DEF 14A of Johnson & Johnson, Mar 11, 2020

DEF 14A of Johnson & Johnson

Filed Mar 11, 2020 · FY20190000200406-20-000018

Open on EDGAR

  1. NOMINEES

    NOMINEES There are 13 Director nominees for election at our 2020 Annual Meeting to hold office until the next Annual Meeting and until their successors have been duly elected and qualified. All of the Director nominees were elected to the Board at the last Annual Meeting and are currently serving as Directors of the Company except for Messrs. Joly and Weinberger, who were both appointed to the Board on December 5, 2019. Mr. Joly and Mr. Weinberger were recommended for appointment by the Nominating & Corporate Governance Committee, in keeping with the Board’s commitment to refreshment and seeking out Director candidates who have been leaders of large, complex organizations across both the public and private sectors, as well as candidates with diverse backgrounds, skills and experiences. Mr. Weinberger was recommended for the Committee's consideration by a Director and Mr. Joly was recommended for the Committee's consideration following a review of a diverse group of candidates identified by a third-party search firm. The Nominating & Corporate Governance Committee conducted a thorough review of both individuals before recommending them for appointment to the Board and for nomination at the 2020 Annual Meeting. In keeping with the Board's policy on retirement of Directors, Mr. William D. Perez, appointed to the Board in 2007, will not stand for re-election. We join the Board in thanking Mr. Perez for his service. Below are summaries of the skills and qualifications, and a brief biography, of each of the Director nominees.

  2. NOMINEES

    | MARY C. BECKERLE, Ph.D. | | | | | Independent Director since 2015 | | Biography: | | | | | Dr. Beckerle, age 65, has served as Chief Executive Officer of the Huntsman Cancer Institute at the University of Utah since 2006. She is the Associate Vice President for Cancer Affairs and a Distinguished Professor of Biology and Oncological Sciences at the University of Utah. Dr. Beckerle joined the faculty of the University of Utah in 1986 and currently holds the Jon M. Huntsman Presidential Endowed Chair. 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, the Board of Scientific Advisors of the National Cancer Institute (USA) and the External Advisory Board of the Dana Farber/Harvard Cancer Center. | | | Current Committees: | | | | | • | Chair, Science, Technology & Sustainability | | | | • | Member, Regulatory Compliance | | | | | | Skills and Qualifications: | | | Other Public Board Service: | | • | Expertise in scientific research and organizational management in the | | • | Huntsman Corporation (since 2011) | | healthcare arena | | | | • | Active participant in national and international scientific affairs | | | | • | Strong focus on patient experience |

  3. NOMINEES

    | D. SCOTT DAVIS | | | | | Independent Director since 2014 | | Biography: | | | | | Mr. Davis, age 68, 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 as Vice Chairman and Chief Financial Officer. 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. | | | | | Skills and Qualifications: | | | | | • | Deep understanding of emerging markets and international operations, | | Current Committees: | | | public policy and global economic indicators | | • | Chair, Audit | • | Expertise in management, strategy, finance and operations | | • | Member, Compensation & Benefits | • | Expertise in supply chain logistics at a time of rapid global expansion | | | | | in the healthcare industry | | Other Public Board Service: | | | | | • | Honeywell International, Inc. (since 2005) | | | | Recent Past Public Board Service: | | | | | • | United Parcel Service, Inc. (2008-2016) | | | | • | EndoChoice, Inc. (2014-2016) | | |

  4. NOMINEES

    | IAN E. L. DAVIS | | | | | Independent Director since 2010 | | Biography: | | | | | Mr. Davis, age 69, 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, and expertise in the consumer products and retail industries. Mr. Davis is a Director Majid Al Futtaim Holding LLC, and a Senior Advisor at Apax Partners, a private equity firm. | | | Current Committees: | | | | | • | Member, Audit | Skills and Qualifications: | | | • | Member, Regulatory Compliance | • | Expertise in leading a broad global business | | | | • | Deep understanding of global business trends | | Other Public Board Service: | | • | Expertise in strategy and business transformation | | • | BP, plc (since 2010) | | | | • | Rolls-Royce Holdings plc (since 2013) | | |

  5. NOMINEES

    | JENNIFER A. DOUDNA, Ph.D. | | | | | Independent Director since 2018 | | Biography: | | | | | Dr. Doudna, age 56, 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 Biomedical 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., both 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. Dr. Doudna is a Director of Driver Inc. and a Trustee for Pomona College. | | | Current Committees: | | | | | • | Member, Science, Technology & Sustainability | Skills and Qualifications: | | | | | • | Pioneer in the field of biochemistry, having co-discovered the simplified | | Other Public Board Service: | | | genome editing technique CRISPR-Cas9 | | • | None | • | Expertise in scientific research and innovation | | | | • | Leader in integration of scientific research and ethics |

  6. NOMINEES

    | ALEX GORSKY | | | | | Management - Director since 2012 | | Biography: | | | | | Mr. Gorsky, age 59, 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 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 serves on the Boards of the Travis Manion Foundation, the National Academy Foundation and the Wharton Board of Overseers. He is a Member of the Board of the Business Roundtable and serves as the Chairman of its Corporate Governance Committee. | | | Current Committees: | | | | | • | Chair, Finance | | | | Other Public Board Service: | | | | | • | International Business Machines Corporation (since 2014) | | | | | | Skills and Qualifications: | | | | | • | Leadership of global business in healthcare industry | | | | • | Expertise in strategy and operations of our Company as well as its risks | | | | | and challenges | | | | • | Deep commitment to ethical, Credo-based leadership |

  7. NOMINEES

    | MARILLYN A. HEWSON | | | | | Independent Director since 2019 | | Biography: | | | | | Ms. Hewson, age 66, has served since January 2014 as Chairman, President and Chief Executive Officer of Lockheed Martin Corporation (aerospace), a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. Ms. Hewson was Chief Executive Officer and President of Lockheed Martin from January to December 2013 and has served as a Director since 2012. Ms. Hewson currently serves on the University of Alabama’s Culverhouse College of Commerce Board of Visitors and its President's Cabinet, the Boards of Governors of the United Service Organizations (USO) and Aerospace Industries Association, the Boards of Directors of the Congressional Medal of Honor Foundation, Catalyst, Inc., and the Business Roundtable, and the International Advisory Board of the Atlantic Council. Ms. Hewson also serves on the Board of Trustees for King Abdullah University of Science and Technology in the Kingdom of Saudi Arabia and Khalifa University of Science and Technology in the United Arab Emirates. | | | Current Committees: | | | | | • | Member, Compensation & Benefits | | | | Other Public Board Service: | | | | | • | Lockheed Martin Corporation (since 2012) | Skills and Qualifications: | | | | | • | Expertise in executive and operational leadership in a global, regulated | | Recent Past Public Board Service: | | | industry | | • | DuPont; DowDuPont Inc. (2007-2019) | • | Insight and experience in global business management, strategic planning, | | | | | cybersecurity, finance, supply chain, leveraged services and manufacturing | | | | • | Expertise in government relations and human capital management |

  8. NOMINEES

    | HUBERT JOLY | | | | | Independent Director since 2019 | | Biography: | | | | | Mr. Joly, age 60, became the Executive Chairman of Best Buy Co., Inc. (consumer electronics) in June 2019, having joined the company in 2012 as President and Chief Executive Officer and becoming Chairman, President, and Chief Executive in 2015. From 2004 to 2008, he was Global President and Chief Executive Officer, Carlson Wagonlit Travel, and then served as President and Chief Executive Officer of Carlson Companies from 2008 to 2012. In 1999, he joined Vivendi as Global Chief Executive Officer, Vivendi Universal Games, and was later appointed Executive Vice President of U.S. Assets and Deputy Chief Financial Officer of Vivendi Universal. Prior roles included, from 1996 to 1999, Vice President, Europe and President of Electronic Data Systems France and, from 1983 to 1996, McKinsey & Company, eventually serving as Partner. Mr. Joly is also a Vice Chairman of The Business Council and serves on the Board of Directors of Sciences Po Foundation, the Board of Trustees of the Minneapolis Institute of Art and the International Advisory Board of his alma mater, HEC Paris. | | | Current Committees: | | | | | • | Member, Nominating & Corporate Governance | | | | Other Public Board Service: | | | | | • | Best Buy Co., Inc. (since 2012) | Skills and Qualifications: | | | • | Ralph Lauren Corporation (since 2009) | • | Extensive strategic, operational and financial expertise relevant to | | | | | international corporations | | | | • | Successfully led the digital transformation of consumer businesses, with | | | | | focus on customer experience | | | | • | Experience in business transformation and human capital management |

  9. NOMINEES

    | MARK B. McCLELLAN, M.D., Ph.D. | | | | | Independent Director since 2013 | | Biography: | | | | | Dr. McClellan, age 56, 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 (FDA) 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 the Clinton 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, is a Member of the National Academy of Medicine, 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. He sits on the Boards of Directors of ResearchAmerica!, Long Term Quality Alliance, Alignment Healthcare, Seer, Inc., National Alliance for Hispanic Health and the Alliance for Health Policy. | | | Current Committees: | | | | | • | Member, Regulatory Compliance | | | | • | Member, Science, Technology & Sustainability | | | | Other Public Board Service: | | | | | • | Cigna Corporation (since 2018) | | | | | | Skills and Qualifications: | | | | | • | Extensive experience in public health policy, including as Commissioner of | | | | | the U.S. Food and Drug Administration and Administrator for the U.S. Centers | | | | | for Medicare & Medicaid Services | | | | • | Broad knowledge of, and unique insights into, the challenges facing the | | | | | healthcare industry |

  10. NOMINEES

    | ANNE M. MULCAHY | | | | | Independent Director since 2009 Lead Director since 2012 | | Biography: | | | | | Ms. Mulcahy, age 67, 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 appointed as a Trustee in February 2018. | | | Current Committees: | | | | | • Member, Audit • Member, Finance • Member, Nominating & Corporate Governance | | | | | | | Skills and Qualifications: | | | | | • | Experience leading a large, global manufacturing and services company | | Other Public Board Service: | | | with one of the world's most recognized brands | | • | Graham Holdings Company (since 2008) | • | Expertise in organizational and operational management issues crucial to a | | • | LPL Financial Holdings Inc. (since 2013) | | large public company. | | • | Williams-Sonoma, Inc. (since 2018) | • | Deep commitment to business innovation and talent development | | Recent Past Public Board Service: | | | | | • | Target Corporation (1997-2017) | | |

  11. NOMINEES

    | CHARLES PRINCE | | | | | Independent Director since 2006 | | Biography: | | | | | Mr. Prince, age 70, 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, Chief Operating Officer from 2001 to 2002 and held positions of increasing responsibility since joining Commercial Credit Company, a predecessor to Citigroup, in 1979. Mr. Prince began his career as an attorney at U.S. Steel Corporation in 1975. Mr. Prince is a Director of Lord Abbett Family of Funds and a member of the Council on Foreign Relations and The Council of Chief Executives. | | | Current Committees: | | Skills and Qualifications: | | | • | Chair, Regulatory Compliance | • | Expertise leading a diverse global company in a regulated environment | | • | Member, Nominating & Corporate Governance | • | Deep expertise in compliance and risk oversight | | | | • | Well-developed legal, global business and financial acumen | | Other Public Board Service: | | | | | • | None | | | | Recent Past Public Board Service: | | | | | • | Xerox Corporation (2008-2018) | | |

  12. NOMINEES

    | A. EUGENE WASHINGTON, M.D., M.Sc. | | | | | Independent Director since 2012 | | Biography: | | | | | Dr. Washington, age 69, is 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 Chairman of the Board of Directors of both the California HealthCare Foundation and The California Wellness Foundation. Dr. Washington serves on the Boards of Directors of the Kaiser Foundation Hospitals and Kaiser Foundation Health Plan, Inc. | | | Current Committees: | | | | | • | Member, Compensation & Benefits | | | | • | Member, Science, Technology & Sustainability | | | | Other Public Board Service: | | | | | • | None | | | | | | Skills and Qualifications: | | | | | • | Expertise in medicine, clinical research and healthcare innovation | | | | • | Important customer and patient perspective through leadership of | | | | | complex health systems | | | | • | Expertise in health policy |

  13. NOMINEES

    | MARK A. WEINBERGER | | | | | Independent Director since 2019 | | Biography: | | | | | Mr. Weinberger, age 58, served as the Global Chairman and Chief Executive Officer of EY (Ernst & Young) (professional services) from 2013 through June 2019, having served as Global Chairman and CEO-elect in the prior year. He was Assistant Secretary of the U.S. Treasury in the George W. Bush Administration and was appointed by President Bill Clinton to serve on the U.S. Social Security Administration Advisory Board. Mr. Weinberger is on the Board of Directors of the Business Roundtable and he previously chaired its Tax and Fiscal Policy Committee and Audit Committee. He is also a Member of the International Advisory Board of British-American Business Council and is on the Board of Advisors for the American Council for Capital Formation. Mr. Weinberger is a Strategic Advisor to the FCLTGlobal (Focusing Capital on the Long-term), is on the CEO Advisory Council of JUSTCapital, and serves on the Board of Directors of the National Bureau of Economic Research and the Aspen Economic Strategy Group. He is also on the Boards of Trustees for the United States Council for International Business, the Greater Washington Partnership, The Concord Coalition, Emory University and Case Western Reserve University. | | | Current Committees: | | | | | • | Member, Audit | | | | • | Member, Regulatory Compliance | | | | Other Public Board Service: | | | | | • | MetLife Inc. (since 2019) | Skills and Qualifications: | | | | | • | Experience leading a global business and working at the highest levels of | | | | | government | | | | • | Track record of driving transformative change in the public and private | | | | | sectors during periods of unprecedented disruption | | | | • | Expertise in accounting, compliance and corporate governance, with | | | | | a strong commitment to corporate purpose |

  14. NOMINEES

    | RONALD A. WILLIAMS | | | | | Independent Director since 2011 | | Biography: | | | | | Mr. Williams, age 70, 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 Directors of Peterson Institute for International Economics, the National Academy Foundation and the President's Circle of the National Academics, 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 Barack Obama's Management Advisory Board from 2011 to January 2017, as Chairman of the Council for Affordable Quality Healthcare from 2007 to 2010, as Vice Chairman of The Business Council from 2008 to 2010 and on the Board of MIT Corporation until July 2019. | | | Current Committees: | | | | | • | Chair, Compensation & Benefits | | | | • | Member, Nominating & Corporate Governance | Skills and Qualifications: | | | | | • | Broad experience leading a complex company in the healthcare industry | | Other Public Board Service: | | • | Expertise in corporate governance and leadership during times of | | • | The Boeing Company (since 2010) | | business disruption and transformation | | • | American Express Company (since 2007) | • | Expertise in operational management and insight into both public | | | | | healthcare policy and the healthcare industry | | Recent Past Public Board Service: | | | | | • | Envision Healthcare Holdings, Inc. (2011-2017) | | |

  15. Oversight of Risks Related to Executive Compensation

    | Key Elements of Our Executive Compensation Programs | | | Balanced performance-based awards | Performance-based awards are based on the achievement of strategic and leadership objectives in addition to financial metrics | | Multi-year Performance Period and Vesting | 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 options vest three years from the grant date | | 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 compensation vesting over three years | | Capped Incentive Awards | Annual performance bonuses and long-term incentive awards are capped at 200% of target | | Stock Ownership Guidelines | Our CEO must directly or indirectly own equity in our Company equal to six times base salary, and the other members of our Executive Committee must own equity equal to three times base salary and retain this level of ownership at all times while serving as an Executive Committee member | | No Change in Control Arrangements | None of our executive officers have in place any change-in-control arrangements that would result in guaranteed payouts | | Compensation Recoupment Policy | The Board has the authority to recoup executive officers’ past compensation in the event of a material restatement of our financial results and for significant misconduct of Company policy or laws relating to the manufacturing, sales or marketing of our products |

  16. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION The Compensation & Benefits Committee charter requires annual review of non-employee Director compensation, including total compensation and each element of our non-employee Director compensation program. During its annual review, the 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 67 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 the full Board based on recommendations by the Committee.

  17. Fiscal 2019 Non-Employee Director Compensation

    Fiscal 2019 Non-Employee Director Compensation The Compensation & Benefits Committee’s analysis in 2018 of the competitive position of our non-employee Director compensation program showed that overall compensation for non-employee Directors was below the peer group median. As a result, the Committee recommended, and the Board approved on September 11, 2018, the following non-employee Director compensation program for 2019 to achieve an overall compensation structure in line with the peer group median:

  18. Fiscal 2019 Non-Employee Director Compensation

    | 2019 Non-Employee Director Compensation | ($) | | Cash Compensation | $120,000 | | 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 | 185,000 |

  19. Fiscal 2020 Non-Employee Director Compensation

    Fiscal 2020 Non-Employee Director Compensation On September 9, 2019, the Compensation & Benefits Committee recommended no changes to the non-employee Director compensation program for 2020. The Board approved no changes to the non-employee Director compensation program for 2020. The compensation of our non-employee Directors for fiscal 2019 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.

  20. Fiscal 2020 Non-Employee Director Compensation

    | 2019 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 | $140,000 | $184,979 | $20,000 | $344,979 | | D. S. Davis | Audit Committee Chair | 145,000 | 184,979 | 0 | 329,979 | | I. E. L. Davis | | 120,000 | 184,979 | 0 | 304,979 | | J. A. Doudna | | 120,000 | 184,979 | 20,000 | 324,979 | | M. A. Hewson(1) | | 80,520 | 0 | 0 | 80,520 | | H. Joly(2) | | 8,877 | 0 | 0 | 8,877 | | M. B. McClellan | | 120,000 | 184,979 | 0 | 304,979 | | A. M. Mulcahy | Lead Director | 155,000 | 184,979 | 20,000 | 359,979 | | W. D. Perez | Committee Chair | 140,000 | 184,979 | 20,000 | 344,979 | | C. Prince | Committee Chair | 140,000 | 184,979 | 20,000 | 344,979 | | A. E. Washington | | 120,000 | 184,979 | 20,000 | 324,979 | | M. A. Weinberger(2) | | 8,877 | 0 | 0 | 8,877 | | R. A. Williams | Committee Chair | 140,000 | 184,979 | 10,000 | 334,979 | | (1) Elected as Director in April 2019 (2) Elected as Director in December 2019 | | | | | |

  21. 2019 Performance and Compensation

    | • | Annual incentive plan: Redesigned to provide greater structure, including weightings on financial and strategic goals and threshold, target, and maximum levels of financial performance and payout. |

  22. 2019 Performance and Compensation

    | • | Long-term incentive plan: Eliminated the 1-year sales goal in the Performance Share Unit plan. The new plan includes 3-year adjusted operational EPS and 3-year relative TSR. |

  23. 2019 Performance and Compensation

    In the meetings with our shareholders, we discussed the special severance action taken in 2018 for a senior executive which we believe significantly contributed to the reduced support for our Say on Pay vote. We also discussed how to address similar situations going forward. Most shareholders cautioned against the unintended consequences of a future commitment to never pay supplemental severance. In response to shareholder feedback, the Committee will generally provide severance benefits within existing programs, and we will retain flexibility, if circumstances warrant, to take additional actions that are in the best long-term interests of the Company. If the Committee determines that discretionary action is in the best interests of the Company, we will disclose the factors that led to that decision. As described in more detail in the CD&A, the following earned incentives and salary rate actions for our CEO demonstrate our pay for performance philosophy and emphasis on long-term results:

  24. 2019 Performance and Compensation

    | • | 2019 annual performance bonus and long-term incentives: Based on strong 2019 Company operating performance, we awarded our CEO, Alex Gorsky, a bonus and long-term incentives both at 108% of target. |

  25. 2019 Performance and Compensation

    | • | 2017-2019 PSUs: Paid out at 94.7% driven primarily by below-target relative total shareholder return. |

  26. 2019 SUMMARY

    | Our Credo | We assess performance by reviewing the financial and strategic results we achieved, how those results were achieved, and whether they were achieved in a manner consistent with the values embodied in Our Credo. We describe our compensation decision process, including the importance of Our Credo values in assessing performance, on page 69. | | | | Shareholder Outreach and Our Compensation Program Changes | In 2019, approximately 66% of the votes cast supported our executive compensation program. We enhanced our shareholder engagement efforts to solicit further feedback on our programs and practices. In total, we met with approximately 115 shareholders representing approximately 35% of our total shares outstanding and approximately 50% of our institutional ownership. On pages 48 and 49 we provide more detail on our shareholder outreach, what we heard, and our compensation program changes in response to shareholder feedback. | | | | | What We Heard | What We Did | | | | Avoid paying supplemental severance, but do not make a commitment to never do so in the future. | We will provide severance benefits within the parameters of our existing plans, and, based on shareholder feedback, we will retain flexibility if additional actions are required by the circumstances. | | | | Add more structure to our annual incentives. | We redesigned our executives' 2020 annual incentives with clear weightings on financial and strategic goals and identified threshold, target, and maximum levels of financial performance and payout. | | | | Use only 3-year measures in the 3-year PSUs. Discontinue using three 1-year sales measures. | We redesigned our PSUs to be based on 3-year EPS and 3-year relative TSR (each weighted 50%) beginning with our 2020 awards. | | | | Shareholders did not express concern over personal use of the company car and driver, but we changed our program based on competitive market data. | Beginning in 2020, we capped the value of our car and driver perquisite. | | | 2019 Company Performance | We exceeded our 2019 enterprise-level financial goals and met our strategic goals. We summarize our performance against our financial and strategic goals and the performance of each of our businesses on pages 50 to 53. | | | | | Financial Goal | Goal | Results | | | Exceeded our operational sales growth goal | 0.0% - 1.0% | 2.8% | | | Exceeded our adjusted operational EPS growth goal | 5.7% - 7.6% | 8.8% | | | Exceeded our free cash flow goal ($ Billions) | $18.6 - $19.4 | $19.9 | | | Note: Operational sales growth, adjusted operational EPS growth, and free cash flow are non-GAAP measures. See page 53 for details. | | | | Compensation Decisions for 2019 Performance | The Board recognized Mr. Gorsky’s 2019 performance by awarding him an annual performance bonus at 108% of target and long-term incentives at 108% of target. The Board kept Mr. Gorsky's salary rate unchanged at $1,650,000 per year. His salary rate has remained the same since 2018. We describe the performance and compensation of our Chairman/CEO and our named executive officers on pages 54 to 58. | | | | | | 2019 Amount ($) | Percent of Target | | | Salary Earned | $1,650,000 | | | | Annual Performance Bonus | 3,120,000 | 108% | | | Long-Term Incentive Awards | 14,610,000 | 108% | | PSU Update | Our 2017-2019 Performance Share Units (PSUs) paid out at 94.7% of target driven by our operational sales, EPS, and TSR performance against our goals. We describe the PSUs earned under all three of our PSU grants that were active in 2019 on pages 59 to 61. | | |

  27. SHAREHOLDER OUTREACH AND OUR COMPENSATION PROGRAM CHANGES

    | • | Severance for Executives: We believe our 2019 Say on Pay vote result was largely the result of mixed views of a one-time 2018 supplemental severance payment to a former named executive officer. The payment facilitated a prompt and orderly departure and a smooth transition of responsibilities without prolonged dispute or potential litigation and was significantly less than the long-term incentives that were forfeited. |

  28. SHAREHOLDER OUTREACH AND OUR COMPENSATION PROGRAM CHANGES

    In addition to discussing this past payment with our shareholders, we discussed how to address similar situations going forward. We asked our shareholders whether we should commit to not paying supplemental severance in the future. Our shareholders would like us to avoid paying supplemental severance. However, they are wary of the unintended consequences of future commitments that tie the hands of our Committee and do not support such a future commitment.

  29. SHAREHOLDER OUTREACH AND OUR COMPENSATION PROGRAM CHANGES

    | • | Annual Incentives: We believe that our executives' annual performance bonuses have historically reflected Company and individual performance. |

  30. SHAREHOLDER OUTREACH AND OUR COMPENSATION PROGRAM CHANGES

    We reviewed market practices and discussed potential changes to our annual incentives with our shareholders. Our shareholders support adding more structure to our annual incentives, including weighted performance measures and identified threshold and maximum payout and performance levels. When we use discretion, they expect the rationale to be disclosed, especially in cases where discretion is used to increase award amounts.

  31. SHAREHOLDER OUTREACH AND OUR COMPENSATION PROGRAM CHANGES

    | • | Performance Share Units: We believe that our PSU performance measures are aligned with our long-term objectives, motivate quality earnings growth, and reflect the TSR outcomes experienced by our shareholders. |

  32. SHAREHOLDER OUTREACH AND OUR COMPENSATION PROGRAM CHANGES

    | What We Heard | What We Did | | Severance for Executives | | | Avoid paying supplemental severance, but do not make a commitment to never do so in the future. | We will provide severance benefits within the parameters of our existing plans, and, based on shareholder feedback, we will retain flexibility if additional actions are required by the circumstances. | | Annual Incentives | | | Add more structure to our annual incentives. | We redesigned our executives' 2020 annual incentives with clear weightings on financial and strategic goals and identified threshold, target, and maximum levels of financial performance and payout. 70% performance against our financial goals • Financial metrics and weights: 1/3rd operational sales 1/3rd adjusted operational EPS 1/3rd free cash flow • Payouts as a percent of target incentive: Maximum 200% Target 100% Threshold 50% Below Threshold 0% 30% performance against our strategic goals The strategic payout factor (0% to 200%) will be determined by the Committee based on its evaluation of performance versus our strategic goals. The Committee may adjust individual awards on an exception basis within a range of 0x to 1.2x (subject to the 200% of target maximum). Note: Business unit executives' financial performance is weighted 75% business unit / 25% enterprise. Adjusted operational net income is used at the business unit level rather than adjusted operational EPS. | | Performance Share Units | | | Use only 3-year measures in the 3-year PSUs. Discontinue using three 1-year sales measures. | We redesigned our PSUs to be based on 3-year adjusted operational EPS and 3-year relative TSR (each weighted 50%) beginning with our 2020 awards. Note: Delivering quality earnings growth continues to be a long-term objective. Our 1-year sales objectives are included in our executives' annual incentives (as described above). | | Personal Use of the Company Car and Driver | | | Shareholders did not express concern over this perquisite, but we changed our program based on competitive market data. | Beginning in 2020, we capped the value of our car and driver perquisite. Executives will reimburse the Company for costs above $24,999. |

  33. 2019 COMPANY PERFORMANCE

    | Performance against our Long-Term Strategic Goals | • Generate Value Through Partnerships: We met our objectives that track elements we need to execute to deliver additional growth opportunities. We: • Created value for the Company by meeting or exceeding our operational income goals in 6 out of 8 of our recent acquisitions. • Delivered approximately 21% growth in e-commerce sales and advanced our applied data science capabilities. • Advanced our strategic partnerships with key customers. • Progressed our sustainability efforts with the goal of reducing plastic in our packaging and optimizing our global carbon footprint. • Empower and Inspire our Employees: We met our objectives that measure our organizational health, diversity, and reputation. We: • Strengthened our leadership talent pipeline, advanced our efforts in diversity and our culture of inclusion, and exceeded our culture of health goals. • Maintained our strong global reputational index and exceeded our employee engagement goals. | | Performance by Business | • Pharmaceuticals exceeded its operational sales growth, operational income growth, and cash flow goals. In 2019, the business: • Advanced the innovation pipeline and launched two new transformational medicines: SPRAVATO® for treatment-resistant depression and BALVERSA® for metastatic urothetlial cancer. • Maximized the value of our in-market brands with the approval of 29 line extensions for key brands including: STELARA®, DARZALEX®, and IMBRUVICA®. • Medical Devices met its operational sales growth and operational income growth goals and exceeded its cash flow goal. In 2019, the business: • Gained market share in two key growth platforms: wound closure and addressable Endocutters. • Executed major strategic moves, including the enhancement of the digital surgery strategy, the acquisition and integration of Auris Health, Inc., and the expansion of strategic partnerships. • Consumer partially met its operational sales growth goals, met its operational income growth goal, and exceeded its cash flow goal. In 2019, the business: • Established a new strategic direction, reallocating resources to focus on key products and priority markets and deliver on financial commitments. • Reduced costs and re-engineered processes to increase profitability. |

  34. Our Annual Incentive Goal Setting Process

    Our Annual Incentive Goal Setting Process In the fall, we undertake a rigorous planning process across the Company to develop our goals for the coming year. Our financial goals are used to develop the estimates that we provide to the investment community. The principles we follow in setting our financial targets are:

  35. Our Annual Incentive Goal Setting Process

    | • | Operational Sales: Align with our strategic objective to exceed market growth using the breadth of our portfolio. |

  36. Our Annual Incentive Goal Setting Process

    | • | Adjusted Operational EPS: Consider our strategic plan, financial principles, competitive position, and investment strategies. |

  37. Our Annual Incentive Goal Setting Process

    | • | Free Cash Flow: Target specific levels of productivity and adjust for significant events as needed. |

  38. Our Annual Incentive Goal Setting Process

    We set our 2019 operational sales growth goal considering:

  39. Our Annual Incentive Goal Setting Process

    | • | Anticipated headwinds in our Pharmaceuticals business (including certain losses of exclusivity and competition from biosimilars and generics), which reduced our 2019 operational sales forecast by approximately $3 billion versus 2018 results. |

  40. Our Annual Incentive Goal Setting Process

    | • | Net divestiture activity, which reduced our planned 2019 operational sales an additional $1.6 billion versus 2018. |

  41. Our Annual Incentive Goal Setting Process

    We set our 2019 adjusted operational EPS growth goal considering:

  42. Our Annual Incentive Goal Setting Process

    | • | The planned 2019 operational sales items noted above, which reduced the 2019 adjusted operational EPS growth target. |

  43. Our Annual Incentive Goal Setting Process

    | • | A more aggressive EPS to sales growth multiple versus the prior year, which emphasizes our commitment to profitable growth in our continuing operations. |

  44. Our Annual Incentive Goal Setting Process

    We set our 2019 free cash flow goal considering:

  45. Our Annual Incentive Goal Setting Process

    | • | Our productivity in generating free cash flow from net income. |

  46. Our Annual Incentive Goal Setting Process

    | • | Adjustments for significant events. |

  47. Our Annual Incentive Goal Setting Process

    | 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 17 of "Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” of our Annual Report on Form 10-K for the fiscal year ended December 29, 2019 (2019 Form 10-K) for our operational sales growth. | | | | | | 2019 Operational Sales Growth % | | | | Sales Growth Currency Translation | 0.6% (2.2%) | | | | Operational Sales Growth | 2.8% | | | 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 $23.4 billion Additions to property, plant and equipment -$3.5 billion Free Cash Flow $19.9 billion | | | | l | Adjusted Operational EPS Growth: Adjusted EPS and adjusted operational EPS are non-GAAP financial measures. ◦ See Exhibit 99.2 to the Company’s Current Report on Form 8-K dated January 22, 2020 and “Reconciliation of Non-GAAP Financial Measures” of our 2019 Annual Report included in our proxy materials for a breakout of special items and intangible amortization expense. ◦ 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. | | | | | | 2019 Actual $ per share | % Change vs. Prior Year* | | | Diluted EPS Special Items and Intangible Amortization Expense | $5.63 3.05 | | | | Adjusted EPS Currency Translation | 8.68 0.22 | 6.1% | | | Adjusted Operational EPS | 8.90 | 8.8% | | | * Prior year Adjusted EPS = $8.18 | | |

  48. 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 Company exceeded its financial goals and met its strategic goals in 2019 under Mr. Gorsky’s leadership, as summarized under “2019 Company Performance” on pages 50 through 53. 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, quality, and innovation commitments despite complex external dynamics. • Strengthened leadership teams and talent in key positions, resulting in new value-creating strategies, meaningful improvements in execution, and strong positioning for growth across our businesses. • Managed our portfolio to drive future value through acquisitions, divestitures, and licensing deals. • Advanced the value of our product pipeline through continued investment in innovation and new product development. Compensation Decisions for 2019 Performance: The Board’s compensation decisions for Mr. Gorsky reflect its assessment of his 2019 performance. The Board recognized Mr. Gorsky’s 2019 performance by awarding him an annual performance bonus at 108% of target and long-term incentives at 108% of target. After reviewing market data and other factors, the Board kept Mr. Gorsky's salary rate unchanged at $1,650,000 per year. His salary rate has remained the same since 2018. Mr. Gorsky’s total direct compensation for 2019 and, for comparison purposes, his total direct compensation for 2017 and 2018 are displayed in the table below. | | | | | | | | | | 2017 | | 2018 | | 2019 | | | | | Amount ($) | Percent of Target (%) | Amount ($) | Percent of Target (%) | Amount ($) | Percent of Target (%) | | | Salary Earned | $1,600,000 | | $1,642,308 | | $1,650,000 | | | | Annual Performance Bonus | 3,080,000 | 110% | 3,030,000 | 105% | 3,120,000 | 108% | | | Long-Term Incentive Awards | 14,352,000 | 115% | 13,500,000 | 105% | 14,610,000 | 108% | | | Total Direct Compensation | $19,032,000 | | $18,172,308 | | $19,380,000 | | | | | | | | | | | | | Please see pages 56 to 58 for details on the awards and total direct compensation. | | | | | | |

  49. Our Compensation Decision Process

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

  50. Our Compensation Decision Process

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

  51. 2019 Total Direct Compensation

    | A | B | C | D | E | | | Cash | | Equity | | | Name | Salary Earned ($) | Annual Performance Bonus ($) | Long-Term Incentive ($) | Total Direct Compensation ($) | | A. Gorsky | $1,650,000 | $3,120,000 | $14,610,000 | $19,380,000 | | J. Wolk | 796,538 | 1,110,000 | 4,830,000 | 6,736,538 | | P. Stoffels | 1,222,500 | 1,710,000 | 7,340,000 | 10,272,500 | | J. Duato | 969,615 | 1,650,000 | 7,310,000 | 9,929,615 | | J. Taubert | 796,154 | 1,000,000 | 5,000,000 | 6,796,154 |

  52. Annual Performance Bonus (Column C)

    Annual Performance Bonus (Column C) Based on 2019 Company and individual performance as discussed on pages 50 to 55, the Board and the Committee awarded annual performance bonuses on February 10, 2020 ranging from 108% to 135% of target for the named executive officers. See the “2019 Grants of Plan-Based Awards” table on page 83 for the target amounts.

  53. Long-Term Incentive Awards (for 2019 performance) (Column D)

    Long-Term Incentive Awards (for 2019 performance) (Column D) The Board and the Committee granted long-term incentive awards on February 10, 2020 (ranging from 108% to 150% of target) to the named executive officers based on their 2019 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), options, and restricted share units (RSUs); and the individual award values.

  54. Long-Term Incentive Awards (for 2019 performance) (Column D)

    | Name | PSUs ($) | Options ($) | RSUs ($) | Total Long-Term Incentives ($) | | Award Weight | 60% | 30% | 10% | 100% | | A. Gorsky | $8,766,000 | $4,383,000 | $1,461,000 | $14,610,000 | | J. Wolk | 2,898,000 | 1,449,000 | 483,000 | 4,830,000 | | P. Stoffels | 4,404,000 | 2,202,000 | 734,000 | 7,340,000 | | J. Duato | 4,386,000 | 2,193,000 | 731,000 | 7,310,000 | | J. Taubert | 3,000,000 | 1,500,000 | 500,000 | 5,000,000 |

  55. Long-Term Incentive Awards (for 2019 performance) (Column D)

    In the table below, we show the number of shares of PSUs, options, and RSUs granted. We determine the number of units or options for each type of long-term incentive by dividing the dollar amount by the value per unit (or option) and rounding to the nearest whole unit or option. See the table on page 58 for details on the value of our 2020 long-term incentive awards.

  56. Long-Term Incentive Awards (for 2019 performance) (Column D)

    | Name | PSUs (#) | Options (#) | RSUs (#) | | Value Per Unit or Option | $140.044 | $16.425 | $140.044 | | A. Gorsky | 62,595 | 266,849 | 10,432 | | J. Wolk | 20,693 | 88,219 | 3,449 | | P. Stoffels | 31,447 | 134,064 | 5,241 | | J. Duato | 31,319 | 133,516 | 5,220 | | J. Taubert | 21,422 | 91,324 | 3,570 |

  57. 2020 Salary Rates

    | Details on 2020 Long-Term Incentive Value per Unit or Option | | | We used $140.044 per unit to determine the number of PSUs. This is the same as the RSU value and equals the value of a PSU assuming 100% of target performance is achieved. | | | We determined the grant date value for the RSUs based on the average of the high and low prices of our common stock on the NYSE on the grant date discounted by the expected dividend yield because dividends are not paid on RSUs prior to vesting. | | | We valued the options using the Black-Scholes model with the assumptions below. | | | We used the same grant date, common stock fair market value and dividend yield assumptions to calculate the values of the options and RSUs shown in the table below. | | | Assumptions used for RSU and Option Calculations | | | Grant Date | 2/10/2020 | | Common Stock Fair Market Value (average of the high and low prices on the NYSE) | $151.41 | | Dividend yield | 2.60% | | Value per RSU | $140.044 | | 2020 Option Value | | | Exercise Price | $151.41 | | Risk Free Rate (determined based on U.S. treasury rate of seven years) | 1.47% | | Expected Volatility (calculated using blended historical average volatility and implied volatility on at-the-money, 2-year, traded options) | 15.325% | | Expected Life in years (calculated based on historical data) | 7.00 | | Value per Option | $16.425 |

  58. 2019 UPDATE ON PERFORMANCE SHARE UNIT AWARDS

    2019 UPDATE ON PERFORMANCE SHARE UNIT AWARDS In 2019, we completed the first year of the PSU performance period for our 2019-2021 awards, the second year of the PSU performance period for our 2018-2020 awards, and the third year of the PSU performance period for our 2017-2019 awards.

  59. 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 2019. 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.

  60. Performance Share Units Earned to Date

    | | | PSUs Earned Based on Performance to Date | | | | | | | Performance Period and Performance Measures | Weight | 2017 | 2018 | 2019 | 2020 | 2021 | Total | | 2017-2019 Performance Share Units | | | | | | | | | Operational Sales | 1/3rd | 95.0% | 145.3% | 145.9% | | | 42.9% | | Cumulative Adjusted Operational EPS | 1/3rd | 93.3% | | | | | 31.1% | | Relative TSR | 1/3rd | 62.0% | | | | | 20.7% | | Total | | | | | | | 94.7% | | 2018-2020 Performance Share Units | | | | | | | | | Operational Sales | 1/3rd | | 145.3% | 145.9% | TBD 2020 | | 32.4% | | Cumulative Adjusted Operational EPS | 1/3rd | | TBD 2018-2020 | | | | 0.0% | | Relative TSR | 1/3rd | | TBD 2018-2020 | | | | 0.0% | | Total | | | | | | | 32.4% | | 2019-2021 Performance Share Units | | | | | | | | | Operational Sales | 1/3rd | | | 145.9% | TBD 2020 | TBD 2021 | 16.2% | | Cumulative Adjusted Operational EPS | 1/3rd | | | TBD 2019-2021 | | | 0.0% | | Relative TSR | 1/3rd | | | TBD 2019-2021 | | | 0.0% | | Total | | | | | | | 16.2% | | Note: The percentages above are rounded to one decimal for display purposes. | | | | | | | |

  61. PSU Performance versus Goals for Performance Periods Completed in 2019

    PSU Performance versus Goals for Performance Periods Completed in 2019

  62. PSU Performance versus Goals for Performance Periods Completed in 2019

    | | 2019 Operational Sales Goal | | 2017-2019 Cumulative Adjusted Operational EPS Goal | | 2017-2019 Relative TSR Goal | | | Level | Operational Sales ($ Millions) | PSUs Earned (% of target) | Cum. Adj. Op. EPS | PSUs Earned (% of target) | Relative TSR | PSUs Earned (% of target) | | Maximum | $86,100 | 200% | $24.56 | 200% | 10.0 % points | 200% | | Target | 82,000 | 100 | 22.33 | 100 | 0.0 % points | 100 | | Threshold | 77,900 | 50 | 20.10 | 50 | (10.0) % points | 50 | | <Threshold | < 77,900 | 0 | < 20.10 | 0 | < (10.0) % points | 0 | | Result | $83,881 | 145.9% | $22.03 | 93.3% | (7.6) % points | 62.0% | | Note: Operational sales and cumulative adjusted operational EPS are non-GAAP measures. See page 61 for details. | | | | | | |

  63. PSU Performance versus Goals for Performance Periods Completed in 2019

    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%.

  64. Our PSU Goal Setting Process

    Our PSU Goal Setting Process 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. Cumulative Adjusted Operational EPS: The EPS goal is set based on:

  65. Our PSU Goal Setting Process

    | • | The operational EPS guidance for the first year, which is provided to the investment community. |

  66. Our PSU Goal Setting Process

    | • | Sales and EPS targets included in our strategic plan for the second and third years of the performance period. |

  67. Our PSU Goal Setting Process

    | • | Analysts’ expectations for the Company and the Competitor Composite Peer Group. |

  68. Our PSU Goal Setting Process

    | • | An EPS growth to sales growth multiple aligned with a long-term goal of growing net income faster than sales. |

  69. Our PSU Goal Setting Process

    Relative Total Shareholder Return (TSR): The 3-year relative TSR goal is set to meet the performance of our Competitor Composite Peer Group, which undergoes annual review. See page 68 for more information on our Competitor Composite Peer Group. Operational Sales: Beginning with awards made in February 2020, one-year operational sales will not be a PSU performance measure. For PSUs granted prior to 2020, our annual operational sales goals were based on actual sales from the prior year and then aligned to the Company’s annual operational sales growth guidance. Currency had a positive impact of approximately $0.3 billion on the 2018 sales base used to set the 2019 operational sales growth goal. The following table shows the 2018 operational and reported sales, the 2018 impact of currency, and the 2019 operational sales goal. We discuss our 2019 operational sales growth goal setting on page 52.

  70. Our PSU Goal Setting Process

    | | ($ millions) | | Base Year Sales | | | 2018 Operational Sales | $81,301 | | Currency Translation | 280 | | 2018 Reported Sales | $81,581 | | 2019 Operational Sales Goal | | | 2019 Operational Sales Growth Goal | 0.5% | | 2019 Operational Sales Goal | $82,000 |

  71. Our PSU Goal Setting Process

    | Details on Non-GAAP PSU Performance Measures | | | 2019 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) | | 2019 Reported Sales | $82,059 | | Currency Translation | 1,822 | | 2019 Operational Sales | $83,881 | | 2017-2019 Cumulative Adjusted Operational EPS Performance: The following is a reconciliation of 2017-2019 cumulative reported EPS to cumulative adjusted operational EPS: | | | | ($) | | Reported EPS | $11.71 | | Special Items and intangible amortization expense | 12.45 | | Non-GAAP EPS | 24.16 | | Currency Translation | (0.19) | | PSU Plan Adjustments | (1.94) | | Cumulative Adjusted Operational EPS | $22.03 | | See Exhibit 99.2 to the Company’s Current Report on Form 8-K dated January 22, 2020 and “Reconciliation of Non-GAAP Financial Measures” of our 2019 Annual Report included in our proxy materials for a breakout of special items and intangible amortization expense. 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. | | | 2017-2019 Relative TSR Performance (calculated using trailing 20-day average closing stock prices): | | | TSR from January 1, 2017 to December 31, 2019 | (%) | | Johnson & Johnson | 11.0% | | Competitor Composite Peer Group | 18.6% | | Relative TSR Performance (J&J minus Competitor Composite) | (7.6%) points |

  72. 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 | Employ 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 | Engage an independent compensation consultant | û | No hedging, pledging or short selling | | | reporting directly to the Committee | | of Company stock | | | | û | No long-term incentive backdating | | | | û | No dividend equivalents on unvested long-term | | | | | incentives |

  73. GUIDING PRINCIPLES

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

  74. 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. |

  75. 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. |

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

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

  77. 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 | | | |

  78. Long-Term Incentives

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

  79. Long-Term Incentives

    | Long-Term Incentive Form | 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 after grant | | l | 1/2 Earnings per Share: 3-year Cumulative Adjusted Operational EPS | l | of growing quality earnings Reflects overall TSR outcomes relative to our competitors | | | | | | | l | 1/2 Relative Total Shareholder | l | Ties PSU value directly to the | | | | | | | | Return: 3-year Compound Annual | | share price | | | | | | | | Growth Rate versus the Competitor Composite peer Group | | | | | | | | l | Share price | | | | | Options | 30% | l | 100% vested | l | Share price appreciation | | l | Motivates share price appreciation | | | | | 3 years after | | | | | 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 | | | | | | | | | | grant | | | | | |

  80. Long-Term Incentives

    Notes:

  81. Long-Term Incentives

    | • | PSU awards prior to February 2020 were based on 1/3 operational sales, 1/3 cumulative adjusted operational EPS, and 1/3 relative TSR. |

  82. Long-Term Incentives

    | • | Operational sales and cumulative adjusted operational EPS are non-GAAP measures. See page 61 for details. |

  83. Long-Term Incentives

    | • | No dividend equivalents are paid on our PSUs, options, or RSUs. |

  84. 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:

  85. 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 Stoffels Duato Taubert | 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. | | 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. | Wolk | l | All unvested equity incentives would be forfeited. | | | | | | | | | | l | Vested options would remain exercisable for up to three months. | | | | |

  86. Non-Competition and Non-Solicitation

    | 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. |

  87. Involuntary Termination due to Specified Divestiture or Reduction in Force

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

  88. 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, but does not target total compensation to a specific percentile of the Executive Peer Group.

  89. Peer Groups for Pay and Performance

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

  90. 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. |

  91. 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. |

  92. 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.

  93. 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, total direct compensation, benefits, perquisites and other compensation to the Executive Peer Group companies. 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 2019 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, 2019. Johnson & Johnson ranks in the top quartile of the peers for revenue, net income, and market capitalization.

  94. 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) | $32,136 | $4,570 | $101 | ü | ü | ü | ü | ü | | Abbott Laboratories (ABT) | 31,904 | 3,687 | 154 | ü | ü | ü | ü | ü | | AbbVie Inc. (ABBV) | 33,266 | 7,882 | 131 | ü | ü | | ü | ü | | AT&T Inc. (T) | 181,193 | 14,975 | 285 | | ü | | ü | | | The Boeing Company (BA) | 76,559 | (636) | 183 | | | ü | ü | | | Cisco Systems, Inc. (CSCO)(3) | 51,550 | 11,054 | 203 | | ü | ü | ü | ü | | The Coca-Cola Company (KO) | 37,266 | 8,920 | 237 | ü | ü | ü | | | | General Electric Company (GE) | 95,214 | (4,912) | 97 | ü | | ü | ü | | | Intel Corporation (INTC) | 71,965 | 21,048 | 260 | | ü | ü | ü | ü | | International Business Machines Corporation (IBM) | 77,147 | 9,431 | 119 | | ü | ü | ü | ü | | Medtronic, PLC (MDT)(3) | 31,062 | 5,349 | 152 | ü | ü | ü | ü | ü | | Merck & Co., Inc. (MRK) | 46,840 | 9,843 | 232 | ü | ü | ü | ü | ü | | Microsoft Corporation (MSFT)(4) | 134,249 | 44,323 | 1,203 | ü | ü | ü | ü | ü | | PepsiCo, Inc. (PEP) | 67,161 | 7,314 | 191 | ü | ü | ü | | | | Pfizer Inc. (PFE) | 51,750 | 16,273 | 217 | ü | ü | ü | ü | ü | | The Procter & Gamble Company (PG)(4) | 69,594 | 4,814 | 311 | ü | ü | ü | ü | | | United Technologies Corporation (UTX) | 77,046 | 5,537 | 129 | | | ü | ü | | | Johnson & Johnson (JNJ) | 82,059 | 15,119 | 384 | ü | ü | ü | ü | ü | | Johnson & Johnson's Ranking | 4th | 4th | 2nd | | | | | | | Johnson & Johnson's Percentile Rank | 82% | 82% | 94% | | | | | |

  95. 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) |

  96. EXECUTIVE PEER GROUP

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

  97. EXECUTIVE PEER GROUP

    | Used last four calendar quarters ending January 24, 2020 for Medtronic, PLC and January 25, 2020 for Cisco Systems, Inc.(3) |

  98. EXECUTIVE PEER GROUP

    | Used last four calendar quarters ending December 31, 2019 for The Procter & Gamble Company and Microsoft Corporation.(4) |

  99. 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 business groups by market capitalization and weight the three business groups using our sales mix each year. We include each of the peer companies in only one of the business groups for the TSR comparison. These companies compete with one or more of our three businesses. We evaluate the peer group on an ongoing basis and update it as necessary. We select the companies based on the following criteria and financial metrics:

  100. COMPETITOR COMPOSITE PEER GROUP

    | • | Product Relevance |

  101. COMPETITOR COMPOSITE PEER GROUP

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

  102. COMPETITOR COMPOSITE PEER GROUP

    | • | Global Presence |

  103. COMPETITOR COMPOSITE PEER GROUP

    The following table lists the 2019 Competitor Composite Peer Group companies by business.

  104. 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 | • Abbott Laboratories • Becton, Dickinson and Company • Boston Scientific Corporation • 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 (Consumer Healthcare) • Unilever plc |

  105. COMPETITOR COMPOSITE PEER GROUP

    For 2020, the Medical Devices Competitor Composite was updated to more accurately reflect changes in its business mix, the evolution of the competitive landscape, and newly public companies. Alcon Inc. and Intuitive Surgical, Inc. were added while Abbott Laboratories, Becton Dickinson, Edwards Lifesciences, and Roche Holding AG (Diabetes) were removed.

  106. 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 annual performance 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.

  107. 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:

  108. INDEPENDENCE OF COMPENSATION CONSULTANT

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

  109. INDEPENDENCE OF COMPENSATION CONSULTANT

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

  110. 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. |

  111. INDEPENDENCE OF COMPENSATION CONSULTANT

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

  112. INDEPENDENCE OF COMPENSATION CONSULTANT

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

  113. INDEPENDENCE OF COMPENSATION CONSULTANT

    To assure continuing independence, the Committee periodically considers whether there should be rotation of its independent compensation consulting firm or the lead consultant.

  114. 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 do not have employment arrangements or agreements with any of our named executive officers.

  115. COMPENSATION DECISIONS FOR 2018 PERFORMANCE

    | • | 2019 PSU and RSU awards included in the “Stock Awards” column |

  116. Compensation Decisions for 2019 Performance

    Compensation Decisions for 2019 Performance In January and February of each year, we assess the performance of each of our named executive officers and we determine the annual performance bonus earned for the prior year's performance, long-term incentive award granted in the first quarter of the year based on the prior year's performance, and salary rate for the upcoming year. We consider an executive's total direct compensation (TDC) for a year to be the sum of salary earned during the year, annual performance bonus earned for that year's performance, and long-term incentive award granted in the first quarter of the following year based on that year's performance.

  117. Differences between Total Direct Compensation and the Total from the Summary Compensation Table

    | • | Long-Term Incentive (LTI) Timing and Accounting Differences: |

  118. Differences between Total Direct Compensation and the Total from the Summary Compensation Table

    | • | LTI Timing Difference: We consider an executive's LTI award granted based on a year's performance to be part of his or her total direct compensation for that year along with his or her salary earned during that year and annual performance bonus earned for that year's performance. In contrast, the Summary Compensation Table total includes LTI granted during the year - not the LTI granted based on that year's performance. |

  119. Differences between Total Direct Compensation and the Total from the Summary Compensation Table

    | • | LTI Accounting Difference: We include the value of the LTI at grant in an executive's total direct compensation. However, the Summary Compensation Table total includes the PSUs considered granted in a year according to U.S. accounting rules which includes the portions of three years of PSU grants that were tied to that year's sales objective. |

  120. Differences between Total Direct Compensation and the Total from the Summary Compensation Table

    This LTI accounting difference adds to the LTI timing difference. For example, the value of the PSUs granted on February 10, 2020 based on 2019 performance are included in our named executive officers' 2019 total direct compensation. However, the PSUs included in the Summary Compensation Table 2019 totals were granted based on performance in 2016, 2017, and 2018.

  121. Differences between Total Direct Compensation and the Total from the Summary Compensation Table

    | • | Other: We do not include amounts related to our legacy cash-based long-term incentives and benefits and perquisites in total direct compensation for a year. However, these amounts are included in the Summary Compensation Table total as follows: |

  122. Differences between Total Direct Compensation and the Total from the Summary Compensation Table

    | ◦ | Legacy cash-based long-term incentives: Dividend equivalent payments on, and the growth in value of, our legacy cash-based long-term incentive plans above a reference rate (included in Columns F and G). We stopped granting cash-based long-term incentives in 2012. |

  123. Differences between Total Direct Compensation and the Total from the Summary Compensation Table

    | CEO Compensation: LTI Timing & Accounting Differences | 2017 | 2018 | 2019 | | LTI Value included in Total Direct Compensation | $14,352,000 | $13,500,000 | $14,610,000 | | Value of Timing Differences | 2,496,019 | 852,000 | (1,110,000) | | Value of Accounting Differences | 560,740 | 273,057 | 506,362 | | LTI Value included in Summary Compensation Table | 17,408,759 | 14,625,057 | 14,006,362 |

  124. Change in Pension Value

    | • | Service: Each year of additional year of service increases the pension benefits. |

  125. Change in Pension Value

    | • | Five-Year Average Pay: Increases in an executive's five-year average pay increase the pension benefits. |

  126. 2019 Summary Compensation Table

    2019 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 2019. We show the compensation of executive officers listed in the table below for 2018 and 2017 if they were also named in the 2019 and 2018 Proxy Statements. For a complete understanding of the table, please read the descriptions of each column that follow the table.

  127. 2019 Summary Compensation Table

    | 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 | 2019 | $1,650,000 | $9,956,365 | $4,049,997 | $3,690,971 | $5,775,000 | $243,444 | $25,365,777 | | Chairman/CEO | 2018 | 1,642,308 | 10,319,463 | 4,305,594 | 3,570,497 | 0 | 259,710 | 20,097,572 | | | 2017 | 1,600,000 | 12,354,361 | 5,054,398 | 3,598,382 | 6,959,144 | 236,279 | 29,802,564 | | Joseph Wolk | 2019 | 796,538 | 2,379,419 | 1,182,003 | 1,132,914 | 1,925,000 | 81,818 | 7,497,692 | | EVP, CFO | 2018 | 597,542 | 670,085 | 216,898 | 749,729 | 441,000 | 32,935 | 2,708,189 | | Paulus Stoffels | 2019 | 1,222,500 | 4,824,472 | 2,040,008 | 2,388,631 | 3,519,000 | 73,238 | 14,067,849 | | VC of the Executive | 2018 | 1,178,300 | 4,666,961 | 2,010,004 | 2,191,603 | 154,000 | 390,897 | 10,591,765 | | Committee, CSO | 2017 | 1,173,023 | 4,630,306 | 1,859,996 | 2,139,188 | 3,335,134 | 443,139 | 13,580,786 | | Joaquin Duato | 2019 | 969,615 | 4,622,787 | 1,974,005 | 2,295,437 | 3,469,000 | 88,458 | 13,419,302 | | Vice Chairman of the | 2018 | 934,046 | 4,275,951 | 1,892,999 | 2,010,088 | 79,000 | 91,876 | 9,283,960 | | Executive Committee | 2017 | 897,254 | 11,483,016 | 1,650,003 | 1,928,262 | 3,329,047 | 71,726 | 19,359,308 | | Jennifer Taubert | 2019 | 796,154 | 2,625,279 | 1,200,004 | 1,179,065 | 1,237,000 | 59,798 | 7,097,300 | | EVP, Worldwide Chair | | | | | | | | | | Pharmaceuticals | | | | | | | | |

  128. 2019 Summary Compensation Table

    Note: VC means Vice Chairman. CSO means Chief Scientific Officer. EVP means Executive Vice President.

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

    | ◦ | Change in Pension Value and Non-Qualified Deferred Compensation Earnings column of the Summary Compensation Table 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. |

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

    | ◦ | Non-Qualified Deferred Compensation table on page 91 includes the value of vested CLCs and CLPs that have not been paid out. |

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

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

    | Change in Pension Value and 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 | 2019 | $5,775,000 | $0 | $0 | $5,775,000 | | | 2018 | 0 | 0 | 0 | 0 | | | 2017 | 6,807,000 | 91,082 | 61,062 | 6,959,144 | | J. Wolk | 2019 | 1,925,000 | 0 | 0 | 1,925,000 | | | 2018 | 441,000 | 0 | 0 | 441,000 | | P. Stoffels | 2019 | 3,519,000 | 0 | 0 | 3,519,000 | | | 2018 | 154,000 | 0 | 0 | 154,000 | | | 2017 | 3,174,000 | 121,443 | 39,691 | 3,335,134 | | J. Duato | 2019 | 3,469,000 | 0 | 0 | 3,469,000 | | | 2018 | 79,000 | 0 | 0 | 79,000 | | | 2017 | 3,179,000 | 117,648 | 32,399 | 3,329,047 | | J. Taubert | 2019 | 1,237,000 | 0 | 0 | 1,237,000 |

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

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

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

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

  135. 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. |

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

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

  137. 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 92 for "Details on CLC and CLP Unit Values".

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

    | Above-Reference-Rate Return | CLC | CLP | | Beginning of Year Unit Value | $49.09 | $5.57 | | End of Year Unit Value | $49.66 | $5.62 | | Change in Unit Value ($) | $0.57 | $0.05 | | Change in Unit Value (%) | 1.16% | 0.90% | | Reference-Rate | 2.52% | 2.52% | | Above-Reference-Rate Return | (1.36)% | (1.62)% | | Above reference-rate return included in the Summary Compensation Table | 0.00% | 0.00% |

  139. 2019 Grants of Plan-Based Awards

    2019 Grants of Plan-Based Awards In the table below, we show the potential ranges of the 2019 annual performance bonus and the PSUs considered granted in 2019. We also show the RSUs and options granted in 2019. 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 77. For a complete understanding of the table, please read the descriptions of each column that follow the table.

  140. 2019 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 | $2,887,500 | $5,775,000 | | | | | | | | | | | 2019-2021 PSU | 2/11/2019 | | | | 0 | 51,936 | 103,872 | | | | | $6,474,757 | | | 2018-2020 PSU | 2/11/2019 | | | | 0 | 8,011 | 16,022 | | | | | 999,220 | | | 2017-2019 PSU | 2/11/2019 | | | | 0 | 8,828 | 17,656 | | | | | 1,132,385 | | | RSU | 2/11/2019 | | | | | | | 11,129 | | | | 1,350,003 | | | Stock Awards Total | | | | | | | | | | | | 9,956,365 | | | Option | 2/11/2019 | | | | | | | | 227,464 | $131.94 | $132.00 | 4,049,997 | | J. Wolk | Bonus | | 0 | 1,006,250 | 2,012,500 | | | | | | | | | | | 2019-2021 PSU | 2/11/2019 | | | | 0 | 15,158 | 30,316 | | | | | 1,889,718 | | | 2018-2020 PSU | 2/11/2019 | | | | 0 | 323 | 646 | | | | | 40,288 | | | 2017-2019 PSU | 2/11/2019 | | | | 0 | 432 | 864 | | | | | 55,414 | | | RSU | 2/11/2019 | | | | | | | 3,248 | | | | 393,999 | | | Stock Awards Total | | | | | | | | | | | | 2,379,419 | | | Option | 2/11/2019 | | | | | | | | 66,386 | 131.94 | 132.00 | 1,182,003 | | P. Stoffels | Bonus | | 0 | 1,528,125 | 3,056,250 | | | | | | | | | | | 2019-2021 PSU | 2/11/2019 | | | | 0 | 26,160 | 52,320 | | | | | 3,261,315 | | | 2018-2020 PSU | 2/11/2019 | | | | 0 | 3,740 | 7,480 | | | | | 466,494 | | | 2017-2019 PSU | 2/11/2019 | | | | 0 | 3,248 | 6,496 | | | | | 416,627 | | | RSU | 2/11/2019 | | | | | | | 5,606 | | | | 680,036 | | | Stock Awards Total | | | | | | | | | | | | 4,824,472 | | | Option | 2/11/2019 | | | | | | | | 114,575 | 131.94 | 132.00 | 2,040,008 | | J. Duato | Bonus | | 0 | 1,218,750 | 2,437,500 | | | | | | | | | | | 2019-2021 PSU | 2/11/2019 | | | | 0 | 25,314 | 50,628 | | | | | 3,155,846 | | | 2018-2020 PSU | 2/11/2019 | | | | 0 | 3,522 | 7,044 | | | | | 439,303 | | | 2017-2019 PSU | 2/11/2019 | | | | 0 | 2,882 | 5,764 | | | | | 369,680 | | | RSU | 2/11/2019 | | | | | | | 5,424 | | | | 657,958 | | | Stock Awards Total | | | | | | | | | | | | 4,622,787 | | | Option | 2/11/2019 | | | | | | | | 110,868 | 131.94 | 132.00 | 1,974,005 | | J. Taubert | Bonus | | 0 | 800,000 | 1,600,000 | | | | | | | | | | | 2019-2021 PSU | 2/11/2019 | | | | 0 | 15,389 | 30,778 | | | | | 1,918,516 | | | 2018-2020 PSU | 2/11/2019 | | | | 0 | 1,451 | 2,902 | | | | | 180,985 | | | 2017-2019 PSU | 2/11/2019 | | | | 0 | 981 | 1,962 | | | | | 125,835 | | | RSU | 2/11/2019 | | | | | | | 3,297 | | | | 399,943 | | | Stock Awards Total | | | | | | | | | | | | 2,625,279 | | | Option | 2/11/2019 | | | | | | | | 67,397 | 131.94 | 132.00 | 1,200,004 |

  141. 2019 Outstanding Equity Awards at Fiscal Year-End

    2019 Outstanding Equity Awards at Fiscal Year-End In the table below, we show the outstanding options, RSUs, and PSUs as of fiscal year-end 2019. We also show the values of the RSUs and PSUs.

  142. 2019 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 | Options | | | | | | | | | | | | 1/17/2012 | 1/17/2015 | 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 | 2/9/2024 | | | | | | | 2/9/2015 | 2/10/2018 | 427,127 | | 100.06 | 2/9/2025 | | | | | | | 2/8/2016 | 2/9/2019 | 411,264 | | 101.87 | 2/8/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 377,673 | 115.67 | 2/13/2027 | | | | | | | 2/12/2018 | 2/12/2021 | | 239,519 | 129.51 | 2/11/2028 | | | | | | | 2/11/2019 | 2/11/2022 | | 227,464 | 131.94 | 2/11/2029 | | | | | | | RSUs | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 31,779 | $4,631,789 | | | | | 2/12/2018 | 2/12/2021 | | | | | 12,017 | 1,751,478 | | | | | 2/11/2019 | 2/11/2022 | | | | | 11,129 | 1,622,052 | | | | | 2017 - 2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 49,513 | 7,216,520 | | | | | 2/12/2018 | 2/13/2020 | | | | | 12,827 | 1,869,535 | | | | | 2/11/2019 | 2/13/2020 | | | | | 12,880 | 1,877,260 | | | | | 2018 - 2020 PSU Award | | | | | | | | | | | | 2/12/2018 | 2/12/2021 | | | | | 11,640 | 1,696,530 | 24,130 | $3,516,948 | | | 2/11/2019 | 2/12/2021 | | | | | 11,688 | 1,703,526 | | | | | 2019 - 2021 PSU Award | | | | | | | | | | | | 2/11/2019 | 2/11/2022 | | | | | 10,826 | 1,577,890 | 23,616 | 3,442,032 | | J. Wolk | Options | | | | | | | | | | | | 1/16/2013 | 1/17/2016 | 1,855 | | 72.54 | 1/13/2023 | | | | | | | 2/10/2014 | 2/11/2017 | 12,926 | | 90.44 | 2/9/2024 | | | | | | | 2/9/2015 | 2/10/2018 | 13,015 | | 100.06 | 2/9/2025 | | | | | | | 2/8/2016 | 2/9/2019 | 16,820 | | 101.87 | 2/8/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 19,241 | 115.67 | 2/13/2027 | | | | | | | 2/12/2018 | 2/12/2021 | | 12,066 | 129.51 | 2/11/2028 | | | | | | | 2/11/2019 | 2/11/2022 | | 66,386 | 131.94 | 2/11/2029 | | | | | | | RSUs | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 3,400 | 495,550 | | | | | 2/12/2018 | 2/12/2021 | | | | | 2,543 | 370,642 | | | | | 2/11/2019 | 2/11/2022 | | | | | 3,248 | 473,396 | | | | | 2017 - 2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 2,421 | 352,861 | | | | | 2/12/2018 | 2/13/2020 | | | | | 628 | 91,531 | | | | | 2/11/2019 | 2/13/2020 | | | | | 630 | 91,823 | | | | | 2018 - 2020 PSU Award | | | | | | | | | | | | 2/12/2018 | 2/12/2021 | | | | | 468 | 68,211 | 973 | 141,815 | | | 2/11/2019 | 2/12/2021 | | | | | 471 | 68,648 | | | | | 2019 - 2021 PSU Award | | | | | | | | | | | | 2/11/2019 | 2/11/2022 | | | | | 3,160 | 460,570 | 6,892 | 1,004,509 |

  143. 2019 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 | Options | | | | | | | | | | | | 2/9/2015 | 2/10/2018 | 170,668 | | $100.06 | 2/9/2025 | | | | | | | 2/8/2016 | 2/9/2019 | 174,787 | | 101.87 | 2/8/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 138,982 | 115.67 | 2/13/2027 | | | | | | | 2/12/2018 | 2/12/2021 | | 111,816 | 129.51 | 2/11/2028 | | | | | | | 2/11/2019 | 2/11/2022 | | 114,575 | 131.94 | 2/11/2029 | | | | | | | RSUs | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 11,695 | $1,704,546 | | | | | 2/12/2018 | 2/12/2021 | | | | | 5,610 | 817,658 | | | | | 2/11/2019 | 2/11/2022 | | | | | 5,606 | 817,075 | | | | | 2017 - 2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 18,222 | 2,655,857 | | | | | 2/12/2018 | 2/13/2020 | | | | | 4,719 | 687,794 | | | | | 2/11/2019 | 2/13/2020 | | | | | 4,739 | 690,709 | | | | | 2018 - 2020 PSU Award | | | | | | | | | | | | 2/12/2018 | 2/12/2021 | | | | | 5,433 | 791,860 | 11,265 | $1,641,874 | | | 2/11/2019 | 2/12/2021 | | | | | 5,457 | 795,358 | | | | | 2019 - 2021 PSU Award | | | | | | | | | | | | 2/11/2019 | 2/11/2022 | | | | | 5,454 | 794,921 | 11,895 | 1,733,696 | | J. Duato | Options | | | | | | | | | | | | 1/17/2012 | 1/17/2015 | 84,423 | | 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 | 2/9/2024 | | | | | | | 2/9/2015 | 2/10/2018 | 126,369 | | 100.06 | 2/9/2025 | | | | | | | 2/8/2016 | 2/9/2019 | 125,824 | | 101.87 | 2/8/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 123,291 | 115.67 | 2/13/2027 | | | | | | | 2/12/2018 | 2/12/2021 | | 105,307 | 129.51 | 2/11/2028 | | | | | | | 2/11/2019 | 2/11/2022 | | 110,868 | 131.94 | 2/11/2029 | | | | | | | RSUs | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 10,374 | 1,512,011 | | | | | 2/13/2017 | 2/13/2020 | | | | | 70,733 | 10,309,335 | | | | | 2/12/2018 | 2/12/2021 | | | | | 5,283 | 769,997 | | | | | 2/11/2019 | 2/12/2021 | | | | | 5,424 | 790,548 | | | | | 2017 - 2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 16,164 | 2,355,903 | | | | | 2/12/2018 | 2/13/2020 | | | | | 4,188 | 610,401 | | | | | 2/11/2019 | 2/13/2020 | | | | | 4,205 | 612,879 | | | | | 2018 - 2020 PSU Award | | | | | | | | | | | | 2/12/2018 | 2/12/2021 | | | | | 5,117 | 745,803 | 10,609 | 1,546,262 | | | 2/11/2019 | 2/12/2021 | | | | | 5,139 | 749,009 | | | | | 2019 - 2021 PSU Award | | | | | | | | | | | | 2/11/2019 | 2/11/2022 | | | | | 5,276 | 768,977 | 11,511 | 1,677,728 |

  144. 2019 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 | | | | | | | | J. Taubert | Options | | | | | | | | | | | | 1/16/2013 | 1/17/2016 | 76,923 | | $72.54 | 1/13/2023 | | | | | | | 2/10/2014 | 2/11/2017 | 59,397 | | 90.44 | 2/9/2024 | | | | | | | 2/9/2015 | 2/10/2018 | 58,504 | | 100.06 | 2/9/2025 | | | | | | | 2/8/2016 | 2/9/2019 | 56,471 | | 101.87 | 2/8/2026 | | | | | | | 2/13/2017 | 2/13/2020 | | 43,712 | 115.67 | 2/13/2027 | | | | | | | 2/12/2018 | 2/12/2021 | | 43,391 | 129.51 | 2/11/2028 | | | | | | | 2/11/2019 | 2/11/2022 | | 67,397 | 131.94 | 2/11/2029 | | | | | | | RSUs | | | | | | | | | | | | 2/1/2017 | 2/1/2020 | | | | | 48,312 | $7,041,474 | | | | | 2/13/2017 | 2/13/2020 | | | | | 7,724 | 1,125,773 | | | | | 2/12/2018 | 2/12/2021 | | | | | 2,177 | 317,298 | | | | | 2/11/2019 | 2/11/2022 | | | | | 3,297 | 480,538 | | | | | 2017 - 2019 PSU Award | | | | | | | | | | | | 2/13/2017 | 2/13/2020 | | | | | 5,502 | 801,917 | | | | | 2/12/2018 | 2/13/2020 | | | | | 1,425 | 207,694 | | | | | 2/11/2019 | 2/13/2020 | | | | | 1,431 | 208,568 | | | | | 2018 - 2020 PSU Award | | | | | | | | | | | | 2/12/2018 | 2/12/2021 | | | | | 2,110 | 307,533 | 4,371 | $637,073 | | | 2/11/2019 | 2/12/2021 | | | | | 2,117 | 308,553 | | | | | 2019 - 2021 PSU Award | | | | | | | | | | | | 2/11/2019 | 2/11/2022 | | | | | 3,208 | 467,566 | 6,997 | 1,019,813 |

  145. 2019 Outstanding Equity Awards at Fiscal Year-End

    Grant Date (Column B) PSUs are considered granted when the performance goals are approved (according to U.S. accounting rules). Since we used three 1-year sales goals prior to the 2020 awards, we grouped the PSU awards based on their vesting date. Vesting Date (Column C) Our options, RSUs and PSUs vest 100% 3-years from the date of grant. PSUs are not distributed until the percent of target vested based on performance is certified by the Committee at the end of the 3-year performance period. Please see "Grant Date (Column B)" for when the PSUs tied to operational sales in the second and third years of the 3-year performance period are considered granted for accounting purposes. Number of Shares or Units of Stock that Have Not Vested (Column H) The PSUs that have been earned based on performance to date are included in column H. See "2019 Update on Performance Share Unit Awards" on page 59 for details.

  146. 2019 Option Exercises and Stock Vested

    2019 Option Exercises and Stock Vested None of our named executive officers exercised options during 2019. The table below shows how many PSUs and RSUs vested in 2019 and their value when they vested.

  147. 2019 Option Exercises and Stock Vested

    | | Option Awards | | Stock Awards | | | | Number of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized Upon Vesting ($) | | A. Gorsky | 0 | $0 | 115,653 | $15,261,032 | | J. Wolk | 0 | 0 | 5,919 | 781,105 | | P. Stoffels | 0 | 0 | 49,153 | 6,486,001 | | J. Duato | 0 | 0 | 35,383 | 4,668,976 | | J. Taubert | 0 | 0 | 19,876 | 2,622,951 |

  148. 2019 Pension Benefits

    2019 Pension Benefits In the table below, we show the present value of pension benefits as of year-end 2019 and payments during 2019. For a complete understanding of the table, please read the description of the pension benefits that follow the table.

  149. 2019 Pension Benefits

    | Name | Number of Years Credited Service (#) | Normal Retirement Age | Present Value of Accumulated Benefit | | | Payments During Last Fiscal Year ($) | | | | | Salaried Pension Plan ($) | Excess Pension Plan ($) | Total ($) | | | A. Gorsky | 27.41 | 62 | $1,576,000 | $30,116,000 | $31,692,000 | $0 | | J. Wolk | 21.58 | 62 | 1,003,000 | 3,406,000 | 4,409,000 | 0 | | P. Stoffels | 26.33 | 62 | 1,415,000 | 14,390,000 | 15,805,000 | 0 | | J. Duato | 30.25 | 62 | 1,630,000 | 13,862,000 | 15,492,000 | 0 | | J. Taubert | 14.91 | 62 | 753,000 | 3,589,000 | 4,342,000 | 0 |

  150. 2019 Pension Benefits

    We calculated the present values included in the table using the same assumptions we used for the pension liabilities included in our 2019 Annual Report. We used a discount rate of 3.46% and mortality assumptions according to the PRI-2012 Table, Generational Mortality Projection with Scale MMP-2019. 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 provide pension benefits to our employees to provide retirement income, facilitate succession, and motivate long-service. Our pension benefits are paid through our Salaried Pension Plan and Excess Pension Plan as described below. We offset the benefits from these plans for amounts earned from our non-U.S. pension plans.

  151. 2019 Pension Benefits

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

  152. 2019 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. |

  153. 2019 Pension Benefits

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

  154. 2019 Pension Benefits

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

  155. 2019 Pension Benefits

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

  156. 2019 Pension Benefits

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

  157. 2019 Pension Benefits

    | Frozen grandfathered benefits related to pre-2009 dividend equivalents on unvested CLCs (less than 2% of the total pension benefit for each named executive officer).(4) |

  158. 2019 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 and bonus. |

  159. 2019 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. |

  160. 2019 Pension Benefits

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

  161. 2019 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 $280,000 in 2019. |

  162. 2019 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. |

  163. 2019 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 Pension 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. |

  164. 2019 Non-Qualified Deferred Compensation

    2019 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, the earnings on the deferred compensation, and withdrawals and distributions during the year. For a complete understanding of the table, please read the descriptions of the columns that follow the table.

  165. 2019 Non-Qualified Deferred Compensation

    | A | B | C | D | E | F | | Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at Last FYE ($) | | A. Gorsky | $0 | $61,650 | $250,458 | $0 | $11,438,696 | | J. Wolk | 0 | 23,244 | 17,902 | 0 | 585,123 | | P. Stoffels | 0 | 42,413 | 211,135 | 0 | 11,488,086 | | J. Duato | 0 | 31,033 | 189,772 | 0 | 10,605,716 | | J. Taubert | 0 | 23,227 | 77,904 | 0 | 3,584,896 |

  166. 2019 Potential Payments Upon Termination

    2019 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.

  167. 2019 Potential Payments Upon Termination

    | • | Earned but Unpaid Compensation: Upon any termination of employment as of year-end 2019, 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 2019, he or she would have received his or her: |

  168. 2019 Potential Payments Upon Termination

    | ◦ | Earned but unpaid annual performance bonuses for 2019. 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 79 for the bonus amounts. |

  169. 2019 Potential Payments Upon Termination

    | ◦ | Vested non-qualified deferred compensation balances. See the “Non-Qualified Deferred Compensation — Aggregate Balance at Last Fiscal Year-End (Column F)” table on page 91 for the year-end balances. |

  170. 2019 Potential Payments Upon Termination

    | ◦ | Pension benefits upon retirement. See “2019 Pension Benefits” on page 90 for details. |

  171. 2019 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 2019 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. |

  172. 2019 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. |

  173. 2019 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 | $1,650,000 | $0 | $0 | $0 | | | Healthcare Coverage | 245,000 | 247,000 | 245,000 | 124,000 | 239,000 | | | Equity Incentives | 52,627,272 | 52,627,272 | 0 | 52,627,272 | 52,627,272 | | | Total | 52,872,272 | 54,524,272 | 245,000 | 52,751,272 | 52,866,272 | | J. Wolk | Cash Severance | 0 | 805,000 | 0 | 0 | 0 | | | Healthcare Coverage | 0 | 89,000 | 0 | 5,000 | 274,000 | | | Equity Incentives | 0 | 0 | 0 | 5,989,242 | 5,989,242 | | | Total | 0 | 894,000 | 0 | 5,994,242 | 6,263,242 | | P. Stoffels | Cash Severance | 0 | 1,222,500 | 0 | 0 | 0 | | | Healthcare Coverage | 188,000 | 194,000 | 188,000 | 98,000 | 238,000 | | | Equity Incentives | 22,344,539 | 22,344,539 | 0 | 22,344,539 | 22,344,539 | | | Total | 22,532,539 | 23,761,039 | 188,000 | 22,442,539 | 22,582,539 | | J. Duato | Cash Severance | 0 | 1,125,000 | 0 | 0 | 0 | | | Healthcare Coverage | 205,000 | 210,000 | 205,000 | 106,000 | 236,000 | | | Equity Incentives | 20,656,779 | 20,656,779 | 0 | 30,966,114 | 30,966,114 | | | Total | 20,861,779 | 21,991,779 | 205,000 | 31,072,114 | 31,202,114 | | J. Taubert | Cash Severance | 0 | 800,000 | 0 | 0 | 0 | | | Healthcare Coverage | 164,000 | 173,000 | 164,000 | 87,000 | 249,000 | | | Equity Incentives | 9,684,806 | 9,684,806 | 0 | 16,726,280 | 16,726,280 | | | Total | 9,848,806 | 10,657,806 | 164,000 | 16,813,280 | 16,975,280 |

  174. Terminations Due to a Reduction in Force or Specified Divestiture

    | • | Termination due to a RIF would result in amounts equal to those in the "Involuntary Termination Without Cause" column of the Potential Payments Upon Termination table on page 93, and |

  175. 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 93 are the present values of continued healthcare coverage. The values vary based upon the termination circumstances as follows:

  176. 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 Duato Stoffels Taubert | 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 | Wolk | 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 | | 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 |

  177. Healthcare Coverage

    Note: "ü" means eligible for coverage