DEF 14A of Merck & Co., Inc.
Filed Apr 11, 2024 · FY20230001193125-24-093204
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
| Summary Compensation Table | 63 | | CEO Pay Ratio | 66 | | Pay Versus Performance | 67 | | Grants of Plan-Based Awards | 73 | | Outstanding Equity Awards | 75 | | Option Exercises and Stock Vested | 77 | | Pension Benefits | 78 | | Nonqualified Deferred Compensation | 81 | | Potential Payments Upon Termination or a Change in Control | 82 | | Proposal 3. Ratification of Appointment of Independent Registered Public Accounting Firm for 2024 | 88 | | Audit Committee’s Report | 89 | | Pre-Approval Policy for Services of Independent Registered Public Accounting Firm | 89 | | Fees for Services Provided by the Independent Registered Public Accounting Firm | 90 | | Proposals 4. – 6. Shareholder Proposals | 91 | | Questions and Answers About the Annual Meeting and Voting | 97 | | Shareholder Proposals and Director Nominations for the 2025 Annual Meeting of Shareholders | 102 | | Forward-Looking Statements | 103 | | Other Matters | 103 | | Appendix A — Non-GAAP Income and Non-GAAP EPS | 104 | | Appendix B — Explanation of Adjustments to Non-GAAP Results for Incentive Plans | 106 |
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| | | Annual Base Salary$(1) | Target Annual Incentive% | Target Long-Term Incentive$ | Target TDC Increase%(2) | | | 2023 NEOs | | | | | | | Robert M. Davis Chairman, Chief Executive Officer and President | $1,615,000 | 150% | $13,500,000 | +12.3% | | | | ............................................................................................................................................................................. | | | | | | Caroline Litchfield Executive Vice President and Chief Financial Officer | 1,125,000 | 100 | 4,250,000 | +38.3 | | | | ............................................................................................................................................................................. | | | | | | Sanat Chattopadhyay Executive Vice President and President, Merck Manufacturing Division | 941,806 | 100 | 3,300,000 | —(3) | | | | ............................................................................................................................................................................. | | | | | | Richard R. DeLuca, Jr. Executive Vice President and President, Merck Animal Health | 925,000 | 100 | 3,200,000 | +7.4(3) | | | | ............................................................................................................................................................................. | | | | | | Dean Li, M.D., Ph.D. Executive Vice President and President, Merck Research Laboratories | 1,400,000 | 100 | 5,600,000 | +31.3 |
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| (2) Target Total Direct Compensation (“TDC”) is defined as the sum of annual base salary, target annual cash incentive and target long-term incentive. This column reflects the increase in Target TDC from 2022 to 2023. |
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Variable Compensation is Critical to Achieve Our Objectives (Page 53) Merck’s compensation programs are designed to align the interests of our executives with the interests of our shareholders, among other objectives. For this reason, a significant portion of our NEOs’ pay is variable and at-risk, subject to Company performance as measured against financial, operating and strategic objectives, as well as Relative Total Shareholder Return or R-TSR (as defined in Appendix B). The Company’s variable incentives continue to demonstrate a strong linkage between pay and performance. Annual Cash Incentive The Company Scorecard (described in more detail on page 55) focuses on our most critical business drivers — the Company’s revenue (“Revenue”), non-GAAP pre-tax income (“Pre-Tax Income”), the Company’s research and development goals (“Pipeline”), and the Company’s focus on driving greater access to health for patients around the world and on the engagement and inclusion of our employees (“Sustainability”) — and is used to determine the payout of our annual incentive for most employees, including our NEOs under the Executive Incentive Plan. Our Company Scorecard performance during 2023 resulted in above-target achievement of 148%.
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Long-Term Incentive (“LTI”) The long-term incentive program, consisting of a mix of Performance Share Units (“PSUs”) and stock options, provides our NEOs with the opportunity to own Merck common stock, directly linking a substantial portion of their compensation to the returns realized by our shareholders. The 2021 PSU program (described in more detail on page 58) paid out at 161% based on achievement of one-year Earnings Per Share (“EPS”) and three-year R-TSR metrics during the performance period (2021-2023), weighted at 33% and 67%, respectively. As previously disclosed, one-year EPS was used due to the complexities associated with disentangling our Organon & Co. (“Organon”) business from a multi-year financial plan. Organon was successfully spun off in June 2021.
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| • | be committed to building sound, long-term Company growth. |
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| 32 | ç ç ç ç | Corporate Governance Compensation Consultants |
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| • | competitive market data with respect to the compensation of the CEO and other senior executive compensation; |
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| • | design and setting of performance goals in the variable incentive plans; |
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| • | target TDC and payouts under the Executive Incentive Plan for the CEO; |
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| • | preparation of public filings related to executive compensation, including the Compensation Discussion and Analysis, CEO pay ratio, Pay versus Performance disclosure, and the accompanying tables and footnotes; |
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| • | review of Merck’s primary peer group; and |
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| (2) This column reflects the number of shares that could be acquired within 60 days of February 29, 2024, through the exercise of outstanding stock options. |
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| (3) Represents phantom shares denominated in Merck common stock under the Plan for Deferred Payment of Directors’ Compensation or the Merck Deferral Program. |
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| (4) Mr. Wendell is retiring from the Board effective as of the 2024 Annual Meeting. |
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| 34 | ç ç ç ç | Stock Ownership Information Delinquent Section 16(a) Reports |
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Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act, as amended, requires our executive officers, directors, and beneficial owners of more than 10% of our common stock to file stock ownership reports and reports of changes in ownership with the SEC. Based on a review of those reports and written representations from the reporting persons, to our knowledge, all such reports for 2023 were filed on a timely basis, except one Form 3/A by Chirfi Guindo filed on April 28, 2023 solely to restate the number of shares beneficially and directly owned by Mr. Guindo, and one Form 4 by Joseph Romanelli filed on June 30, 2023 solely to report purchases and sales that were not directed by Mr. Romanelli, but were rather executed by a brokerage firm for the benefit of Mr. Romanelli’s managed account without his knowledge. Stock Ownership of Certain Beneficial Owners The table below reflects the number of shares beneficially owned by persons or entities known to us to own more than 5% of the outstanding shares of Merck common stock as of December 31, 2023. As of December 31, 2023, 2,531,633,273 shares of Merck common stock were issued and outstanding.
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| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | | The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355 | 244,767,034(1) | 9.66% | | BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 | 201,836,434(2) | 8.00% |
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| (1) As reported on Amendment No. 9 to Schedule 13G (the “Vanguard filing”) filed with the SEC on February 13, 2024. According to the Vanguard filing, of the 244,767,034 shares of Merck common stock beneficially owned by The Vanguard Group (“Vanguard”) as of December 31, 2023, Vanguard has the shared power to vote or direct the vote with respect to 3,215,979 shares, sole power to dispose or to direct the disposition of 233,574,886 shares, and shared power to dispose or to direct the disposition of 11,192,148 shares. |
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| (2) As reported on Amendment No. 14 to Schedule 13G (the “BlackRock filing”) filed with the SEC on January 26, 2024. According to the BlackRock filing, of the 201,836,434 shares of Merck common stock beneficially owned by BlackRock, Inc. (“BlackRock”) as of December 31, 2023, BlackRock has the sole power to vote or direct the vote with respect to 182,531,000 shares and sole power to dispose or to direct the disposition of 201,836,434 shares. |
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| Proposal 1 Election of Directors | | | | | | 35 |
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The Board has recommended 12 nominees for election as Directors at the 2024 Annual Meeting: Mr. Douglas M. Baker, Jr., Ms. Mary Ellen Coe, Ms. Pamela J. Craig, Mr. Robert M. Davis, Mr. Thomas H. Glocer, Dr. Risa J. Lavizzo-Mourey, Dr. Stephen L. Mayo, Dr. Paul B. Rothman, Ms. Patricia F. Russo, Dr. Christine E. Seidman, Mr. Inge G. Thulin, and Ms. Kathy J. Warden. All nominees, other than Mr. Davis, our Chairman and Chief Executive Officer, satisfy the NYSE independence requirements. Mr. Peter Wendell will be retiring from the Board effective as of the 2024 Annual Meeting. Mr. Wendell has a distinguished history of insightful contributions since joining the Board in 2003, and the Board has benefited from his extensive management, financial and venture capital expertise. All Director nominees currently serve on the Board and were elected by the shareholders at the 2023 Annual Meeting of Shareholders. In addition, all Director nominees meet the Board’s criteria for membership and were recommended by the Governance Committee, and approved by the Board, for election by shareholders at the 2024 Annual Meeting. All of them hold, or have held, senior leadership positions in large, complex organizations, including multi-national corporations, medical or academic institutions, or charitable organizations. In these positions, our Director nominees have demonstrated their leadership, intellect and analytical skills and gained deep experience in core disciplines significant to their oversight responsibilities at the Company. Their varied roles and experiences reflect a diversity of perspectives, skills and expertise to address the Company’s current and anticipated needs as the Company’s opportunities and challenges evolve. If elected, each nominee will serve until the 2025 Annual Meeting of Shareholders or until a successor has been duly elected and qualified, subject to their earlier resignation, death or removal. Any Director nominee who does not receive a majority of the votes cast with respect to his or her election will not be re-elected as a Director of the Company. However, under the New Jersey Business Corporation Act, incumbent Directors who are not re-elected in an uncontested election because of a failure to receive a majority of the votes cast in favor of their re-election will be “held over” and continue as Directors of the Company until they resign, or their successors are elected at the next election of directors. Our Incumbent Director Resignation Policy, included in the Policies of the Board, provides that an incumbent Director who is not re-elected must promptly submit a resignation. The Governance Committee will evaluate whether to accept such resignation and make a recommendation to the full Board. The Board must act on the recommendation no later than 90 days following certification of the shareholder vote and publicly disclose its decision and rationale. If any Director nominee becomes unavailable for election (which we do not expect), votes will be cast for such substitute Director nominee or nominees as may be designated by the Board, unless the Board reduces its size. There are no family relationships among the Company’s executive officers and Directors. We provide below biographical information for each Director nominee, including key experience, qualifications and skills such Director nominee contributes to the Board in light of our current needs and business priorities.
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| FOR The Board of Directors recommends that the shareholders vote FOR the election of each of the Director Nominees. |
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| 36 | ç ç ç ç | Proposal 1 Election of Directors |
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| Douglas M. Baker, Jr. Independent | | | Age: 65 | | | Director Since: 2022 | | | Committees: | | | | | | Audit | Governance |
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| Experience | | Mr. Baker has wide-ranging expertise in corporate governance and general and organizational management, including a deep understanding of global marketing, sales and operations of public companies. Mr. Baker is a Founding Partner of E2SG Partners, a company that invests in environmentally sustainable technologies. Previously, Mr. Baker was Chairman & Chief Executive Officer of Ecolab Inc., a provider of water and hygiene services and technologies for the food, hospitality, industrial and energy markets. Mr. Baker is also a member of the Board of Target Corporation and served as their Lead Independent Director from 2015 to 2021. This directorship as well as his previous directorship at U.S. Bancorp provide him with deep experience on governance issues facing large public companies. |
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| Career Highlights | | E2SG Partners • Founding Partner (2022-Present) Ecolab Inc. • Executive Chairman (2021-2022) • Chairman and Chief Executive Officer (2006-2020) • Chief Executive Officer (2004-2006) | | Other Public Directorships | | Current • Target Corporation (Since 2013) Former • Ecolab Inc. (2006-2022) • U.S. Bancorp (2008-2018) |
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| Mary Ellen Coe Independent | | | Age: 57 | | | Director Since: 2019 | | | Committees: | | | | | | Compensation and Management Development | Research |
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| Experience | | Ms. Coe has a deep understanding of the digital, media and technology landscape, as well as global strategy and operations, due to her experience as a senior leader at YouTube Inc. and Google Inc. At YouTube, Ms. Coe currently serves as the Chief Business Officer, leading all global business operations, content plus distribution partnerships across multiple areas and YouTube’s monetization ecosystem, including streaming businesses like YouTube TV, YouTube Music and YouTube Premium, in addition to supporting the company’s advertising business. At Google, Ms. Coe previously served as the President of Google Customer Solutions, overseeing the global ads business for mid-market and small businesses, serving millions of customers and thousands of partners worldwide. She also has extensive marketing and sales expertise from her leadership position at McKinsey and other global marketing consulting firms. |
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| Career Highlights | | YouTube Inc. • Chief Business Officer (2022-Present) Google Inc. • President, Google Customer Solutions (2017-2022) • Vice President, Go-to-Market Vice President, Go-to-Market Operations and Strategy (2012-2017) | | Other Public Directorships | | Current • None Former • Whole Foods Market, Inc. (2016-2017) |
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| Proposal 1 Election of Directors | ÷ ÷ ÷ ÷ | 37 |
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| Pamela J. Craig Independent | | | Age: 67 | | | Director Since: 2015 | | | Committees: | | | | | | Audit (Chair) | Governance |
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| Experience | | Ms. Craig has extensive finance, management, operational, technology and international business expertise, including her history of accomplishment and executive ability as Chief Financial Officer of Accenture plc. In addition, her directorships at other public companies, including her service as a member of the Audit Committee and Chair of the Compensation & Talent Committee of 3M Company, as a member of the Audit and Corporate Responsibility and Sustainability Committees of Corning Incorporated, and as chair of the Technology Committee and a member of the Compensation Committee of Progressive Insurance, provide her with valuable experience on governance issues facing public companies. |
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| Career Highlights | | Accenture plc, global management consulting, technology services and outsourcing company • Chief Financial Officer (2006-2013) • Senior Vice President, Finance (2004-2006) • Group Director, Business Operations and Services (2003-2004) • Managing Partner, Global Business Operations (2001-2003) | | Other Public Directorships | | Current • Progressive Insurance (since 2018) • Corning Incorporated (since 2021) Former • 3M Company (2019-2023) • Akamai Technologies, Inc. (2011-2019) • Wal-Mart Stores, Inc. (2013-2017) |
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| Robert M. Davis Management | | Age: 57 | | Director Since: 2021 |
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| Experience | | Mr. Davis, Merck’s Chairman, Chief Executive Officer and President, has extensive management, financial, and operational expertise. Previously, Mr. Davis served as Merck’s President, with responsibility for Merck’s operating divisions, Human Health, Animal Health, Manufacturing and Merck Research Laboratories. Prior to that, he served as Merck’s Chief Financial Officer and Executive Vice President, Global Services, with broad responsibilities, including with respect to finance, risk management, real estate operations, corporate strategy, business development, information technology and procurement. In addition, Mr. Davis’s service on the board of directors of Duke Energy, including his roles as Chair of the Finance & Risk Management Committee and member of the Corporate Governance Committee, has provided him with valuable experience on governance issues facing public companies. Prior to joining Merck in 2014, Mr. Davis held leadership roles at Baxter International, Inc., including as Corporate Vice President and President of Medical Products and Corporate Vice President and Chief Financial Officer. |
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| Career Highlights | | Merck & Co., Inc. • Chairman (2022-present) • Chief Executive Officer and President (2021-present) • Chief Financial Officer and Executive Vice President, Global Services (2016-2021) • Chief Financial Officer and Executive Vice President (2014-2016) Baxter International, Inc. • Corporate Vice President and President, Medical Products (2010-2014) • Corporate Vice President and Chief Financial Officer (2006-2010) • Corporate Vice President and Treasurer (2004-2006) | | Other Public Directorships | | Current • Duke Energy (since 2018) Former • C.R. Bard (2015-2017) |
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| 38 | ç ç ç ç | Proposal 1 Election of Directors |
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| Thomas H. Glocer Independent Lead Director | | | Age: 64 | | | Director Since: 2007 | | | Committees: | | | | | | Compensation and Management Development | Governance (Chair) |
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| Experience | | Mr. Glocer has extensive management, operational, technology and international business expertise, including his history of accomplishment and executive ability as CEO and a Director of Thomson Reuters Corporation. In addition, his directorships at other public companies, including his service as Lead Director and as a member of the Governance Committee at Morgan Stanley, provide him with valuable experience on governance issues facing public companies. |
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| Career Highlights | | Angelic Ventures LP, a family office investing in early-stage technology and data companies • Founder and Managing Partner (2012-present) Thomson Reuters Corporation, multi-national media and information firm • Chief Executive Officer (2008-2011) • Chief Executive Officer, Reuters Group PLC (2001-2008) | | Other Public Directorships | | Current • Morgan Stanley (since 2013) • Publicis Groupe (since 2016) Former • None |
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| Risa J. Lavizzo-Mourey, M.D. Independent | | | Age: 69 | | | Director Since: 2020 | | | Committees: | | | | | | Compensation and Management Development | Research |
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| Experience | | Dr. Lavizzo-Mourey has extensive health policy experience, serving as Robert Wood Johnson Foundation Population Health and Health Equity Professor Emerita and formerly as President and Chief Executive Officer of Robert Wood Johnson Foundation, the nation’s largest healthcare-focused philanthropic organization. Her role at Robert Wood Johnson Foundation provided her with deep management, strategic, human capital and talent development expertise. In addition, her directorships at other public companies, including her service as Lead Director and Chair of the Governance Committee of GE Healthcare Technologies, Inc., provide her with extensive experience on corporate governance matters. Dr. Lavizzo-Mourey was elected to the National Academy of Medicine, American Academy of Arts and Sciences and The American Philosophical Society. |
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| Career Highlights | | University of Pennsylvania • Robert Wood Johnson Foundation Population Health and Health Equity Professor Emerita (2021-Current) • Penn Integrates Knowledge Professor of Health Equity and Health Policy (2018-2021) Robert Wood Johnson Foundation • President Emerita (2017-present) • President and Chief Executive Officer (2003-2017) • Senior Vice President and Director (2001-2002) | | Other Public Directorships | | Current • GE HealthCare Technologies, Inc. (since 2023) • Intel Corporation (since 2018) Former • Better Therapeutics (2021-2023) • General Electric Company (2017-2023) • Hess Corporation (2004-2020) |
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| Proposal 1 Election of Directors | ÷ ÷ ÷ ÷ | 39 |
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| Stephen L. Mayo, Ph.D. Independent | | | Age: 62 | | | Director Since: 2021 | | | Committees: | | | | | | Audit | Research |
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| Experience | | Dr. Mayo has extensive scientific experience relevant to the biopharmaceutical industry, including being the Bren Professor of Biology and Chemistry, Merkin Institute Professor and former Chair of the Division of Biology and Biological Engineering at the California Institute of Technology (“Caltech”) and co-founder of Xencor, a public antibody engineering company. In addition, in his role as the former Vice Provost at Caltech, Dr. Mayo oversaw Caltech’s technology licensing program. Elected to the National Academy of Sciences in 2004 for his pioneering contributions in the field of protein design, Dr. Mayo has also served as a presidential appointee on the National Science Foundation’s National Science Board and as an elected board member for the American Association for the Advancement of Science. Dr. Mayo also serves as a member of the board of directors of Sarepta Therapeutics, Inc and Allogene Therapeutics, Inc. |
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| Career Highlights | | California Institute of Technology • Merkin Institute Professor (2021-present) • Bren Professor of Biology and Chemistry (2007–present) • Chair, Division of Biology and Biological Engineering (2010–2020) • Vice Provost for Research (2007–2010) Howard Hughes Medical Institute, non-profit medical research organization • Investigator (1994–2007) | | Other Public Directorships | | Current • Allogene Therapeutics (since 2021) • Sarepta Therapeutics (since 2021) Former • None |
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| Paul B. Rothman, M.D. Independent | | | Age: 66 | | | Director Since: 2015 | | | Committees: | | | | | | Audit | Research (Chair) |
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| Experience | | Dr. Rothman has extensive expertise in patient care, science and medicine relevant to the pharmaceutical industry, including through his past experiences as (a) the CEO of Johns Hopkins Medicine and the Dean of Medical Faculty and Vice President for Medicine, The Johns Hopkins University, and (b) Dean and Head of Internal Medicine at Carver College of Medicine at the University of Iowa. His vast operational and management experience leading a large-scale medical organization provide him with a deep understanding of the complexities of the U.S. healthcare delivery system and policy environment. |
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| Career Highlights | | Johns Hopkins University • Dean of the Medical Faculty and Vice President for Medicine (2012-2022) Johns Hopkins Medicine • Chief Executive Officer (2012-2022) Carver College of Medicine at the University of Iowa • Dean (2008-2012) • Head of Internal Medicine (2004-2008) | | Other Public Directorships | | Current • Labcorp (since 2023) Former • None |
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| 40 | ç ç ç ç | Proposal 1 Election of Directors |
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| Patricia F. Russo Independent | | | Age: 71 | | | Director Since: 1995(1) | | | Committees: | | | | | | Compensation and Management Development (Chair) | Governance |
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| Experience | | Ms. Russo has extensive management, operational, international business and financial expertise, as well as a broad understanding of the technology industry, which includes her career achievements during her tenure as CEO and Director of Alcatel-Lucent and Lucent Technologies Inc. In addition, her directorships at other public companies, including her roles as the Non-executive Chair of Hewlett Packard Enterprise Company and Chair of the Governance and Corporate Responsibility Committee of General Motors, provide her with deep experience on governance issues facing large public companies. |
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| Career Highlights | | Hewlett Packard Enterprise Company, technology company • Non-executive Chair (2015-present) Alcatel-Lucent, global telecommunications equipment company • Chief Executive Officer and Director (2006-2008) • Chairman, Lucent Technologies Inc. (2003-2006) • President and Chief Executive Officer, Lucent Technologies Inc. (2002-2006) | | Other Public Directorships | | Current • General Motors Company (since 2009), Independent Lead Director (2010-2014; 2021-present) • Hewlett Packard Enterprise Company (since 2015), Non-executive Chair (since 2015) • KKR Management Inc. (the managing partner of KKR & Co., L.P.) (since 2011) Former • Arconic, Inc. (2016-2018) formerly Alcoa, Inc. (2008-2016) |
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| (1) Ms. Russo was on the Board of Directors of Schering-Plough Corporation from 1995 until 2009 when the Company became Merck & Co., Inc. |
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| Christine E. Seidman, M.D. Independent | | | Age: 71 | | | Director Since: 2020 | | | Committees: | | | | | | Audit | Research |
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| Experience | | Dr. Seidman has extensive scientific experience relevant to the biopharmaceutical industry, including being the Thomas W. Smith Professor of Medicine and Genetics at Harvard Medical School and the director of the Cardiovascular Genetics Center. Her role leading the Seidman Laboratory, a research laboratory focusing on integrating clinical medicine and molecular technologies to define disease-causing gene mutations and genetic variations that increase disease risk, provides Dr. Seidman with managerial experience relevant to scientific research. The recipient of many honors, Dr. Seidman was elected to the American Society for Clinical Investigation, the National Academy of Sciences, American Academy of Arts and Sciences and the National Academy of Medicine. Awards • The Ray C. Fish Award for Scientific Achievement (2020) • American Heart Association Medal for Genomic and Precision Medicine (2019) • Vanderbilt Prize in Biomedical Sciences (2019) |
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| Career Highlights | | Harvard Medical School/Brigham and Women’s Hospital (Harvard University) • Thomas W. Smith Professor of Medicine and Genetics (2005-present) • Professor of Genetics and Medicine (1998-2005) • Professor of Medicine (1997-1998) Howard Hughes Medical Institute, non-profit medical research organization • Investigator (1994-present) Brigham and Women’s Hospital • Director, Cardiovascular Genetics Center (1992-present) • Attending Physician, Cardiovascular Division (1987-present) | | Other Public Directorships | | Current • None Former • None |
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| Proposal 1 Election of Directors | ÷ ÷ ÷ ÷ | 41 |
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| Inge G. Thulin Independent | | | Age: 70 | | | Director Since: 2018 | | | Committees: | | | | | | Compensation and Management Development | Governance |
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| Experience | | Mr. Thulin has extensive management, operational, technology and international business expertise, as demonstrated by a track record of success leading 3M Company. Mr. Thulin possesses broad industry experience drawn from 3M’s diverse businesses, commitment to research and strong life sciences division. He also brings valuable insight into driving innovation, based on his experience with new product development and manufacturing. In addition, his previous directorships at other public companies provide him with deep experience on governance issues facing large public companies. |
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| Career Highlights | | 3M Company, global technology company • Executive Chairman (2018-2019) • Chairman, President and Chief Executive Officer (2012-2018) • President and Chief Executive Officer (2012) • Executive Vice President and Chief Operating Officer (2011-2012) • Executive Vice President, International Operations (2004-2011) | | Other Public Directorships | | Current • None Former • 3M Company (2012-2019) • Chevron Corporation (2015-2019) |
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| Kathy J. Warden Independent | | | Age: 52 | | | Director Since: 2020 | | | Committees: | | | | | | Audit | Governance |
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| Experience | | Ms. Warden has broad experience in operational leadership as Chair, CEO and President of Northrop Grumman Corporation, an innovative company using science, technology and engineering to create and deliver products and services. Ms. Warden has extensive expertise in strategy, performance and business development in government and commercial markets, as well as cybersecurity expertise. Prior to joining Northrop Grumman, Ms. Warden held leadership roles at General Dynamics and General Electric. In addition, Ms. Warden is a former chair of the board of the Richmond Federal Reserve Bank. |
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| Career Highlights | | Northrop Grumman Corporation, global security company • Chair, Chief Executive Officer and President (2019-present) • President and Chief Operating Officer (2018) • Corporate Vice President and President, Mission System Sector (2016-2017) • Corporate Vice President and President, Information Systems Sector (2013-2015) • Vice President, Cyber Intelligence Division (2011-2012) | | Other Public Directorships | | Current • Northrop Grumman Corporation (since 2018) Former • None |
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| 42 | ç ç ç ç |
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Director Compensation Our non-employee Directors receive cash compensation, as well as cash-settled equity compensation in the form of deferred stock units, for their Board service. During 2023, non-employee Directors were compensated for their Board service as shown in the chart below. 2023 Schedule of Director Fees
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| Compensation Element(1) | Director Compensation Program | | Annual Retainer | $120,000 | | Annual Mandatory Deferral | $220,000 credit to Director’s Merck common stock account under the Plan for Deferred Payment of Directors’ Compensation | | Committee Chair Retainer | $30,000 for the Audit Committee(2) | | | $20,000 for the Governance Committee(3) | | | $20,000 for the Compensation and Management Development Committee | | | $20,000 for the Research Committee | | Audit Committee Member Retainer | $10,000(2) | | Lead Director Retainer | $40,000(3) |
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| 2023 Director Compensation | ÷ ÷ ÷ ÷ | 43 |
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| | Director Compensation for Fiscal Year Ended December 31, 2023 | | | | Name | Fees Earned or Paid in Cash ($) | All Other Compensation ($)(1) | Total ($) | | Douglas M. Baker, Jr. | $127,639 | $220,000 | $347,639 | | Mary Ellen Coe | 122,361 | 220,000 | 342,361 | | Pamela J. Craig | 150,000 | 250,000 | 400,000 | | Thomas H. Glocer | 180,000 | 250,100 | 430,100 | | Risa J. Lavizzo-Mourey, M.D. | 120,000 | 245,000 | 365,000 | | Stephen L. Mayo, Ph.D. | 130,000 | 220,000 | 350,000 | | Paul B. Rothman, M.D. | 150,000 | 230,000 | 380,000 | | Patricia F. Russo | 140,000 | 220,000 | 360,000 | | Christine E. Seidman, M.D. | 130,000 | 220,000 | 350,000 | | Inge G. Thulin | 120,000 | 220,000 | 340,000 | | Kathy J. Warden | 130,000 | 220,000 | 350,000 | | Peter C. Wendell(2) | 120,000 | 250,000 | 370,000 |
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Changes to Non-Employee Director Compensation Program effective 2024 The Governance Committee reviews the Company’s non-employee Director compensation program on a biennial basis. In 2023, the Governance Committee conducted such a review in consultation with FW Cook, the C&MD Committee’s independent compensation consultant. The review included FW Cook’s analysis of both compensation levels and program design compared to Merck’s peer groups that are used for executive compensation competitive benchmarking—a U.S. pharmaceutical peer group and a supplemental peer group comprised of the Dow Jones Industrial Average companies, excluding financial services companies (as described on page 49). Based on this review and the recommendation of FW Cook, the Governance Committee submitted its findings to the full Board in November 2023 and recommended that the full Board approve changes to the non-employee Director compensation program to better align leadership position retainers with external peer companies prior to the Governance Committee’s biennial Director compensation program review in 2025. Based on the results of FW Cook’s analysis and the Governance Committee’s recommendation, the Board approved the following changes to the non-employee Director compensation program effective April 1, 2024:
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| PSU Performance (2021–2023)(1) |
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| (2) As previously disclosed, due to the complexities associated with disentangling our Organon business from a multi-year financial plan, we adjusted the design of the 2021 PSU program to truncate the performance period for EPS to one-year and to adjust the weighting of EPS and R-TSR. With having completed the spin-off in 2021 as planned, we reverted to a three-year cumulative EPS and R-TSR design beginning with the 2022 PSU program, with 50% tied to EPS and 50% tied to R-TSR (described in more detail on pages 57-58). |
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| We do… | | We do not… | | | Utilize a relative total shareholder return metric in the PSU program to align the payout with long-term stock performance and shareholder experience | Allow Directors and management employees, including officers, to engage in transactions involving short sales, publicly traded options, hedging or pledging of Merck common stock Grant stock options with an exercise price less than fair market value Re-price underwater stock options without shareholder approval Pay tax gross-ups on any payments made in connection with a change in control event | | | Monitor LTI program share utilization regularly relative to both industry standards and versus our primary and supplemental peer groups | | | | Conduct annual competitive benchmarking to ensure executive officer compensation is aligned to market | | | | Include caps on annual cash incentive and PSU program payouts and thresholds below which no payouts are earned | | | | Offer limited perquisites that are supported by business interests | | | | Retain an independent compensation consultant that reports directly to the C&MD Committee | | | | Maintain robust stock ownership requirements and share retention policies | | | | Maintain a rigorous incentive recoupment (i.e., clawback) policy that exceeds the NYSE listing requirements | | | | Conduct assessments to identify and mitigate risk in our compensation programs | | | | Provide dividend equivalents only on earned Restricted Stock Units (“RSUs”) and PSUs | | | | Require double-trigger vesting of equity in the event of a change in control (i.e., there must be both a change in control and an involuntary termination) | | | | Avoid employment agreements | |
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| Compensation Discussion and Analysis Peer Groups | ÷ ÷ ÷ ÷ | 49 |
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Peer Groups Merck’s Primary Peer Group Individual executive officer compensation levels and opportunities are compared to a peer group of large multinational pharmaceutical companies approved by the C&MD Committee that participate in a pharmaceutical industry compensation survey conducted by Willis Towers Watson, an independent consulting firm. In setting compensation levels for 2023, the C&MD Committee reviewed the survey results for the following peer companies that Merck competes with to attract talented, high-performing executives (the “primary peer group”). The C&MD Committee regularly reviews segmented information focused on the companies in the primary peer group that are headquartered in the U.S. because practices outside the U.S. can differ geographically.
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| Primary Peer Group Companies AbbVie Amgen AstraZeneca Bristol-Myers Squibb Eli Lilly Gilead Sciences GlaxoSmithKline Johnson & Johnson Novartis Pfizer Roche Holding AG Sanofi All numbers are as of 12/31/2023 | |
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Merck’s Supplemental Peer Group In addition to the primary peer group described above, we also use a supplemental peer group consisting of the companies that comprise the Dow Jones Industrial Average (excluding the financial services companies) as a secondary reference for CEO compensation and for other compensation-related practices (for example, share usage and dilution, change in control policy design, and stock ownership and retention guidelines). Merck is a member of the Dow Jones Industrial Average, and we believe this group provides insight into practices among companies of similar scale and complexity that operate across a variety of industries, providing us with a broader view of market pay, policies, and practices.
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| Supplemental Peer Group Companies(1) | | | | 3M Amgen Apple Boeing Caterpillar Chevron Cisco Systems Coca-Cola Dow Home Depot Honeywell IBM Intel | Johnson & Johnson McDonald’s Microsoft Nike Procter & Gamble salesforce.com UnitedHealth Group Verizon Visa Walgreens Walmart Walt Disney | | | (1) Reflects Dow Jones Industrial Average companies (excluding the financial services companies) as of the beginning of 2023. All numbers are as of 12/31/2023 | | |
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| What We Reward | How We Link Pay To Performance | How We Pay | | • Top and bottom-line performance that meets or exceeds the Board approved annual and long-term operating plans • Pipeline accomplishments that advance our position as an industry-leading biopharmaceutical company • Achievement of strategic sustainability priorities that focus on greater access to health and on the engagement and inclusion of employees • Decision-making that yields long-term value creation for shareholders • Executing on our growth strategy by consistently seeking opportunities that complement or supplement our broad portfolio in key areas including Oncology, Vaccines, Cardiometabolic, and Animal Health | • Inclusion of key financial and non-financial metrics in our annual cash incentive plan to ensure executives are rewarded for top and bottom-line performance, pipeline advancement that leads to longer-term revenue opportunities, and metrics focusing on driving sustainable business outcomes • Long-term incentives comprised of a mix of performance share units and stock options, linking a substantial amount of pay opportunity to long-term company performance and increased shareholder value • Majority of total target pay opportunity is at-risk and tied to company performance and/or long-term stock value | • Overall target total pay opportunity, as well as each pay element, is assessed for competitiveness relative to primary and/or supplemental peer groups, which include similarly-sized pharmaceutical peers and Dow Jones Industrial Average companies, excluding financial services companies • Competitive positioning is targeted to median of market; actual positioning varies based on a variety of factors, including scope and complexity of role, years of experience, demonstrated performance over time, and other factors |
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| The C&MD Committee must balance the need to deliver a competitive level of base salary with ensuring the appropriate mix of fixed to variable compensation for each NEO. The table shows adjustments made to base salaries in 2023. All annual base salary increases were based on Merck’s U.S. salary increase budget for all employees, including the NEOs. | Named Executive Officer | Annual Base Salary Increase % | Market Adjustment % | New Base Salary(1) | | | Davis | 4.5% | No change | $1,615,000 | | | Litchfield | 4.5 | 10.9% | 1,125,000 | | | Chattopadhyay | —(2) | —(2) | 941,806 | | | DeLuca | 4.5(2) | 4.3(2) | 925,000 | | | Li | 4.5 | 7.5 | 1,400,000 | | | (1) Reflects base salary as of December 31, 2023. (2) Mr. Chattopadhyay was not an NEO in 2022. Although Mr. DeLuca was not an NEO in 2022, he was an NEO in 2021. As such, pursuant to SEC rules, we have included his 2022 compensation information in the Summary Compensation table. | | | | | Annual Cash Incentive | | | | | | The NEOs participate in the Executive Incentive Plan (“EIP”). Award amounts under the EIP are determined based upon achievement of Company performance measures as reflected by the Company Scorecard. The overall EIP award fund cannot exceed 200% of the aggregate total target incentive amount for all participants. The maximum award amount for each NEO for 2023, excluding the impact of the Company Scorecard, is listed in the Grants of Plan-Based Awards table on page 73. | Named Executive Officer | | 2022 Target Annual Incentive % of Base Salary(1) | 2023 Target Annual Incentive % of Base Salary(1) | | | Davis | | 150% | 150% | | | Litchfield | | 100 | 100 | | | Chattopadhyay | | —(2) | 100 | | | DeLuca | | 100(2) | 100 | | | Li | | 100 | 100 | | | (1) Reflects annual incentive targets as of December 31 of the applicable year. (2) Mr. Chattopadhyay was not an NEO in 2022. Although Mr. DeLuca was not an NEO in 2022, he was an NEO in 2021. As such, pursuant to SEC rules, we have included his 2022 compensation information in the Summary Compensation table. | | | |
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2023 Company Scorecard Our Company Scorecard helps translate our strategic priorities into operational terms that enable tracking and measurement of our progress and performance against annual operating goals and critically important strategic drivers of long-term value creation, including goals tied to our research and development pipeline — each of which is measured in the context of compliance, health, safety, and environmental outcomes. The Company Scorecard may be adjusted based on an evaluation of these outcomes, recognizing the importance they play in driving Merck’s values and a culture of integrity. For 2023, no such adjustment was applied. We believe creating greater accountability for the sustainable delivery of business goals will help drive financial results and long-term shareholder value. As a result, the C&MD Committee approved a new measure in our 2023 Company Scorecard that links the compensation of most employees, including our executives, to certain Sustainability metrics. The new design reflects our focus on driving greater access to health to patients around the world and on the engagement and inclusion of our employees, each of which is a strategic priority. Revenue and Pre-Tax Income are equally weighted at 35% (previously 40%), each based on the C&MD Committee’s belief that they are the key financial measures of our success during the year. The Pipeline goals are collectively weighted at 20% and are designed to ensure we are focused on internal and external early discovery opportunities, late-stage clinical development progression, and regulatory filings and approvals. Finally, our new Sustainability metrics are collectively weighted at 10%. The target, threshold, and maximum Revenue and Pre-Tax Income goals are set in relation to the Board-approved annual operating plan and the expectations of management. Each year, the Pipeline goals are recommended by the President of Merck Research Laboratories, reviewed by the Research Committee, and approved by the C&MD Committee. The Sustainability metrics are recommended by Merck’s Global Market Access, ESG, and Human Resources teams and approved by the C&MD Committee. Failure to achieve threshold performance on any of the metrics would result in forfeiture of the entire opportunity for that metric. If the combined results of the four metrics do not total at least 50, there would be no payout. The overall results of the Company Scorecard are calibrated so individuals may receive between 50% and 200% of their target award opportunity established for the annual performance period. Adjustments are applied to Revenue and Pre-Tax Income results using a consistent framework of adjustments to our reported financial results for incentive program purposes approved by the C&MD Committee to accurately reflect the operating performance of our business. For further explanation of these adjustments, please refer to Appendix B on page 106. The 2023 Company Scorecard results are summarized below. 2023 Company Scorecard(1)
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Revenue: Reported revenue of $60.12B was adjusted to $60.29B to exclude the impact of currency exchange rates (versus currency exchange rates budgeted in the annual operating plan) and the associated impact of hyper-inflation in certain markets (consistent with plan design). Pre-Tax Income: Non-GAAP pre-tax income of $5.99B was adjusted to $22.52B to exclude the effect of certain business development transactions as well as the impact of currency exchange rates (versus currency exchange rates budgeted in the annual operating plan) and the associated impact of hyper-inflation in certain markets (all consistent with plan design). Named Executive Officer 2023 Annual Incentive Payouts The table below shows the 2023 annual cash incentives paid to the NEOs. The “Final Award” for each NEO is reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation table.
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| | | Target | | | | | Named Executive Officer | Annual Base Salary (as of 12/31/23) ($) | Annual Incentive (%) | Annual Incentive ($) | Company Scorecard Result (%) | Final Award ($) | | Davis | $1,615,000 | 150% | $2,422,500 | 148% | $3,585,300 | | Litchfield | 1,125,000 | 100 | 1,125,000 | 148 | 1,665,000 | | Chattopadhyay | 941,806 | 100 | 941,806 | 148 | 1,393,873 | | DeLuca | 925,000 | 100 | 925,000 | 148 | 1,369,000 | | Li | 1,400,000 | 100 | 1,400,000 | 148 | 2,072,000 |
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Long-Term Equity Incentives The long-term incentive program, consisting of a mix of PSUs and stock options, provides our NEOs with the opportunity to own Merck common stock, directly linking a substantial portion of their compensation to the returns realized by our shareholders. We use these two vehicles to ensure that our LTI program remains balanced, sustainable, and supportive of its objectives over a multi-year period. 2023 Equity Award Mix
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| | Performance Share Units | | | PSUs link realized compensation value to the achievement of critical financial objectives and align executives’ interests with those of our shareholders. The earned award varies based on results versus pre-determined performance goals, as well as long-term returns to shareholders as measured by relative stock price performance and dividend yield. | | | Stock Options Stock options align our executives’ interests with the interests of our shareholders because options only have financial value to the recipient if the price of our common stock at the time of exercise exceeds the stock price on the date of grant. As a result, we believe stock option grants encourage executives to focus on behaviors and initiatives that support sustained long-term stock price appreciation, which benefits all shareholders. |
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Current LTI Grant Practices All grants to executive officers are made under the Merck & Co., Inc. 2019 Stock Incentive Plan and approved by the C&MD Committee and, in the case of our CEO, recommended by the C&MD Committee and approved by the independent members of the Board of Directors. Annual PSU grants (with a three-year performance period) are generally made on the last business day in March and annual stock option grants are made on the third business day following the announcement of
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our first quarter earnings. We may also selectively grant PSUs, stock options, and RSUs to executive officers on the third business day following the announcement of quarterly earnings generally as part of a new hire sign-on or for retention purposes. These dates were chosen to ensure that grants are made shortly after we have released information about our financial performance to the public. However, the C&MD Committee reserves the right to change the date when grants are made, in view of its responsibility to consider all facts and circumstances to ensure that grants are consistent with our compensation philosophy and objectives. Stock options are granted at no less than fair market value on a fixed date or date of a particular event, with all required approvals obtained in advance of or on the actual grant date. Fair market value is the closing price of a share of Merck common stock on the grant date. The re-pricing of stock options is not permitted under the Incentive Stock Plan without prior shareholder approval. 2023 LTI Grant Values The 2023 annual LTI grant values for the CEO and other NEOs, as compared to the prior year, are shown in the following table. The number of shares associated with each award is set forth in the Grants of Plan-Based Awards table on page 73. The LTI grant value for Mr. Davis was increased by the Board and the LTI grant values for the other NEOs were increased by the C&MD Committee to strengthen their competitive position versus our primary peer group and reflect their expected future contributions in creating sustained long-term shareholder value.
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| (1) Grant values shown above will be different from the values shown in the Summary Compensation and Grants of Plan-Based Awards tables based on the fair value on grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) and SEC disclosure rules which consider factors other than share price. |
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The 2021 PSU program concluded at the end of 2023 and the payout is described below. Due to the complexities associated with disentangling our Organon business from a multi-year financial plan, we adjusted the design for the 2021 program as described below. Our Organon business was successfully spun off in June 2021. Following the completion of the spin-off, we reverted to a three-year cumulative EPS and R-TSR design beginning with the 2022 PSU program, with 50% tied to EPS and 50% tied to R-TSR.
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Payouts Under the 2021–2023 PSU Program Performance Period For grants issued in 2021, 70% of each NEO’s annual target LTI was converted to PSUs based on the closing price of Merck stock on the date of grant. The number of PSUs ultimately earned is based on our performance against the pre-established EPS target and R-TSR performance. As a result of the spin-off of Organon, the original number of PSUs granted were adjusted to preserve the same intrinsic value as was in place immediately prior to the adjustments. For the 2021-2023 performance period, as a result of the Organon spin-off, one-year (2021) EPS was weighted at 33%, and three-year R-TSR versus our primary peer group was weighted at 67%. If the Organon spin-off did not occur, three-year cumulative EPS would have been used. The outcome of the combined performance resulted in an actual payout of 161% as illustrated below. The 161% payout was based on our strong EPS and R-TSR performance (both above 150%) during the performance period due to the Emergency Use Authorization of LAGEVRIO in the United States in 2021 and our TSR outperforming the median of our primary peer group by nearly 11%.
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| (1) As a result of the Organon spin-off, the original number of PSUs granted in 2021 were adjusted to preserve the same intrinsic value that was in place immediately prior to the adjustments. |
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| Named Executive Officer | Target Total Direct Compensation Increase % | Annual Base Salary Increase % | Target Annual Incentive % of Base Salary | Target LTI Grant Value Increase $ | | Davis | +11.4% | No Change | No change | +$2,000,000 | | Litchfield | +1.4 | +4.0% | No change | No change | | Chattopadhyay | +1.5 | +4.0 | No change | No change | | DeLuca | +1.5 | +4.0 | No change | No change | | Li | +1.3 | +4.0 | No change | No change |
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Other Compensation Practices Stock Ownership Requirements The C&MD Committee recognizes the critical role that executive stock ownership has in aligning the interests of management with those of shareholders. As such, we maintain a formal stock ownership policy that requires the CEO and other senior executives to hold a certain amount of Merck common stock for so long as they remain in office. The amount of Merck common stock an executive is required to hold is based on a designated multiple of the executive’s base salary. Until the designated multiple of base salary is reached, executives are required to retain in stock a percentage of the after-tax net proceeds associated with stock option exercises and/or PSU and RSU settlements (100% for the CEO and 75% for the other NEOs). In calculating the attainment of our stock ownership requirements, we exclude (1) unexercised stock options and (2) unvested PSUs and RSUs. All NEOs have met their stock ownership requirements.
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| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | | Robert M. Davis Chairman, Chief Executive Officer and President | 2023 | $1,603,091 | $0 | $9,997,585 | $4,050,000 | $3,585,300 | $651,163(7) | $386,148 | $20,273,287 | | | 2022 | 1,538,613 | 0 | 8,868,587 | 3,524,995 | 4,125,150 | 180,259(8) | 412,490 | 18,650,093 | | | 2021 | 1,319,959 | 0 | 6,324,576 | 2,760,003 | 2,834,606 | 235,640 | 247,337 | 13,722,121 | | Caroline Litchfield Executive Vice President and Chief Financial Officer | 2023 | 1,093,063 | 0 | 3,147,375 | 1,275,003 | 1,665,000 | 792,534(9) | 327,410 | 8,300,385 | | | 2022 | 959,959 | 0 | 2,075,595 | 824,999 | 1,735,500 | 0(10) | 326,605 | 5,922,657 | | | 2021 | 805,060 | 0 | 1,512,420 | 660,001 | 1,184,203 | 0(11) | 434,946 | 4,596,630 | | Sanat Chattopadhyay Executive Vice President and President, Merck Manufacturing Division | 2023 | 934,923 | 0 | 2,443,907 | 989,997 | 1,393,873 | 317,466 | 160,194 | 6,240,360 | | | 2022(14) | — | — | — | — | — | — | — | — | | | 2021(14) | — | — | — | — | — | — | — | — | | Richard R. DeLuca, Jr. Executive Vice President and President, Merck Animal Health | 2023 | 910,027 | 0 | 2,369,846 | 959,999 | 1,369,000 | 470,087(12) | 118,931 | 6,197,890 | | | 2022(14) | 840,522 | 0 | 2,264,301 | 899,993 | 1,513,000 | 0(13) | 101,011 | 5,618,828 | | | 2021 | 790,247 | 0 | 3,856,115(15) | 809,999 | 1,184,000 | 128,732 | 71,907 | 6,841,000 | | Dean Li, M.D., Ph.D. Executive Vice President and President, Merck Research Laboratories | 2023 | 1,368,819 | 0 | 4,147,202 | 1,679,999 | 2,072,000 | 339,249 | 172,146 | 9,779,414 | | | 2022 | 1,095,055 | 0 | 2,943,574 | 1,169,998 | 2,225,000 | 210,204 | 122,233 | 7,766,063 | | | 2021 | 937,104 | 0 | 2,062,363 | 900,003 | 1,400,799 | 114,593 | 66,057 | 5,480,919 |
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| For more information about deferred amounts, see the Nonqualified Deferred Compensation table and related footnotes on page 81. |
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| For more information on the awards granted during 2023, see the Grants of Plan-Based Awards table and related narrative and footnotes beginning on page 73. |
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| For more information on stock options granted during 2023, see the Grants of Plan-Based Awards table and related narrative and footnotes beginning on page 73. |
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| (4) Represents amounts paid under the EIP. For more information, see the Grants of Plan-Based Awards table and related narrative and footnotes beginning on page 73. |
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| Summary Compensation Table | ÷ ÷ ÷ ÷ | 65 |
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| 68 | ç ç ç ç | Pay Versus Performance Pay Versus Performance Table |
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| | Summary Compensation Table Total for CEO (Davis) | Summary Compensation Table Total for CEO (Frazier) | Compensation Actually Paid to CEO (Davis) (5) | Compensation Actually Paid to CEO (Frazier) (5) | Average Summary Compensation Table Total for Non-CEO NEOs | Average Compensation Actually Paid to Non-CEO NEOs (5) | Value of Initial Fixed $100 Investment Based on | | | | | Fiscal Year | | | | | | | Total Shareholder Return (6) | Peer Group Total Shareholder Return (7) | GAAP Net Income ($000’s) | Non-GAAP EPS (8) | | 2023 (1) | $20,273,287 | — | $26,701,326 | — | $7,629,512 | $9,360,664 | $142.53 | $142.00 | $364,655 | $1.51 | | 2022 (2) | 18,650,093 | — | 52,474,235 | — | 8,406,647 | 22,341,814 | 141.12 | 138.11 | 14,519,000 | 7.48 | | 2021 (3) | 13,722,121 | 15,196,920 | 14,390,893 | 13,328,924 | 6,709,905 | 7,004,950 | 94.47 | 130.44 | 12,345,000 | 5.37 | | 2020 (4) | — | 22,088,429 | — | 10,578,487 | 6,041,722 | 3,582,756 | 92.79 | 106.53 | 4,519,000 | 2.97 |
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| Pay Versus Performance Pay Versus Performance Table | ÷ ÷ ÷ ÷ | 69 |
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| | Summary Compensation Table Total Compensation | Value of Pension Benefits Deducted from SCT (1) | Value of Equity Deducted from SCT | Value of Pension Benefits Per CAP Definition (2) | Fair Value of Equity Compensation Granted in Current Year (3) | Year-Over-Year Change in Fair Value of Unvested Equity (4) | Change in Fair Value of Equity that Vested During the Year (5) | Value of Dividends Accrued or Paid on Stock Awards (6) | Compensation Actually Paid | | CEO (Davis) | | | | | | | | | | | 2023 | $20,273,287 | $651,163 | $14,047,586 | $271,130 | $18,028,095 | $(97,780) | $1,522,952 | $1,402,391 | $26,701,326 | | 2022 | 18,650,093 | 180,259 | 12,393,581 | 280,085 | 26,824,642 | 14,171,478 | 3,931,065 | 1,190,712 | 52,474,235 | | 2021 | 13,722,121 | 235,640 | 9,084,579 | 265,823 | 10,649,030 | (669,339) | (661,118) | 404,596 | 14,390,893 | | CEO (Frazier) | | | | | | | | | | | 2021 | 15,196,920 | — | 10,615,096 | 418,183 | 12,443,073 | (2,633,787) | (2,435,189) | 954,819 | 13,328,924 | | 2020 | 22,088,429 | 2,288,641 | 15,502,597 | 379,037 | 17,150,711 | (5,340,113) | (7,290,425) | 1,382,086 | 10,578,487 | | Average Non-CEO NEOs | | | | | | | | | | | 2023 | 7,629,512 | 479,834 | 4,253,332 | 152,186 | 5,458,528 | (43,471) | 475,952 | 421,122 | 9,360,664 | | 2022 | 8,406,647 | 42,041 | 5,514,804 | 122,447 | 9,133,936 | 6,336,440 | 3,346,846 | 552,343 | 22,341,814 | | 2021 | 6,709,905 | 107,732 | 4,261,734 | 122,147 | 4,829,729 | (247,588) | (208,749) | 168,972 | 7,004,950 | | 2020 | 6,041,722 | 498,315 | 3,518,845 | 157,683 | 3,892,938 | (1,222,908) | (1,583,911) | 314,391 | 3,582,756 |
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| 70 | ç ç ç ç | Pay Versus Performance Pay Versus Performance Table |
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| Pay Versus Performance Pay Versus Performance Table | ÷ ÷ ÷ ÷ | 71 |
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| 72 | ç ç ç ç | Pay Versus Performance Pay Versus Performance Table |
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| (3) For more information on RSUs, see the narrative to the Grants of Plan-Based Awards table on page 74. |
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| 74 | ç ç ç ç | Grants of Plan-Based Awards Narrative Information Relating to the Grants of Plan-Based Awards Table |
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| 76 | ç ç ç ç | Outstanding Equity Awards |
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| (1) This column represents the values realized upon stock option exercises during 2023, which were calculated based on the difference between the market price of Merck common stock at the time of exercise and the exercise price of the option. |
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| Pension Benefits | ÷ ÷ ÷ ÷ | 79 |
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| 80 | ç ç ç ç | Pension Benefits |
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Early Retirement Subsidies. Under the FAP formula, a participant who is age 55 with at least 10 years of credited service is entitled to early retirement subsidies. Under this provision, unreduced benefits may begin at age 62 and benefits that begin before 62 are only reduced by 3% per year. As of December 31, 2023, Mr. Chattopadhyay, and Mr. DeLuca are retirement eligible under the Qualified Plan and the SRP (i.e., at least age 55 and having completed at least 10 years of Credited Service). SRP Benefits. The Qualified Plan benefits are limited by the Internal Revenue Code. The SRP is an unfunded plan maintained to provide benefits according to the formulas described above without regard to those limits. The SRP also may include benefits based on compensation deferred into the Merck Deferral Program. Forms of Benefit. In the Qualified Plan and in the SRP for accruals prior to 2005, a participant generally can choose from several annuity options or a lump sum. SRP accruals post-2004 are payable in a lump sum or installments of 5 to 10 years. All forms of benefit are actuarially equivalent to the single life annuity.
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| ÷ ÷ ÷ ÷ | 81 |
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Nonqualified Deferred Compensation The following table shows the executive contributions, earnings, and account balances for the Named Executive Officers in the Merck Deferral Program, an unfunded, nonqualified, unsecured deferred compensation plan. The Merck Deferral Program allows participants who are executive officers to defer all or a portion of annual bonus and/or up to 50% of base salary, subject to certain limitations. Nonqualified Deferred Compensation for Fiscal Year Ended December 31, 2023
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| Name | Executive Contributions in 2023 ($) | Registrant Contributions in 2023 ($)(1) | Aggregate Earnings in 2023 ($)(2) | Aggregate Withdrawals/ Distributions in 2023 ($) | Aggregate Balance at 12/31/23 ($)(3) | | Davis | $0 | $242,730 | $213,020 | $0 | $1,517,885 | | Litchfield | 0 | 112,315 | 42,976 | 0 | 310,519 | | Chattopadhyay | 0 | 99,300 | 700,674 | 0 | 11,068,547 | | DeLuca | 226,950 | 94,081 | 937,585 | 0 | 4,877,634 | | Li | 0 | 146,717 | 100,553 | 0 | 525,693 |
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| (1) The amounts disclosed in this column represent the Company’s annual 4.5% credit of eligible pay in excess of the IRS limit to the NEOs’ accounts under the Merck Deferral Program. These amounts are included within the amount disclosed in the “All Other Compensation” column of the Summary Compensation table for each applicable NEO for 2023. |
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| (2) This column represents dividends earned plus changes in market and account value (investment earnings or losses) for the period of January 1, 2023 to December 31, 2023. |
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| (3) This column includes deferred compensation earned in earlier years which was disclosed as “Salary,” “Non-Equity Incentive Plan Compensation” or “All Other Compensation” in the Summary Compensation table of prior proxy statements as follows: Mr. Davis, $182,890 for 2022 and $92,124 for 2021; Ms. Litchfield, $82,660 for 2022 and $36,720 for 2021; Dr. Li, $98,508 for 2022 and $43,007 for 2021; and Mr. DeLuca, $48,857 for 2021. Mr. Chattopadhyay was not an NEO in 2022 and 2021. Although Mr. DeLuca was not an NEO for 2022 and his 2022 compensation information was not disclosed in prior proxy statements, pursuant to SEC rules, his 2022 compensation information is included in the Summary Compensation table in this year’s proxy, and the balance listed for him in this column includes a Company credit of $77,286 for 2022. |
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Merck Deferral Program Investments. Account balances may be invested in phantom investments selected by the executive from an array of investment options that mirrors the funds in the Merck U.S. Savings Plan. Distributions. When participants elect to defer amounts into the Merck Deferral Program, they also elect when the amounts ultimately will be distributed to them. Distributions may either be made in a specific year (regardless of whether employment has then ended) or at a time that begins at or after the executive’s employment has ended. Distributions can be made in a lump sum or up to 15 annual installments. Distributions from the Merck common stock fund are made in shares, with cash payable for any partial share.
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| 82 | ç ç ç ç |
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Potential Payments Upon Termination or a Change in Control The section below describes the payments and benefits that may be made to the NEOs upon termination from employment, including in connection with a change in control (as defined below). For payments that may be made to the NEOs upon retirement, see the Pension Benefits table and related narrative beginning on page 78. Merck & Co., Inc. U.S. Separation Benefits Plan, as amended (the “Separation Plan”) The Separation Plan provides severance pay and benefits to certain eligible employees, including the NEOs, whose employment is terminated due to organizational changes, including discontinuance of operations, location closings, corporate restructuring, or a work force reduction. For the NEOs, the following severance pay and benefits are payable under the Separation Plan:
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| • | A cash lump sum severance payment, the amount which for the NEOs, is determined as follows: |
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| Years of Continuous Service at Separation Date | Severance Pay (base salary in weeks) | | Less than 1 year | 26 | | 1-4 years | 40 | | 5 years or more | 40 plus 2 additional weeks for each year of continuous service beyond 4 years (maximum 78 total) |
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| • | Continued participation in the Company’s medical, dental, and basic life insurance plans at active-employee rates for 26 to 78 weeks (determined based on years of continuous service); and |
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| • | Outplacement services for up to 12 months. |
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To be eligible for the severance pay and benefits described above, a general release of claims is required, as well as compliance with applicable restrictive covenants. Effects of Termination on Other Awards or Under Other Benefit Plans The NEOs may be eligible for additional payments and benefits upon termination from employment as described below.
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| • | EIP Awards. The NEOs may be eligible for payments in lieu of EIP bonus payouts as follows: |
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| Timing of Termination | Eligibility for Pay in Lieu of EIP | Determination of Amount of Pay in Lieu of EIP | | Termination occurs following the end of the performance year | Eligibility determined in accordance with same terms and conditions as other employees participating in the EIP | Amount determined in accordance with same terms and conditions as other employees participating in the EIP | | Termination occurs between January 1 and June 30 of the performance year | Eligible for special payment if NEO is retirement eligible | Amount of the special payment is based on the NEO’s target award and the number of months worked in the performance year | | Termination occurs after June 30 and before December 31 of the performance year | Eligible for special payment | Amount of the special payment is based on the NEO’s target award and the number of months worked in the performance year |
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| • | Retirement Plan Bridge. NEOs who are age 50 or above with at least 10 years of Cash Balance Service as of December 31 of the year of separation may be eligible for a pro-rata portion of the early retirement subsidies described in the Pension Benefits section beginning on page 78. The pro-rata portion equals the percentage of the employee’s Credited Service on the separation date divided by the Credited Service the employee would have had if employment had continued until the employee was first eligible to be treated as an early retiree. This benefit is only provided in exchange for a valid release of claims. |
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| Potential Payments Upon Termination or a Change in Control Merck & Co., Inc. U.S. Separation Benefits Plan, as amended (the “Separation Plan”) | ÷ ÷ ÷ ÷ | 83 |
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| 84 | ç ç ç ç | Potential Payments Upon Termination or a Change in Control Individual Agreements and Arrangements |
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| Potential Payments Upon Termination or a Change in Control Effects of Change in Control under Change in Control, Equity, and Other Benefit Plans | ÷ ÷ ÷ ÷ | 85 |
Effects of Change in Control under Other Benefit Plans
| 86 | ç ç ç ç | Potential Payments Upon Termination or a Change in Control Effects of Change in Control under Change in Control, Equity, and Other Benefit Plans |
Effects of Change in Control under Other Benefit Plans
| Potential Payments Upon Termination or a Change in Control Effects of Change in Control under Change in Control, Equity, and Other Benefit Plans | ÷ ÷ ÷ ÷ | 87 |