OUR PURPOSE INNOVATE TO BRING THERAPIES TO PATIENTS THAT SIGNIFICANTLY IMPROVE THEIR LIVES		OUR VALUES CUSTOMER FOCUS COMMUNITY RESPECT FOR PEOPLE PERFORMANCE COLLABORATION LEADERSHIP INTEGRITY QUALITY INNOVATION
OUR MISSION  TO BE THE PREMIER INNOVATIVE BIOPHARMACEUTICAL COMPANY

 

OUR STRATEGIC IMPERATIVES

 

1

Innovate and Lead Improve Pfizer’s ability to innovate in biomedical R&D and develop a new generation of high-value, highly differentiated medicines and vaccines.

 

2

Maximize Value Invest and allocate our resources in ways that create the greatest long-term returns for our shareholders.

 

3

Earn Greater Respect Earn society’s respect by generating breakthrough therapies, improving access, expanding the dialogue on healthcare and acting as a responsible corporate citizen.

 

4

Own Our Culture Build and sustain a culture where colleagues view themselves as owners, generating new ideas, dealing with problems in a straightforward way, investing in open and candid conversations and working as teammates on challenges and opportunities.

For registered holders and Pfizer Savings Plans Participants:   (Shares are registered in your name with Pfizer’s transfer agent, Computershare, or held in the Pfizer Savings Plan)
	Electronically using your mobile device – scan this QR code*
	Electronically via the Internet at www.investorvote.com/PFE*
	By telephone* within the U.S., U.S. territories & Canada 1-800-652-VOTE (8683) – toll-free By telephone, outside of the U.S., U.S. territories & Canada 1-781-575-2300 – standard rates apply
	By mail using the enclosed proxy card

For beneficial owners:   (Shares are held in a stock brokerage account or by a bank or other holder of record)
	Electronically using your mobile device – scan this QR code*
	Electronically via the Internet at www.proxyvote.com*
	By telephone* 1-800-454-VOTE (8683) – toll-free
	By mail using the enclosed voting instruction form

CORPORATE GOVERNANCE

 

Pfizer is committed to exercising good corporate governance practices. We believe that good governance promotes the long-term interests of shareholders and strengthens Board and management accountability and improves our standing as a trusted member of society. The Company seeks to maintain and enhance its long record of excellence in corporate governance by continually refining its corporate governance policies, procedures and practices. This includes aligning with evolving practices and addressing issues raised by our shareholders and other stakeholders and otherwise as circumstances warrant.

 

We believe that engaging in shareholder outreach is essential to maintaining our governance profile. We strive for a collaborative and mutually beneficial approach to issues of importance to investors that affect our business and to gain valuable insights into the current and emerging issues they care most about. In 2014, we engaged with institutional investors representing approximately 40% of our outstanding shares.

 

CORPORATE GOVERNANCE HIGHLIGHTS

 

Board and Other Governance Information
Annual Election of All Directors	Yes
Majority Voting for Directors	Yes
Number of Independent Directors Standing for Election	10
Total Number of Director Nominees	11
Average Age of Directors Standing for Election*	62
Separate Chairman and CEO	No
Lead Independent Director	Yes
Regular Executive Sessions of Independent Directors	Yes
Annual Board and Committee Self-Evaluations	Yes
Annual Independent Director Evaluation of Chairman and CEO	Yes
Risk Oversight by Full Board and Committees	Yes
Stock Ownership Requirements for Executives	Yes
Anti-Hedging, Anti-Short-Sale and Anti-Pledging Policies	Yes
Compensation Recovery/Clawback Policy	Yes
Annual Equity Grant to Directors	Yes
Code of Business Conduct and Ethics for Directors	Yes
Robust Investor Outreach Program	Yes

Shareholder Rights and Accountability
Annual Advisory Approval of Executive Compensation	Yes
Shareholder Ability to Call Special Meetings (20% Threshold)	Yes
Policy Prohibiting Use of Corporate Funds for Direct Independent Expenditures in Federal and State Elections	Yes
Board Oversight and Expanded Disclosure Related to Corporate Political Expenditures	Yes

 

* As of April 23, 2015

 

EXECUTIVE COMPENSATION

 

EXECUTIVE COMPENSATION PHILOSOPHY, GOALS AND PRINCIPLES

 

Pfizer’s compensation philosophy, set by the Compensation Committee of the Board, is to align each executive’s compensation with Pfizer’s short-term and long-term performance and to provide the compensation and incentives needed to attract, motivate and retain key executives who are crucial to Pfizer’s long-term success. To achieve these objectives:

 

•	We position compensation at approximately the median of our pharmaceutical peer and general industry comparator companies.
•	We align annual short-term incentive awards with annual operating, financial and strategic objectives, as well as with business unit / function and individual performance.
•	We align long-term incentive awards with the interests of our shareholders by delivering value based on absolute and relative shareholder return, encouraging stock ownership and promoting retention of key talent.
•	A significant portion of the total compensation opportunity for our executives is directly related to Pfizer’s total shareholder return and our progress against the goals of our strategic and operating plans, as well as our performance against that of our comparators.

CHANGES TO OUR EXECUTIVE COMPENSATION PROGRAM

 

Pfizer’s executive compensation program received substantial shareholder support and was approved, on an advisory basis, by 95.6% of the votes cast at the 2014 Annual Meeting. Even with our consistent level of strong shareholder support, during 2014 we continued to engage in robust shareholder outreach including with respect to our executive compensation program. As part of an overall evaluation of our program and in response to shareholder feedback during 2014 and early 2015, the Compensation Committee took several actions to enhance our executive compensation program. We believe these changes improve alignment with performance and market practices. Following are four of the key changes to our executive compensation program. For further discussion of all changes made in 2014 and early 2015, see “Compensation Discussion and Analysis” later in this Proxy Statement.

 

•	Replacing Restricted Stock Unit (RSU) Awards with Additional Performance Share Awards—Commencing in 2015, long-term incentive compensation awards for our executive leadership team (ELT), including our Named Executive Officers (NEOs), will be fully performance-based and will be delivered as 50% in Performance Share Awards (PSAs) and 50% in 5- and 7-year Total Shareholder Return Units (TSRUs).
•	Amending PSA Performance Metrics—Effective with the February 2015 long-term incentive grant, we changed the performance measure in the PSAs from three-year relative total shareholder return (TSR) versus a peer group of pharmaceutical companies, to two measures: (1) operating income over three one-year periods; and (2) TSR as compared to the NYSE ARCA Pharmaceutical Index (DRG Index) over the three-year performance period.
•	Enhancing Disclosure—Based in part on shareholder feedback, we enhanced disclosure in this Proxy Statement of the annual incentive award pool funding and targets and the rationale for providing annual incentive award ranges. We have also included tabular disclosure of NEO total direct compensation on a performance year basis in addition to the required Summary Compensation Table disclosure. The Compensation Committee believes that disclosure of compensation on a performance year basis aligns more closely with how it assesses compensation and better demonstrates the link between pay and performance.
•	Updating Peer Group—During 2014, we modified the composition of our general industry comparator group and reduced its size to create a group that more closely reflects companies most similar to Pfizer in terms of revenue, market capitalization, scope, complexity, and pay models.

 

The following charts illustrate the changes to the long-term incentive (LTI) award grant allocations made for our ELT members, including our NEOs, beginning with the 2015 annual LTI grant.

CHANGES TO LONG-TERM INCENTIVE COMPENSATION

 

 

 

 

2014 ELEMENTS OF COMPENSATION

 

We compensated our executives using the following elements in 2014:

 

Element	Type/Description
Long-Term Incentive Compensation (100% Equity)	• RSUs–25% • 5-Year TSRUs–25% • 7-Year TSRUs–25% • PSAs–25%
Annual Short-Term Incentive Compensation	Awards based on the achievement of Pfizer’s short-term financial goals (total revenue, adjusted diluted earnings per share and cash flow from operations), as well as certain other qualitative criteria measured over the current year
Salary	Fixed amount of cash compensation for performing day-to-day responsibilities
Retirement	• Pension Plan • Supplemental Pension Plan • Savings Plan • Retirement Savings Contribution • Supplemental Savings Plan
Other	Perquisites

2014 ANNUAL INCENTIVE AWARDS

 

Our annual incentive plan provides the opportunity for a competitively based annual incentive cash award. The annual incentive award pool is funded based on Pfizer’s performance against three financial metrics (total revenue, adjusted diluted earnings per share (EPS) and cash flow from operations), each for annual incentive compensation purposes, as well as other strategic objectives.

 

Once funded, the annual incentive award pool is allocated to the various business units based on relative performance of these units. Individual awards to our executives, including the NEOs, are determined by the Compensation Committee based on individual and business unit / function performance against pre-established objective goals within the parameters of the overall annual incentive award funding. The annual incentive awards for 2014 performance were determined in February 2015.

 

2014 PERFORMANCE FOR ANNUAL INCENTIVE PURPOSES

 

The Company exceeded the 2014 target goal for adjusted diluted EPS and cash flow, but fell slightly below target performance for revenue. These target goals for annual incentive purposes were set by the Compensation Committee in the first quarter of 2014 based on its evaluation of the budgeted amounts and its determination that there was a sufficient degree of stretch in the targets. These results are different from our results under Generally Accepted Accounting Principles (GAAP) in the United States.

 

2014 FINANCIAL OBJECTIVES (FOR ANNUAL INCENTIVE PURPOSES)*

 

 

*	See “Financial Measures” on page 88 for a reconciliation of U.S. GAAP numbers to these objectives for annual incentive purposes and “Financial Results for Annual Incentive Purposes” on page 58 for additional information.

2014 LONG-TERM INCENTIVE AWARDS (EQUITY)

 

Long-term incentive compensation for our executives, including the NEOs, was delivered entirely in the form of equity awards. In February 2014, executives received long-term incentive awards consisting of RSUs, PSAs and TSRUs. The long-term incentive grant value was divided equally among RSUs, PSAs and 5- and 7-Year TSRUs in 2014. Commencing in 2015, long-term incentive grant value for our ELT members including our NEOs, will be delivered as 50% in 5- and 7-Year TSRUs and 50% in PSAs.

 

Long-Term Instruments	Objective
RSUs	To encourage ownership and retention while providing immediate alignment with shareholders
PSAs	To reward relative total shareholder return over a three-year performance period (see “Changes to Our Executive Compensation Program” above for changes to our PSAs beginning with grants made in 2015)
TSRUs	To provide long-term alignment with shareholders by linking rewards to absolute total shareholder return over a five- or seven-year period

 

The grant value of each NEO’s long-term incentive award was based on competitive market data (targeted to median), relative duties and responsibilities, the individual’s future advancement potential, and his impact on Pfizer’s results. The awards are also used for retention purposes.

 

OUR COMPENSATION PRACTICES

 

Pfizer continues to implement and maintain leading practices in its compensation program, shareholder outreach and related areas. These practices include:

 

√	Risk Mitigation	√	No Repricing
√	Compensation Recovery	√	Minimum Vesting
√	No Hedging or Pledging	√	No Employment
			Agreements
√	No “Gross-ups”	√	Independent
			Compensation
			Consultant
√	Stock Ownership	√	Robust Investor
	Requirements		Outreach

OVERVIEW

 

The following sections provide an overview of Pfizer’s corporate governance structure and processes, including the independence and other criteria we use in selecting Director nominees; our Board leadership structure; risk oversight; shareholder outreach; and certain responsibilities and activities of the Board of Directors and its Committees. We also discuss how shareholders and other stakeholders can communicate with our Directors.

 

Our governance structure and processes are based upon a number of key governance documents, including our Corporate Governance Principles. The Principles, which are included as Annex 1 to this Proxy Statement, govern the operation of the Board of Directors and its Committees and guide the Board and our Executive Leadership Team in the execution of their responsibilities. The Principles are reviewed at least annually and are updated periodically in response to changing regulatory requirements, evolving practices, issues raised by our shareholders and other stakeholders, and otherwise as circumstances warrant.

 

 

We will provide copies of any of these items without charge upon written request to our Corporate Secretary, Pfizer Inc., 235 East 42nd Street, New York, New York 10017-5755. The information on our website is not a part of this Proxy Statement.

 

GOVERNANCE INFORMATION

 

CRITERIA FOR BOARD MEMBERSHIP

 

The Corporate Governance Committee of the Board of Directors focuses on Board succession planning on a continuous basis. In performing this function, the Committee is responsible for recruiting and recommending to the full Board of Directors nominees for election as Directors. The goal of the Committee is to achieve a Board that provides effective oversight of the Company through the

 

The Company’s Corporate Governance Principles are reviewed at least annually and are updated periodically in response to changing regulatory requirements, evolving practices, issues raised by our shareholders and other stakeholders, and otherwise as circumstances warrant.

appropriate balance of diversity of experience, expertise, skills, specialized knowledge and other qualifications and attributes of the individual Directors. Important general criteria for Board membership include the following:

 

•	Members of the Board should be individuals of proven integrity and independence, with a record of substantial achievement in an area of relevance to the Company, and generally should have prior or current leadership experience with major complex organizations, including within the scientific, government service, educational, finance, marketing, technology or not-for-profit sectors, with some members of the Board being widely recognized as leaders in the fields of medicine or biological sciences.
•	Members of the Board should be committed to enhancing the long-term growth of the Company.
•	Members of the Board should have demonstrated ability, with broad experience, diverse perspectives, and the ability to exercise sound judgment, and should possess a judicious and critical temperament that will enable objective appraisal of management’s plans and programs.
•	The composition of the Board should be diverse in terms of gender, ethnic background and professional experience.

 

The Committee considers on an ongoing basis the background, experience and skills of the individual Directors that are important to the Company’s current and future needs, including experience and skills in the following areas:

 

•	business and operations leadership;
•	finance and accounting;
•	medicine, science or research and development (R&D);
•	government and public policy;
•	healthcare and related fields (including pharmaceuticals);
•	international business;
•	academics;
•	leadership and management development; and
•	technology.

 

The satisfaction of these criteria is implemented and assessed through ongoing evaluations of Directors and nominees by the Corporate Governance Committee and the full Board, as well as annual Board and Committee self-evaluations. Based upon these activities and their review of the current composition of the Board, the Committee and the Board believe that these criteria have been satisfied.

 

SELECTION OF CANDIDATES

 

In recruiting and selecting Board candidates, the Corporate Governance Committee takes into account the size of the Board and considers a “skills matrix,” which indicates whether a particular Board member or candidate possesses one or more of the above “skill sets,” as well as whether those skills and/or other attributes qualify him or her for service on a particular committee. The Committee also considers a wide range of additional factors, including each Director’s and candidate’s projected retirement date, to assist in Board succession planning; other positions the Director or candidate holds, including other boards of directors on which he or she serves; and the independence of each Director and candidate, to ensure that a substantial majority of the Board is independent (see “Director Independence” below).

 

On an ongoing basis, the Committee considers potential Director candidates identified on its own initiative, as well as candidates referred or recommended to it by other Directors, members of management, search firms, shareholders and other sources (including individuals seeking to join the Board). Shareholders who wish to recommend candidates may contact the Committee in the manner described in “Communications with Directors.” All candidates are required to meet the criteria outlined above, as well as those discussed under “Director Independence” below and in our Corporate

 

The Corporate Governance Committee considers on an ongoing basis the background, experience and skills of the individual Directors that are important to the Company’s current and future needs.

Governance Principles and other governing documents, as applicable, as determined by the Committee in its sole discretion. Shareholder nominations must be made according to the procedures required under our By-laws and described in this Proxy Statement under the heading “Requirements for Submitting Proxy Proposals and Nominating Directors.” Shareholder-recommended candidates and shareholder nominees whose nominations comply with these procedures and who meet the criteria referred to above will be evaluated by the Committee in the same manner as the Committee’s nominees.

 

The Committee and the Board believe that each of the nominees for election at the Annual Meeting brings a strong and unique set of attributes, experiences and skills and that the Board as a whole has an optimal balance of experience, leadership, competencies, qualifications and skills in areas of importance to our Company.

 

Under “Item 1—Election of Directors—Nominees for Directors,” we provide an overview of each nominee’s principal occupation, business experience and other directorships, together with the key attributes, experience and skills viewed as particularly meaningful in providing value to the Board, our Company and our shareholders.

 

DIRECTOR INDEPENDENCE

 

Our Board of Directors has adopted Director Qualification Standards (Standards) to evaluate and determine Director independence. Our Standards meet, and in some respects exceed, the independence requirements of the New York Stock Exchange (NYSE). To qualify as independent under our Standards, a non-employee Director must be determined to have no material relationship with the Company other than as a Director. The Standards also contain strict guidelines for Directors and their immediate families regarding employment or affiliation with the Company or its independent registered public accounting firm; prohibitions against Audit Committee members having any direct or indirect financial relationship with the Company; considerations for evaluation of Compensation Committee member independence; and restrictions on both commercial and not-for-profit relationships between non-employee Directors and the Company. Directors may not receive personal loans or extensions of credit from the Company, must deal at arm’s length with the Company and its subsidiaries, and must disclose any circumstance that might be perceived as a conflict of interest. Our Director Qualification Standards can be found on our website at www.pfizer.com/about/corporate_governance/director_qualification_standards.jsp.

 

With the assistance of legal counsel to the Company, the Corporate Governance Committee has reviewed the applicable legal and NYSE standards for Board and Committee member independence, as well as our Standards. A summary of the answers to annual questionnaires completed by each of the Directors and a report of transactions with Director-affiliated entities are also made available to the Committee. On the basis of this review, the Committee has delivered a report to the full Board of Directors, and the Board has made its independence determinations based upon the Committee’s report and the supporting information.

 

The Board has affirmatively determined that all of our current Directors (other than Mr. Ian C. Read) are independent of the Company and its management and meet the Company’s criteria for independence. The independent Directors are Drs. Dennis A. Ausiello, Frances D. Fergusson, Helen H. Hobbs and Marc Tessier-Lavigne; Ms. Constance J. Horner and Ms. Suzanne Nora Johnson; and Messrs. W. Don Cornwell, James M. Kilts, George A. Lorch, Shantanu Narayen, Stephen W. Sanger and James C. Smith. The Board has determined that Mr. Ian C. Read is not independent because of his employment as the Company’s CEO.

 

In making these determinations, the Board considered that, in the ordinary course of business, relationships and transactions may occur between the Company and its subsidiaries on the one hand and entities with which some of our Directors are or have been affiliated on the other. Under Pfizer’s Director Qualification Standards, certain relationships and transactions are not considered to be material transactions that would impair a Director’s independence, including the following:

 

•

the Director is an employee, or an immediate family member of the Director is an executive officer, of another company that does business with Pfizer, and our annual sales to, or purchases from, the other company in each of the last three fiscal years amounted to less than 1% of the annual revenues of the other company; and

 

The Corporate Governance Committee and the Board believe that each of the nominees for election at the Annual Meeting brings a strong and unique set of attributes, experiences and skills and that the Board as a whole has an optimal balance of experience, leadership, competencies, qualifications and skills in areas of importance to our Company.

 

 

 

 

 

Aside from our CEO, all of our current Directors are independent of the Company and its management.

 

To qualify as independent under our Director Qualification Standards, a non-employee Director must be determined to have no material relationship with the Company other than as a Director.

•	the Director or an immediate family member of the Director is an executive officer of another company, and our indebtedness to the other company or its indebtedness to Pfizer amounts to less than 1% of the total consolidated assets of the other company.

 

In 2014, there was no indebtedness between Pfizer and any entity of which a Director or an immediate family member of a Director was an executive officer.

 

Drs. Ausiello, Hobbs and Tessier-Lavigne are employed at medical or academic institutions with which Pfizer engages in ordinary-course business transactions, and Mr. Narayen is the chief executive officer of Adobe Systems Incorporated and Mr. Smith is the chief executive officer of Thomson Reuters Corporation, companies with which Pfizer engages in ordinary-course business transactions. We reviewed our transactions with each of these entities and found that these transactions were made in the ordinary course of business and were below the levels set forth in our Director Qualification Standards (1% of the annual revenues of these entities in each of the last three years).

 

Under our Director Qualification Standards, contributions to not-for-profit entities in which a Director of the Company, or a Director’s spouse, serves as an executive officer, amounting to less than 2% of that organization’s latest publicly available total revenues (or $1 million, whichever is greater), will not serve as a bar to the Director’s independence. None of our Directors or their spouses is an executive officer of a not-for-profit organization to which Pfizer contributes. Nonetheless, a summary of charitable contributions to not-for-profit organizations with which our Directors or their spouses are affiliated was made available to the Committee. None of the contributions approached the levels set forth in our Director Qualification Standards.

 

BOARD LEADERSHIP STRUCTURE

 

The Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of senior management and a highly engaged and high-functioning Board. Based on its experience, considerable engagement with shareholders, and an assessment of research on this issue, the Board understands that there are a variety of viewpoints concerning a board’s optimal leadership structure; that available empirical data concerning the impact of board leadership on shareholder value is inconclusive; and, accordingly, that there is no single, generally accepted approach to board leadership in the U.S. Given the dynamic and competitive environment in which we operate, the Board believes that the right leadership structure may vary as circumstances warrant. Consistent with this understanding, the independent Directors do not view any particular Board leadership structure as preferred and consider the Board’s leadership structure on at least an annual basis. This consideration includes the pros and cons of alternative leadership structures in light of the Company’s current operating and governance environment, a review of empirical data on the topic and investor feedback, with the goal of achieving the optimal model for Board leadership and effective oversight of senior leaders by the Board. The Board recognizes that in circumstances where the positions of Chairman and CEO are combined, investors believe it is imperative that the Board appoint a strong Lead Independent Director with clearly defined roles and responsibilities.

 

Based upon these considerations, and following thorough reviews by the Corporate Governance Committee, the independent Directors reconsidered the Board’s leadership structure and determined in December 2014 to maintain the current leadership structure, with Mr. Read as Chairman. These determinations were based on the independent Directors’ continued strong belief that Mr. Read has extensive experience in and knowledge of the research-based biopharmaceutical industry and regulatory environment; continues to demonstrate the leadership and vision necessary to lead the Board and the Company in our challenging industry and macroeconomic environments; has a fundamentally investor-driven viewpoint; and exercises leadership that has generated strong operational performance. The independent Directors also believe that this unified structure provides our Company with strong and consistent leadership and that, given the significant regulatory and market environment in which we operate, having one clear leader in both roles, with deep industry expertise and Company knowledge, provides decisive and effective leadership internally and externally.

 

The independent Directors do not view any particular Board leadership structure as preferred and consider the Board’s leadership structure on at least an annual basis.

 

 

 

 

The independent Directors believe that Mr. Read, Pfizer’s Chairman and CEO, has extensive experience in and knowledge of the research-based biopharmaceutical industry and regulatory environment; continues to demonstrate the leadership and vision necessary to lead the Board and the Company in our challenging industry and macroeconomic environments; has a fundamentally investor-driven viewpoint; and exercises leadership that has generated strong operational performance.

The independent Directors have also selected Dr. Dennis A. Ausiello, contingent upon his election as a Director at the 2015 Annual Meeting of Shareholders, to serve as Lead Independent Director following the Annual Meeting—a position that, at Pfizer, entails significant responsibility for independent Board leadership. Pfizer’s current Lead Independent Director, Mr. George A. Lorch, will retire from the Board at the 2015 Annual Meeting of Shareholders. During his tenure as Director, Dr. Ausiello has demonstrated strong leadership skills and independent thinking, a deep understanding of the business and a high level of scientific expertise. The independent Directors are confident in Dr. Ausiello’s ability to serve as Lead Independent Director. Upon becoming Lead Independent Director, Dr. Ausiello will also serve as an ex-officio member of each of the Board’s committees and will continue in his role as Chair of the Science and Technology Committee.

 

In considering the Board’s leadership structure, the independent Directors have taken a number of factors into account. The Board—which consists entirely of independent Directors other than Mr. Read—exercises a strong, independent oversight function. This oversight function is enhanced by the fact that our Audit, Compensation, Corporate Governance, Regulatory and Compliance and Science and Technology Committees are comprised entirely of independent Directors. Further, a number of Board and committee processes and procedures provide substantial independent oversight of our CEO’s performance, including regular executive sessions of the independent Directors, an annual evaluation of our CEO’s performance against pre-determined goals, and a separate evaluation that, among other things, assesses the CEO’s interactions with the Board in his role as Chairman.

 

The independent Directors remain committed to evaluating our Board leadership structure at least annually. Under the Company’s By-laws and Corporate Governance Principles, the Board can and will change its leadership structure if it determines that doing so is appropriate and in the best interest of Pfizer and its shareholders. The Board believes that these factors provide the appropriate balance between the authority of those who oversee the Company and those who manage it on a day-to-day basis.

 

The Company’s Corporate Governance Principles align with investor preferences and require the appointment of a Lead Independent Director, with a clearly defined role and responsibilities, if the positions of Chairman and CEO are held by the same individual. The independent Directors believe that Mr. Lorch has demonstrated, and that Dr. Ausiello will demonstrate, strong and independent leadership in that position.

 

 

 

 

 

 

The independent Directors have selected Dr. Dennis A. Ausiello, contingent upon his election as a Director at the 2015 Annual Meeting of Shareholders, to serve as Lead Independent Director following the Annual Meeting. During his tenure as a Director, Dr. Ausiello has demonstrated strong leadership skills and independent thinking, a deep understanding of the business and a high level of scientific expertise.

 

EXECUTIVE SESSIONS

 

Executive sessions of the independent Directors (i.e., all Directors other than Mr. Read) generally take place at every regular Board meeting. At these executive sessions, the independent Directors review, among other things, the criteria upon which the performance of the CEO and other senior managers is evaluated, the performance of the CEO against those criteria, and the compensation of the CEO and other senior managers.

 

THE BOARD’S ROLE IN RISK OVERSIGHT

 

Management is responsible for assessing and managing risk, subject to oversight by the Board. The Board believes that its leadership structure, described above, and the Company’s Enterprise Risk Management, or “ERM,” program support the risk oversight function of the Board. The Board executes its oversight responsibility for risk assessment and risk management directly and through its committees, as follows:

 

•	The Audit Committee has primary responsibility for overseeing the Company’s ERM program. The Company’s Chief Internal Auditor, who reports to the Committee, facilitates the ERM program, in

 

Our Lead Independent Director has a clear mandate, as well as significant authority and responsibilities, including leading the evaluation by the independent Directors of the CEO’s effectiveness as Chairman and CEO.

	coordination with the Company’s Legal Division and Compliance Division, to complement the Company’s strategic and operating planning process. The Committee’s meeting agendas throughout the year include discussions of individual risk areas, as well as an annual summary of the ERM process. For additional information, see “Board and Committee Information—The Audit Committee” and “Item 2—Ratification of Selection of Independent Registered Public Accounting Firm—Audit Committee Report” later in this Proxy Statement.
	The Audit Committee also reviews and receives regular briefings concerning cyber risks and threats, including discussion of the Company’s cyber risk protections and risk management program. The Company’s Chief Information Officer leads Pfizer’s cyber security risk management program, which is fully integrated into Pfizer’s overall ERM program and overseen by the Committee.
•	The Regulatory and Compliance Committee has primary responsibility for overseeing and reviewing risks associated with the Company’s healthcare law compliance programs and the status of compliance with related laws, regulations and internal procedures. The Committee, in consultation with the Compensation Committee, is responsible for discussing with management the risks associated with our compensation policies and practices for sales and marketing personnel and the alignment of compensation practices with the Company’s compliance standards. From time to time, the Regulatory and Compliance Committee and the Audit Committee hold joint sessions to discuss risks relevant to both committees’ areas of risk oversight. For additional information, see “Board and Committee Information—The Regulatory and Compliance Committee” later in this Proxy Statement.
•	The Board’s other committees—Compensation, Corporate Governance, and Science and Technology—oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee considers the risks associated with our compensation policies and practices, with respect to both executive compensation and compensation generally.
•	The Board of Directors is kept informed of its committees’ risk oversight and other activities through reports of the committee Chairs to the full Board. These reports are presented at every regular Board meeting and include discussions of committee agenda topics, including matters involving risk oversight.
•	The Board considers specific risk topics, including risks associated with our strategic plan, our capital structure and our R&D activities. In addition, the Board receives regular reports from members of our Executive Leadership Team, or “ELT”—the heads of our principal business and corporate functions—that include discussions of the risks involved in their respective areas of responsibility, and the Board is routinely informed of developments that could affect our risk profile or other aspects of our business.

 

PFIZER POLICIES ON BUSINESS ETHICS AND CONDUCT

 

All of our employees, including our Chief Executive Officer, Chief Financial Officer and Controller, are required to abide by Pfizer’s policies on business conduct to ensure that our business is conducted in a consistently legal and ethical manner. Pfizer’s policies form the foundation of a comprehensive process that includes compliance with corporate policies and procedures, an open relationship among colleagues to foster good business conduct, and a high level of integrity. Our policies and procedures cover all major areas of professional conduct, including employment practices, conflicts of interest, intellectual property and the protection of confidential information, and require strict adherence to laws and regulations applicable to the conduct of our business.

 

Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of Pfizer’s policies on business conduct. As required by the Sarbanes-Oxley Act of 2002, our Audit Committee has procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

 

The full text of the Summary of Pfizer Policies on Business Conduct is posted on our website at www.pfizer.com/about/corporate_compliance/code_of_conduct.jsp. We will disclose any future amendments to, or waivers from, provisions of these ethics policies and standards affecting our Chief Executive Officer, Chief Financial Officer and Controller on our website as promptly as practicable, as may be required under applicable U.S. Securities and Exchange Commission (SEC) and NYSE rules.

 

The Audit Committee has primary responsibility for overseeing the Company’s Enterprise Risk Management program.

 

The Audit Committee also reviews and receives regular briefings concerning cyber risks and threats, including discussion of the Company’s cyber risk protections and risk management program.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integrity is essential to how we do business. All of our employees and Directors are required to abide by codes of ethics.

CODE OF CONDUCT FOR DIRECTORS

 

Our Directors are required to comply with a Code of Business Conduct and Ethics for Members of the Board of Directors. This Code is intended to focus the Board and the individual Directors on areas of ethical risk, help Directors recognize and deal with ethical issues, provide mechanisms to report unethical conduct, and foster a culture of honesty and accountability. This Code covers all areas of professional conduct relating to service on the Pfizer Board, including conflicts of interest, unfair or unethical use of corporate opportunities, strict protection of confidential information, compliance with applicable laws and regulations, and oversight of ethics and compliance by employees of the Company. Under the Corporate Integrity Agreement Pfizer entered into in 2009, which expired at the end of 2014 (discussed under “Board and Committee Information—The Regulatory and Compliance Committee” below), our Board members also had certain obligations with respect to our Summary of Pfizer Policies on Business Conduct, including annually certifying that they have received and reviewed the Summary of Pfizer Policies on Business Conduct.

 

The full text of the Code of Business Conduct and Ethics for Members of the Board of Directors is posted on our website at www.pfizer.com/about/corporate_governance/directors_code.jsp.

 

COMMUNICATIONS WITH DIRECTORS

 

Shareholders and other interested parties may communicate with any of our Directors, including the Lead Independent Director and the Audit Committee Chair, by writing to the Corporate Secretary, Pfizer Inc., 235 East 42nd Street, New York, New York 10017-5755 or by e-mail via Pfizer’s website at www.pfizer.com/about/corporate_governance/contact_directors.

 

Shareholder communications are distributed to the Board, or to any individual Director or Directors, as appropriate, depending on the facts and circumstances outlined in the communication. The Board of Directors has requested that certain items that are unrelated to the duties and responsibilities of the Board be excluded or redirected, as appropriate, such as business solicitations or advertisements, junk mail and mass mailings, new product suggestions, product complaints, product inquiries, resumes and other forms of job inquiries, spam and surveys. In addition, material that is unduly hostile, threatening or similarly unsuitable will be excluded; however, any communication will be made available to any Director upon his or her request.

 

SHAREHOLDER OUTREACH

 

We believe that shareholder outreach is essential to maintaining our good corporate governance practices and profile. Throughout the year, we engage with our global investors to gain valuable insights into the current and emerging governance issues about which they care most. We strive for a collaborative and mutually beneficial approach to issues of importance to investors that affect our business and also to ensure that our corporate governance practices remain industry-leading.

 

During 2014, we engaged in discussions with institutional investors based both in and outside the U.S. representing approximately 40% of our outstanding shares. The feedback received was summarized and presented to the Corporate Governance Committee and full Board.

 

•

Board-related: Items on the agenda for these discussions included director/shareholder engagement practices and policies; board composition and refreshment mechanisms; director evaluations; shareholder rights matters, including proxy access; board oversight of cyber security; executive compensation; and other matters. The subject of board composition dominated many of our discussions. Some investors are becoming more interested in evaluating directors and full boards beyond the scope of independence, tenure and gender diversity, with greater focus on relevant skill sets in connection with business needs and strategic objectives. During our discussions, investors were keenly interested in our board succession planning, director evaluations, refreshment policies and leadership structure. In general, investors expressed minimal concerns about our Board and individual Directors or with our Board policies or approach to engagement. With respect to our Board’s leadership structure, a majority of our U.S. investors appear to have little or no concerns, with most evaluating this issue by assessing our strong counterbalancing structure of a robust Lead Independent Director in connection with the Company’s operating performance. In contrast, our

 

 

 

 

 

 

 

Shareholders and other interested parties may communicate with any of our Directors, including the Lead Independent Director and the Audit Committee Chair.

 

 

 

 

We believe that shareholder outreach is essential to maintaining our good corporate governance practices and profile.

 

Our agenda for our outreach discussions in 2014 included director/shareholder engagement practices and policies; board composition and refreshment mechanisms; director evaluations; shareholder rights matters; including proxy access; board oversight of cyber security; executive compensation; and other matters.

	investors in the U.K., where the roles of Chairman and CEO are commonly held by two separate individuals, generally prefer that companies separate the roles.
•	Executive Compensation: During our discussions, investors continued to show support for our current philosophy and program, seeing it as well-structured and aligning with performance. Investors were particularly interested in discussing the long-term components of our program. We also discussed the use of certain performance metrics over others, including specific metrics tied to R&D performance such as those for our portfolio performance share award program for R&D colleagues. The shareholder feedback was reported to the Compensation Committee and the Board for consideration. As a result of this review and an analysis of industry best practices, the Compensation Committee has taken several important actions to enhance the design of the Company’s executive compensation program. See “Item 3—Advisory Approval of Executive Compensation” and “Compensation Discussion and Analysis” elsewhere in this Proxy Statement.
•	Written Consent: Some investors continue to support written consent proposals under any circumstances; however, there is general consensus among Pfizer shareholders that the ability to call special meetings under our existing By-laws is sufficient and preferable in some circumstances.
•	Proxy Access: We also discussed the potential benefits and risks of giving shareholders the ability to nominate Directors without having to resort to separate proxy materials and the terms on which such “proxy access” might be provided. Investors continue to evaluate resolutions mostly on a case-by-case basis and to formulate their respective internal voting policies on proxy access.
•	Political Contributions/Lobbying Activities: Investors were less interested in discussing our political contributions disclosures and lobbying activities than in previous years. Most indicated they are satisfied with our current level of disclosure, Board oversight of the process and rigorous internal approval/review (involving the Company’s Government Affairs Leaders and oversight by the Corporate Governance Committee). A minority of investors indicated an interest in viewing additional disclosures involving our association with trade associations, think tanks and other legislative organizations, as well as our lobbying expenditures and priorities. See “Item 4—Shareholder Proposal Regarding Report on Lobbying Activities.”

 

In addition to speaking with our institutional investors, we also are highly responsive to our individual shareholders, who are valuable and important shareholders to the Company. In 2014, Pfizer responded to more than 1,200 of the written communications received by our Board of Directors’ mailboxes and via proxy cards on a variety of topics, including governance matters, product comments and shareholder services inquiries. Shareholder sentiment from these individual investors is also regularly shared with the Board.

 

PUBLIC POLICY ENGAGEMENT AND POLITICAL PARTICIPATION

 

Engaging in Public Policy

 

In the highly regulated and competitive pharmaceutical industry, it is fundamental to our business that we engage on public policy issues that may affect our ability to meet patient needs and enhance shareholder value, such as barriers to access, counterfeit medicines, illegal drug importation and challenges to our intellectual property protection. Because we have extensive knowledge about healthcare and many ideas about improving its efficiency, as well as a global perspective on public health, disease prevention and health education and wellness, we regularly work with policy makers to help create and maintain an innovative environment where we can cultivate new medicines, bring them to market and ensure that patient health and safety remain a priority.

 

To broaden our engagement efforts, we are also a member of several industry and trade groups, including the Pharmaceutical Research and Manufacturers of America, the National Association of Manufacturers, the Biotechnology Industry Association, the U.S. Chamber of Commerce and the Business Roundtable. These organizations, along with the others to which we belong, represent both the pharmaceutical industry and the business community at large in an effort to bring about consensus on broad policy issues that can impact our business and service to patients. Our support of these organizations is evaluated annually by the Company’s Government Affairs Leaders based on these organizations’ expertise in

 

 

Our support of industry and trade groups is evaluated annually by the Company’s Government Affairs Leaders based on these organizations’ expertise in healthcare policy/advocacy and issues that impact the life sciences industry.

healthcare policy/advocacy and issues that impact the life sciences industry. In addition, we require that these organizations support key issues of importance to Pfizer, including advancing biomedical research, healthcare innovation, advocating for protecting intellectual property rights and access to care. In addition to their positions on healthcare policy issues, these organizations may engage in activities pertaining to a myriad of issues. At times we may not share the views promoted by these industry and trade groups and/or members on certain issues, but we are able to voice our concerns to them, as appropriate, through our colleagues who serve on the boards and committees of these groups. We also believe that our participation in an organization can provide opportunities to positively influence how they operate.

 

Corporate Political Contributions

 

Our Company complies fully with all federal, state and local laws and reporting requirements governing corporate political contributions. We also request that trade associations receiving total payments of $100,000 or more from Pfizer annually report the portion of Pfizer dues or payments used for expenditures or contributions that, if made directly by Pfizer, would not be deductible under section 162(e)(1)(B) of the Internal Revenue Code. All corporate political contributions are published semiannually in the Political Action Committee (PAC) and Corporate Political Contributions report in compliance with Pfizer corporate policy. Every two years, at the end of each federal election cycle, the report is audited by Bond Beebe, a certified public accounting and advisory firm.

 

We regularly discuss our political contributions reporting practices with investors and other stakeholders to ensure that our disclosures continue to meet their needs. Shareholder engagement has helped us expand our level of disclosure and create or modify corporate policies related to political expenditures in recent years.

 

Independent Expenditures

 

Our Company does not make direct independent expenditures. We adopted a strict policy precluding Pfizer from making direct independent expenditures in connection with any federal or state election. This action formalized a process that was underway for many years at Pfizer and was adopted in response to shareholders’ concerns about corporate political spending in the wake of the Supreme Court’s decision in Citizens United v. Federal Election Commission.

 

Policies and Procedures for Approval/Oversight of Corporate and PAC Political Expenditures

 

All corporate and PAC political spending decisions undergo a rigorous review process conducted by the PAC Steering Committee comprised of colleagues from various divisions throughout the Company to ensure that each contribution we make is done to advance our business objectives and is not based on the political preferences or views of any individual colleague within Pfizer.

 

The PAC Steering Committee evaluates candidates to whom we contribute on the basis of their views on issues that impact not only Pfizer but our patients as well. The Committee also takes note of whether Pfizer facilities or colleagues reside in a candidate’s district or state. All PAC and corporate contribution requests are shared with the Pfizer Political Contributions Policy Committee (PCPC), chaired by the Executive Vice President, Corporate Affairs and composed of senior leaders from different divisions in the organization.

 

The Corporate Governance Committee of the Board of Directors is responsible for maintaining an informed status on public policy and corporate political spending practices through periodic discussions and reviews of the Company’s PAC and Corporate Political Contributions reports.

 

Federal and State Lobbying Activity

 

We file quarterly reports of our federal lobbying activity in compliance with the Honest Leadership and Open Government Act of 2007. In addition to Pfizer’s federal lobbying activity, the amount we report also includes the amount spent on federal lobbying activity by trade associations of which Pfizer is a member. These reports are available to the public at http://soprweb.senate.gov/index.cfm?event=selectfields.

 

With regard to Pfizer’s state lobbying activity, Pfizer complies with state registration and reporting requirements in all the states where Pfizer is currently active.

 

Our Company complies fully with all federal, state and local laws and reporting requirements governing corporate political contributions.

 

We regularly discuss our political contributions reporting practices with investors and other stakeholders to ensure that our disclosures meet their needs.

 

 

 

 

 

 

 

 

 

 

The Corporate Governance Committee of the Board of Directors is responsible for maintaining an informed status on public policy and corporate political spending practices through periodic discussions and reviews of the Company’s PAC and Corporate Political Contributions reports.

The Corporate Governance Committee seeks to maintain and enhance Pfizer’s record of excellence in corporate governance by continually refining Pfizer’s corporate governance policies, procedures and practices. The following are examples of how we worked to achieve these objectives in 2014.

 

•	Board and Committee Matters; Director Evaluations: During 2014, the Committee assessed Director independence and qualifications to serve on various committees; conducted a comprehensive self-evaluation process for the Board and its committees; reviewed and, where appropriate, recommended changes to our governing documents, including our committee charters and Corporate Governance Principles; and continued to review the functioning of the Board and committees in developing areas. During its self-evaluation, the Board considered whether to incorporate individual Director evaluations into the process, and following its review, determined that its current process is robust and highly effective and, therefore, will remain unchanged for 2015. The Committee also discussed committee Chair and membership assignments and determined that there would be no change to current Chair assignments for a one-year period given the election of a new Lead Independent Director in 2015.
•	Board Leadership Structure: The Committee conducted its thorough annual review of the Board’s leadership structure, resulting in determinations to retain the current leadership structure consisting of a combined Chairman and CEO, and a Lead Independent Director. In addition, in light of Mr. Lorch’s planned retirement in April 2015, the Committee engaged in thorough succession-planning discussions and analysis for the role of Lead Independent Director following Mr. Lorch’s retirement. In February 2015, the Committee recommended and the independent Directors elected Dr. Dennis A. Ausiello to serve as Lead Independent Director following Mr. Lorch’s retirement, subject to his election as a Director at the 2015 Annual Meeting. See “Governance Information—Board Leadership Structure” and “—Lead Independent Director.”
•	Recruitment and Assessment of New Directors: In 2014, the Committee continued an ongoing Board succession planning process to assess candidates for election as Directors, based upon a “skills matrix” and the other criteria discussed in “Governance Information—Selection of Candidates.” Resulting from this process, in June 2014 the Committee recommended and the Board elected Mr. James C. Smith as a Director and a member of the Corporate Governance and Science and Technology Committees. Among other qualifications, Mr. Smith brings leadership and operational and international business experience to the Board. The Committee considered the election of Mr. Smith as a Director upon recommendation by our Chairman and CEO and evaluation by a third-party search firm. The Committee also reviewed outside requests to join the Board.
•	Non-Employee Director Compensation: The Committee conducted a review of the Company’s compensation program for non-employee Directors to ensure its alignment with industry best practices and shareholder interests. As a result of this review, modifications to the non-employee Director compensation program were proposed and were subsequently presented to and approved by the full Board at its April 2014 meeting. See “Compensation of Non-Employee Directors.”
•	Corporate Responsibility and Public Policy: Under its charter, the Committee is responsible for maintaining an informed status on Company issues related to public policy, social responsibility and philanthropy and for monitoring emerging issues potentially affecting the reputation of the pharmaceutical industry and Pfizer specifically. The Committee received an update on the Company’s corporate responsibility initiatives at year end and was also informed of Pfizer’s public policy and corporate political spending practices through periodic discussions and reviews of the Company’s biannual PAC and Corporate Political Contributions Report. A summary discussion of Pfizer’s public policy engagement and political participation has been included in this Proxy Statement. See “Governance Information—Public Policy Engagement and Political Participation.”

 

 

In 2014, the Corporate Governance Committee continued an ongoing Board succession planning process to assess candidates for election as Directors, based upon a “skills matrix” and the other criteria discussed in “Selection of Candidates.” Resulting from this process, in June 2014 the Corporate Governance Committee recommended and the Board elected Mr. James C. Smith as a Director and a member of the Corporate Governance and Science and Technology Committees.

 

In addition, in light of Mr. Lorch’s planned retirement in April 2015, the Corporate Governance Committee engaged in thorough succession-planning discussions and analysis for the role of Lead Independent Director following Mr. Lorch’s retirement.

under the CIA. The CIA obligations related to the Committee include the following: (i) the Committee must meet at least quarterly to review and oversee Pfizer’s compliance program; (ii) the Committee must adopt resolutions each year summarizing its review and oversight of the Company’s compliance program and its compliance with federal healthcare program requirements, FDA requirements and the obligations of the CIA and concluding that, to the best of its knowledge, Pfizer has adopted an effective compliance program to meet those requirements and obligations; and (iii) Pfizer must promptly report any changes in the composition of the Committee or any actions or changes that would affect the Committee’s ability to perform the duties necessary to meet the obligations of the CIA. The Company’s compliance obligations under the CIA ended December 31, 2014. The Committee will be asked to adopt the final CIA-required resolution later this year.

 

The Regulatory and Compliance Committee Charter is available on our website at www.pfizer.com/about/corporate_governance/regulatory_compliance_committee.jsp.

 

Regulatory and Compliance Committee Report

 

The Regulatory and Compliance Committee assists the Board of Directors with the oversight of significant healthcare-related regulatory and compliance issues. Under the terms of its charter, the Committee receives reports regarding Pfizer’s compliance program and had oversight of compliance with the requirements of the Company’s CIA through its expiration on December 31, 2014. Management has primary responsibility for the operation of the Company’s compliance program and for implementing the requirements of the Company’s CIA.

 

In 2014, the Regulatory and Compliance Committee received reports and discussed with management, including the Chief Compliance and Risk Officer, healthcare-related regulatory and compliance risks and related compliance program initiatives and functions. Among the matters considered by the Committee were: (i) potential healthcare-related regulatory or compliance risks in connection with the development, manufacture and marketing of Pfizer products, and efforts to mitigate those risks; (ii) government investigations and other legal proceedings involving the Company; (iii) internal investigations of potential healthcare-related compliance or regulatory matters; (iv) results of internal audits conducted in areas within the Committee’s oversight; (v) the Company’s responses to FDA Warning Letters and/or other regulatory communications; (vi) the integration of acquired companies into the Company’s compliance program; (vii) the Company’s anti-retaliation policies and procedures, and the retaliation claims received by the Company; (viii) the Company’s compensation practices for sales and marketing personnel; and (ix) external reviews of Pfizer policies and practices for compliance with federal healthcare laws and regulations.

 

In its activities, the Committee considered potential risks and steps the Company has taken to mitigate risk in areas within the Committee’s oversight. With respect to the CIA, the Committee monitored the status of the Company’s compliance with CIA requirements.

 

The Regulatory and Compliance Committee

 

Dennis A. Ausiello		W. Don Cornwell		Frances D. Fergusson, Chair
Constance J. Horner		Marc Tessier-Lavigne

 

The Regulatory and Compliance Committee is primarily responsible for assisting the Board of Directors with overseeing and reviewing the Company’s healthcare-related regulatory and compliance issues, including its compliance programs and the status of compliance with related laws, regulations and internal procedures.

The Audit Committee is composed entirely of independent Directors and is governed by a Board-approved charter stating its responsibilities. Under its charter, the Audit Committee is responsible for reviewing and discussing, with the independent registered public accounting firm, Internal Audit and management, the adequacy and effectiveness of internal control over financial reporting. The Committee also reviews and consults with management, Internal Audit and the independent registered public accounting firm on matters related to the annual audit, the published financial statements, earnings releases, and the accounting principles applied. In addition, the Committee reviews reports from management relating to the status of compliance with laws, regulations and internal procedures and policies. The Committee also is responsible for reviewing and discussing the scope and results of the internal audit program.

 

The Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm. To execute this responsibility, the Committee engages in a comprehensive annual evaluation of the independent registered public accounting firm’s qualifications, performance and independence and whether the independent registered public accounting firm should be rotated, and considers the advisability and potential impact of selecting a different independent registered public accounting firm.

 

In addition, the Committee is responsible for reviewing and discussing with management the Company’s policies with respect to risk assessment and risk management. More information about the role of the Audit Committee in risk assessment and risk management is included in the section entitled “Governance Information—The Board’s Role in Risk Oversight.”

 

The Audit Committee has established policies and procedures for the pre-approval of all services provided by the independent registered public accounting firm. The Audit Committee also has established procedures for the receipt, retention and treatment, on a confidential basis, of complaints received by the Company regarding its accounting, internal controls and auditing matters. Further details of the role of the Audit Committee, as well as the Audit Committee Report, may be found in “Item 2—Ratification of Selection of Independent Registered Public Accounting Firm” later in this Proxy Statement.

 

The Board of Directors has determined that each member of the Audit Committee is financially literate and independent, as defined by SEC and NYSE rules, as well as independent under our Director Qualification Standards. The Board of Directors also has determined that each of Ms. Nora Johnson and Messrs. Cornwell and Sanger is an “audit committee financial expert” for purposes of the SEC’s rules.

 

The Audit Committee Charter is available on our website at www.pfizer.com/about/corporate_governance/audit_committee.jsp.

 

 

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm.

THE COMPENSATION COMMITTEE

 

James M. Kilts, Committee Chair Additional Committee Members: W. Don Cornwell, Frances D. Fergusson and Suzanne Nora Johnson   Meetings Held in 2014: 7

 

The Compensation Committee is composed entirely of independent Directors and is governed by a Board-approved charter stating its responsibilities. The Committee reviews, determines and oversees the execution of the Company’s executive compensation philosophy and oversees the administration of the Company’s executive compensation programs. Its responsibilities also include overseeing Pfizer’s compensation and benefit plans and policies, administering its stock plans (including reviewing and approving equity grants) and reviewing and approving annually all compensation decisions for the Company’s executive officers, including the NEOs identified in the 2014 Summary Compensation Table. See “Compensation Discussion and Analysis” later in this Proxy Statement for information concerning the Committee’s role, processes and activities in overseeing executive compensation. See also “Compensation Committee Report” later in this Proxy Statement.

 

The Board of Directors has determined that each member of the Compensation Committee is independent, as defined by SEC rules and NYSE listing standards, as well as independent under our Director Qualification Standards. In addition, each Committee member is a “non-employee director” as defined in Rule 16b-3 under the Securities Exchange Act of 1934 and an “outside director” as defined in Section 162(m) of the Internal Revenue Code.

 

The Compensation Committee Charter is available on our website at www.pfizer.com/about/corporate_governance/compensation_committee.jsp. The Compensation Committee Report appears under “Executive Compensation” later in this Proxy Statement.

 

Compensation Committee Interlocks and Insider Participation. During 2014 and as of the date of this Proxy Statement, none of the members of the Compensation Committee was or is an officer or employee of the Company, and no executive officer of the Company served or serves on the compensation committee or board of any company that employed or employs any member of the Company’s Compensation Committee or Board of Directors.

 

The Compensation Committee reviews, determines and oversees the execution of the Company’s executive compensation philosophy and oversees the administration of the Company’s executive compensation programs.

THE SCIENCE AND TECHNOLOGY COMMITTEE

 

Dennis A. Ausiello, M.D., Committee Chair Additional Committee Members: W. Don Cornwell, Frances D. Fergusson, Helen H. Hobbs, Constance J. Horner, James M. Kilts, Shantanu Narayen, Suzanne Nora Johnson, Stephen W. Sanger, James C. Smith and Marc Tessier-Lavigne   Meetings Held in 2014: 3

 

The Science and Technology Committee is composed entirely of independent Directors and is governed by a Board-approved charter stating its responsibilities. Under its charter, the Committee is responsible for periodically examining management’s strategic direction of and investment in the Company’s pharmaceutical R&D and technology initiatives. This includes monitoring progress of the Company’s R&D pipeline, and evaluating the quality and direction of the Company’s R&D programs and the Company’s approach to acquiring and maintaining key scientific technologies. The Committee also identifies emerging issues, assesses the performance of R&D leaders, and evaluates the sufficiency of review by external scientific experts.

 

The Science and Technology Committee Charter is available on our website at www.pfizer.com/about/corporate_governance/science_technology_committee.jsp.

 

 

The Science and Technology Committee is responsible for periodically examining management’s strategic direction of and investment in the Company’s pharmaceutical R&D and technology initiatives.

Our non-employee Directors receive cash compensation, as well as equity compensation in the form of Pfizer stock units. Each of these components is described below. The 2014 compensation of our non-employee Directors is shown in the 2014 Director Compensation Table below. Mr. Read does not receive any compensation for his service as a Director or as Chairman.

 

NON-EMPLOYEE DIRECTOR COMPENSATION

 

In 2014, compensation for our non-employee Directors consisted of the following:

 

Position		Cash Retainers				Pfizer Stock Units
Board Member		$	137,500	*		$	162,500
Chair of each Board Committee		$	30,000
Lead Independent Director		$	50,000

 

*  Mr. Smith was paid a prorated portion of the cash retainer for the period he served as a Director in 2014.

 

In April 2014, the Board, on recommendation of the Corporate Governance Committee, approved modifications to the non-employee Director compensation program to increase the value of the annual grant of Pfizer stock units to non-employee Directors from $137,500 to $162,500. Under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors (Unit Award Plan), during 2014, each Director (other than Mr. Smith) received Pfizer stock units with a value of $162,500 as of the date of grant upon election at the 2014 Annual Meeting of Shareholders, provided the Director continued to serve as a Director following the Meeting. In 2015, each Director will receive Pfizer stock units with a value of $162,500 as of the date of grant upon election at the 2015 Annual Meeting of Shareholders, provided the Director continues to serve as a Director following the Meeting. A new Director also receives Pfizer stock units in a like amount when first elected to the Board, and in 2014, Mr. Smith received Pfizer stock units with a value of $162,500 as of the date of grant upon his election to the Board.

 

During 2014, the Board also increased the stock ownership guidelines for non-employee Directors, upon the recommendation of the Corporate Governance Committee. Non-employee Directors are now required to own shares of Pfizer common stock having a value of at least five times their annual base cash compensation, which is currently $687,500 worth of Pfizer stock. This represents an increase from the previous guideline of $550,000. For purposes of satisfying this requirement, a Director’s holdings include, in addition to shares held outright, units granted to the Director as compensation for Board service and shares or units held under a deferral or similar plan. A Director has five years from the date of (a) his or her first election as a Director; or (b) if later, an increase in the amount of Pfizer stock required to be held, to satisfy this ownership requirement. We maintain policies that prohibit Directors from pledging Pfizer stock or engaging in activities considered hedging of our common stock, and none of our Directors has pledged Pfizer stock as collateral for personal loans or other obligations.

 

DEFERRED COMPENSATION

 

Cash Compensation. Non-employee Directors may defer all or a part of their annual cash retainers under the Unit Award Plan until they cease to be members of the Board. At a Director’s election, the cash retainer fees held in the Director’s account could have been credited either with Pfizer stock units or with interest at the rate of return of an intermediate treasury index. Beginning in 2015, the fees can be credited with Pfizer stock units or deemed invested in the same investments available to Pfizer employees under certain deferred compensation plans. The number of Pfizer stock units is calculated by dividing the amount of the deferred fee by the closing price of Pfizer’s common stock on the last business day of the fiscal quarter in which the fee is earned. If fees are deferred as Pfizer stock units, the number of stock units in a Director’s account is increased by crediting additional stock units based on the value of any dividends on the common stock. When a Director ceases to be a member of the Board, the amount attributable to stock units held in his or her account is paid in cash or in shares of Pfizer stock, at the Director’s election. The amount of any cash payment is determined by multiplying the number of Pfizer stock units in the account by the closing price of our common stock on the last business day before the payment date.

 

 

During 2014, the Board increased the stock ownership guidelines for non-employee Directors, upon the recommendation of the Corporate Governance Committee.

 

Non-employee Directors are now required to own shares of Pfizer common stock having a value of at least five times their annual base cash compensation, which is currently $687,500 worth of Pfizer stock.

Related-Person Transactions and Indemnification

 

RELATED-PERSON-TRANSACTION APPROVAL POLICY

 

The Company has adopted a Related-Person-Transaction Approval Policy that is administered by the Corporate Governance Committee. The Policy applies to any transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a related person under the Policy has a direct or indirect material interest. Under the Policy, Company management determines whether a transaction requires review by the Committee, and transactions requiring review are referred to the Committee for approval, ratification or other action. Based on its consideration of all of the relevant facts and circumstances, the Committee decides whether or not to approve such transactions and approves only those transactions that are deemed to be in the best interests of the Company. If the Company becomes aware of an existing transaction with a related person that has not been approved under this Policy, the matter is referred to the Committee. The Committee then evaluates all options available, including ratification, revision or termination of such transaction.

 

TRANSACTIONS WITH RELATED PERSONS

 

We have no related-person transactions to report.

 

INDEMNIFICATION

 

We indemnify our Directors and our elected officers to the fullest extent permitted by law so that they will be free from undue concern about personal liability in connection with their service to the Company. This is required under our By-laws, and we have also entered into agreements with those individuals contractually obligating us to provide this indemnification to them.

 

 

The Company has adopted a Related-Person-Transaction Approval Policy that is administered by the Corporate Governance Committee. The Policy applies to any transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a related person under the Policy has a direct or indirect material interest.

Nominees for Directors

 

Dennis A. Ausiello, M.D., 69

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

Director, Center for Assessment Technology and Continuous Health (CATCH). Physician-in-Chief, Emeritus at Massachusetts General Hospital and Chief of Medicine at Massachusetts General Hospital from 1996 until April 2013. Jackson Distinguished Professor of Clinical Medicine at Harvard Medical School. President of the Association of American Physicians in 2006. Member of the Institute of Medicine of the National Academies of Science and a Fellow of the American Academy of Arts and Sciences. Director of Alnylam Pharmaceuticals, Blend Therapeutics, TARIS BioMedical, Inc. and several non-profit organizations. Member of the scientific advisory board of Bind Therapeutics. Our Director since 2006. Chair of our Science and Technology Committee and member of our Audit Committee, our Corporate Governance Committee, and our Regulatory and Compliance Committee. Lead Independent Director effective April 23, 2015, subject to election as a Director at the 2015 Annual Meeting.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Dr. Ausiello’s experience and training as a practicing physician (Board certified in nephrology), a scientist and a nationally recognized leader in academic medicine enable him to bring valuable insights to the Board, including through his understanding of the scientific nature of our business and the ability to assist us in prioritizing opportunities for drug development. In addition, Dr. Ausiello oversaw a large research portfolio and an extensive research and education budget at Massachusetts General Hospital, giving him a critical perspective on drug discovery and development and providing a fundamental understanding of the potential pathways contributing to disease. Through his past experience as the Chief of Medicine at Massachusetts General Hospital, Dr. Ausiello also brings leadership, oversight and finance experience to the Board.

 

W. Don Cornwell, 67

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

Chairman of the Board and Chief Executive Officer of Granite Broadcasting Corporation from 1988 until his retirement in August 2009 and Vice Chairman until December 2009. Granite Broadcasting Corporation filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in December 2006 and emerged from its restructuring in June 2007. Director of American International Group, Inc. and Avon Products, Inc. Director of the Wallace Foundation from 2002 until 2012 and previously served as a Director of CVS Caremark (including two years as Chair of its Compensation Committee) for over 10 years. Trustee of Big Brothers/Sisters of New York. Our Director since 1997. Chair of our Audit Committee and member of our Compensation Committee, our Regulatory and Compliance Committee, and our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Through Mr. Cornwell’s 38-year career as an entrepreneur driving the growth of a consumer-focused media company, an executive in the investment banking industry and a director of several significant consumer product and healthcare companies, he has valuable business, leadership and management experience and brings important perspectives on the issues facing our Company. Mr. Cornwell founded and built Granite, a consumer-focused media company, through acquisitions and operating growth, enabling him to provide insight and guidance on strategic direction and growth. Mr. Cornwell’s strong financial background, including his work at Goldman Sachs prior to co-founding Granite and his service and leadership on the audit, finance and investment committees of other companies, also provides financial expertise to the Board, including an understanding of financial statements, corporate finance, accounting and capital markets.

 

 

 

 

 

 

 

Frances D. Fergusson, Ph.D., 70

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

President Emeritus of Vassar College since 2006 and President from 1986 to 2006. Served on the Mayo Clinic Board for 14 years, the last four years as its Chairman, and as President of the Board of Overseers of Harvard University from 2007 through 2008. Director of Wyeth from 2005 until 2009. Director of Mattel, Inc. She serves as a Trustee of the J. Paul Getty Trust (executive committee), The School of American Ballet and Second Stage Theatre and as a Director on the executive committee of The John and Mable Ringling Museum of Art Foundation, Inc. Our Director since 2009. Chair of our Regulatory and Compliance Committee and a member of our Compensation Committee and our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Dr. Fergusson has strong leadership skills, having served as President of Vassar College for 20 years and, during her tenure, developing a long-term financial plan and strengthening the College’s financial position. She has also headed strategic planning projects at Vassar and other organizations. Dr. Fergusson’s service on the boards of not-for-profit organizations, including the Mayo Clinic (which she chaired from 1988 to 2002), enables her to bring to the Board experience and knowledge of healthcare from alternate perspectives.

 

Helen H. Hobbs, M.D., 62

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

Investigator of the Howard Hughes Medical Institute since 2002, a Professor of Internal Medicine and Molecular Genetics and Director of the McDermott Center for Human Growth and Development at the University of Texas Southwestern Medical Center. In 2007, Dr. Hobbs was elected to the National Academy of Sciences and received the Distinguished Scientist Award from the American Heart Association. Dr. Hobbs was elected to the Institute of Medicine in 2004 and the American Academy of Arts and Sciences in 2006. She is a member of the American Society of Clinical Investigation and the Association of American Physicians. Director of the Dallas Heart Study. She received the International Society of Atherosclerosis Prize in 2012. In 2005 she became the first recipient of the Clinical Scientist Award from the American Heart Association and was awarded Germany’s Heinrich Wieland Prize. Our Director since 2011. Member of our Corporate Governance Committee and our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Dr. Hobbs’ background reflects significant achievements in academia and medicine. She has served as a faculty member at the University of Texas Southwestern Medical Center for more than 20 years and is a leading geneticist in the arena of metabolism and heart disease, areas in which Pfizer has significant investments and experience. Pfizer benefits from her experience, expertise and achievements in both medicine and science.

James M. Kilts, 67

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

Founding Partner, Centerview Capital, a private equity firm, since 2006. Vice Chairman, The Procter & Gamble Company, from 2005 to 2006. Chairman and Chief Executive Officer, The Gillette Company, from 2001 to 2005 and President, The Gillette Company, from 2003 to 2005. President and Chief Executive Officer, Nabisco Group Holdings Corporation, from 1998 until its acquisition in 2000. Non-Executive Director of the Board of Nielsen Holdings, Chairman of the Board of Nielsen Holdings (from January 2011 until December 2013), Director of MetLife, Inc., and Chairman of Big Heart Pet Brands, a private company which is a producer, distributor and marketer of pet food. Trustee of Knox College and the University of Chicago, and a member of the Board of Overseers of Weill Cornell Medical College. Director of Meadwestvaco Corporation until April 2014. Our Director since 2007. Chair of our Compensation Committee and member of our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Mr. Kilts’ tenure as CEO of Gillette and Nabisco and as Vice Chairman of Procter & Gamble provides valuable business, leadership and management experience, including expertise in cost management, creating value and resource allocation. In addition, Mr. Kilts’ knowledge of consumer businesses has given him insights on reaching consumers and on the importance of innovation—both important aspects of Pfizer’s business. Through his service on the board of MetLife, an insurance company, Mr. Kilts can offer a view of healthcare from another perspective, and through Mr. Kilts’ service on various compensation committees, including ours, he has a strong understanding of executive compensation and related areas.

 

Shantanu Narayen, 51

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

President and Chief Executive Officer and Director of Adobe Systems Incorporated, a producer of creative and digital marketing software. Prior to his appointment as CEO in December of 2007, Mr. Narayen held various leadership roles at Adobe, including President and Chief Operating Officer, Executive Vice President of Worldwide Products, and Senior Vice President of Worldwide Product Development. Director of Dell Inc. from 2009 until October 2013 and Director of Metavante Technologies Inc. from 2007 until 2009. He serves as President of the Board of Adobe Foundation, which funds philanthropic initiatives around the world. He is a member of the U.S. President’s Management Advisory Board, established in 2010 to provide advice on how to implement best business practices. Our Director since 2013. Member of our Corporate Governance Committee and our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Mr. Narayen’s experience as President and CEO of Adobe Systems brings strong leadership and management skills, and his past roles in worldwide product development provide valuable global operations experience. His past experience as a director on other public boards provides a broad perspective on issues facing public companies and governance matters. Mr. Narayen also brings a strong technology background to Pfizer’s Board as well as a diversity of experience that benefits Pfizer.

 

 

 

 

 

 

 

Suzanne Nora Johnson, 57

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

Retired Vice Chairman, Goldman Sachs Group, Inc., since 2007. During her 21-year tenure with Goldman Sachs, she served in various leadership roles, including Chair of the Global Markets Institute, Head of Global Research, and Head of Global Health Care. Director of American International Group, Inc., Intuit Inc. and Visa Inc. Member of the Board of Governors of the American Red Cross; Vice Chair, Board of Trustees of The Brookings Institution; Co-Chairman of the Board of Trustees of the Carnegie Institution of Washington; and member of the Board of Trustees of the University of Southern California. Our Director since 2007. Member of our Audit Committee, our Compensation Committee and our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Ms. Nora Johnson’s careers in law and investment banking, including serving in various leadership roles at Goldman Sachs, provide valuable business experience and critical insights on the roles of the law, finance and strategic transactions to our business. In addition, Ms. Nora Johnson’s extensive knowledge of healthcare through her role in healthcare investment banking and her involvement with not-for-profit organizations, such as in scientific research (The Carnegie Institution), healthcare policy (RAND Corporation and The Brookings Institution) and healthcare services (the American Red Cross), provide touchstones of public opinion and exposure to diverse, global points of view. Ms. Nora Johnson also brings financial expertise to the Board, providing an understanding of financial statements, corporate finance, accounting and capital markets.

 

Ian C. Read, 61

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

Chairman of the Board and Chief Executive Officer of Pfizer since December 2011. President and Chief Executive Officer from December 2010. Previously, he served as Senior Vice President and Group President of the Worldwide Biopharmaceutical Businesses, which he led from 2006 through December 2010. In that role, he oversaw five global business units—Primary Care, Specialty Care, Oncology, Established Products and Emerging Markets. Mr. Read began his career with Pfizer in 1978 as an operational auditor. He worked in Latin America through 1995, holding positions including Chief Financial Officer, Pfizer Mexico, and Country Manager, Pfizer Brazil. In 1996, he was appointed President of Pfizer’s International Pharmaceuticals Group, with responsibility for Latin America and Canada. He became Executive Vice President, Europe, in 2000, was named a Corporate Vice President in 2001, and assumed responsibility for Canada, in addition to Europe, in 2002. Mr. Read later became accountable for operations in both the Africa/Middle East region and Latin America as well. Director of Kimberly-Clark Corporation. Mr. Read serves on the Boards of Pharmaceutical Research and Manufacturers of America (PhRMA) and the Partnership of New York City. Member of the President’s Export Council and U.S.-China Business Council. Our Director since December 2010.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Mr. Read brings over 35 years of business, operating and leadership experience to the Board. His extensive knowledge of the biopharmaceutical industry in general, and Pfizer’s worldwide biopharmaceutical business in particular, provides crucial insight to our Board on the Company’s strategic planning and operations. Mr. Read provides an essential link between management and the Board on management’s business perspectives, and the combination of his knowledge of the business and his leadership skills make his role as Chairman and CEO optimal at this time. Further, his experience as a member of another public company board provides him with an enhanced perspective on issues applicable to public companies.

Stephen W. Sanger, 69

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

Chairman of General Mills, Inc., a packaged food producer and distributor, from 1995 until his retirement in 2008 and its Chief Executive Officer from 1995 to 2007. Former Chairman of the Grocery Manufacturers of America. Recipient of the Woodrow Wilson Award for Public Service in 2009. Chaired the Fiscal Policy Committee of the Business Roundtable and served as a director of Catalyst. Director of Wells Fargo & Company. Director of Target Corporation from 1996 until 2013. Our Director since 2009. Chair of our Corporate Governance Committee and a member of our Audit Committee and our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

With more than 12 years’ experience as Chairman and CEO of General Mills, Mr. Sanger has valuable business, leadership and management experience, including experience in acquisitions through the purchase of Pillsbury, creating one of the world’s largest food companies. As CEO of General Mills, Mr. Sanger improved sales and market position, developed innovative ideas and streamlined operations, expertise which benefits Pfizer. In addition, Mr. Sanger has experience leading a company whose products are subject to FDA regulation, lending insight into the regulated nature of our consumer business.

 

James C. Smith, 55

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

President and Chief Executive Officer and Director of Thomson Reuters Corporation, a provider of intelligent information for businesses and professionals, since January 2012 and its Chief Operating Officer from September 2011 to December 2011 and its Chief Executive Officer, Thomson Reuters Professional Division, from 2008 to 2011. Prior to the acquisition of Reuters Group PLC (Reuters) by The Thomson Corporation (Thomson) in 2008, he served as Chief Operating Officer of Thomson and as President and Chief Executive Officer of Thomson Learning’s Academic and Reference Group. Member of the International Business Council of the World Economic Forum, the International Advisory Boards of British American Business and the Atlantic Council. Our Director since 2014. Member of our Corporate Governance Committee and our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Mr. Smith’s experience as President and CEO of Thomson Reuters Corporation brings valuable leadership and management skills. Pfizer benefits from Mr. Smith’s organizational expertise and leadership experience, honed during the merger and subsequent integration of two of the information industry’s preeminent firms, as well as his strong operational and international expertise from his experience as Chief Operating Officer.

 

 

 

 

Marc Tessier-Lavigne, Ph.D., 55

 

POSITION, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE:

 

President of The Rockefeller University since March 2011, Carson Family Professor and head of the Laboratory of Brain Development at The Rockefeller University. Between 2003 and 2011, held positions of increasing responsibility at Genentech, a leading biopharmaceutical company, where he became Executive Vice President, Research, and Chief Scientific Officer. Susan B. Ford Professor in the School of Humanities and Sciences, and Professor of Biological Sciences and of Neurology and Neurological Sciences at Stanford University from 2001 to 2003, and a faculty member at the University of California, San Francisco from 1991 to 2001. In addition, Dr. Tessier-Lavigne was a Howard Hughes Medical Institute Investigator from 1994 to 2003. Director of Regeneron Pharmaceuticals, Inc., Agios Pharmaceuticals Inc. and Juno Therapeutics, Inc. Member of the National Academy of Sciences and its Institute of Medicine, and a Fellow of the Royal Society (U.K.), the Royal Society of Canada, the Academy of Medical Sciences (U.K.) and the American Association for the Advancement of Science. Director of the Rockefeller Archive Center and Federal Reserve Bank of New York and also serves on various scientific boards. Our Director since 2011. Member of our Regulatory and Compliance Committee and our Science and Technology Committee.

 

KEY ATTRIBUTES, EXPERIENCE AND SKILLS:

 

Dr. Tessier-Lavigne’s background reflects significant achievements in a wide variety of disciplines. His business experience includes a senior management role at Genentech, demonstrating his understanding of the role of science in business; his achievements and credentials in science and medicine reflect significant medical and scientific knowledge; and his previous and current roles in academia provide an understanding of the role of research in the pharmaceutical industry. Pfizer benefits from his experience and expertise in these and other areas.

YOUR COMPANY’S RESPONSE

 

The Board of Directors believes that the actions requested by the proponent are unnecessary and not in the best interests of our shareholders and recommends a vote AGAINST this proposal. A similar resolution appeared on the Company’s ballot in 2014 and received favorable votes from only 6.2% of the votes cast.

 

CURRENT OVERSIGHT OF OUR LOBBYING ACTIVITIES

 

Pfizer’s Board of Directors and its committees already play an important role in our public policy engagement and have oversight responsibilities for these activities. As disclosed under its charter, the Corporate Governance Committee is responsible for maintaining an informed status on Company issues related to public policy and corporate social responsibility, as well as for monitoring emerging issues potentially affecting the reputation of Pfizer and the pharmaceutical industry. The Committee also is required to remain informed of Pfizer’s corporate political spending practices, which it does through periodic discussions and reviews of the Company’s bi-annual “Political Action Committee (PAC) and Corporate Political Contributions Report.”

 

In addition, the Company’s disclosures with respect to its federal lobbying activities are fully compliant with the Honest Leadership and Open Government Act of 2007. We file quarterly reports of our federal lobbying activities, including the amount spent on federal lobbying activity by trade associations of which Pfizer is a member. Shareholders may view this information at http://www.pfizer.com/about/corporate_governance/corporate_governance. Pfizer also complies with state registration and reporting requirements in all the states where it is currently active.

 

OUR ENGAGEMENT WITH LAWMAKERS AND TRADE AND INDUSTRY ORGANIZATIONS

 

In the highly regulated and competitive pharmaceutical industry, we continue to face significant legislative and regulatory challenges. Given this environment, it is essential that we maintain the flexibility to engage with lawmakers and trade and industry organizations regularly to help build constructive discourse in the political and regulatory environment in support of our short- and long-term business priorities, which align with creating value for our shareholders.

 

To broaden and enhance our engagement, we are a member of several industry and trade groups. In addition to their positions on healthcare policy issues, these organizations may engage in activities that extend beyond the scope of the key issues of importance to Pfizer.

 

At times, our views may differ from those held by these organizations or their members. Because of this, we state on our Company’s website (www.pfizer.com) that our participation as a member of various industry and trade groups comes with the understanding that we may not always agree with the positions of the organization and/or its members. If concerns arise about a particular issue, we voice our concerns, as appropriate, through our colleagues who serve on the boards and committees of these groups rather than issuing a public statement.

 

In recent years, Pfizer’s contributions to the American Legislative Exchange Council (ALEC) and think tanks have been spotlighted by some stakeholders and advocacy groups due to their positions on certain issues that do not align with Pfizer’s policies or practices. In response to inquiries, and discussions with key investors about the risks and benefits of associating with some of these organizations, including ALEC, we publish our formal funding criteria to provide greater transparency about our funding decisions on our Company’s website at: http://www.pfizer.com/files/responsibility/third_party_funding_criteria.pdf.

 

Our support of trade and industry groups is evaluated annually by Pfizer’s Government Affairs Leaders, who are experts in public policy and the political environment, and by members of the Executive Leadership Team and Pfizer’s Chief Executive Officer, when necessary. Decisions to provide funding are based on an organization’s support of issues that impact our industry, including advancing biomedical research, healthcare innovation, advocating for protecting intellectual property rights, access to medicines and tax policy. During the process our leaders:

 

1.	Examine the philosophy, major objectives and actions taken by the organization supported;

YOUR COMPANY’S RESPONSE

 

2.	Assess the consistency between Pfizer’s stated policies, principles and Code of Conduct with those of the organization supported;
3.	Determine if the relationship carries reputational or business risk with a negative impact on the Company, its shareholders or other stakeholders; and
4.	Evaluate management’s rationale for the Company’s direct involvement in or financial support of the organization to determine if this support is in the long-term best interests of the Company and its stakeholders.

 

SUMMARY

 

Pfizer believes that its current practices as described above sufficiently address the proponent’s concerns. A report further summarizing the Board’s review and assessment of organizations that lobby directly or indirectly on Pfizer’s behalf would not only be unnecessary but burdensome, as preparation of such a report would not be a productive use of the Company’s funds and would provide minimal value to the vast majority of Pfizer’s shareholders.

 

Accordingly, your Board of Directors recommends a vote AGAINST this proposal.

 

CD&A:		Compensation Discussion and Analysis included in this Proxy Statement
DRG Pharmaceutical Index or DRG Index:		NYSE ARCA Pharmaceutical Index
ELT:		Executive Leadership Team – the CEO and his direct reports
GAAP:		Generally Accepted Accounting Principles in effect in the U.S. from time to time
GEP:		Global Established Pharmaceutical Segment
GIP:		Global Innovative Pharmaceutical Segment
GPP:		Global Performance Plan – annual incentive award program
IBT:		Income Before Taxes
IRC/Internal Revenue Code:		The Internal Revenue Code of 1986, as amended
LOE:		Loss of Exclusivity – loss of patent rights
Named Executive Officers or NEOs:		Pfizer’s CEO and CFO, and the next three most highly compensated Executive Officers during fiscal 2014
OI:		Operating Income
OTC:		Over-the-Counter
PSA:		Performance Share Award – Long-term incentive award tied to performance
PSP:		Pfizer Savings Plan – A qualified defined contribution plan which includes a 401(k) feature
PSSP:		Pfizer Inc. Nonfunded Deferred Compensation and Supplemental Savings Plan – Our Non-Qualified Savings Plan
RSC:		Retirement Savings Contribution – Annual employer retirement contribution to the PSP
RSU:		Restricted Stock Unit – Long-term incentive instrument
Section 16:		Section 16 of the Securities Exchange Act of 1934, as amended
SEC:		U.S. Securities and Exchange Commission
SCT:		Summary Compensation Table
TSR:		Total Shareholder Return
TSRU:		Total Shareholder Return Unit – Long-term incentive instrument
VOC:		Global Vaccines, Oncology and Consumer Healthcare Segment

GIP—focuses on developing, registering and commercializing novel, value-creating medicines that significantly improve patients’ lives. These therapeutic areas include inflammation, cardiovascular/metabolic, neuroscience and pain, rare diseases and women’s/men’s health and include leading brands, such as Xeljanz, Eliquis and Lyrica (U.S. and Japan). GIP has a pipeline of medicines in inflammation, cardiovascular/metabolic disease, neuroscience and pain, and rare diseases.

 

VOC—focuses on developing and commercializing vaccines and products for oncology and consumer healthcare. Consumer Healthcare manufactures and markets several well-known, over-the-counter (OTC) products. Each of the three businesses in VOC operates as a separate, global business with distinct specialization in terms of the science and market approach necessary to deliver value to consumers and patients.

 

GEP—includes the brands that have lost market exclusivity and, generally, the mature, patent-protected products that are expected to lose exclusivity through 2015 in most major markets and, to a much smaller extent, generic pharmaceuticals. Additionally, GEP includes our sterile injectable products and biosimilar development portfolio.

IMPROVING THE PERFORMANCE OF OUR INNOVATIVE CORE:

 

£	We received FDA and European Commission approvals for Eliquis, for the treatment of deep vein thrombosis (DVT) and pulmonary embolism (PE) in the U.S. and the European Union (E.U.), respectively.
£	Trumenba became the first meningitis B vaccine approved in the U.S., following a Breakthrough Therapy designation and Priority Review by the FDA.
£	The Prevnar 13 franchise was advanced following the U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) vote to recommend Prevnar 13 for routine use to help protect adults aged 65 years and older against pneumococcal disease.
£	We filed a New Drug Application for Ibrance (palbociclib) plus letrozole for first-line treatment of post-menopausal women with estrogen receptor-positive (ER+), human epidermal growth factor receptor 2-negative (HER2-) advanced breast cancer, which subsequently received accelerated approval from the FDA in February 2015.
£	In our late stage pipeline, we initiated key Phase 3 programs including Ibrance (palbociclib) for high risk early breast cancer, biosimilar trastuzumab for metastatic breast cancer, biosimilar infliximab for rheumatoid arthritis, and biosimilar rituximab for follicular lymphoma.
£	In our early- and mid-stage pipeline, we advanced 29 programs and made significant progress in key programs, including IL6 for lupus, Ibrance (palbociclib) for intermediate-risk early breast cancer, biosimilar bevacizumab for various cancers, and tofacitinib for atopic dermatitis.

MAKING THE RIGHT CAPITAL ALLOCATION DECISIONS:

 

£	We leveraged several external partnerships to enhance and accelerate our immuno-oncology (IO) program.
£	We deployed capital for targeted transactions that considerably strengthened our development portfolio and advanced growth opportunities across the business, including our agreements with Merck KGaA and Cellectis to enhance our IO program, our acquisition of InnoPharma to broaden our portfolio of sterile injectables, and the acquisition of Baxter’s portfolio of marketed vaccines.
£	After absorbing an approximate 55% increase in new product launch costs, we achieved approximately $250 million in reductions in adjusted Selling, Informational and Administrative expenses* operationally, compared with 2013, due to ongoing cost-reduction and productivity initiatives.
£	We delivered on our commitment to return capital to our shareholders:

 

	•	We returned nearly $12 billion to shareholders in 2014 through dividend payments and share repurchases; and
	•	We increased our quarterly dividend payments by 8% from $0.24 to $0.26, as compared to 2013.

 

Over the last four years, we have returned approximately $64 billion of capital to shareholders through dividends and stock repurchases.

EARNING GREATER RESPECT FROM SOCIETY:

 

£	We continued our efforts to improve our reputation in the communities in which we operate by furthering our “Get Old” platform, to continue the dialogue on healthy aging, and by taking leadership positions on key issues to encourage public policy that allows innovation to serve patients today and in the future.
£	We remained committed to the path to a sustainable future. Our “green journey” focuses on three areas key to our business: energy, waste and water. In its 2013 and 2014 ratings, the Carbon Disclosure Project scored Pfizer 91 and 92, respectively, out of a possible 100 for Climate Disclosure. Pfizer is also an acknowledged leader in Green Chemistry, having made significant solvent and waste reductions for more than a decade by investing in safer chemistry pathways that result in greener processes.
£	We launched a disease awareness campaign called “Meet Meningitis” to build awareness of this disease among healthcare providers. The campaign teaches U.S. healthcare providers about meningococcal disease, patient populations at increased risk, and risk factors that can promote the transmission of this disease.

CREATING A CULTURE OF OWNERSHIP:

 

£	We continued our efforts to instill a culture of ownership, engaging in “Straight Talk” and embracing “Dare to Try.” “Dare to Try” encourages colleagues to look for opportunities to deliver above and beyond ordinary traditional paradigms and challenge our approach to the business.
£	We made significant strides in advancing our OWNIT! culture, illustrated by the improvements observed across every cultural dimension measured in our internal colleague engagement survey.
£	We continue to highlight our ownership culture as a business imperative in our external communications.

OUR COMPENSATION PRACTICES

The results of these analyses were reviewed and discussed by the Committee. Based on this review, the Committee concluded that our compensation program is designed and administered in a manner that does not encourage undue risk-taking by our executives (including the NEOs) and employees, and does not create a potential material risk for the Company.

 

Pfizer’s Pay for Performance Philosophy, Goals and Principles

 

Pfizer’s compensation philosophy, which is set by the Committee, is to align each executive’s compensation with Pfizer’s short-term and long-term performance and to provide the compensation and incentives needed to attract, motivate and retain key executives who are crucial to Pfizer’s long-term success.

 

We believe that our overall compensation program is effectively designed to align the interests of our executives with our shareholders. The program is instrumental in achieving our business goals. We set our executives’ (including our CEO’s) total target direct compensation for 2014 at approximately the 50th percentile of the market as defined by our comparators. This aligns with our compensation philosophy to ensure that our executive compensation program continues to be an effective tool to attract, motivate and retain executive talent and maintain a close alignment between pay and performance.

 

The Global Performance Plan (GPP), our annual incentive program, is funded based on Pfizer’s performance against three financial metrics: total revenue, adjusted diluted earnings per share, and cash flow from operations, each for annual incentive compensation purposes. Our annual long-term incentive awards are aligned with the interests of our shareholders because they deliver value based on absolute and relative shareholder return, encourage stock ownership and promote retention of key talent.

 

A significant portion of the total compensation opportunity for each of our executives (including the NEOs) is directly related to Pfizer’s TSR and to other performance factors that measure our progress against the goals of our strategic and operating plans, as well as our performance against that of our pharmaceutical peer group and general industry comparators. In making such comparisons, we consider company market capitalization and complexity, as indicated by revenues, range of products, international operations and other factors, because we use such factors in setting target levels of compensation and determining the value or level of awards granted.

 

2014 Elements of Executive Compensation

 

The elements of total compensation for our executives are as follows:

 

2014 SALARY

 

Salary is a fixed amount of compensation for performing day-to-day responsibilities. Salary represented approximately 11% of total compensation for the CEO and less than 20% for the other NEOs in 2014.

 

2014 ANNUAL INCENTIVE AWARDS

 

The Committee determines the bonus funding percentage based on performance against three financial metrics, within the funding ranges, and takes into consideration certain other factors influencing performance, including a qualitative assessment of Pfizer’s performance related to the pipeline. The GPP pool funding can range from 0%-200% of target; however, the pool is not funded unless performance exceeds a threshold level. Once the pool has been funded, individual awards are determined based on the available pool, business unit / function performance, and the individual’s performance against his or her objectives.

 

We position target compensation at approximately the median of our pharmaceutical peer and general industry comparator companies.

 

We align annual short-term incentive awards with annual operating, financial and strategic objectives, as well as business unit / function and individual performance.

 

We align long-term incentive awards with the interests of our shareholders by delivering value based on absolute and relative shareholder return, encouraging stock ownership and promoting retention of key talent.

Financial Performance Metric*	Weighting	Supports Basic Principles
Total Revenue	40%	Revenue is a leading indicator of performance and value creation; provides a clear focus on growth; is an important measure in a sales industry; and is understandable with clear line of sight and employee impact.
Adjusted diluted earnings per share (EPS)	40%	EPS is a measure of income; provides focus on profitable growth; focuses managers on expense control; is viewed as a strong indicator of sustained performance over the long term; and is understandable with clear line of sight and employee impact.
Cash flow from operations (Cash Flow)	20%	Cash Flow provides focus on generating cash in the short term to fund operations and research and to return funds to shareholders in the form of dividends and share repurchases; focuses managers on expense control and on improvement in working capital; and is a strong link to long-term shareholder value creation.

Long-Term Incentive Instruments	Objective
RSUs	To encourage ownership and retention while providing immediate alignment with shareholders
PSAs	To reward relative total shareholder return over a three-year performance period
TSRUs	To provide absolute long-term alignment with shareholders by linking rewards to absolute total shareholder return over a five-/seven-year period