DEF 14A of Johnson & Johnson, Mar 14, 2018

DEF 14A of Johnson & Johnson

Filed Mar 14, 2018 · FY20170000200406-18-000009

Open on EDGAR

  1. NOMINEES

    NOMINEES There are 11 Director nominees for election at our 2018 Annual Meeting, to hold office until the next Annual Meeting and until their successors have been duly elected and qualified. All of the nominees were elected to the Board at the last Annual Meeting and are currently serving as Directors of the company except for Dr. Jennifer A. Doudna, who was nominated for election to the Board on February 13, 2018. Dr. Doudna was initially identified as a potential nominee by members of the Science, Technology & Sustainability Committee and by an executive search firm. Dr. Doudna was recommended for nomination by the Nominating & Corporate Governance Committee, in keeping with the Board’s commitment to seek out Directors who are widely recognized as leaders in the fields of medicine or the biological sciences, as well as candidates with diverse backgrounds, skills and experiences. Below are summaries of the background, business experience and description of the principal occupation of each of the nominees.

  2. NOMINEES

    | | MARY C. BECKERLE, Ph.D. Chief Executive Officer and Director, Huntsman Cancer Institute at the University of Utah; Distinguished Professor of Biology, College of Science, University of Utah With her expertise in scientific research and organizational management in the healthcare arena, and her active participation in national and international scientific affairs, Dr. Beckerle provides a perspective crucial to a global healthcare company. Director since 2015; Independent Chairman, Science, Technology & Sustainability Committee; Member, Regulatory, Compliance & Government Affairs Committee | | Dr. Beckerle, 63, has served as CEO and Director of Huntsman Cancer Institute since 2006, and she was appointed in 2009 to an additional key health sciences leadership role as Associate Vice President for Cancer Affairs at the University of Utah. Dr. Beckerle joined the faculty of the University of Utah in 1986 and is a distinguished professor of biology and oncological sciences, holding the Ralph E. and Willia T. Main Presidential Professorship. Dr. Beckerle has served on the National Institute of Health (NIH) Advisory Committee to the Director, on the Board of Directors of the American Association for Cancer Research, as president of the American Society for Cell Biology, and as the Chair of the American Cancer Society Council for Extramural Grants. She currently serves on a number of scientific advisory boards, including the Medical Advisory Board of the Howard Hughes Medical Institute and the Scientific Advisory Boards of the National Center for Biological Sciences at the Tata Institute of Fundamental Research in India, the Mechanobiology Institute in Singapore, and the Dana Farber/Harvard Cancer Center. Dr. Beckerle held a Guggenheim Fellowship at the Curie Institute in Paris, received the Utah Governor’s Medal for Science and Technology in 2001, the Sword of Hope Award from the American Cancer Society in 2004 and is an elected Fellow of the American Academy of Arts and Sciences and the American Philosophical Society. Dr. Beckerle was also named a National Association of Corporate Directors (NACD) Governance Fellow in 2012. Other Public Company Board Service: Huntsman Corporation (2011 to present) | |

  3. NOMINEES

    | | D. SCOTT DAVIS Former Chairman and Chief Executive Officer, United Parcel Service, Inc. Having served as Chairman and CEO of the world’s largest publicly-traded logistics company, and given his knowledge and passion for emerging markets and international operations, deep understanding of public policy and global economic indicators, and expertise in management, strategy, finance and operations, Mr. Davis brings to our Board his unique expertise in supply chain logistics at a time of rapid global expansion in the healthcare industry. Director since 2014; Independent Chairman, Audit Committee; Member, Compensation & Benefits Committee | | Mr. Davis, 66, served as Chairman and Chief Executive Officer of United Parcel Service, Inc. (UPS) (shipment and logistics) from 2008 to 2014, and as Chairman from 2014 to 2016. Previously, Mr. Davis held various leadership positions with UPS, primarily in the finance and accounting area, including Vice Chairman and Chief Financial Officer. Prior to joining UPS, he was Chief Executive Officer of II Morrow Inc., a developer of general aviation and marine navigation instruments. Mr. Davis is a Certified Public Accountant. He previously served on the Board of the Federal Reserve Bank of Atlanta from 2003 to 2009, serving as Chairman in 2009. Mr. Davis is a trustee of the Annie E. Casey Foundation and a member of The Carter Center Board of Councilors. Other Public Company Board Service: Honeywell International, Inc. (2005 to present) Recent Past Public Company Board Service: United Parcel Service, Inc. (2008 to 2016); EndoChoice, Inc. (2014 to 2016) | |

  4. NOMINEES

    | | IAN E. L. DAVIS Chairman, Rolls-Royce Holdings plc; Former Chairman and Worldwide Managing Director, McKinsey & Company Having served as Chairman and Worldwide Managing Director of one of the world’s leading management consulting firms, and as a consultant to a range of global organizations across the public, private and not-for-profit sectors, Mr. Davis brings considerable global experience, management insight and business knowledge to our Board. Director since 2010; Independent Member, Audit Committee; Member, Regulatory, Compliance & Government Affairs Committee | | Mr. Davis, 67, is currently non-executive Chairman, Rolls-Royce Holdings plc. Mr. Davis retired from McKinsey & Company (management consulting) in 2010 as a Senior Partner, having served as Chairman and Worldwide Managing Director from 2003 until 2009. In his more than 30 years at McKinsey, he served as a consultant to a range of global organizations across the public, private and not-for-profit sectors. Prior to becoming Chairman and Worldwide Managing Director, he was Managing Partner of McKinsey’s practice in the United Kingdom and Ireland. His experience included oversight for McKinsey clients and services in Asia, Europe, the Middle East and Africa, as well as expertise in the consumer products and retail industries. Mr. Davis is a Director of Teach for All, Inc., a global network of independent social enterprises working to expand educational opportunities in their nations; BP plc., a global energy group; and Majid Al Futtaim Holding LLC; and a Senior Advisor at Apax Partners, a private equity firm. Other Public Company Board Service: BP plc (2010 to present); Rolls-Royce Holdings plc (2013 to present) | |

  5. NOMINEES

    | | JENNIFER A. DOUDNA Professor of Chemistry; Professor of Biochemistry & Molecular Biology; Li Ka Shing Chancellor's Professor in Biomedical and Health, University of California, Berkeley As a pioneer in the field of biochemistry, having co-discovered the simplified genome editing technique Crispr-Cas9, and with her vast academic experience and her steadfast concern for ethics in science, Dr. Doudna will bring a global, ethical and scientific perspective to our Board. Director Nominee; Independent | | Dr. Doudna, 54, joined the faculty at University of California, Berkeley, as a Professor of Biochemistry & Molecular Biology in 2002. She directs the Innovative Genomics Institute, a joint UC Berkeley-UC San Francisco center, holds the Li Ka Shing Chancellor’s Professorship in Biomedicine and Health, and is the chair of the Chancellor’s Advisory Committee on Biology at UC Berkeley. Dr. Doudna is Principal Investigator at the Doudna Lab at UC Berkeley and has founded and serves on the scientific advisory boards of Caribou Biosciences, Inc. and Intellia Therapeutics, Inc., leading CRISPR genome engineering companies. She has been an Investigator with the Howard Hughes Medical Institute since 1997. Dr. Doudna is the recipient of numerous scientific awards in biochemistry and genetics, including: the Alan T. Waterman Award (2000); the Eli Lilly Award in Biological Chemistry of the American Chemical Society (2001); a co-recipient of the Breakthrough Prize in Life Sciences (2015); a co-recipient of the Gruber Prize in Genetics (2015); a co-recipient of the Canada Gairdner International Award (2016); the Heineken Prize for Biochemistry and Biophysics (2016); the Tang Prize (2016); the Japan Prize (2017); and the Albany Medical Center Prize (2017). Dr. Doudna was elected to the National Academy of Sciences (2002); the American Academy of Arts and Sciences (2003); the National Academy of Medicine (2010); the National Academy of Inventors (2014); and as a Foreign Member of the Royal Society (2016). Dr. Doudna is a Trustee for Pomona College and serves on the Board of Directors of Driver Inc., a treatment access platform for cancer patients. Other Public Company Board Service: None | |

  6. NOMINEES

    | | ALEX GORSKY Chairman, Board of Directors; Chief Executive Officer; Chairman, Executive Committee, Johnson & Johnson Having started his career at Johnson & Johnson in 1988 and having been promoted to positions of increasing responsibility across business segments, culminating in his appointment to CEO and election to our Board of Directors in 2012, Mr. Gorsky brings a full range of strategic management expertise, a broad understanding of the issues facing a multinational business in the healthcare industry, and an in-depth knowledge of the company’s business, history and culture to our Board and the Chairman position. Director since 2012; Management Chairman, Finance Committee | | Mr. Gorsky, 57, was appointed as Chairman, Board of Directors in December 2012. He was named Chief Executive Officer, Chairman of the Executive Committee and joined the Board of Directors in April 2012. Mr. Gorsky began his Johnson & Johnson career with Janssen Pharmaceutica Inc. in 1988. Over the next 15 years, he advanced through positions of increasing responsibility in sales, marketing, and management. In 2001, Mr. Gorsky was appointed President of Janssen Pharmaceutical Inc., and in 2003 he was named Company Group Chairman of the Johnson & Johnson pharmaceutical business in Europe, the Middle East and Africa. Mr. Gorsky left Johnson & Johnson in 2004 to join Novartis Pharmaceuticals Corporation, where he served as head of the company’s pharmaceutical business in North America. Mr. Gorsky returned to Johnson & Johnson in 2008 as Company Group Chairman for Ethicon. In early 2009, he was appointed Worldwide Chairman of the Surgical Care Group and member of the Executive Committee. In September 2009, he was appointed Worldwide Chairman of the Medical Devices and Diagnostics Group. Mr. Gorsky became Vice Chairman of the Executive Committee in January 2011. Mr. Gorsky also serves on the boards of the Travis Manion Foundation, the Congressional Medal of Honor Foundation and the National Academy Foundation; the Wharton Board of Overseers; and as a member of the Business Roundtable Board of Directors and as the Chairman of its Corporate Governance Committee. Other Public Company Board Service: International Business Machines Corporation (IBM) (2014 to present) | |

  7. NOMINEES

    | | MARK B. McCLELLAN, M.D., Ph.D. Director, Duke-Robert J. Margolis, MD, Center for Health Policy With his extensive experience in public health policy, including as Commissioner of the United States Food and Drug Administration and Administrator for the United States Centers for Medicare & Medicaid Services, Dr. McClellan possesses broad knowledge of, and unique insights into, the challenges facing the healthcare industry, making him a valuable member of the board of a broad-based healthcare company. Director since 2013; Independent Member, Regulatory, Compliance & Government Affairs Committee; Member, Science, Technology & Sustainability Committee | | Dr. McClellan, 54, became the inaugural Director of the Duke-Robert J. Margolis, MD, Center for Health Policy and the Margolis Professor of Business, Medicine and Policy at Duke University in January 2016. He is also a faculty member at Dell Medical School at The University of Texas in Austin. Previously, he served from 2007 to 2015 as a Senior Fellow in Economic Studies and as Director of the Initiatives on Value and Innovation in Health Care at the Brookings Institution. Dr. McClellan served as Administrator of the Centers for Medicare & Medicaid Services for the U.S. Department of Health and Human Services from 2004 to 2006 and as Commissioner of the U.S. Food and Drug Administration from 2002 to 2004. He served as a member of the President’s Council of Economic Advisers and as senior director for healthcare policy at the White House from 2001 to 2002 and, during President Bill Clinton’s administration, held the position of Deputy Assistant Secretary for Economic Policy for the Department of the Treasury. Dr. McClellan previously served as an associate professor of economics and medicine with tenure at Stanford University, where he also directed the Program on Health Outcomes Research. Dr. McClellan is the founding chair and a current board member of the Reagan-Udall Foundation for the Food and Drug Administration, is a member of the National Academy of Medicine and chairs the Academy’s Leadership Consortium for Value and Science-Driven Health Care, and co-chairs the guiding committee of the Health Care Payment Learning and Action Network. Other Public Company Board Service: None Recent Past Public Company Board Service: Aviv REIT, Inc. (2013 to 2015) | |

  8. NOMINEES

    | | ANNE M. MULCAHY Former Chairman and Chief Executive Officer, Xerox Corporation Having served as Chairman and CEO of a large, global manufacturing and services company with one of the world’s most recognized brands, Ms. Mulcahy provides to our Board valuable insight into organizational and operational management issues crucial to a large public company, as well as a strong reputation for leadership in business innovation and talent development. Lead Director since 2012 Director since 2009; Independent Member, Audit Committee; Member, Nominating & Corporate Governance Committee; Member, Finance Committee | | Ms. Mulcahy, 65, was Chairman and Chief Executive Officer of Xerox Corporation (business equipment and services) until July 2009, when she retired as CEO after eight years in the position. Prior to serving as CEO, Ms. Mulcahy was President and Chief Operating Officer of Xerox. She also served as President of Xerox’s General Markets Operations, which created and sold products for reseller, dealer and retail channels. Earlier in her career at Xerox, which began in 1976, Ms. Mulcahy served as Vice President for Human Resources with responsibility for compensation, benefits, human resource strategy, labor relations, management development and employee training; and as Vice President and Staff Officer for Customer Operations, covering South America and Central America, Europe, Asia and Africa. Ms. Mulcahy was the U.S. Board Chair of Save the Children from March 2010 to February 2017, and was reappointed as a Board member in February 2018. Other Public Company Board Service: Graham Holdings Company (2008 to present); LPL Financial Holdings Inc. (2013 to present) Recent Past Public Company Board Service: Target Corporation (1997 to 2017) | |

  9. NOMINEES

    | | WILLIAM D. PEREZ Retired President and Chief Executive Officer, Wm. Wrigley Jr. Company With his experience as CEO of several large, consumer-focused companies across a wide variety of industries, Mr. Perez contributes to our Board significant organizational and operational management skills, combined with a wealth of experience in global, consumer-oriented businesses vital to a large public company in the consumer products space. Director since 2007; Independent Chairman, Nominating & Corporate Governance Committee; Member, Audit Committee | | Mr. Perez, 70, served as President and Chief Executive Officer for the Wm. Wrigley Jr. Company (confectionary and chewing gum) from 2006 to 2008. He was a Senior Advisor at Greenhill & Co., Inc. from 2010 to 2017. Before joining Wrigley, Mr. Perez served as President and Chief Executive Officer of Nike, Inc. Previously, he spent 34 years with S.C. Johnson & Son, Inc., including eight years as its President and Chief Executive Officer. Mr. Perez is a Director at Northwestern Memorial Hospital. Other Public Company Board Service: Whirlpool Corporation (2009 to present) | |

  10. NOMINEES

    | | CHARLES PRINCE Retired Chairman and Chief Executive Officer, Citigroup Inc. Having served as Chairman and CEO of the nation’s largest and most diversified financial institution, Mr. Prince brings to our Board a strong mix of organizational and operational management skills combined with well-developed legal, global business and financial acumen critical to a large public company. Director since 2006; Independent Chairman, Regulatory, Compliance & Government Affairs Committee; Member, Nominating & Corporate Governance Committee | | Mr. Prince, 68, served as Chief Executive Officer of Citigroup Inc. (financial services) from 2003 to 2007 and as Chairman from 2006 to 2007. Previously he served as Chairman and Chief Executive Officer of Citigroup’s Global Corporate and Investment Bank from 2002 to 2003 and Chief Operating Officer from 2001 to 2002. Mr. Prince began his career as an attorney at U.S. Steel Corporation in 1975. Mr. Prince is a member of the Council on Foreign Relations and The Council of Chief Executives. Other Public Company Board Service: Xerox Corporation (2008 to present) | |

  11. NOMINEES

    | | A. EUGENE WASHINGTON, M.D., M.Sc. Duke University’s Chancellor for Health Affairs; President and Chief Executive Officer, Duke University Health System Dr. Washington brings to our Board his distinct expertise born of significant achievements as a senior executive in academia, an accomplished clinical investigator, an innovator in health care, and a leader in shaping national health policy. With his unique combination of knowledge, skills and experience in organizational management, medical research, patient care, and public health policy, Dr. Washington provides an invaluable perspective for a company in the healthcare industry. Director since 2012; Independent Member, Compensation & Benefits Committee; Member, Science, Technology & Sustainability Committee | | Dr. Washington, 67, is currently Duke University’s Chancellor for Health Affairs and the President and Chief Executive Officer of the Duke University Health System. Previously he was Vice Chancellor of Health Sciences, Dean of the David Geffen School of Medicine at UCLA; Chief Executive Officer of the UCLA Health System; and Distinguished Professor of Gynecology and Health Policy at UCLA. Prior to UCLA, he served as Executive Vice Chancellor and Provost at the University of California, San Francisco (UCSF) from 2004 to 2010. Dr. Washington co-founded UCSF’s Medical Effectiveness Research Center for Diverse Populations in 1993 and served as Director until 2005. He was Chair of the Department of Obstetrics, Gynecology, and Reproductive Sciences at UCSF from 1996 to 2004. Dr. Washington also co-founded the UCSF-Stanford Evidence-based Practice Center and served as its first Director from 1997 to 2002. Prior to UCSF, Dr. Washington worked at the Centers for Disease Control and Prevention. Dr. Washington was elected to the National Academy of Sciences’ Institute of Medicine in 1997, where he served on its governing Council. He was founding Chair of the Board of Governors of the Patient-Centered Outcomes Research Institute, served as a member of the Scientific Management Review Board for the NIH, and also served as Chair of the Board of Directors of both the California HealthCare Foundation and The California Wellness Foundation. Dr. Washington currently serves on the Boards of Directors of the Kaiser Foundation Hospitals and Kaiser Foundation Health Plan, Inc. Other Public Company Board Service: None | |

  12. NOMINEES

    | | RONALD A. WILLIAMS Former Chairman and Chief Executive Officer, Aetna Inc. With his long and distinguished career in the healthcare industry, from his experience leading one of Fortune’s Most Admired healthcare companies to his career-long role as an advocate for meaningful healthcare reform, Mr. Williams provides our Board with an exceptional combination of operational management expertise and insight into both public healthcare policy and the healthcare industry critical to a large public company in the healthcare industry. Director since 2011; Independent Chairman, Compensation & Benefits Committee; Member, Nominating & Corporate Governance Committee | | Mr. Williams, 68, served as Chairman and Chief Executive Officer of Aetna Inc. (managed care and health insurance) from 2006 to 2010, and as Chairman from 2010 until his retirement in April 2011. He is also an advisor to the private equity firm, Clayton, Dubilier & Rice, LLC. In addition, Mr. Williams serves on the boards of MIT Corporation, Peterson Institute for International Economics, the Advisory Board of Peterson Center on Healthcare and is Vice Chairman of the Board of Trustees of The Conference Board. Previously, Mr. Williams served on President Obama's Management Advisory Board from 2011 to January 2017, as Chairman of the Council for Affordable Quality Healthcare from 2007 to 2010, and as Vice Chairman of The Business Council from 2008 to 2010. Other Public Company Board Service: The Boeing Company (2010 to present), American Express Company (2007 to present) Recent Past Public Company Board Service: Envision Healthcare Holdings, Inc. (2011 to 2017) | | | The Board of Directors recommends a vote FOR election of each of the above-named nominees. | |

  13. Risk Related to Executive Compensation

    | Characteristics | Description | Page # | | Balanced Approach to Performance‑Based Awards | Performance targets are tied to multiple financial metrics, including operational sales growth, free cash flow, adjusted operational earnings per share growth, and long-term total shareholder return | 57 | | | Performance-based awards are based on the achievement of strategic and leadership objectives in addition to financial metrics | | | | See “Base Salary, Annual Performance Bonus, and Long-Term Incentives” | | | Performance Period and Vesting Schedules | The performance period and vesting schedules for long-term incentives overlap and, therefore, reduce the motivation to maximize performance in any one period. Performance Share Units, Restricted Share Units, and Stock Options vest three years from the grant date. See "Long Term Incentives" | 58 | | Balanced Mix of Pay Components | The target compensation mix is not overly weighted toward annual incentive awards and represents a balance of cash and long-term equity-based compensation vesting over three years. See “2017 Pay Mix at Target” | 60 | | Capped Incentive Awards | Annual performance bonuses and long-term incentive awards are capped at 200% of target. See “Aligning Compensation to "The What" & "The How"" | 63 | | Stock Ownership Guidelines | These guidelines require our CEO to directly or indirectly own equity in our company equal to six times salary, and the other members of our Executive Committee (the principal management group) to own equity equal to three times salary, and to retain this level of equity at all times while serving as an Executive Committee member. See “Stock Ownership Guidelines for Named Executive Officers” | 66 | | Executive Compensation Recoupment Policy | This Policy gives our Board authority to recoup executive officers’ past compensation in the event of a material restatement of our financial results and for events involving material violations of company policy relating to the manufacturing, sales or marketing of our products. See “Executive Compensation Recoupment Policy” | 67 | | No Change-in-Control Arrangements | None of our executive officers have in place any change-in-control arrangements that would result in guaranteed payouts. See "Potential Payments Upon Termination" | 83 |

  14. Proxy Access

    | In 2015, as part of our long-standing shareholder outreach program, we engaged with a number of our shareholders regarding proxy access and the potential terms of proxy access provisions that our shareholders would view as appropriate for Johnson & Johnson. After taking into account the feedback provided as part of these discussions and considering developments in market practice, in January 2016, we amended our By-Laws to implement proxy access with the following key parameters: | | | Ownership threshold: | 3% of outstanding shares of our common stock | | Holding period: | Continuously for 3 years | | Number of nominees: | Up to 20% of our Board, with a minimum of up to two nominees if Board size is less than 10 | | Nominating group size: | Up to 20 shareholders may group together to reach the 3% ownership threshold | | We continue to believe this proxy access framework reflects a thoughtfully designed and balanced approach to proxy access that mitigates the risk of abuse and protects the interests of all of our shareholders, while affording a meaningful proxy access right in light of our size and shareholder base. Shareholders who wish to nominate directors for inclusion in our Proxy Statement in accordance with the proxy access procedures in our By-Laws should see “General Information—Notice and Access” on page 95. | |

  15. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION Our Compensation & Benefits Committee is required by its charter to annually review non-employee Director compensation, including total compensation and each element of our non-employee Director compensation program.

  16. DIRECTOR COMPENSATION

    | During its annual review, the Compensation & Benefits Committee analyzes the competitive position of our non-employee Director compensation program and each element of that program against the programs of the peer group used for executive compensation purposes (see page 61 for information about the Executive Peer Group). Frederic W. Cook & Co., Inc., the Committee’s independent consultant, provides an independent assessment of the competitive data provided to the Committee and advises the Committee on non-employee Director compensation. Decisions regarding the non-employee Director compensation program are approved by our full Board of Directors, based on recommendations by our Compensation & Benefits Committee. |

  17. Fiscal 2017 Non-Employee Director Compensation

    Fiscal 2017 Non-Employee Director Compensation The Compensation & Benefits Committee’s analysis in 2016 of the competitive position of our non-employee Director compensation program showed that overall compensation for non-employee Directors and the retainer for the Lead Director were below the peer group median. As a result, our Compensation & Benefits Committee recommended, and our Board of Directors approved on September 13, 2016, the following non-employee Director compensation program for 2017 to achieve an overall compensation structure in line with the peer group median.

  18. Fiscal 2017 Non-Employee Director Compensation

    | 2017 Non-Employee Director Compensation(1) | ($) | | Cash Compensation | $110,000 | | Lead Director Cash Retainer | 35,000 | | Audit Committee Chair Cash Retainer | 25,000 | | Committee Chair (other than Audit) Cash Retainer | 20,000 | | Value of Deferred Share Units | 175,000 |

  19. Fiscal 2017 Non-Employee Director Compensation

    | See columns C and D of the table below(1) |

  20. Fiscal 2017 Non-Employee Director Compensation

    The compensation of our non-employee Directors for fiscal 2017 is set forth in the following table. Mr. Gorsky is an employee of the company, and therefore, received no additional compensation for his service as a Director. For a complete understanding of the table, please read the accompanying footnotes and the narrative disclosures.

  21. Fiscal 2017 Non-Employee Director Compensation

    | 2017 Total Non-Employee Director Compensation | | | | | | | A | B | C | D | E | F | | Name | Role for Additional Cash Retainer | Fees Earned or Paid in Cash ($) | Stock Awards (DSUs) ($) | All Other Compensation ($) | Total ($) | | M. C. Beckerle | Committee Chair | $130,000 | $174,893 | $20,000 | $324,893 | | D. S. Davis | Audit Committee Chair | 135,000 | 174,893 | 0 | 309,893 | | I. E. L. Davis | | 110,000 | 174,893 | 0 | 284,893 | | M. B. McClellan | | 110,000 | 174,893 | 0 | 284,893 | | A. M. Mulcahy | Lead Director | 145,000 | 174,893 | 0 | 319,893 | | W. D. Perez | Committee Chair | 130,000 | 174,893 | 20,000 | 324,893 | | C. Prince | Committee Chair | 130,000 | 174,893 | 20,000 | 324,893 | | A. E. Washington | | 110,000 | 174,893 | 0 | 284,893 | | R. A. Williams | Committee Chair | 130,000 | 174,893 | 20,000 | 324,893 |

  22. Fiscal 2018 Non-Employee Director Compensation

    Fiscal 2018 Non-Employee Director Compensation The Compensation & Benefits Committee’s analysis in 2017 of the competitive position of our non-employee Director compensation program showed that overall compensation for non-employee Directors and the retainer for the Lead Director were below the peer group median. As a result, our Compensation & Benefits Committee recommended, and our Board of Directors approved on September 12, 2017, the following non-employee Director compensation program for 2018 to achieve an overall compensation structure in line with the peer group median:

  23. Fiscal 2018 Non-Employee Director Compensation

    | 2018 Non-Employee Director Compensation | ($) | | Cash Compensation(1) | $115,000 | | Lead Director Cash Retainer | 35,000 | | Audit Committee Chair Cash Retainer | 25,000 | | Committee Chair (other than Audit) Cash Retainer | 20,000 | | Value of Deferred Share Units(2) | 185,000 | | (1) Increase of $5,000 (2) Increase of $10,000 | |

  24. Fiscal 2018 Non-Employee Director Compensation

    | Item 2: Advisory Vote to Approve Named Executive Officer Compensation | | | Before you vote, we urge you to read the following for additional details on our executive compensation l Compensation Discussion and Analysis on pages 42 to 67 l Executive Compensation Tables on pages 68 to 85 | The Board of Directors recommends that shareholders vote, in an advisory manner, FOR approval of the compensation of our named executive officers and the executive compensation philosophy, policies and procedures described in the Compensation Discussion and Analysis (CD&A) section of the 2018 Proxy Statement. | | | When casting your 2018 “Say on Pay” vote, we encourage you to consider: • The alignment of the 2017 compensation of our Chairman/CEO and our other named executive officers with our company’s 2017 performance • The pay-for-performance alignment built into the design of our incentive programs • Our continued evaluation of our executive compensation program • Our continued direct engagement with our shareholders | | | We recognize that executive compensation is an important matter for our shareholders. We believe our compensation programs are strongly aligned with the long-term interests of our shareholders. The guiding principles of our executive compensation program continue to be: • Competitiveness; • Pay for Performance; • Accountability for Short-Term and Long-Term Performance; and • Alignment to Shareholders’ Interests. Above all, we assess performance by reviewing not only what financial and strategic objectives are achieved but also how those results were achieved and whether they were achieved consistent with the values embodied in Our Credo. As an advisory vote, the results of this vote will not be binding on the Board or the company. However, the Board of Directors values the opinions of our shareholders, and will consider the outcome of the vote when making future decisions on the compensation of our named executive officers and our executive compensation philosophy, policies and procedures. Following our 2018 shareholder meeting on April 26, 2018 the next advisory vote on executive compensation is expected to occur at the 2019 Annual Meeting of Shareholders, unless the Board of Directors modifies its policy on the frequency of holding such advisory votes. |

  25. Fiscal 2018 Non-Employee Director Compensation

    | Compensation Committee Report The Compensation & Benefits Committee of the Board of Directors (the Committee) has reviewed and discussed the section of this Proxy Statement entitled “Compensation Discussion and Analysis” with management. Based on this review and discussion, the Committee has recommended to the Board that the section entitled “Compensation Discussion and Analysis,” as it appears on pages 42 through 67, be included in this Proxy Statement and incorporated by reference into the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Ronald A. Williams, Chairman D. Scott Davis A. Eugene Washington |

  26. Fiscal 2018 Non-Employee Director Compensation

    Compensation Discussion and Analysis

  27. Fiscal 2018 Non-Employee Director Compensation

    | 2017 PERFORMANCE AND COMPENSATION | 43 | | 2017 Summary | 43 | | 2017 Company Performance | 44 | | CEO Performance and Compensation Decisions | 47 | | Other Named Executive Officer Performance | 48 | | 2017 Compensation Decisions for 2016 Performance | 49 | | 2017 Update on Performance of Performance Share Unit Awards versus Goals | 52 | | Shareholder Outreach and Our Compensation Program | 55 | | EXECUTIVE COMPENSATION PHILOSOPHY | 56 | | Key Features of Our Executive Compensation Program | 56 | | Guiding Principles | 56 | | COMPONENTS OF EXECUTIVE COMPENSATION | 57 | | Base Salary, Annual Performance Bonus, and Long-Term Incentives | 57 | | Executive Perquisites & Other Benefits | 60 | | Compensation Target Setting Process and Pay Position | 60 | | 2017 Pay Mix at Target | 60 | | PEER GROUPS FOR PAY AND PERFORMANCE | 61 | | Executive Peer Group | 61 | | Competitor Composite Peer Group | 62 | | COMPENSATION DECISION PROCESS | 63 | | Importance of Credo Values in Assessing Performance | 63 | | Assessing "The What" and "The How" | 63 | | Aligning Compensation to "The What" and "The How" | 63 | | GOVERNANCE OF EXECUTIVE COMPENSATION | 64 | | Independence of Compensation Consultant | 65 | | ADDITIONAL INFORMATION CONCERNING EXECUTIVE COMPENSATION | 66 | | Use of Tally Sheets | 66 | | Limited Employment Arrangements and Agreements | 66 | | Stock Ownership Guidelines for Named Executive Officers | 66 | | Executive Compensation Recoupment Policy | 67 | | Tax Impact on Compensation | 67 | | 2017 Compensation Decisions for 2016 Performance | 67 |

  28. 2017 SUMMARY

    | Our Credo | When we assess performance, we review not only what results were achieved but also how they were achieved and whether they were achieved consistent with the values embodied in Our Credo. In 2017, we upheld our Credo values by focusing on the needs and well-being of: our patients, consumers, and health care professionals who use our products; our employees; the communities in which we live and work; and our shareholders. | | | | Company Performance | We delivered solid performance in 2017. We largely met or exceeded our combined financial and strategic goals. This was driven by strong performance in our Pharmaceutical business. We made good progress on many important strategic initiatives that will benefit our company in future years. | | | | | Financial Goal | Goal | Results | | | Met our operational sales growth goal | 4.0% - 5.0% | 4.0% | | | Met our adjusted operational EPS growth goal | 4.8% - 7.0% | 6.5% | | | Exceeded our free cash flow goal ($ Billions) | $14.8 - $15.6 | $17.8 | | | Note: Operational sales growth, adjusted operational EPS growth, and free cash flow are non-GAAP measures. See page 46 for details. Our sales growth and EPS results do not include the impact of our Actelion Ltd. acquisition since it was not included in the goals. We summarize our performance against our financial and strategic goals and the performance of each of our businesses on pages 44 to 46. | | | | Compensation Decisions for 2017 | The Board believes the company largely met or exceeded its combined financial and strategic goals. It recognized Mr. Gorsky’s 2017 performance by awarding him an annual performance bonus at 110% of target and long-term incentives at 115% of target. After reviewing market data and other factors, the Board adjusted Mr. Gorsky’s salary rate by 3.1% to $1,650,000 (effective February 26, 2018). | | | | | | 2017 Amount ($) | Percent of Target (%) | | | Salary Earned | $1,600,000 | | | | Annual Performance Bonus | 3,080,000 | 110% | | | Long-Term Incentive Awards | 14,352,000 | 115% | | | Total Direct Compensation | $19,032,000 | | | | We describe the performance and compensation of our Chairman/CEO on page 47 and our named executive officers on pages 48 to 51. | | | | Update on Performance Share Unit Awards vs. Goals | Our 2015-2017 Performance Share Units (PSU) paid out at 136.0% of target driven primarily by our 3-year Total Shareholder Return (TSR) exceeding our competitors and EPS performance exceeding our goals. We describe the PSUs earned under all three of our PSU grants that were active in 2017 on pages 52 to 54. | | | | Shareholder Outreach | Our Lead Director and management discussed our executive compensation program with our shareholders. Our shareholders continued to strongly support our program. Our “Say on Pay” vote has been 93% or more in favor since 2013. See page 55 for more detail. | | | | Compensation Program Changes | In 2017, we increased the weight of our PSUs to 60% for our 2018 long-term incentive grant based on: shareholder feedback, competitive data, and our objective of increasing the focus on long-term performance. The weighting is: 60% PSUs, 30% options, and 10% RSUs. See page 55 for more detail. | | |

  29. 2017 COMPANY PERFORMANCE

    | Performance against our Long-Term Strategic Goals | • Excellence in Execution: We exceeded our objectives that track elements we need to execute to unleash additional growth opportunities. We: • Made strategic acquisitions to enhance our future growth, including Actelion Ltd. and Abbott Medical Optics Inc. • Achieved our Enterprise Standards and Productivity annual savings goal. • Met or exceeded all our quality goals. • Leading with Purpose: We met our objectives that measure our organizational health, diversity, and reputation. We: • Strengthened our leadership talent pipeline, advanced diversity, and exceeded our employee engagement benchmarks. • Maintained our high reputational standing, ranking #17 among Fortune’s Most Admired Companies and placing #1 in the pharmaceutical industry for the 5th consecutive year. | | Performance by Business | • Pharmaceuticals exceeded its operational sales growth, operational income, and cash flow goals. In 2017, it: • Advanced our innovation pipeline with the approval of TREMFYA® for treatment of moderate to severe plaque psoriasis, and completed the acquisition of Actelion Ltd. • Maximized the value of our in-market brands through line extension approvals, including: SIMPONI®, STELARA®, XARELTO®, DARZALEX® and IMBRUVICA®. • Consumer exceeded its cash flow goal, met its operational income goal, and did not meet its operational sales growth goal. In 2017, it: • Maintained market share against our competitors in 4 of our 6 core platforms, despite category slowdowns. • Advanced our eCommerce capabilities. • Medical Devices met its cash flow goal and did not meet its operational sales and income goals. In 2017, it: • Increased market share in 3 of our 6 key product platforms. • Exceeded our operational sales growth goal and gained market share in our Vision Care business. • Managed our product portfolio: acquiring Megadyne Medical Products, Inc. (energy) and Neuravi Limited (neurovascular); integrating Abbott Medical Optics Inc.; and divesting the Codman Neurosurgery business. |

  30. 2017 COMPANY PERFORMANCE

    | Details on Non-GAAP Performance Measures | | | | | l | Operational Sales Growth: Operational Sales Growth is the sales increase due to volume and price, excluding the effect of currency translation. ◦ See page 16 of "Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Conditions” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (2017 Form 10-K) for our operational sales growth. ◦ We excluded the impact of our Actelion Ltd. acquisition since it was not included in the goals. | | | | | | 2017 Operational Sales Growth % | | | | Sales Growth Currency Translation | 6.3% (0.3%) | | | | Operational Sales Growth | 6.0% | | | | Impact of Actelion Ltd. acquisition | 2.0% | | | | Operational Sales Growth (without Actelion Ltd.) | 4.0% | | | l | Free Cash Flow: Free cash flow is the net cash from operating activities less additions to property, plant and equipment. The figures are rounded for display purposes. Cash flow from operating activities $21.1 billion Additions to property, plant and equipment -$3.3 billion Free Cash Flow $17.8 billion | | | | l | Adjusted Operational EPS Growth: Adjusted EPS and adjusted operational EPS are non-GAAP financial measures. ◦ Adjusted EPS excludes special items and intangible amortization expense as disclosed in Exhibit 99.2O to the company’s Current Report on Form 8-K dated January 23, 2018 and in “Reconciliation of Non-GAAP Financial Measures” of our 2017 Annual Report included in our proxy materials. ◦ Adjusted operational EPS growth also excludes the effect of currency translation. ◦ Below is a reconciliation of diluted EPS (the most directly comparable U.S. GAAP measure) to adjusted EPS and adjusted operational EPS. ◦ We excluded the impact of our Actelion Ltd. acquisition since it was not included in the goals. | | | | | | 2017 Actual $ per share | % Change vs. Prior Year* | | | Diluted EPS Special Items and Intangible Amortization Expense | $0.47 6.83 | | | | Adjusted EPS Currency Translation | 7.30 (0.06) | 8.5% | | | Adjusted Operational EPS | 7.24 | 7.6% | | | Impact of Actelion Ltd. acquisition | 0.07 | | | | Adjusted operational EPS (without Actelion Ltd.) | 7.17 | 6.5% | | | * Prior year Adjusted EPS = $6.73 | | |

  31. CEO PERFORMANCE AND COMPENSATION DECISIONS

    | Alex Gorsky | Chairman, Board of Directors and Chief Executive Officer Performance: The Board based its assessment of Mr. Gorsky’s performance primarily upon its evaluation of the company’s performance. The Board believes the company largely met or exceeded its combined financial and strategic goals in 2017 under Mr. Gorsky’s leadership, as summarized under “2017 Company Performance” on pages 44 through 46. In addition to our company’s overall performance, the Board evaluated Mr. Gorsky’s performance against a set of strategic priorities. Mr. Gorsky: • Delivered on our financial and quality commitments. • Drove sales growth in the face of biosimilar competition and pricing pressure. • Managed our business portfolio with key acquisitions and divestitures. • Increased the value of our product pipeline. 2018 CEO Compensation Decisions for 2017 Performance: The Board’s compensation decisions for Mr. Gorsky reflect the Board’s assessment of his 2017 performance. The Board recognized Mr. Gorsky’s 2017 performance by awarding him an annual performance bonus at 110% of target and long-term incentives at 115% of target. After reviewing market data and other factors, the Board adjusted Mr. Gorsky's salary rate by 3.1% to $1,650,000 (effective as of February 26, 2018). Mr. Gorsky’s total direct compensation for 2017 and, for comparison purposes, his total direct compensation for 2016 are displayed in the table below. | | | | | | | | 2016 | | 2017 | | | | | Amount ($) | Percent of Target (%) | Amount ($) | Percent of Target (%) | | | Salary Earned | $1,600,000 | | $1,600,000 | | | | Annual Performance Bonus | 3,780,000 | 135% | 3,080,000 | 110% | | | Long-Term Incentive Awards | 16,848,019 | 135% | 14,352,000 | 115% | | | Total Direct Compensation | $22,228,019 | | $19,032,000 | | | | | | | | | | | Please see pages 49 to 51 for details on the awards and total direct compensation. | | | | |

  32. How Compensation Decisions are Reported

    | • | Annual performance bonus earned for the prior year’s performance, |

  33. How Compensation Decisions are Reported

    | • | Long-term incentive award granted in the first quarter of the year based on the prior year's performance, and |

  34. How Compensation Decisions are Reported

    The independent members of the Board approve the compensation decisions for the Chairman/CEO. The Compensation & Benefits Committee approves the compensation decisions for all other named executiv`e officers. In the tables below, we summarize the decisions regarding the annual performance bonuses, long-term incentive awards, and salary rates. We also show the 2017 total direct compensation. We believe that these tables best summarize the actions taken on the named executive officers’ compensation for the performance year. By contrast, most of the amounts required by the U.S. Securities and Exchange Commission’s (SEC) rules to be reported in the “Summary Compensation Table” on page 68 are the result of compensation decisions from prior years, earnings from prior long-term incentive awards, or participation in long-standing pension programs as follows. The:

  35. How Compensation Decisions are Reported

    | • | Stock Awards and Option Awards are grants made in 2017 based on performance in 2016. For PSUs, grants from 2016 and 2015 are also included for the portion of the awards based on 2017 sales (since they were considered granted in 2017 according to U.S. accounting rules). |

  36. How Compensation Decisions are Reported

    | • | Non-Equity Incentive Plan Compensation includes dividend equivalent payments on our legacy cash-based long-term incentive plans. We stopped granting cash-based long-term incentives in 2012. |

  37. How Compensation Decisions are Reported

    | • | Non-Qualified Deferred Compensation Earnings is the growth in value of our legacy cash-based long-term incentive plans above a reference rate. We stopped granting these long-term incentives in 2012. |

  38. How Compensation Decisions are Reported

    | In the table below, we show the 2017 total direct compensation for our Chairman/CEO (shown on page 50), the total from the “Summary Compensation Table” on page 68, and the differences between the two amounts as described above. | | | Reconciliation of Our CEO's 2017 Total Direct Compensation to Summary Compensation Table (SCT) Total | | | 2017 Total Direct Compensation | $19,032,000 | | Long-Term Incentives granted in 2018 for 2017 Performance | (14,352,000) | | Stock Awards and Option Awards granted in 2017 based on 2016 performance (SCT columns D and E) | 17,408,759 | | Dividend Equivalents on legacy cash-based long-term incentives (included in SCT column F) | 518,382 | | Change in Pension Present Value (included in SCT column G) | 6,807,000 | | Non-Qualified Deferred Compensation Earnings (included in SCT column G) | 152,144 | | All Other Compensation (SCT column H) | 236,279 | | Total from Summary Compensation Table (SCT column I) | $29,802,564 |

  39. 2017 Total Direct Compensation

    | A | B | C | D | E | | | Cash | | Equity | | | Name | Salary ($) | Annual Performance Bonus ($) | Long-Term Incentive ($) | Total Direct Compensation ($) | | A. Gorsky | $1,600,000 | $3,080,000 | $14,352,000 | $19,032,000 | | D. Caruso | 932,600 | 1,230,000 | 5,150,000 | 7,312,600 | | S. Peterson | 1,057,500 | 1,270,000 | 5,630,000 | 7,957,500 | | J. Duato | 897,254 | 1,350,000 | 6,310,000 | 8,557,254 | | P. Stoffels | 1,173,023 | 1,530,000 | 6,700,000 | 9,403,023 |

  40. Annual Performance Bonus (Column C)

    Annual Performance Bonus (Column C) Based on 2017 company performance and individual performance as discussed on pages 44 to 48, the Board and the Committee awarded annual performance bonuses on February 12, 2018 ranging from 95% to 150% of target for the named executive officers. See the “Grants of Plan-Based Awards” table on page 73 for the target bonus amounts.

  41. Long-Term Incentive Awards (for 2017 performance) (Column D)

    Long-Term Incentive Awards (for 2017 performance) (Column D) The Board and Committee granted long-term incentive awards on February 12, 2018 (ranging from 105% to 160% of target) to the named executive officers based on their 2017 performance, impact on the company’s long-term results, competitive market data, and long-term potential within the organization. In the table below, we show: the total long-term incentive awards granted; the weighting of Performance Share Units (PSUs), Stock Options, and Restricted Share Units (RSUs); and the individual award values.

  42. Long-Term Incentive Awards (for 2017 performance) (Column D)

    | Name | PSUs ($) | Options ($) | RSUs ($) | Total Long-Term Incentives ($) | | Award Weight | 60% | 30% | 10% | 100% | | A. Gorsky | $8,611,200 | $4,305,600 | $1,435,200 | $14,352,000 | | D. Caruso | 3,090,000 | 1,545,000 | 515,000 | 5,150,000 | | S. Peterson | 3,378,000 | 1,689,000 | 563,000 | 5,630,000 | | J. Duato | 3,786,000 | 1,893,000 | 631,000 | 6,310,000 | | P. Stoffels | 4,020,000 | 2,010,000 | 670,000 | 6,700,000 |

  43. Long-Term Incentive Awards (for 2017 performance) (Column D)

    In the table below, we show the number of shares of PSUs, options, and RSUs granted. We determine the number of shares for each type of long-term incentive by dividing the dollar amount by the fair value per share and rounding to the nearest whole share.

  44. Long-Term Incentive Awards (for 2017 performance) (Column D)

    | Name | PSUs (#) | Options (#) | RSUs (#) | | Fair Value | $119.433 | $17.976 | $119.433 | | A. Gorsky | 72,101 | 289,519 | 12,017 | | D. Caruso | 25,872 | 85,948 | 4,312 | | S. Peterson | 28,284 | 93,959 | 4,714 | | J. Duato | 31,700 | 105,307 | 5,283 | | P. Stoffels | 33,659 | 111,816 | 5,610 |

  45. Long-Term Incentive Awards (for 2017 performance) (Column D)

    | Details on Long-Term Incentive Fair Values | | | | | • | PSU Fair Value: | | | | | • | $119.433 was the estimated grant date fair value used to determine the number of PSUs granted. | | | | • | We assumed the estimated grant date fair value per PSU to be equal to the estimated grant date fair value per RSU to determine the number of PSUs, because: | | | | | • | The RSU fair value equals the value of a PSU at 100% of target. | | | | • | The fair values for the portions of the PSU award tied to the sales goals for the second and third years of the performance period are determined at the beginning of the second and third years when the sales goals for those years are set. | | • | Option Fair Value: | | | | | • | $17.976 was the grant date fair value used to determine the number of options granted. | | | | • | $129.51 was the option exercise price based on the average of the high and low prices of our common stock on the NYSE on the grant date. | | | | • | We used the Black-Scholes option valuation model to calculate the grant date fair value with the following assumptions: | | | | | • | 15.77% volatility based on a blended rate of historical average volatility and implied volatility based on at-the-money traded Johnson & Johnson stock options with a life of two years. | | | | • | 2.70% dividend yield. | | | | • | 2.77% risk-free interest rate based on a U.S. Treasury rate of seven years. | | | | • | 7-year option life. | | • | RSU Fair Value: | | | | | • | $119.433 was the grant date fair value used to determine the number of RSUs granted. | | | | • | We determined the grant date fair value for the RSU awards based on the average of the high and low prices of our common stock on the NYSE on the grant date ($129.51) discounted by an expected dividend yield of 2.70% since dividends are not paid on the RSUs prior to vesting. | |

  46. 2017 UPDATE ON PERFORMANCE OF PERFORMANCE SHARE UNIT AWARDS VERSUS GOALS

    2017 UPDATE ON PERFORMANCE OF PERFORMANCE SHARE UNIT AWARDS VERSUS GOALS In 2017, we completed the first year of the PSU performance period for our 2017-2019 awards, the second year of the PSU performance period for our 2016-2018 awards, and the third year of the PSU performance period for our 2015-2017 awards.

  47. Performance Share Units Earned to Date

    Performance Share Units Earned to Date In the table below, we show the PSUs earned to date highlighting the contribution of the performance periods completed in 2017. We determine the number of PSUs earned based on our adjusted operational EPS and relative Total Shareholder Return (TSR) performance at the end of the 3-year performance period. We pay out earned PSUs at the end of the 3-year performance period.

  48. Performance Share Units Earned to Date

    | | | PSUs Earned Based on Performance to Date | | | | | | | Performance Period and Performance Measures | Weight | 2015 | 2016 | 2017 | 2018 | 2019 | Total | | 2015 - 2017 Performance Share Units | | | | | | | | | Operational Sales | 1/3(rd) | 106.3% | 118.2% | 95.0% | | | 35.5% | | Cumulative Adjusted Operational EPS | 1/3(rd) | 141.5% | | | | | 47.2% | | Relative TSR | 1/3(rd) | 160.0% | | | | | 53.3% | | Total | | | | | | | 136.0% | | 2016 - 2018 Performance Share Units | | | | | | | | | Operational Sales | 1/3(rd) | | 118.2% | 95.0% | TBD 2018 | | 23.7% | | Cumulative Adjusted Operational EPS | 1/3(rd) | | TBD 2016-2018 | | | | 0.0% | | Relative TSR | 1/3(rd) | | TBD 2016-2018 | | | | 0.0% | | Total | | | | | | | 23.7% | | 2017 - 2019 Performance Share Units | | | | | | | | | Operational Sales | 1/3(rd) | | | 95.0% | TBD 2018 | TBD 2019 | 10.6% | | Cumulative Adjusted Operational EPS | 1/3(rd) | | | TBD 2017-2019 | | | 0.0% | | Relative TSR | 1/3(rd) | | | TBD 2017-2019 | | | 0.0% | | Total | | | | | | | 10.6% | | Note: The percentages above are rounded to one decimal for display purposes. | | | | | | | |

  49. PSU Performance versus Goals for Performance Periods Completed in 2017

    PSU Performance versus Goals for Performance Periods Completed in 2017

  50. PSU Performance versus Goals for Performance Periods Completed in 2017

    | | 2017 Operational Sales Goals | | 2015 - 2017 Cumulative Adjusted Operational EPS Goal | | 2015 - 2017 Relative TSR Goal | | | Level | Operational Sales ($ Millions) | PSUs Earned (% of target) | Cum. Adj. Op. EPS Goal | PSUs Earned (% of target) | Relative TSR Goal | PSUs Earned (% of target) | | Maximum | $78,910 | 200% | $22.72 | 200% | 10.0 % points | 200% | | Target | 75,150 | 100 | 20.65 | 100 | 0.0 % points | 100 | | Threshold | 71,390 | 50 | 18.58 | 50 | (10.0) % points | 50 | | <Threshold | < 71,390 | 0 | < 18.58 | 0 | < (10.0) % points | 0 | | Result | $74,771 | 95.0% | $21.51 | 141.5% | 6.0 % points | 160.0% | | Note: Operational sales and cumulative adjusted operational EPS are non-GAAP measures. See page 54 for details. | | | | | | |

  51. PSU Performance versus Goals for Performance Periods Completed in 2017

    If performance falls between threshold and target or between target and maximum, we determine the percentage of target earned using interpolation. If performance is below threshold for a goal, the percentage of target earned for that goal is 0%. If TSR is negative, the percentage of target earned based on TSR performance would be capped at 100%.

  52. Our PSU Goal Setting Process

    Our PSU Goal Setting Process Our PSU goals support our long-term objectives to grow sales faster than our competitors and grow earnings faster than sales. Sales growth drives quality EPS growth and quality EPS growth drives TSR growth, all of which drive shareholder value creation. During the first quarter of the year, the Committee establishes the goals for the next PSU award 3-year cycle. It reviews the company’s performance against the PSU goals on a quarterly basis. Following year-end, the Committee certifies the result for the year’s operational sales performance and certifies the EPS and TSR results for the completed 3-year award cycle. Our PSU goals are based on our long-term strategic plan and take into account our product portfolio and pipeline, anticipated healthcare market growth and other external factors, including the competitive landscape. The sales goals and first-year EPS goal are also set to align with the annual guidance provided to the investment community. The 3-year TSR goal is set at meeting the performance of our Competitor Composite Peer Group. See page 62 for more information on our Competitor Composite Peer Group. Our annual operational sales goals are based on actual sales from the prior year and then aligned to the company’s annual operational sales growth guidance. Currency had a negative impact of approximately $0.9 billion on the 2016 sales base used to set the 2017 operational sales growth goal. The following table shows the 2016 operational and reported sales, the 2016 impact of currency, and the 2017 operational sales goal.

  53. Our PSU Goal Setting Process

    | | ($ Millions) | | Base Year Sales | | | 2016 Operational Sales | $72,833 | | Currency Translation | (943) | | 2016 Reported Sales | $71,890 | | 2017 Operational Sales Goal | | | 2017 Operational Sales Growth Goal | 4.5% | | 2017 Operational Sales Goal | $75,150 |

  54. Our PSU Goal Setting Process

    | Details on Non-GAAP PSU Performance Measures | | | | | | l | 2017 Operational Sales Performance: Operational sales growth is the sales increase due to volume and price, excluding the effect of currency translation. The following is a reconciliation of operational sales to reported sales (the most directly comparable GAAP measure). | | | | | | | | ($ millions) | | | | | 2017 Reported Sales | $76,450 | | | | | Currency Translation | (268) | | | | | PSU Plan Adjustments | (1,411) | | | | | 2017 Operational Sales | $74,771 | | | | l | PSU Plan adjustments: significant acquisitions, divestitures and changes in accounting rules that impact sales to customers by more than 0.5%. | | | | l | 2015-2017 Cumulative Adjusted Operational EPS Performance: The following is a reconciliation of 2015-2017 cumulative reported EPS to cumulative adjusted operational EPS: | | | | | | | | | ($) | | | | Reported EPS | | $11.88 | | | | Special Items and intangible amortization expense | | 8.35 | | | | Non-GAAP EPS | | 20.23 | | | | Currency Translation | | 1.97 | | | | PSU Plan Adjustments | | (0.69) | | | | Cumulative Adjusted Operational EPS | | $21.51 | | | | Special items and intangible amortization expense | | ($) | | | | 2015 | | 0.72 | | | | 2016 | | 0.80 | | | | 2017 | | 6.83 | | | | 2015 - 2017 Total | | $8.35 | | | l | PSU plan adjustments: (1) significant acquisitions, divestitures, share repurchases, and changes in accounting rules or tax laws that impact adjusted operational EPS results by more than 1%; and (2) earnings from products that were not approved when the targets were set. | | | | l | 2015-2017 Relative TSR Performance: | | | | | | | TSR from January 1, 2015 to December 31, 2017 | | (%) | | | | Johnson & Johnson | | 13.1% | | | | Competitor Composite Peer Group | | 7.1% | | | | Relative TSR Performance (J&J minus Competitor Composite Peer Group) | | 6.0% points | | | l | TSR performance is calculated using trailing 20-day average closing stock prices. | | |

  55. SHAREHOLDER OUTREACH AND OUR COMPENSATION PROGRAM

    | In 2017, we held an annual advisory vote to approve named executive officer compensation, commonly known as “Say on Pay”. Since 2013, 93% or more of the votes cast voted in favor of our executive compensation program as disclosed in our Proxy Statements. We believe that this continued strong support for the named executive officer compensation resulted from our direct engagement with our shareholders and the changes we made to our executive compensation program over the past several years. We regularly consider the feedback from our shareholders and we continue to evaluate our executive compensation program. During 2017, we continued our shareholder outreach on our executive compensation program. Our Lead Director and members of senior management had discussions with a diverse mix of U.S. and international institutional shareholders on our executive compensation program. We describe our shareholder engagement, feedback, and our responses starting on page 23 (under “Shareholder Engagement”). | | | Change in 2017 We increased the weighting of performance share units for our executive officers based on our shareholders' feedback, our competitive benchmarking, and to increase the focus on our long-term performance. Our 2018 long-term incentive grant based on 2017 performance reflects the change in mix as follows: | | | | |

  56. KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM

    | What We Do | | What We Don't Do | | | ü | Align CEO pay with company performance | û | No automatic or guaranteed annual salary | | | | | increases | | ü | Align the majority of named executive officer pay | | | | | with shareholders through long-term incentives | û | No guaranteed bonuses or long-term incentive | | | | | awards | | ü | Balance short-term and long-term incentives | | | | | | û | No above-median targeting of executive | | ü | Cap incentive awards | | compensation | | ü | Require executives to own significant amounts of | û | No change-in-control benefits | | | company stock | | | | | | û | No tax gross-ups (unless they are provided | | ü | Have a compensation recoupment policy | | pursuant to our standard relocation practices) | | | applicable to our named executive officers | | | | | | û | No option repricing without shareholder | | ü | Actively engage with our shareholders | | approval | | ü | Use an independent compensation consultant | û | No hedging of company stock | | | reporting directly to the Committee | | | | | | û | No long-term incentive backdating | | | | û | No dividend equivalents on unvested long-term | | | | | incentives |

  57. GUIDING PRINCIPLES

    | • | Competitiveness: We compare our practices against appropriate peer companies that are of similar size and complexity, so we can continue to attract, retain, and motivate high-performing executives. |

  58. GUIDING PRINCIPLES

    | • | Pay for Performance: We tie annual bonuses and grants of long-term incentives to performance, including the performance of: our company, the individual’s business unit or function, and the individual. |

  59. GUIDING PRINCIPLES

    | • | Accountability for Short-Term and Long-Term Performance: We structure performance-based compensation to reward an appropriate balance of short-term and long-term financial and strategic business results, with an emphasis on managing the business for long-term results. |

  60. BASE SALARY, ANNUAL PERFORMANCE BONUS, AND LONG-TERM INCENTIVES

    BASE SALARY, ANNUAL PERFORMANCE BONUS, AND LONG-TERM INCENTIVES In the table below, we describe the components of our total direct compensation, how we determine their size, and why we pay them.

  61. BASE SALARY, ANNUAL PERFORMANCE BONUS, AND LONG-TERM INCENTIVES

    | Component | Form | Vesting / Performance Period | How Size is Determined | | | Why We Pay Each Component | | | Base Salary | Cash | Ongoing | l | We base salary rates on: | | l | Recognize job responsibilities | | | | | | l | Competitive data | | | | | | | | l | Scope of responsibilities | | | | | | | | l | Work experience | | | | | | | | l | Time in position | | | | | | | | l | Internal equity | | | | | | | | l | Individual performance | | | | Annual Performance Bonus | Cash | 1 year | l | We set target awards as a percent of salary based on competitive data | | l | Motivate attainment of our near-term priorities, consistent with our long-term strategic plan | | | | | l | We determine award payouts based on business and individual performance | | | | | Long-Term Incentives | Equity | 3 years (options: 10-year term) | l | We set target awards as a percent of salary based on competitive data | | l | Motivate attainment of our long-term goals, TSR, and share price growth | | | | | l | We grant long-term incentives based on business and individual performance, contribution, and long-term potential | | l | Retain executives | | | | | l | We determine payouts based on achievement of long-term operational goals, TSR, and share price appreciation | | | |

  62. Long-Term Incentives

    Long-Term Incentives In the table below, we describe the forms of long-term incentive we use for our named executive officers, their weighting, performance periods, how the payouts are determined and why we use them.

  63. Long-Term Incentives

    | Long-Term Incentive Form | 2017 Mix | Vesting / Performance Period | | How Payouts are Determined | | | Why We Use Them | | | Performance | 60% | l | 0% to 200% | l | Measures and Weight: | | l | Aligns with our long-term objectives | | Share Units | | | vested 3 years | | l | 1/3 Sales: 1-year Operational Sales for each year of the 3-year performance period | | of growing sales faster than our | | | | | after grant | | | Sales for each year of the 3-year | | competitors and earnings faster | | | | | | | | performance period | | than sales | | | | | | | l | 1/3 Earnings per Share: 3-year Cumulative Adjusted Operational EPS | l | Ensures quality earnings growth by motivating top line and bottom line growth | | | | | | | l | 1/3 Relative Total Shareholder | l | Reflects overall TSR outcomes | | | | | | | | Return: 3-year Compound Annual | | relative to our competitors | | | | | | | | Growth Rate versus the | l | Ties PSU unit value directly to the | | | | | | | | Competitor Composite Peer Group | | share price | | | | | | l | Share Price | | | | | | | | | l | No dividend equivalents paid | | | | | Stock Options | 30% | l | 100% vested | l | Share price appreciation | | l | Motivates share price appreciation | | | | | 3 years after | l | No dividend equivalents paid | | | over the long-term | | | | | grant | | | | l | Reinforces emphasis on long-term growth aligned with our objectives | | | | l | 10-year term | | | | | | | Restricted Share Units | 10% | l | 100% vested | l | Share price | | l | Ties RSU value directly to the share price | | | | | 3 years after | l | No dividend equivalents paid | | | | | | | | grant | | | | | | | Note: Operational sales and cumulative adjusted operational EPS are non-GAAP measures. See page 54 for details | | | | | | | | |

  64. Long-Term Incentive Vesting and Treatment upon Termination

    Long-Term Incentive Vesting and Treatment upon Termination Our long-term incentives vest 100% on the third anniversary of the grant date. In addition, we do not pay out our PSUs until we determine the percent of target PSUs that have been earned based on performance. The treatment of our long-term incentives upon termination varies depending on the termination circumstances as follows:

  65. Long-Term Incentive Vesting and Treatment upon Termination

    | Termination | Eligibility | | Eligible Named Executive Officers | Voluntary Termination | Involuntary Termination Without Cause | Involuntary Termination with Cause | | Death | Disability | | Qualifying Separation | l | Termination of employment at age 62 or later, or | Gorsky Caruso Duato Stoffels | l | Grants within 6 months prior to termination would be forfeited. | l | All vested and unvested equity awards would be forfeited. | l | All equity awards would become vested on the termination date. | | | l | Termination of employment after attainment of age 55 and at least 10 years of service with at least 5 years of consecutive service immediately before termination of employment. | | l | Other equity awards would become vested on their normal vesting dates. | | | l | Options would remain exercisable for their remaining terms. | | | | | | l | Options would remain exercisable for their remaining terms. | | | l | Accelerated PSUs would be paid out at 100% of target with a “top up” at the end of the performance period if the payout exceeds target. | | Non-Qualifying Separation (age 55-61) | l | Termination of employment after attainment of age 55, but before age 62 and without meeting the service requirements for Qualifying Separation. | Peterson | l | All unvested equity incentives would be forfeited. | | | | | | | | | | l | Vested options would remain exercisable for up to three years. | | | | | | Non-Qualifying Separation (Under age 55) | l | Termination of employment before attainment of age 55. | | l | All unvested equity incentives would be forfeited. | | | | | | | | | | l | Vested options would remain exercisable for up to three months. | | | | |

  66. Changes for Long-Term Incentives Granted in 2018

    Changes for Long-Term Incentives Granted in 2018 •Non-Competition and Non-Solicitation: Long-term incentive awards granted in 2018 are subject to enhanced forfeiture and repayment provisions if an employee violates non-competition or non-solicitation agreements as follows:

  67. Changes for Long-Term Incentives Granted in 2018

    | Competition with the Company | | Impact on Long-Term Incentive Awards | | | l | Violating the non-competition provisions of the award agreement during employment or within 18 months of termination. | l | Forfeit vested and unvested PSUs, options, and RSUs. | | l | Violating any other non-competition or non-solicitation agreement an employee has with the company. | l | Repay any PSUs or RSUs vested or options exercised within the 12 months prior to the violation. |

  68. Changes for Long-Term Incentives Granted in 2018

    | • | Involuntary Termination due to Specified Divestiture or Reduction in Force: Long-term incentive awards granted in 2018 are pro-rated in the event of a Specified Divestiture or Reduction in Force as follows: |

  69. Changes for Long-Term Incentives Granted in 2018

    | ◦ | Pro-ration: Awards would be prorated in proportion to the time worked during the vesting period. |

  70. Changes for Long-Term Incentives Granted in 2018

    | ◦ | Vesting: PSU and RSU awards would become available on their normal vesting dates. Stock option vesting would be accelerated as of the date of termination and the options would remain exercisable for up to three months. |

  71. Changes for Long-Term Incentives Granted in 2018

    | ◦ | Coordination with Qualifying Separations: If an employee’s termination is also a Qualifying Separation, the employee’s awards would receive the better of the Qualifying Separation or the pro-ration treatments. |

  72. Changes for Long-Term Incentives Granted in 2018

    | ◦ | Specified Divestiture: A Specified Divestiture is a divestiture where the acquirer does not replace the awards that would be forfeited. |

  73. Changes for Long-Term Incentives Granted in 2018

    | ◦ | Reduction in Force: A Reduction in Force is a termination of employment due to position elimination or plant closing. |

  74. COMPENSATION TARGET SETTING PROCESS AND PAY POSITION

    COMPENSATION TARGET SETTING PROCESS AND PAY POSITION Before each year begins, we set compensation targets to ensure that we can compete for talent and to maintain internal equity among positions with similar responsibilities. We conduct an annual review of publicly available information and executive compensation surveys to determine current pay levels among the Executive Peer Group. The Committee reviews market data to understand how our target pay levels compare to benchmark positions. It does not target total compensation to a specific percentile of the Executive Peer Group.

  75. Peer Groups for Pay and Performance

    Peer Groups for Pay and Performance We use two peer groups for executive compensation:

  76. Peer Groups for Pay and Performance

    | • | Executive Peer Group: We use the Executive Peer Group to assess the competitiveness of the compensation of our named executive officers. |

  77. Peer Groups for Pay and Performance

    | • | Competitor Composite Peer Group: We use the Competitor Composite Peer Group to evaluate the relative performance of our company. |

  78. Peer Groups for Pay and Performance

    As described below, the two peer groups vary because executive compensation levels and practices are influenced by business complexity and company size. Most of our business competitors are smaller than Johnson & Johnson or even each of our individual businesses.

  79. EXECUTIVE PEER GROUP

    EXECUTIVE PEER GROUP The Committee compares our executive compensation levels and practices to those of the Executive Peer Group companies. It consists of companies that generally: are similar to Johnson & Johnson's size and scope; have executive positions similar to ours; and compete with us for executive talent. The Committee reviews the composition of the Executive Peer Group annually. We compare our salaries, annual performance bonuses, long-term incentives, and total direct compensation to the Executive Peer Group companies. We also compare our benefits, perquisites and other compensation to the Executive Peer Group. We do not include non-U.S. companies because comparable compensation data for the named executive officers is not available. We also do not include companies in industries whose compensation programs are not comparable to our programs, such as the financial services or oil and gas industries. The following table lists the 2017 Executive Peer Group companies, their business characteristics, and Johnson & Johnson’s rankings among these companies. Each company’s figures are for the most recent four fiscal quarters. Market capitalization is as of December 31, 2017. Johnson & Johnson ranks in the top quartile of the peers for revenue and market capitalization.

  80. EXECUTIVE PEER GROUP

    | Company (Ticker Symbol) | Revenue ($ Millions) | Net Income ($ Millions) | Market Cap ($ Billions) | Common Industry (Y/N)(1) | Gross Margin (>40%) | Inter-national Sales (> 33%) | Business Complexity(2) | R&D % of Sales (>or = 5%) | | 3M Company (MMM) | $31,657 | $4,858 | $140 | ü | ü | ü | ü | ü | | Abbott Laboratories (ABT) | 27,390 | 477 | 99 | ü | ü | ü | ü | ü | | The Boeing Company (BA) | 93,392 | 8,197 | 176 | | | ü | ü | | | Bristol-Myers Squibb Company (BMY) | 20,776 | 1,007 | 100 | ü | ü | ü | ü | ü | | Cisco Systems, Inc. (CSCO)(3) | 48,096 | (1,445) | 189 | | ü | ü | ü | ü | | The Coca-Cola Company (KO) | 35,410 | 1,248 | 195 | ü | ü | ü | | | | Eli Lilly and Company (LLY) | 22,871 | (204) | 93 | ü | ü | ü | ü | ü | | General Electric Company (GE) | 122,092 | (6,222) | 151 | ü | | ü | ü | | | Intel Corporation (INTC) | 62,761 | 9,601 | 216 | | ü | ü | ü | ü | | International Business Machines Corporation (IBM) | 79,139 | 5,753 | 142 | | ü | ü | ü | ü | | Medtronic, plc. (MDT)(3) | 29,725 | 2,807 | 109 | ü | ü | ü | ü | ü | | Merck & Co., Inc. (MRK) | 40,122 | 2,568 | 153 | ü | ü | ü | ü | ü | | Microsoft Corporation (MSFT)(4) | 98,863 | 11,588 | 660 | ü | ü | ü | ü | ü | | PepsiCo, Inc. (PEP) | 63,525 | 4,857 | 171 | ü | ü | ü | | | | Pfizer Inc. (PFE) | 52,546 | 21,308 | 216 | ü | ü | ü | ü | ü | | The Procter & Gamble Company (PG)(4) | 65,732 | 10,119 | 233 | ü | ü | ü | ü | | | United Technologies Corporation (UTX) | 59,837 | 4,552 | 102 | | | ü | ü | | | Johnson & Johnson (JNJ) | 76,450 | 1,300 | 375 | ü | ü | ü | ü | ü | | Johnson & Johnson’s Ranking | 5(th) | 12(th) | 2(nd) | | | | | | | Johnson & Johnson’s Percentile Rank | 76% | 35% | 94% | | | | | |

  81. EXECUTIVE PEER GROUP

    | Common Industry means that the company is in an industry similar to one of Johnson & Johnson’s business segments: pharmaceutical, medical devices or consumer packaged goods.(1) |

  82. EXECUTIVE PEER GROUP

    | Business Complexity means the company is a complex organization with multiple product lines.(2) |

  83. EXECUTIVE PEER GROUP

    | Used last four calendar quarters ending January 26, 2018 for Medtronic, plc. and ending January 27, 2018 for Cisco Systems, Inc.(3) |

  84. EXECUTIVE PEER GROUP

    | Used last four calendar quarters ending December 31, 2017 for The Procter & Gamble Company and Microsoft Corporation.(4) |

  85. COMPETITOR COMPOSITE PEER GROUP

    COMPETITOR COMPOSITE PEER GROUP The Committee compares overall company performance to the weighted performance of the Competitor Composite Peer Group companies. For example, when we set the sales goals for our businesses, we compare the sales of our individual businesses to the total sales of their industry competitors. For the TSR component of our PSUs, we weight the TSR within the three groups by market capitalization and weight the three groups using our sales mix each year. We include each of the peer companies in only one of the groups for the TSR comparison. These companies compete with one, or more, of our three businesses. We evaluate the group on an ongoing basis and update it as necessary. We select the companies based on the following criteria and financial metrics:

  86. COMPETITOR COMPOSITE PEER GROUP

    | • | Product Relevance |

  87. COMPETITOR COMPOSITE PEER GROUP

    | • | Financial Comparison: Sales growth, net income growth and margin, EPS growth, and TSR |

  88. COMPETITOR COMPOSITE PEER GROUP

    | • | Global Presence |

  89. COMPETITOR COMPOSITE PEER GROUP

    The following table lists the 2017 Competitor Composite Peer Group companies by business.

  90. COMPETITOR COMPOSITE PEER GROUP

    | Pharmaceuticals | Medical Devices | Consumer | | • AbbVie Inc. • Amgen Inc. • AstraZeneca plc • Bristol-Myers Squibb Company • Eli Lilly and Company • GlaxoSmithKline plc • Merck & Co., Inc. • Novartis AG • Pfizer Inc. • Roche Holding AG (Pharm Rx only) • Sanofi SA | • Abbott Laboratories • Boston Scientific Corporation • C. R. Bard, Inc. • Edwards Lifesciences Corporation • Medtronic plc • The Cooper Companies, Inc. • Roche Holding AG (Diabetes) • Smith & Nephew plc • Stryker Corporation • Zimmer Biomet Holdings, Inc. | • Beiersdorf AG • Bayer AG (Consumer Healthcare) • Colgate-Palmolive Company • GlaxoSmithKline plc (Consumer Healthcare) • The L’Oréal Group • Pfizer Inc. (Consumer Healthcare) • The Procter & Gamble Company • Reckitt Benckiser Group plc • Sanofi SA (Consumer Healthcare) • Unilever plc |

  91. COMPETITOR COMPOSITE PEER GROUP

    Effective in 2017, we included the financial performance of Abbott Laboratories as a whole in our Medical Devices composite in order to better reflect the industries in which we compete. Previously, we had only included its vascular and diabetes businesses. Effective in 2018, C. R. Bard, Inc. has been removed from the Competitor Composite Peer Group, and Becton, Dickinson and Company has been added.

  92. ALIGNING COMPENSATION TO "THE WHAT" AND "THE HOW"

    ALIGNING COMPENSATION TO "THE WHAT" AND "THE HOW" An individual employee can earn from 0% to 200% of the applicable target for annual performance bonuses and long-term incentives based on his or her individual performance on both “the what” and “the how”. This broad range allows for meaningful differentiation based on performance. The Committee determines annual performance bonuses, long-term incentive awards and salary rates on a component-by-component and total direct compensation basis. The Committee also compares the position of actual compensation for the prior year and target compensation for the current year to Executive Peer Group data. The independent directors (in the case of the Chairman/CEO) and the Committee (in the case of the other named executive officers) use their judgment and experience to determine bonuses, long-term incentives, and salary rates. Performance against goals is the most significant input in determining compensation levels. However, it does not determine them in a formulaic manner. In addition, we do not consider an employee’s previous long-term incentive awards and total equity ownership when making annual long-term incentive awards.

  93. INDEPENDENCE OF COMPENSATION CONSULTANT

    INDEPENDENCE OF COMPENSATION CONSULTANT The Committee determined that FWC’s service as its independent compensation consultant did not raise any conflict of interest concerns. The Committee considered the following factors, among others, when assessing the independence of its compensation consultant:

  94. INDEPENDENCE OF COMPENSATION CONSULTANT

    | • | FWC does not provide any other services to the company and reports directly to the Committee. |

  95. INDEPENDENCE OF COMPENSATION CONSULTANT

    | • | FWC has in place policies and procedures to prevent conflicts of interest. |

  96. INDEPENDENCE OF COMPENSATION CONSULTANT

    | • | No member of the FWC consulting team serving the Committee has a business or personal relationship with any member of the Committee or any executive officer of the company. |

  97. INDEPENDENCE OF COMPENSATION CONSULTANT

    | • | Neither FWC nor any principal of FWC owns any shares of our common stock. |

  98. INDEPENDENCE OF COMPENSATION CONSULTANT

    | • | The amount of fees paid to FWC is less than 1% of FWC's total consulting income. |

  99. LIMITED EMPLOYMENT ARRANGEMENTS AND AGREEMENTS

    LIMITED EMPLOYMENT ARRANGEMENTS AND AGREEMENTS Our Severance Pay Plan provides benefits to certain full-time U.S. employees who are involuntarily terminated. We provide two weeks base salary for each year of service, with guaranteed minimums based on an employee’s level. The minimum for our named executive officers is 52 weeks of base salary. We pay severance according to our normal payroll cycle. We do not pay severance as a lump-sum payment. We provide Dr. Stoffels an annual stipend of $320,000 to assist him in the payment of foreign taxes. While serving as a member of the Executive Committee, he is considered a U.S. employee even though he is a non-resident of the United States. As a result, he is subject to both U.S. taxation and foreign taxation. He does not receive any other tax equalization assistance. The Committee reviews the stipend annually and can terminate it at any time. We do not have employment arrangements or agreements with any of our other named executive officers.

  100. TAX IMPACT ON COMPENSATION

    | ◦ | Dividend equivalents paid on Certificates of Long-Term Compensation (CLCs) and Certificates of Long-Term Performance (CLPs) that were granted after 1992 |

  101. TAX IMPACT ON COMPENSATION

    In 2018 and future years, we expect that earnings from stock options and PSUs granted prior to 2018 (and certain other arrangements) will continue to be tax-deductible because they are considered grandfathered under the tax reform legislation. However, we are waiting for additional guidance on the tax reform act and these amounts may not be tax-deductible. We expect that other compensation paid to our named executive officers above $1 million will not be tax-deductible.

  102. 2017 COMPENSATION DECISIONS FOR 2016 PERFORMANCE

    | • | 2017 PSU and RSU awards included in the “Stock Awards” column |

  103. Summary Compensation Table

    Summary Compensation Table In the table below, we show the compensation of our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers for 2017. We also show their compensation for 2016 and 2015 if they were named in the 2017 and 2016 Proxy Statements. For a complete understanding of the table, please read the descriptions of each column that follow the table.

  104. Note on Changes in Pension Values

    | A | B | C | D | E | F | G | H | I | | Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Alex Gorsky | 2017 | $1,600,000 | $12,354,361 | $5,054,398 | $3,598,382 | $6,959,144 | $236,279 | $29,802,564 | | Chairman, CEO | 2016 | 1,600,000 | 10,608,901 | 4,118,398 | 4,652,556 | 5,663,771 | 228,094 | 26,871,720 | | | 2015 | 1,613,462 | 10,693,427 | 4,562,998 | 4,009,536 | 2,714,268 | 202,175 | 23,795,866 | | Dominic Caruso | 2017 | 932,600 | 4,263,779 | 1,756,706 | 2,156,680 | 2,467,265 | 159,172 | 11,736,202 | | EVP, CFO | 2016 | 909,500 | 3,624,523 | 1,425,643 | 2,758,967 | 2,475,956 | 110,240 | 11,304,829 | | | 2015 | 922,577 | 3,497,099 | 1,458,603 | 2,772,796 | 925,536 | 112,789 | 9,689,400 | | Sandra Peterson | 2017 | 1,057,500 | 12,027,780 | 1,859,996 | 1,270,000 | 832,000 | 128,780 | 17,176,056 | | EVP, Group Worldwide Chairman | 2016 | 963,462 | 3,897,074 | 1,539,002 | 1,600,000 | 592,000 | 141,246 | 8,732,784 | | | 2015 | 908,654 | 3,504,177 | 1,574,621 | 1,125,000 | 367,000 | 147,000 | 7,626,452 | | Joaquin Duato | 2017 | 897,254 | 11,483,016 | 1,650,003 | 1,928,262 | 3,329,047 | 71,726 | 19,359,308 | | EVP, Worldwide Chairman Pharmaceuticals | 2016 | 875,000 | 3,198,483 | 1,260,002 | 2,158,006 | 2,535,760 | 77,278 | 10,104,529 | | Paulus Stoffels | 2017 | 1,173,023 | 4,630,306 | 1,859,996 | 2,139,188 | 3,335,134 | 443,139 | 13,580,786 | | EVP, CSO | 2016 | 1,144,000 | 4,383,454 | 1,750,317 | 2,425,461 | 2,642,012 | 380,232 | 12,725,476 | | | 2015 | 1,158,385 | 4,208,874 | 1,823,246 | 2,172,098 | 1,022,024 | 401,118 | 10,785,745 |

  105. Non-Equity Incentive Plan Compensation (Column F)

    | ◦ | Change in Pension Value and Non-Qualified Deferred Compensation Earnings column includes the annual change in value of vested CLCs and CLPs, but only to extent that the unit values grow at a rate that exceeds a reference rate of return. |

  106. Non-Equity Incentive Plan Compensation (Column F)

    | ◦ | Non-Qualified Deferred Compensation table on page 81 includes the value of vested CLCs and CLPs that have not been paid out. |

  107. Change in Pension Value and Non-Qualified Deferred Compensation Earnings (Column G)

    Change in Pension Value and Non-Qualified Deferred Compensation Earnings (Column G) Column G includes the increase in the present value of the accrued pension benefit and the above-reference-rate non-qualified deferred compensation earnings.

  108. Above-Reference-Rate Non-Qualified Deferred Compensation Earnings

    Above-Reference-Rate Non-Qualified Deferred Compensation Earnings The above-reference-rate returns on vested CLCs and CLPs are not paid in the current year. They are deferred.

  109. Above-Reference-Rate Non-Qualified Deferred Compensation Earnings

    | • | The change in the values of the CLCs and CLPs depend on our long-term operational performance. |

  110. Above-Reference-Rate Non-Qualified Deferred Compensation Earnings

    | • | We use 120% of the December applicable federal long-term interest rate (AFR) as the reference rate. |

  111. Above-Reference-Rate Non-Qualified Deferred Compensation Earnings

    | • | Negative figures are not included in the Summary Compensation Table (according to the SEC’s rules). |

  112. Above-Reference-Rate Non-Qualified Deferred Compensation Earnings

    The following table details the calculation of the above-reference-rate returns on CLCs and CLPs. See page 82 for "Details on CLC and CLP Unit Values".

  113. Above-Reference-Rate Non-Qualified Deferred Compensation Earnings

    | Above-Reference-Rate Return | CLC | CLP | | Beginning of Year Unit Value | $46.55 | $5.25 | | End of Year Unit Value | $48.78 | $5.49 | | Change in Unit Value ($) | $2.23 | $0.24 | | Change in Unit Value (%) | 4.79% | 4.57% | | Reference-Rate | 3.16% | 3.16% | | Above-Reference-Rate Return | 1.63% | 1.41% | | Above reference-rate return included in the Summary Compensation Table | 1.63% | 1.41% |

  114. Above-Reference-Rate Non-Qualified Deferred Compensation Earnings

    The table below shows the change in pension values and above-reference-rate amounts for vested CLCs and CLPs included in column G.

  115. Above-Reference-Rate Non-Qualified Deferred Compensation Earnings

    | Name | Fiscal Year | Change in Pension Value ($) | Above Reference- Rate Calculation for Vested CLCs ($) | Above Reference- Rate Calculation for Vested CLPs ($) | Total ($) | | A. Gorsky | 2017 | $6,807,000 | $91,082 | $61,062 | $6,959,144 | | | 2016 | 5,012,000 | 354,676 | 297,095 | 5,663,771 | | | 2015 | 2,667,000 | 47,268 | 0 | 2,714,268 | | D. Caruso | 2017 | 2,219,000 | 182,165 | 66,100 | 2,467,265 | | | 2016 | 1,445,000 | 709,352 | 321,604 | 2,475,956 | | | 2015 | 831,000 | 94,536 | 0 | 925,536 | | S. Peterson | 2017 | 832,000 | 0 | 0 | 832,000 | | | 2016 | 592,000 | 0 | 0 | 592,000 | | | 2015 | 367,000 | 0 | 0 | 367,000 | | J. Duato | 2017 | 3,179,000 | 117,648 | 32,339 | 3,329,047 | | | 2016 | 1,920,000 | 458,123 | 157,637 | 2,535,760 | | P. Stoffels | 2017 | 3,174,000 | 121,443 | 39,691 | 3,335,134 | | | 2016 | 1,976,000 | 472,901 | 193,111 | 2,642,012 | | | 2015 | 959,000 | 63,024 | 0 | 1,022,024 |

  116. Grants of Plan-Based Awards

    Grants of Plan-Based Awards In the table below, we show the potential ranges of the 2017 annual performance bonus and the PSUs considered granted in 2017. We also show the RSU and options granted in 2017. We include the grant date fair values of the stock awards and option awards in columns D and E of the Summary Compensation Table on page 68. For a complete understanding of the table, please read the descriptions of each column that follow the table.

  117. Grants of Plan-Based Awards

    | A | B | C | D | E | F | G | H | I | J | K | L | M | N | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Annual Performance Bonus) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (Performance Share Units) | | | All other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/sh) | Closing Market Price on the Grant Date ($) | Grant Date Fair Value of Stock and Option Awards ($) | | Name | Award | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | | | | A. Gorsky | Bonus | | $0 | $2,800,000 | $5,600,000 | | | | | | | | | | | 2017-2019 PSU | 2/13/2017 | | | | 0 | 61,792 | 123,584 | | | | | $7,052,445 | | | 2016-2018 PSU | 2/13/2017 | | | | 0 | 8,216 | 16,432 | | | | | 896,793 | | | 2015-2017 PSU | 2/13/2017 | | | | 0 | 9,213 | 18,426 | | | | | 1,035,532 | | | RSU | 2/13/2017 | | | | | | | 31,779 | | | | 3,369,591 | | | Stock Awards Total | | | | | | | | | | | | 12,354,361 | | | Option Award | 2/13/2017 | | | | | | | | 377,673 | $115.67 | $115.88 | 5,054,398 | | D. Caruso | Bonus | | 0 | 1,171,000 | 2,342,000 | | | | | | | | | | | 2017-2019 PSU | 2/13/2017 | | | | 0 | 21,477 | 42,954 | | | | | 2,451,213 | | | 2016-2018 PSU | 2/13/2017 | | | | 0 | 2,844 | 5,688 | | | | | 310,428 | | | 2015-2017 PSU | 2/13/2017 | | | | 0 | 2,945 | 5,890 | | | | | 331,015 | | | RSU | 2/13/2017 | | | | | | | 11,045 | | | | 1,171,123 | | | Stock Awards Total | | | | | | | | | | | | 4,263,779 | | | Option Award | 2/13/2017 | | | | | | | | 131,264 | 115.67 | 115.88 | 1,756,706 | | S. Peterson | Bonus | | 0 | 1,340,625 | 2,681,250 | | | | | | | | | | | 2017-2019 PSU | 2/13/2017 | | | | 0 | 22,740 | 45,480 | | | | | 2,595,362 | | | 2016-2018 PSU | 2/13/2017 | | | | 0 | 3,070 | 6,140 | | | | | 335,097 | | | 2015-2017 PSU | 2/13/2017 | | | | 0 | 3,179 | 6,358 | | | | | 357,316 | | | RSU | 2/13/2017 | | | | | | | 82,428 | | | | 8,740,005 | | | Stock Awards Total | | | | | | | | | | | | 12,027,780 | | | Option Award | 2/13/2017 | | | | | | | | 138,982 | 115.67 | 115.88 | 1,859,996 | | J. Duato | Bonus | | 0 | 901,300 | 1,802,600 | | | | | | | | | | | 2017-2019 PSU | 2/13/2017 | | | | 0 | 20,172 | 40,344 | | | | | 2,302,271 | | | 2016-2018 PSU | 2/13/2017 | | | | 0 | 2,514 | 5,028 | | | | | 274,408 | | | 2015-2017 PSU | 2/13/2017 | | | | 0 | 2,726 | 5,452 | | | | | 306,400 | | | RSU | 2/13/2017 | | | | | | | 81,107 | | | | 8,599,937 | | | Stock Awards Total | | | | | | | | | | | | 11,483,016 | | | Option Award | 2/13/2017 | | | | | | | | 123,291 | 115.67 | 115.88 | 1,650,003 | | P. Stoffels | Bonus | | 0 | 1,178,300 | 2,356,600 | | | | | | | | | | | 2017-2019 PSU | 2/13/2017 | | | | 0 | 22,740 | 45,480 | | | | | 2,595,362 | | | 2016-2018 PSU | 2/13/2017 | | | | 0 | 3,492 | 6,984 | | | | | 381,159 | | | 2015-2017 PSU | 2/13/2017 | | | | 0 | 3,681 | 7,362 | | | | | 413,741 | | | RSU | 2/13/2017 | | | | | | | 11,695 | | | | 1,240,044 | | | Stock Awards Total | | | | | | | | | | | | 4,630,306 | | | Option Award | 2/13/2017 | | | | | | | | 138,982 | 115.67 | 115.80 | 1,859,996 |

  118. Outstanding Equity Awards at Fiscal Year-End

    Outstanding Equity Awards at Fiscal Year-End In the table below, we show the outstanding stock options, RSUs, and PSUs as of fiscal year-end 2017. We also show the values of the RSUs and PSUs.

  119. Outstanding Equity Awards at Fiscal Year-End

    | A | B | C | D | E | F | G | H | I | J | K | | | | | Options | | | | Stock Awards | | | | | | | | Number of Securities Underlying Unexercised Options (#) | | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Name | Grant Date | Vesting Date | Exercisable | Unexercisable | | | | | | | | A. Gorsky | Stock Options | | | | | | | | | | | | 2/08/2010 | 2/09/2013 | 119,770 | | $62.62 | 2/07/2020 | | | | | | | 1/10/2011 | 1/11/2014 | 144,695 | | 62.20 | 1/08/2021 | | | | | | | 1/17/2012 | 1/18/2015 | 231,951 | | 65.37 | 1/17/2022 | | | | | | | 1/16/2013 | 1/17/2016 | 547,692 | | 72.54 | 1/13/2023 | | | | | | | 2/10/2014 | 2/11/2017 | 495,146 | | 90.44 | 2/09/2024 | | | | | | | 2/09/2015 | 2/10/2018 | | 427,127 | 100.06 | 2/09/2025 | | | | | | | 2/08/2016 | 2/08/2019 | | 411,264 | 101.87 | 2/08/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 377,673 | 115.67 | 2/13/2027 | | | | | | | RSUs | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 33,165 | $4,633,814 | | | | | 2/08/2016 | 2/08/2019 | | | | | 29,579 | 4,132,778 | | | | | 2/13/2017 | 2/13/2020 | | | | | 31,779 | 4,440,162 | | | | | 2015-2017 PSU Award | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 93,120 | 13,010,726 | | | | | 2/08/2016 | 2/09/2018 | | | | | 10,890 | 1,521,551 | | | | | 2/13/2017 | 2/09/2018 | | | | | 8,752 | 1,222,829 | | | | | 2016-2018 PSU Award | | | | | | | | | | | | 2/08/2016 | 2/08/2019 | | | | | 9,712 | 1,356,961 | 49,298 | $6,887,917 | | | 2/13/2017 | 2/08/2019 | | | | | 7,805 | 1,090,515 | | | | | 2017-2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/08/2020 | | | | | 8,385 | 1,171,552 | 52,966 | 7,400,410 | | D. Caruso | Stock Options | | | | | | | | | | | | 2/09/2009 | 2/10/2012 | 110,578 | | 58.33 | 2/08/2019 | | | | | | | 2/08/2010 | 2/09/2013 | 119,770 | | 62.62 | 2/07/2020 | | | | | | | 1/10/2011 | 1/11/2014 | 145,447 | | 62.20 | 1/08/2021 | | | | | | | 1/17/2012 | 1/18/2015 | 173,702 | | 65.37 | 1/17/2022 | | | | | | | 1/16/2013 | 1/17/2016 | 233,846 | | 72.54 | 1/13/2023 | | | | | | | 2/10/2014 | 2/11/2017 | 158,277 | | 90.44 | 2/09/2024 | | | | | | | 2/09/2015 | 2/10/2018 | | 136,535 | 100.06 | 2/09/2025 | | | | | | | 2/08/2016 | 2/09/2019 | | 142,365 | 101.87 | 2/08/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 131,264 | 115.67 | 2/13/2027 | | | | | | | RSUs | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 10,601 | 1,481,172 | | | | | 2/08/2016 | 2/08/2019 | | | | | 10,239 | 1,430,593 | | | | | 2/13/2017 | 2/13/2020 | | | | | 11,045 | 1,543,207 | | | | | 2015-2017 PSU Award | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 29,767 | 4,159,045 | | | | | 2/08/2016 | 2/09/2018 | | | | | 3,481 | 486,365 | | | | | 2/13/2017 | 2/09/2018 | | | | | 2,798 | 390,937 | | | | | 2016-2018 PSU Award | | | | | | | | | | | | 2/08/2016 | 2/08/2019 | | | | | 3,362 | 469,739 | 17,066 | 2,384,462 | | | 2/13/2017 | 2/08/2019 | | | | | 2,702 | 377,523 | | | | | 2017-2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 2,916 | 407,424 | 18,408 | 2,571,966 |

  120. Outstanding Equity Awards at Fiscal Year-End

    | A | B | C | D | E | F | G | H | I | J | K | | | | | Options | | | | Stock Awards | | | | | | | | Number of Securities Underlying Unexercised Options (#) | | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Name | Grant Date | Vesting Date | Exercisable | Unexercisable | | | | | | | | S. Peterson | Stock Options | | | | | | | | | | | | 1/16/2013 | 1/17/2016 | 61,538 | | $72.54 | 1/13/2023 | | | | | | | 2/10/2014 | 2/11/2017 | 162,509 | | 90.44 | 2/09/2024 | | | | | | | 2/09/2015 | 2/10/2018 | | 147,395 | 100.06 | 2/09/2025 | | | | | | | 2/08/2016 | 2/09/2019 | | 153,685 | 101.87 | 2/08/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 138,982 | 115.67 | 2/13/2027 | | | | | | | RSUs | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 11,445 | $1,599,095 | | | | | 2/08/2016 | 2/08/2019 | | | | | 11,053 | 1,544,325 | | | | | 2/13/2017 | 2/13/2020 | | | | | 70,733 | 9,882,815 | | | | | 2/13/2017 | 2/13/2020 | | | | | 11,695 | 1,634,025 | | | | | 2015 - 2017 PSU Award | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 32,134 | 4,489,762 | | | | | 2/08/2016 | 2/09/2018 | | | | | 3,758 | 525,068 | | | | | 2/13/2017 | 2/09/2018 | | | | | 3,020 | 421,954 | | | | | 2016 - 2018 PSU Award | | | | | | | | | | | | 2/08/2016 | 2/08/2019 | | | | | 3,630 | 507,184 | 18,422 | $2,573,922 | | | 2/13/2017 | 2/08/2019 | | | | | 2,917 | 407,563 | | | | | 2017 - 2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 3,088 | 431,455 | 19,490 | 2,723,143 | | J. Duato | Stock Options | | | | | | | | | | | | 2/09/2009 | 2/10/2012 | 5,130 | | 58.33 | 2/08/2019 | | | | | | | 1/10/2011 | 1/11/2014 | 19,293 | | 62.20 | 1/08/2021 | | | | | | | 1/17/2012 | 1/18/2015 | 100,000 | | 65.37 | 1/17/2022 | | | | | | | 1/16/2013 | 1/17/2016 | 148,538 | | 72.54 | 1/13/2023 | | | | | | | 2/10/2014 | 2/11/2017 | 130,969 | | 90.44 | 2/09/2024 | | | | | | | 2/09/2015 | 2/10/2018 | | 126,369 | 100.06 | 2/09/2025 | | | | | | | 2/08/2016 | 2/09/2019 | | 125,824 | 101.87 | 2/08/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 123,291 | 115.67 | 2/13/2027 | | | | | | | RSUs | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 9,812 | 1,370,933 | | | | | 2/08/2016 | 2/08/2019 | | | | | 9,049 | 1,264,326 | | | | | 2/13/2017 | 2/13/2020 | | | | | 70,733 | 9,882,815 | | | | | 2/13/2017 | 2/13/2020 | | | | | 10,374 | 1,449,455 | | | | | 2015 - 2017 PSU Award | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 27,549 | 3,849,146 | | | | | 2/08/2016 | 2/09/2018 | | | | | 3,222 | 450,178 | | | | | 2/13/2017 | 2/09/2018 | | | | | 2,590 | 361,875 | | | | | 2016 - 2018 PSU Award | | | | | | | | | | | | 2/08/2016 | 2/08/2019 | | | | | 2,972 | 415,248 | 15,082 | 2,107,257 | | | 2/13/2017 | 2/08/2019 | | | | | 2,388 | 333,651 | | | | | 2017 - 2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 2,738 | 382,553 | 17,290 | 2,415,759 |

  121. Outstanding Equity Awards at Fiscal Year-End

    | A | B | C | D | E | F | G | H | I | J | K | | | | | Options | | | | Stock Awards | | | | | | | | Number of Securities Underlying Unexercised Options (#) | | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Name | Grant Date | Vesting Date | Exercisable | Unexercisable | | | | | | | | P. Stoffels | Stock Options | | | | | | | | | | | | 2/10/2014 | 2/11/2017 | 155,342 | | $90.44 | 2/09/2024 | | | | | | | 2/09/2015 | 2/10/2018 | | 170,668 | 100.06 | 2/09/2025 | | | | | | | 2/08/2016 | 2/09/2019 | | 174,787 | 101.87 | 2/08/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 138,982 | 115.67 | 2/13/2027 | | | | | | | RSUs | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 13,252 | $1,851,569 | | | | | 2/08/2016 | 2/08/2019 | | | | | 12,571 | 1,756,420 | | | | | 2/13/2017 | 2/13/2020 | | | | | 11,695 | 1,634,025 | | | | | 2015 - 2017 PSU Award | | | | | | | | | | | | 2/09/2015 | 2/09/2018 | | | | | 37,208 | 5,198,702 | | | | | 2/08/2016 | 2/09/2018 | | | | | 4,352 | 608,061 | | | | | 2/13/2017 | 2/09/2018 | | | | | 3,497 | 488,601 | | | | | 2016 - 2018 PSU Award | | | | | | | | | | | | 2/08/2016 | 2/08/2019 | | | | | 4,128 | 576,764 | 20,952 | $2,927,413 | | | 2/13/2017 | 2/08/2019 | | | | | 3,317 | 463,451 | | | | | 2017 - 2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 3,088 | 431,455 | 19,490 | 2,723,143 |

  122. Outstanding Equity Awards at Fiscal Year-End

    Note: The PSUs that have been earned based on performance to date are included in columns H and I. See “2017 Update on Performance of Performance Share Unit Awards Versus Goals” on page 52 for details.

  123. Option Exercises and Stock Vested

    Option Exercises and Stock Vested In the table below, we show how many stock options each executive exercised in 2017 and the value received from exercising them. We also show how many PSUs and RSUs vested in 2017 and their value when they vested.

  124. Option Exercises and Stock Vested

    | | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized Upon Vesting ($) | | A. Gorsky | 0 | $0 | 151,654 | $17,523,609 | | D. Caruso | 82,591 | 6,067,135 | 48,478 | 5,601,630 | | S. Peterson | 0 | 0 | 49,773 | 5,751,267 | | J. Duato | 50,000 | 3,193,720 | 40,114 | 4,635,170 | | P. Stoffels | 102,692 | 6,445,977 | 123,070 | 16,031,788 |

  125. Pension Benefits

    Pension Benefits In the table below, we show the present value of pension benefits as of year-end 2017. For a complete understanding of the table, please read the description of the pension benefits that follow the table.

  126. Pension Benefits

    | | | | Present Value of Accumulated Benefit | | | | Name | Number of Years Credited Service (#) | Normal Retirement Age | Salaried Pension Plan ($) | Excess Pension Plan ($) | Total ($) | | A. Gorsky | 25.41 | 62 | $1,293,000 | $24,817,000 | $26,110,000 | | D. Caruso | 18.00 | 62 | 994,000 | 8,682,000 | 9,676,000 | | S. Peterson | 5.08 | 62 | 268,000 | 2,248,000 | 2,516,000 | | J. Duato | 28.25 | 62 | 1,320,000 | 10,624,000 | 11,944,000 | | P. Stoffels | 24.33 | 62 | 1,134,000 | 10,998,000 | 12,132,000 |

  127. Pension Benefits

    We calculated the present values included in the table using the same assumptions we used for the pension liabilities included in our 2017 Annual Report. We used a discount rate of 3.74% and mortality assumptions according to the RP-2014 White Collar table with generational improvements projected according to Scale MMP-2016. The named executive officers participate in the same defined benefit pension plans provided to other U.S. non-union employees hired before January 1, 2015. We did not make any payments to our named executive officers from our pension plans in 2017. We describe our U.S. pension formula and pension plans below:

  128. Pension Benefits

    | • | U.S. Pension Formula: Our U.S. pension formula determines a monthly annuity amount payable for life. |

  129. Pension Benefits

    | • | Retirement Age: At age 62 employees can begin receiving unreduced pension payments. At age 55 they can begin receiving reduced pension benefits. If an employee begins receiving his or her pension before age 62, the pension is reduced by 4% per year for each year before age 62. |

  130. Pension Benefits

    | • | Monthly Annuity Amount: We calculate the monthly annuity amount as: |

  131. Pension Benefits

    | Final average earnings multiplied by 1.667%, multiplied by years of service prior to 2005, plus(1) |

  132. Pension Benefits

    | Final average earnings multiplied by 1.55%, multiplied by years of service after 2004, minus(2) |

  133. Pension Benefits

    | Age 65 Social Security benefits multiplied by 1.429%, multiplied by total years of service.(3) |

  134. Pension Benefits

    | • | Final Average Earnings: Final average earnings is the average of the highest consecutive 60 months out of the last 120 months of pay. Pay includes: base salary, bonus, and dividend equivalents paid or deferred on unvested CLCs for years prior to 2009. |

  135. Pension Benefits

    | • | Benefits Paid as an Annuity: Pension benefits must be taken in the form of an annuity, except the Belgian portion of Dr. Stoffels’ benefit which is payable as a lump sum at retirement. |

  136. Pension Benefits

    | • | Pension Plans: We pay our U.S. pensions from the Salaried and Excess Pension Plans as follows: |

  137. Pension Benefits

    | • | Salaried Pension Plan: The Salaried Pension Plan applies the U.S. pension formula to pay up to the IRS’s covered compensation limit. The limit was $270,000 in 2017. |

  138. Pension Benefits

    | • | Excess Pension Plan: The Excess Pension Plan uses the U.S. pension formula without applying the IRS pay limits. Its payments are reduced by amounts paid from the Salaried Pension Plan. U.S. non-union employees participate in the Excess Pension Plan if their covered compensation exceeds the IRS limit. |

  139. Pension Benefits

    | • | Offset for non-U.S. Pensions: Because Dr. Stoffels has worked in both Belgium and the U.S., his pension includes benefits from both the U.S. and Belgian Plans. The U.S. portion is calculated using the U.S. formula above for all service and subtracting the amount earned in the Belgian Plan. This treatment of service rendered outside the U.S. applies to all participants in the Salaried Plan who were hired before January 1, 2015 and who earned company service outside the U.S. before joining the U.S. pension plan on, or before, July 1, 2015. |

  140. Non-Qualified Deferred Compensation

    Non-Qualified Deferred Compensation In the table below, we show our named executive officers’ year-end non-tax-qualified compensation deferral plan balances. We also show how much they and the company contributed to the plans and the earnings on the deferred compensation during the year. For a complete understanding of the table, please read the descriptions of the columns that follow the table.

  141. Non-Qualified Deferred Compensation

    | A | B | C | D | E | | Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Balance at Last FYE ($) | | A. Gorsky | $0 | $59,850 | $565,095 | $11,006,891 | | D. Caruso | 0 | 29,817 | 1,228,208 | 19,110,703 | | S. Peterson | 0 | 35,437 | 27,605 | 188,123 | | J. Duato | 0 | 28,226 | 503,701 | 10,295,972 | | P. Stoffels | 0 | 40,636 | 545,505 | 11,129,104 |

  142. Potential Payments Upon Termination

    Potential Payments Upon Termination We pay earned and unpaid compensation to our employees upon termination as described below. In addition, depending upon the circumstances of the termination and the employee’s age and years of service, we pay severance, provide continued health benefit coverage, and provide continued vesting in equity incentives as described below. We have no change-in-control benefits.

  143. Potential Payments Upon Termination

    | • | Earned but Unpaid Compensation: Upon any termination of employment as of year-end 2017, employees would receive their annual performance bonus and vested non-qualified deferred compensation. They would also be entitled to their pension benefits upon retirement. If a named executive officer had terminated as of year-end 2017, he or she would have received his or her: |

  144. Potential Payments Upon Termination

    | ◦ | Earned but unpaid annual performance bonuses for 2017. An employee must be employed through the end of the year to be eligible for a non-pro-rated bonus. However, in case of involuntary termination for cause, these amounts would be forfeited. See the “Non-Equity Incentive Plan Compensation” table on page 70 for the bonus amounts. |

  145. Potential Payments Upon Termination

    | ◦ | Vested non-qualified deferred compensation balances. See the “Non-Qualified Deferred Compensation” table on page 81 for the year-end balances. |

  146. Potential Payments Upon Termination

    | ◦ | Pension benefits upon retirement. See “Pension Benefits” on page 80 for details. |

  147. Potential Payments Upon Termination

    | • | Severance, Healthcare Coverage, and Equity Incentives: In the table below, we show the value of cash severance, continued healthcare coverage, and continued vesting in equity incentives as if the named executive officers had terminated as of year-end 2017 under the circumstances shown below. For a complete understanding of the table please read the descriptions of the types of payments that follow the table. |

  148. Potential Payments Upon Termination

    | • | No Change-in-Control Benefits: We do not have any change-in-control agreements or arrangements in place for any of our named executive officers. In addition, there are no change-in-control provisions in any of our compensation plans or instruments. |

  149. Potential Payments Upon Termination

    | Name | Type of Payment | Voluntary Termination ($) | Involuntary Termination Without Cause ($) | Involuntary Termination with Cause ($) | Death ($) | Disability ($) | | A. Gorsky | Cash Severance | $0 | $1,600,000 | $0 | $0 | $0 | | | Healthcare Coverage | 248,000 | 251,000 | 248,000 | 128,000 | 292,000 | | | Equity Incentives | 92,073,285 | 92,073,285 | 0 | 92,073,285 | 92,073,285 | | | Total | 92,321,285 | 93,924,285 | 248,000 | 92,201,285 | 92,365,285 | | D. Caruso | Cash Severance | 0 | 1,152,985 | 0 | 0 | 0 | | | Healthcare Coverage | 172,000 | 176,000 | 172,000 | 90,000 | 211,000 | | | Equity Incentives | 30,917,509 | 30,917,509 | 0 | 30,917,509 | 30,917,509 | | | Total | 31,089,509 | 32,246,494 | 172,000 | 31,007,509 | 31,128,509 | | S. Peterson | Cash Severance | 0 | 1,072,500 | 0 | 0 | 0 | | | Healthcare Coverage | 0 | 14,000 | 0 | 4,000 | 242,000 | | | Equity Incentives | 0 | 0 | 0 | 43,082,053 | 43,082,053 | | | Total | 0 | 1,086,500 | 0 | 43,086,053 | 43,324,053 | | J. Duato | Cash Severance | 0 | 970,631 | 0 | 0 | 0 | | | Healthcare Coverage | 243,000 | 251,000 | 243,000 | 123,000 | 293,000 | | | Equity Incentives | 28,296,365 | 28,296,365 | 0 | 38,179,180 | 38,179,180 | | | Total | 28,539,365 | 29,517,996 | 243,000 | 38,302,180 | 38,472,180 | | P. Stoffels | Cash Severance | 0 | 1,178,300 | 0 | 0 | 0 | | | Healthcare Coverage | 241,000 | 249,000 | 241,000 | 122,000 | 292,000 | | | Equity Incentives | 36,782,026 | 36,782,026 | 0 | 36,782,026 | 36,782,026 | | | Total | 37,023,026 | 38,209,326 | 241,000 | 36,904,026 | 37,074,026 |

  150. Healthcare Coverage

    Healthcare Coverage Upon termination of employment, all non-union U.S. employees receive continued healthcare coverage that varies based upon the termination circumstances. The “Healthcare Coverage” amounts in the table on page 83 are the present values of continued healthcare coverage. The values vary based upon the termination circumstances as follows:

  151. Healthcare Coverage

    | Healthcare Coverage | Eligibility | Eligible Named Executive Officers | Voluntary Termination | Involuntary Termination Without Cause | Involuntary Termination with Cause | Death | Disability | | Retiree | Employees age 55 with ten years of service | Gorsky Caruso Duato Stoffels | ü | ü Begins at the end of the cash severance period | ü | ü Coverage for Dependents | ü | | Separation | Employees between ages 50 and 54 with ten years of service who are involuntarily terminated without cause | | Not Applicable | ü Begins at the earlier of the end of the cash severance period or 52 weeks and ends at age 65 | Not Applicable | Not Applicable | Not Applicable | | Active-employee | All Employees | Peterson | No continued coverage | ü While on severance - up to 52 weeks | No continued coverage | ü Coverage for Dependents for 6 months | ü While on Long-term disability |