie contributes funds to a director’s trust so that as of year-end the stock equivalent account balance (net of taxes) is not less than seventy-five percent of the market value of the related AbbVie common stock at year end.
| (2) | The amounts in this column represent the aggregate grant date fair value of the restricted stock unit awards granted during 2022, determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. AbbVie determines the grant date fair value of the awards by multiplying the number of units granted by the average of the high and low market prices of one share of AbbVie common stock on the award grant date. |
In addition to the fees described in footnote (1), each non-employee director elected to or serving on the board of directors on the day of the 2022 annual stockholder meeting received under the AbbVie Amended and Restated 2013 Incentive Stock Program vested restricted stock units with a target grant date value of
2023 Proxy Statement | 27
$215,000. In 2022, this equated to 1,421 restricted stock units (after rounding the award down to the nearest whole unit), with a reportable value of $214,948. The non-employee directors receive cash payments equal to the dividends paid on the shares covered by the units at the same rate as other stockholders, but do not otherwise have access to the restricted stock units during their board service. Upon termination or retirement from the board, death, or a change in control of the company, a non-employee director will receive one common share for each restricted stock unit outstanding under the Incentive Stock Program.
The following AbbVie restricted stock units were outstanding as of December 31, 2022: R. Alpern, 31,542; R. Austin, 22,983; W. Burnside, 22,983; T. Freyman, 5,435; B. Hart, 15,497; E. Liddy, 0; M. Meyer, 12,523; E. Rapp, 22,983; R. Roberts, 9,753; G. Tilton, 35,189; and F. Waddell, 22,983. These numbers include, where applicable, AbbVie restricted stock units issued with respect to Abbott Laboratories restricted stock units outstanding when AbbVie separated from Abbott on January 1, 2013.
| (3) | No AbbVie stock options were outstanding as of December 31, 2022. |
| (4) | The totals in this column include reportable interest credited under the AbbVie Non-Employee Directors’ Fee Plan during 2022. |
| (5) | Charitable contributions made by AbbVie’s non-employee directors are eligible for a matching contribution (up to $25,000 annually). For 2022 contributions, the AbbVie Foundation made charitable matching contributions on behalf of the following AbbVie directors: R. Alpern, $25,000; R. Austin, $25,000; W. Burnside, $17,500; T. Freyman, $20,000; B. Hart, $25,000; E. Liddy, $21,500; M. Meyer, $25,000; E. Rapp, $25,000; R. Roberts, $25,000; G. Tilton, $25,000; and F. Waddell, $25,000. This column also includes reimbursement for certain taxes. |
| (6) | Mr. Liddy retired from the board of directors effective May 6, 2022. |
28 | 2023 Proxy Statement
SECURITIES OWNERSHIP
Securities Ownership of Executive Officers and Directors
The table below reflects the number of shares of AbbVie common stock beneficially owned as of January 31, 2023, by each director and director nominee, the chief executive officer, and the other named executive officers (NEOs), and by all directors and executive officers of AbbVie as a group. It also reflects the number of stock equivalent units and restricted stock units held by non-employee directors under the AbbVie Non-Employee Directors’ Fee Plan.
Stock Options | Stock | |||||
Shares | Exercisable | Equivalent | ||||
Beneficially | within 60 days | Units | ||||
Name |
| Owned(1)(2)(3) |
| of January 31, 2023 |
|
|
R. Gonzalez | 532,668 | 803,823 | 0 | |||
R. Alpern | 31,542 | 0 | 8,723 | |||
R. Austin | 50,705 | 0 | 0 | |||
W. Burnside | 22,983 | 0 | 0 | |||
T. Freyman | 130,658 | 0 | 0 | |||
B. Hart | 15,497 | 0 | 0 | |||
M. Meyer | 12,523 | 0 | 0 | |||
E. Rapp | 38,972 | 0 | 23,256 | |||
R. Roberts | 9,753 | 0 | 0 | |||
G. Tilton | 47,939 | 0 | 36,572 | |||
F. Waddell | 24,983 | 0 | 0 | |||
R. Michael | 37,877 | 250,021 | 0 | |||
L. Schumacher(5) | 248,002 | 391,492 | 0 | |||
S. Reents | 809 | 88,208 | 0 | |||
J. Stewart | 62,279 | 180,180 | 0 | |||
A. Saleki-Gerhardt | 164,107 | 366,010 | 0 | |||
All directors and executive officers as a group(4) | 1,678,386 | 2,910,887 | 68,551 |
| (1) | The table includes shares held in the executive officers’ accounts in the AbbVie Savings Plan as follows: A. Saleki-Gerhardt, 2,322; all executive officers as a group, 5,960. Each executive officer has shared voting power and sole investment power with respect to the shares held in his or her account. |
| (2) | The table includes restricted stock units held by the non-employee directors. The directors’ units are payable in stock as described in footnote (2) to the Director Compensation table. |
| (3) | The table includes shared voting and/or investment power over shares as follows: R. Gonzalez, 29,415; J. Stewart, 1,338; A. Saleki-Gerhardt, 6,195; T. Freyman, 7,882; G. Tilton, 350; and all directors and executive officers as a group, 112,959. |
| (4) | The directors and executive officers as a group own less than one percent of the outstanding shares of AbbVie. |
| (5) | Ms. Schumacher retired from her position as Vice Chairman, External Affairs and Chief Legal Officer at the end of 2022. |
Securities Ownership of Principal Stockholders
The table below reports the number of shares of AbbVie common stock beneficially owned as of December 31, 2022 by The Vanguard Group and BlackRock, Inc. (directly or through subsidiaries), respectively, the only persons known to AbbVie to own beneficially more than 5% of AbbVie’s outstanding common stock. It is based on information contained in Schedules 13G filed with the Securities and Exchange Commission by The Vanguard Group on February 9, 2023 and by BlackRock, Inc. on February 16, 2023. The Vanguard Group reported that it had sole voting power with respect to 0 shares, shared voting power with respect to 2,644,856 shares, sole
2023 Proxy Statement | 29
dispositive power with respect to 150,630,452 shares and shared dispositive power with respect to 7,687,100 shares. BlackRock, Inc. reported that it had sole voting power with respect to 125,282,408 shares, shared voting power with respect to 0 shares, sole dispositive power with respect to 138,702,758 shares and shared dispositive power with respect to 0 shares.
Name and Address of Beneficial Owner |
| Shares Beneficially Owned |
| Percent of Class | |
The Vanguard Group | 158,317,552 | 8.95 | % | ||
100 Vanguard Blvd. | |||||
Malvern, PA 19355 | |||||
BlackRock, Inc. | 138,702,758 | 7.8 | % | ||
55 East 52nd Street | |||||
New York, NY 10055 |
30 | 2023 Proxy Statement
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (CD&A) describes the pay philosophy established for AbbVie's named executive officers (NEOs), the design of our compensation programs, the process used to examine performance in the context of executive pay decisions, and the performance goals and results for each NEO:
RICHARD A. GONZALEZ Chairman of the Board of Directors and Chief Executive Officer | ROBERT A. MICHAEL Vice Chairman and President | SCOTT T. REENTS Executive Vice President, Chief Financial Officer | LAURA J. SCHUMACHER1 Vice Chairman, External Affairs and Chief Legal Officer | JEFFREY R. STEWART Executive Vice President, Chief Commercial Officer | AZITA SALEKI-GERHARDT Executive Vice President, Operations |
1 Ms. Schumacher retired from her position as Vice Chairman, External Affairs and Chief Legal Officer at the end of 2022.
Although we describe our programs in the context of the NEOs, it is important to note that our programs generally have broad eligibility and therefore in most cases apply to employee populations outside the NEO group as well.
The content of this section is organized according to the following.
32 |
| 42 | ||
32 | 42 | |||
33 | 42 | |||
36 | 45 | |||
37 | 46 | |||
39 | 47 | |||
40 | 47 | |||
47 | ||||
41 | 48 | |||
41 | 48 | |||
41 | 48 | |||
41 | 48 | |||
41 | ||||
42 | ||||
2023 Proxy Statement | 31
Executive Summary
COMPENSATION PHILOSOPHY
We believe that a well-designed compensation program should:
1 | Align executive interests with the drivers of stockholder returns and profitable growth | 2 | Support achievement of the company’s primary business goals to have a remarkable impact on patients’ lives | 3 | Attract and retain world-class executives whose talents and contributions sustain the growth in long-term stockholder value |
WHAT WE DO | WHAT WE DO NOT DO | ||
✓ We balance short- and long-term strategic objectives and directly link compensation to stockholder value. ✓ We tie more than three-fourths of our NEO compensation to performance. ✓ We are committed to pay equity and conduct pay equity analyses annually to ensure pay is equitable across genders and ethnicities among U.S. employees. ✓ We have broad discretion to claw back incentive awards in the unlikely event of a restatement of earnings or material breach of the AbbVie Code of Business Conduct. ✓ We engage annually with a large portion of our stockholders to gather feedback on our policies and practices. ✓ We have robust stock ownership guidelines and prohibit the selling of shares unless ownership guidelines have been met. | X We do not have employment agreements with any of our NEOs. X We do not provide excise tax gross-ups on NEO compensation. X NEOs are prohibited from entering or engaging in the purchase or sale of financial instruments that are designed to hedge or offset any decrease in the market value of AbbVie equity securities they hold. X We do not include pay design features that may have the potential to encourage excessive risk-taking. X We do not pay dividends on unearned performance shares. X We do not have single trigger change in control. |
BUSINESS PERFORMANCE HIGHLIGHTS
AbbVie has delivered robust financial results since our launch in 2013
Adjusted Net Revenues |
|
| TSR |
|
| Adjusted Diluted EPS |
+13.4% | +613% | +18.8% | ||||
compound annual growth rate* | 10-year total stockholder return | compound annual growth rate* | ||||
Adjusted R&D Investment | Approvals | Development Pipeline | ||||
$55BN | 25 | >80 | ||||
cumulative since inception** | major product or indication approvals | active clinical and device programs*** | ||||
Market Capitalization Increase | Quarterly Dividend Increase | |||||
+$232BN | +270% | The measures set forth in this table were calculated as of 12/31/2022. * Net revenues and diluted earnings per share are adjusted to exclude certain specified items and are non-GAAP measures, which are reconciled in Appendix B. ** Adjusted R&D investment reflects adjusted non-GAAP R&D expense, acquired IPR&D milestones expense, and Calico collaboration expense and is a non-GAAP measure, which is reconciled in Appendix B. *** In development individually or under collaboration or license agreements. | ||||
added significant stockholder value | raised to $1.48 per share from $0.40 per share at inception |
AbbVie has demonstrated strong financial execution with a double-digit compound annual growth rate (CAGR) for both adjusted net revenues and adjusted diluted earnings per share (EPS) as an independent company.
Adjusted Net Revenues* | Adjusted EPS* | |||
|
|
*Net revenues and diluted earnings per share are adjusted to exclude certain specified items and are non-GAAP measures, which are reconciled in Appendix B.
2023 Proxy Statement | 33
2022 Highlights
Strong operational execution
| ● | Net revenues of $58.1BN, an increase of 3.3% on a reported basis and 5.1% operationally. |
| ● | Delivered operating margin of 31.2% on a GAAP basis or 52.0% of net revenues on an adjusted basis. |
| ● | Reported diluted EPS of $6.63 on a GAAP basis and adjusted diluted EPS of $13.77, up 16.4%. |
| ● | Generated operating cash flow of $24.9BN. |
Advancing new medicines with an innovative R&D pipeline
| ● | Achieved regulatory approvals for several new products or major indications, including Skyrizi for the treatment of adults with moderately to severely active Crohn’s disease (CD), Rinvoq for the treatment of adults with moderately to severely active ulcerative colitis who have had an inadequate response or intolerance to one or more tumor necrosis factor blockers, and Vraylar as an adjunctive therapy to antidepressants for the treatment of major depressive disorder in adults. |
| ● | Submitted regulatory applications for additional key development programs, including Rinvoq for the treatment of adult patients with moderately to severely active CD, epcoritamab for the treatment of adult patients with relapsed/refractory large B-cell lymphoma, and ABBV-951 for the treatment of motor fluctuations in patients with advanced Parkinson’s disease. |
Total Stockholder Return (TSR)
AbbVie has a track record of robust total stockholder returns. Since inception, AbbVie’s TSR ranks in the top tier of its named peers and surpasses the cumulative total returns of the Standard & Poor’s 500 Index and the NYSE Arca Pharmaceutical Index, as shown in the tables below.
1-Year | 3-Year | 5-Year | 10-Year | |||||
+24% | +110% | +111% | +613% |
AbbVie’s Relative TSR Performance | ||||||||||||
Versus Peer Group (Multi-Year) | Versus Select Indices (10-Year) | |||||||||||
2022 |
| |||||||||||
3rd place out of 10 | ||||||||||||
3 Years | ||||||||||||
2nd place out of 10 | ||||||||||||
5 Years | ||||||||||||
3rd place out of 10 | ||||||||||||
2nd place out of 10 | ||||||||||||
AbbVie’s peer group above includes: Amgen, Inc; Bristol-Myers Squibb Company; Eli Lilly and Company; Gilead Sciences, Inc.; GlaxoSmithKline plc; Johnson & Johnson; Merck & Company, Inc; Novartis AG; and Pfizer Inc. TSR measured as of 12/31/22.
34 | 2023 Proxy Statement
TOTAL STOCKHOLDER RETURN (TSR)
Since becoming a public company in 2013, AbbVie has delivered a total stockholder return of 613%, which places AbbVie in the top tier of its Health Care Peers and surpasses the cumulative total returns of the Standard & Poor’s 500 Index and the NYSE Arca Pharmaceutical Index, as shown in the graph below. The following graph covers the period from January 2, 2013 (the first day AbbVie’s common stock began “regular-way” trading on the NYSE) through December 31, 2022. This graph assumes $100 was invested in AbbVie common stock and each index on January 2, 2013 and also assumes the reinvestment of dividends. The stock price performance in the following graph is not necessarily indicative of future stock price performance.
Comparison of Cumulative Total Return since AbbVie’s Inception
2023 Proxy Statement | 35
COMPONENTS OF OUR COMPENSATION PROGRAM The compensation committee of the board oversees our executive compensation program, which includes several compensation elements that have each been tailored to incentivize and reward specific aspects of company performance the board believes are central to delivering long-term stockholder value. Key components of our annual compensation program are listed below. | ||||||
Base Salary Designed to be competitive with market and industry norms, and to reflect individual performance Individual salaries are established relative to market median based on each NEO’s individual performance, skills, and experience, and internal equity, as well as the company’s annual operating budget | Short-Term Performance Incentive Plan (PIP) Based on non-GAAP performance measures such as: — Income before taxes — Platform revenue — Operating margin — Return on assets — Strategic and leadership goals | Long-Term 80% Performance shares and performance-vested restricted stock units 20% Non-qualified stock options | Our Compensation | |||
Align executive interests with the drivers of stockholder returns and profitable growth | ||||||
Support achievement of the company’s primary business goals to have a remarkable impact on patients’ lives | ||||||
Attract and retain world-class executives whose talents and contributions sustain the growth in long-term stockholder value | ||||||
The compensation committee is dedicated to ensuring that a substantial portion of executive compensation is “at-risk” and variable. Generally, more than three-fourths of our NEOs’ total direct compensation is variable and directly affected by both the company’s and the NEO’s performance.
The committee believes the use of non-GAAP metrics to measure company performance for incentive plan purposes is appropriate. The use of certain non-GAAP metrics aligns NEOs to performance objectives that are commonly used to evaluate the performance of the company, provide accountability, and avoid inappropriate windfalls or penalties due to factors outside of their control. Importantly, both the goals and the financial performance are presented on a consistent non-GAAP basis.
In 2022, AbbVie agreed to a nationwide settlement to resolve opioid-related claims with states and their respective subdivisions and special districts, provided that certain conditions are satisfied. This settlement will provide up to $2.02 billion to help support state and local efforts to address opioid-related issues in the United States, as well as reimburse attorneys' fees and costs. This includes costs for claims related to the generic prescription opioid business Allergan previously divested to Teva in 2016, as to which AbbVie and Teva have resolved Teva’s indemnification obligations. An accounting accrual for the settlement amount was previously recorded and disclosed for the second quarter of 2022. Consistent with AbbVie’s financial earnings release on July 29, 2022, certain financial metrics have been adjusted to exclude these costs, including for purposes of executive compensation.
In determining whether to adjust a metric for a settlement such as this, the compensation committee considers numerous factors, including:
| (1) | Whether the allegations relate to misconduct by current AbbVie executives. Where allegations relate to misconduct by current executives, the committee would consider exercising its discretion to provide accountability, reduce compensation, and not adjust metrics, as it deems appropriate. In the case of the opioid settlement, it relates to liabilities associated with an acquired business (i.e., Allergan’s opioid portfolio). As the current AbbVie executives had no responsibility for the acquired business, the committee believes it is appropriate to limit the impact of the settlement costs on current executive compensation. |
36 | 2023 Proxy Statement
| (2) | Whether the settlement is in the best interests of AbbVie, its stockholders, and its other stakeholders. The committee believes that executives should be incentivized to enter into a settlement when it is in the best interests of AbbVie, its stockholders, and its other stakeholders to resolve the claims. In some matters, despite a lack of merit to the allegations made against the company or its officers or employees, the unpredictability of litigation (including, for example, the practical limitations on the ability to obtain ultimate appellate review to correct erroneous decisions by lower courts), even large settlements may be in the best interests of the company. For opioids, the settlement will bring certainty while also providing resources to support state and local efforts to address opioid-related issues. |
| (3) | Whether there is a risk of potential misconduct continuing. Consistent with our foundational AbbVie Principles, AbbVie is dedicated to transforming lives every day and working with uncompromising integrity in everything we do. The committee believes that compensation is an important tool in incentivizing ethical behavior and, as discussed above, has discretion to reduce compensation and not adjust metrics where there is a risk of continued misconduct. In this case, AbbVie continues to act responsibly regarding opioid products. When AbbVie acquired Allergan in 2020, we made the decision voluntarily to discontinue Allergan’s remaining opioid business (which represented a very small portion of market share). Moreover, AbbVie does not have any opioid products in distribution or its pipeline. |
| (4) | Whether an adjustment would create a misalignment between stockholder and executive interests. The committee strives to ensure AbbVie’s compensation programs and decisions are aligned with the interests of stockholders. Where a metric is adjusted for an earnings release or other investor communication, including guidance (consistent with common market practice), using that same adjusted metric for executive compensation ensures consistency and alignment between our investor communications and expectations and executive compensation decisions. |
We understand that transparency on this decision-making process is important to our investors, and we are committed to disclosing the committee’s assessment of similar settlements that represent more than 0.2% of our market capitalization.
2022 PERFORMANCE RESULTS
The performance targets established under our annual and long-term incentive plans are rigorous and calibrated to a range of potential outcomes, with above target payouts for strong performance and below target payouts (including no payout) for below target performance. Targets are based on expected business, market and regulatory conditions, including expectations for our pipeline. The financial goals shown in the following table were carried by all of the NEOs as part of their 2022 performance goals. The specific weightings for each NEO are established at the start of each performance year based on the NEO’s role and anticipated contributions to the company’s annual objectives. Financial goals are set rigorously; achievement of these targets has resulted in top-tier industry performance.
Financial Goals
2022 Target vs. | 2022 Actual vs. | |||||||||||||
Goal and Expected Result(1) |
| 2021 Actual |
| 2022 Target |
| 2021 Actual |
| 2022 Actual |
| 2022 Target | ||||
A. Non‑GAAP Income Before Taxes | $ | 25.9 BN | (2) | $ | 28.8 BN | 111 | % | $ | 29.2 BN | (2) | 101 | % | ||
B. Platform Revenue(3) | N/A | (3) | $ | 38.3 BN | N/A | (3) | $ | 37.6 BN | (2) | 98 | % | |||
C. Adjusted Return on Assets |
| 19.5 | % |
| 22.9 | % | 117 | % |
| 23.0 | % | 100 | % | |
D. Non‑GAAP Operating Margin | $ | 28.2 BN | (2) | $ | 30.8 BN | 109 | % | $ | 31.0 BN | (2) | 101 | % | ||
| (1) | Results achieved reflect certain specified items, which are reconciled in Appendix B. |
| (2) | Evaluated on a constant currency basis. |
| (3) | Platform Revenue is a non-GAAP metric comprised of net revenues less total Humira sales and adjusted for foreign exchange, as outlined in Appendix B. We expect this metric to inform our focus as we navigate the Humira loss of exclusivity period and eventual return to growth. This was a new incentive metric for 2022 without a comparable 2021 actual result. |
2023 Proxy Statement | 37
The committee reviews and ensures all goals are appropriately rigorous and in line with the long-term success of the company. Each NEO achieved or exceeded his or her 2022 goals, which are listed below:
| ● | Richard A. Gonzalez: Drive top-tier business performance; execute key strategic initiatives to drive sustainable long-term business performance; deliver value to our stockholders, building investor confidence and credibility; successfully advance mid- and late-stage pipeline assets; continue to drive employee engagement and motivation around AbbVie’s mission and future prospects; and advance our transformation to a biopharmaceutical culture. |
| ● | Robert A. Michael: Achieve proprietary pharmaceutical pipeline enhancement objectives and key product milestones; and provide support on corporate strategic initiatives and build shareholder value through investor activities. |
| ● | Scott T. Reents: Achieve transaction integration objectives and enterprise synergy targets; and provide support on finance strategic initiatives. |
| ● | Laura J. Schumacher: Successfully continue to develop and implement strategies to effectively resolve key litigation matters; achieve proprietary pharmaceutical pipeline enhancement objectives; execute biologics strategic development initi |