Corporate Governance

Corporate Governance

We believe good governance is integral to achieving long-term shareholder value. We are committed to governance policies and practices that serve the interests of our company and the company’s shareholders.

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In exercising our fiduciary duty to our shareholders, we take a long-term perspective on shareholder value that takes into account both our company’s relationship with society as a whole and the interests of our many diverse stakeholders.

THE BOARD

The primary mission of our Board is to represent and protect the long-term interests of our company’s shareholders. The Board meets, at minimum, seven times per year to provide strategic direction and to review our progress on a wide variety of measures. In overseeing the affairs of the company, including our governance, the Board has established four committees to help fulfill our obligations to our shareholders.

Kenneth C. Frazier, our company’s chairman of the Board, president and chief executive officer, is the only company executive serving on the Board. Leslie A. Brun serves as the Board’s independent lead director. As lead director, Mr. Brun confers with management on matters involving the Board and serves as a liaison to shareholders on investor matters. Mr. Frazier is not a member of any of the Board’s committees; only independent directors serve on those committees.

The Board has a balanced membership, representing a deep and diverse range of experience, expertise and backgrounds. While it is our company’s philosophy that the full Board should consider and act on matters of significance, the committees assist it in carrying out its responsibilities and provide greater focus in key areas.

BOARD INDEPENDENCE & PERFORMANCE

Some shareholders believe that the Board should be completely independent. Our policy is that the Board should consist of a substantial majority of independent directors, in accordance with the standard for independence established in our Policies of the Board. As noted above, Mr. Frazier is the only member of the Board who is not independent.

For additional details on our Board’s leadership structure, please see our company’s 2017 Proxy Statement (pages 28–34).

CORPORATE MANAGEMENT

Our company’s chairman, president and chief executive officer, Kenneth C. Frazier, is accountable to the Board. Our company’s Executive Committee, an internal management committee of company executives who report directly to Mr. Frazier, meets regularly to review our progress and to attend to other matters affecting our company.

SHAREHOLDER ENGAGEMENT

We regularly communicate with our shareholders to better understand their perspectives, and have established a shareholder engagement program that is proactive and cross-functional. Throughout the year, members of Investor Relations, the Office of the Secretary, and Human Resources, along with other subject-matter experts within the company, engage with our shareholders to remain well-informed regarding their perspective on current issues, as well as to address any questions or concerns. These teams serve as liaisons between shareholders, members of senior management and the Board. This open and constructive dialogue with our shareholders has led us to make certain governance- and compensation-related changes over the past few years, including the adoption of proxy access, lowering of the threshold required for shareholders to call special meetings and various changes in the design of the long-term incentive plan. For additional details on shareholder engagement, please see our company’s 2017 Proxy Statement.

COMPLIANCE

Our company’s Board of Directors and senior management, including the company’s chief ethics and compliance officer and the Corporate Compliance Committee, oversee our company’s Global Compliance Program. Our compliance program is designed to maintain a culture that promotes the prevention, detection and resolution of potential violations of law or company policies. The program is dynamic, involving regular assessments to ensure that it is responsive to the company’s evolving business and associated compliance risks. The Global Compliance Organization is led by the senior vice president and chief ethics and compliance officer, who reports directly to the chief executive officer and provides regular quarterly updates to the Audit Committee of the Board of Directors on the state of ethics and compliance at our company. This reporting structure supports open communications with senior leadership and the Board regarding important developments that relate to ethics and compliance.

ENVIRONMENT, HEALTH & SAFETY GOVERNANCE

We are committed to full compliance with all environmental and employee health and safety laws and regulations, to engaging with our stakeholders concerning these issues, and to actively identifying, understanding and addressing potential environmental, health and safety (EHS) risks.

Our Executive Committee has established the EHS Council to provide enterprise-wide leadership and governance of our EHS compliance and performance. In addition to a corporate EHS policy, we are continuing to implement and sustain a robust compliance management program that effectively oversees and manages EHS issues affecting the company, in order to meet our responsibilities and commitments and to improve our performance.

RISK MANAGEMENT

Our company’s Corporate Audit and Assurance Services group is accountable to the Audit Committee of the Board of Directors for assessing the adequacy and effectiveness of the company’s control environment in relation to financial reporting and operating processes. This responsibility includes the appropriate management and oversight of key company risks, in accordance with our corporate policy on audit, control and risk management.

DISCLOSURE

We are committed to a policy of full, accurate and timely disclosure of all material information in order to keep shareholders and the investing public informed about the company’s business and operations. Accordingly, we have established a corporate disclosure policy that articulates the standards, processes and governance for the company’s disclosure practices. Pursuant to the policy, our Disclosure Committee oversees the company’s disclosure practices and disclosure obligations.

EXECUTIVE COMPENSATION

Our company’s compensation programs are designed to align the interests of our executives with the interests of our shareholders. Each year, the Compensation and Benefits Committee of the Board of Directors considers the outcome of shareholder advisory votes on executive compensation when making decisions relating to the compensation of the company’s executive officers, including the chief executive officer, and to our executive compensation program and policies.

In 2017, shareholders continued their strong support of our executive compensation programs, with 95 percent of the votes cast for approval of the “say on pay” proposal at the 2017 Annual Meeting of Shareholders. The Compensation and Benefits Committee believes that the voting results conveyed our shareholders’ support of the philosophy, strategy and objectives of our executive compensation programs. Furthermore, we continue to engage in direct constructive dialogue with our shareholders regarding our executive compensation programs and policies to ensure that investors understand the manner in which these programs and policies support our long-term strategic objectives.

Additional information on our company’s executive compensation programs, policies and practices can be found in our company’s 2017 Proxy Statement.

GOVERNANCE OF OUR RESEARCH AGENDA

The Research Leadership Team, headed by the president of our company’s research laboratories, develops the divisional strategy, allocates resources, and manages the research and development portfolio. The Research Leadership Team is made up of the heads of functional areas within our research laboratories. Each area provides expert support of our medicine and vaccine candidates during the discovery and development process.

SAFETY MONITORING

Our Global Clinical Safety and Pharmacovigilance organization collects, medically reviews, and evaluates and reports adverse experiences to global health authorities in compliance with global regulatory reporting requirements. The global product safety teams within our research laboratories are responsible for monitoring the evolving safety profile of our medicines and vaccines. In parallel, at the country level, local pharmacovigilance teams at our subsidiaries worldwide are responsible for ensuring that adverse experience information is collected and reported to our global product safety staff at headquarters and to local regulatory authorities.

CORPORATE RESPONSIBILITY GOVERNANCE

Our Office of Corporate Responsibility identifies corporate responsibility issues that are important to our business success and to our stakeholders, and formally manages targets and performance for those issues. In addition, the Public Policy Responsibility Council, comprising senior representatives of each major division and function of the company, provides executive-level oversight and guidance on corporate responsibility matters. To learn more, click here.

Performance

CORPORATE GOVERNANCE SUMMARY20122013201420152016
Independent directors on the Board1111111312
Percentage of Board members who are independent92%92%92%93%92%
Separate chairman of the Board and CEO1NoNoNoNoNo
Lead independent directorYesYesYesYesYes
Independent Audit CommitteeYesYesYesYesYes
Independent Compensation and Benefits CommitteeYesYesYesYesYes
Independent Governance CommitteeYesYesYesYesYes
Number of Board meetings scheduled or held177888
Shareholder support of the advisory vote on executive compensation97.18%88.76%95.81%95.24%94.31%
1. Meetings held in person or via telephone.