Document/ExhibitDescriptionPagesSize 1: 10-K/A Amendment to Form 10-K HTML 866K
2: EX-31.1 Certification per Sarbanes-Oxley Act (Section 302) HTML 7K
3: EX-31.2 Certification per Sarbanes-Oxley Act (Section 302) HTML 7K
Five
Giralda Farms, Madison, NJ
(Address of principal executive offices)
07940-0874
(Zip Code)
Registrant’s
telephone number, including area code (973) 660-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
$2 Convertible Preferred Stock, $2.50 par value
New York Stock Exchange
Common Stock, $0.33 1/3 par value
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.
Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No o
Indicate
by checkmark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§ 229.405 of this chapter) during the preceeding
12 months (or for such shorter period that the registrant was required
to submit and post such files).
Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,”“accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
(Do not check if a smaller reporting company) o
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act.): Yes o No x
State the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common stock was last sold, or the
average bid of and asked price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter.
Wyeth (the
Company, we, our, and
us) is filing this Amendment No. 1 on Form 10-K/A
(Amendment) to its Annual Report on Form 10-K for
the fiscal year ended December 31, 2008 (the Original Filing), which was originally filed with the Securities and Exchange
Commission (the SEC) on February 27, 2009, solely to set forth information
required by Items 10, 11, 12, 13 and 14 of Part III of Form 10-K because a definitive proxy
statement containing such information will not be filed within 120 days after the end of the fiscal
year covered by the Original Filing. This Amendment amends and restates in its entirety Items 10, 11, 12, 13 and 14 of Part III of the Original Filing. Except as expressly set forth herein, this
Amendment does not reflect events occurring after the date of the Original Filing or modify or update
any of the other disclosures contained therein in any way other than as required to reflect the amendments
discussed above. The reference on the cover of the Original Filing to the incorporation by reference of the registrant’s definitive proxy statement into Part III of the Original Filing is hereby deleted.
Certification of disclosure as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of disclosure as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS OF WYETH
Information relating to our directors is set forth below.
Robert M. Amen
Mr. Amen is 59 years old and has been a Director of Wyeth
since October 2007. Since July 2006, he has been the
Chairman and Chief Executive Officer of International Flavors
& Fragrances Inc., a leading creator and manufacturer of
flavors and fragrances used in a wide variety of consumer
products and packaged goods. He was previously with
International Paper Company, a paper and packaging company,
where he was President from 2003 until 2006 and previously
Executive Vice President.
Michael J. Critelli
Mr. Critelli is 60 years old and has been a Director of
Wyeth since April 2008. Mr. Critelli was Executive Chairman
of Pitney Bowes Inc., a provider of mailstream solutions, from
May 2007 to December 2008 and a Director from 1994 to December
2008. Mr. Critelli previously was the Chairman and Chief
Executive Officer of Pitney Bowes Inc. from January 1997 through
May 2007. Mr. Critelli is also a Director of Eaton Corporation.
Frances D. Fergusson, Ph.D.
Dr. Fergusson is 64 years old and has been a Director
of Wyeth since January 2005. She is a Professor at Vassar
College and is President Emeritus of the College, a position she
held from 1986 to July 2006. She is also a Director of Mattel,
Inc.
1
Victor F. Ganzi
Mr. Ganzi is 62 years old and has been a Director of Wyeth
since December 2005. Mr. Ganzi was the President and Chief
Executive Officer from 2002 to 2008 and a Director from 1990 to
2008 of The Hearst Corporation, a diversified communications
company. He is also a Director of Gentiva Health Services, Inc.
Robert Langer, Sc.D
Dr. Langer is 60 years old and has been a Director of
Wyeth since January 2004. He was named an Institute Professor at
Massachusetts Institute of Technology in 2006 and has been on
the faculty of Massachusetts Institute of Technology since 1977.
He is also a Director of Alseres Pharmaceuticals, Inc., Echo
Therapeutics, Inc. and Momenta Pharmaceuticals, Inc.
John P. Mascotte
Mr. Mascotte is 69 years old and has been a Director of
Wyeth since 1995. He is the retired President and Chief
Executive Officer of Blue Cross and Blue Shield of Kansas City,
Inc., a position he held from 1997 through 2001. He is also the
former Chairman of Johnson & Higgins of Missouri, Inc. and
former Chairman and Chief Executive Officer of The Continental
Corporation.
Raymond J. McGuire
Mr. McGuire is 52 years old and has been a Director of
Wyeth since October 2006. Mr. McGuire has been Co-Head, Global
Investment Banking at Citi since 2005. Prior to that, Mr.
McGuire was the Global Co-Head of Mergers & Acquisitions at
Morgan Stanley from 2003 to May 2005; a Managing Director at
Morgan Stanley from 2000 to 2003; a Managing Director in the
Mergers and Acquisitions Group of Merrill Lynch & Co., Inc.
from 1994 to 2000; and one of the original members of
Wasserstein Perella & Co., Inc. where he became a
Partner/Managing Director in 1991.
2
Mary Lake Polan,
M.D., Ph.D., M.P.H.
Dr. Polan is 65 years old and has been a Director of
Wyeth since 1995. She joined Stanford University School of
Medicine in 1990 and is currently Professor and Chair Emeritus
of the Department of Obstetrics and Gynecology at Stanford, as
well as Adjunct Professor of Obstetrics and Gynecology at
Columbia University School of Medicine. She is also a Director
of Quidel Corporation.
Bernard Poussot
Mr. Poussot is 57 years old and has been a Director of
Wyeth since January 2007. Mr. Poussot is Chairman of the Wyeth
board of directors, a position he has held since June 2008, our
Chief Executive Officer, a position he has held since January
2008, and our President, a position he has held since April
2006. He was our Chief Operating Officer from January 2007
through December 2007 and our Vice Chairman from April 2006
through December 2007. From June 2002 to April 2006, he was
Executive Vice President of Wyeth and President, Wyeth
Pharmaceuticals. From January 2001 to June 2002, he served as
Senior Vice President of Wyeth and President, Wyeth
Pharmaceuticals. Prior to that, Mr. Poussot held positions of
increasing responsibility since joining Wyeth in 1986.
Gary L. Rogers
Mr. Rogers is 64 years old and has been a Director of Wyeth
since October 2005. He is former Vice Chairman of General
Electric Company, a position he held from 2001 through 2003.
Prior to that, Mr. Rogers held various executive positions
during his long tenure at General Electric. He is also a
Director of Rohm and Haas Company and W.W. Grainger, Inc.
John R. Torell III
Mr. Torell is 69 years old and has been a Director of Wyeth
since 1982. He is Partner at Core Capital Group, LLC, a position
he has held since 2000. He is also Chairman of Indecomm Global
Services Corporation and International Executive Services Corps.
He is the former President of Manufacturers Hanover Corporation
and Manufacturers Hanover Trust Company, former Chairman of the
Board, President and Chief Executive Officer of CalFed Inc. and
former Chairman and Chief Executive Officer of Fortune Bancorp.
EXECUTIVE OFFICERS OF WYETH
Information relating to our executive officers is included in
Part I of our Annual Report on Form 10-K for the year ended December 31, 2008 under
the caption “Executive Officers of the Registrant as of February26, 2009.”
Our executive officers, directors and owners of more than 10% of
our securities are required under Section 16(a) of the
Exchange Act to file reports of ownership and changes in
ownership with the SEC, the New York Stock Exchange (the
NYSE) and Wyeth. Most transactions
are reportable within two business days of the transaction and
are required to be filed electronically with the SEC through its
EDGAR system. To facilitate compliance, we have undertaken the
responsibility to prepare and file these reports on behalf of
our executive officers and directors. Based upon inquiries made
of our directors and executive officers and a review of the
filings made on their behalf during 2008 and Wyeth’s
records, we believe that all reports were timely filed in 2008,
except that the ownership of 71 shares of Wyeth common
stock was inadvertently omitted from Michael J. Critelli’s
Form 3 filed on April 28, 2008. The Form 3 was
subsequently amended to report these shares on October 3,2008.
CODE OF
ETHICS
We have adopted a code of ethics, included within the Wyeth Code of Conduct, that applies to
all employees, including our principal executive officer, principal financial officer, principal
accounting officer, controller and others performing similar functions. The Wyeth Code of Conduct
is available on the Wyeth Internet Web site at www.wyeth.com. Copies of the Wyeth Code of Conduct
are also available, without charge, by contacting Wyeth Investor Relations at (877) 552-4744. We
intend to post on our Internet Web site at www.wyeth.com any amendments to, or waivers from, our
code of ethics that apply to our principal executive officer, principal financial officer,
principal accounting officer, controller and others performing similar functions.
4
COMMITTEES
OF THE WYETH BOARD OF DIRECTORS
The Wyeth board of directors has, as standing committees, an
Audit Committee, a Compensation and Benefits Committee (the
“Compensation Committee”), a Nominating and Governance
Committee, a Corporate Issues Committee and a Science and
Technology Committee. The members of these standing committees
are all non-employee independent directors whom the Wyeth board
of directors has determined satisfy the definition of
“independent directors” under NYSE Corporate
Governance Standards and the Wyeth Corporate Governance
Guidelines. In addition, the Audit Committee consists of
directors whom the Wyeth board of directors has determined
satisfy the independence criteria set forth in
Rule 10A-3
under the Securities Exchange Act of 1934, as amended (the
Exchange Act), and the Compensation Committee consists
of directors whom the Wyeth board of directors has determined
satisfy the definition of “non-employee directors”
under
Rule 16b-3
under the Exchange Act and “outside directors” under
Section 162(m) of the Internal Revenue Code. The Audit
Committee is a separately designated standing committee
established in accordance with Section 3(a)(58)(A) of the
Exchange Act. The charters of each of the standing committees
can be found at the Corporate Governance section of our Internet
Web site at www.wyeth.com. The Wyeth board of directors
also has an Executive Committee, which includes Mr. Poussot
as the Chairman. The following table shows the directors
currently serving on each of these committees, the number of
committee meetings in 2008 and a brief description of the
functions of each of these committees.
5
Number
of Meetings in
Committee
Members*
Key Functions of Committee
2008
Audit
John P. Mascotte, Chairman**
Robert M. Amen**
Victor F. Ganzi**
Gary L. Rogers
John R. Torell III
Hiring (subject to ratification by the stockholders) and approving the fees of our independent registered public accounting firm.
Pre-approving non-audit services and evaluating performance and independence of our independent registered public accounting firm.
Reviewing and discussing our periodic financial statements and other disclosure and risk management and control policies and procedures, as appropriate, with management and our independent registered public accounting firm, and seeking to ensure the integrity of the financial reporting process and compliance with applicable laws and accounting initiatives.
Reviewing, and approving, ratifying or making recommendations to the Wyeth board of directors regarding, related person transactions as defined under applicable disclosure regulations to the extent not delegated to another committee of the Wyeth board of directors.
Issuing an annual report of the Audit Committee for inclusion in the
proxy statement.
9
Compensation
and Benefits
Victor F. Ganzi, Chairman Robert M. Amen
Michael J. Critelli
John P. Mascotte
Gary L. Rogers
Evaluating performance of, and determining and approving the salary of, our Chief Executive Officer.
Evaluating performance of, and recommending to the Wyeth board of directors the salaries of our executive officers (other than our Chief Executive Officer) and other senior executives.
Administering our incentive compensation and equity incentive plans, overseeing other benefit plans and approving performance targets related to compensation programs.
Establishing and administering performance-based compensation programs under Section 162(m) of the Internal Revenue Code.
Periodically evaluating the competitiveness of our compensation programs and incentive, retirement and other plans and programs.
7
6
Number
of Meetings in
Committee
Members*
Key Functions of Committee
2008
Nominating and
Governance
Frances D. Fergusson, Ph.D., Chairman Robert Langer, Sc.D.
John P. Mascotte
Raymond J. McGuire
Mary Lake Polan, M.D., Ph.D., M.P.H.
Establishing criteria and procedures for recommending director candidates to the Wyeth board of directors, including those submitted by stockholders.
Having sole authority to hire search firms to identify candidates for the Wyeth board of directors.
Making recommendations to the Wyeth board of directors on the functions and size of board committees.
Screening and nominating board candidates.
Overseeing other corporate governance matters, including the evaluation of the functioning of the Wyeth board of directors and its committees, and recommending corporate governance principles.
Annually evaluating the charters of each of the committees of the Wyeth board of directors.
5
Corporate Issues
John R. Torell III, Chairman Michael J. Critelli
Frances D. Fergusson, Ph.D.
Robert Langer, Sc.D.
Raymond J. McGuire
Mary Lake Polan, M.D., Ph.D., M.P.H.
Reviewing our major public and social policies, practices and programs and making recommendations to the Wyeth board of directors as appropriate on public issues, including environmental, health and safety matters, employment practices, charitable contributions, community outreach and political contributions.
Reviewing and making recommendations regarding stockholder proposals relating to public and social issues.
2
Science and
Technology
Mary Lake Polan, M.D., Ph.D., M.P.H., Chairman Frances D. Fergusson, Ph.D.
Robert Langer, Sc.D.
Reviewing and reporting to the Wyeth board of directors regarding scientific matters relating to our research and development programs and technology initiatives.
Reviewing our ability to acquire and maintain innovative science and technology through mechanisms including, but not limited to, acquisitions, collaborations and alliances.
Bernard Poussot, Chairman Victor F. Ganzi
John P. Mascotte
Authorized, under our bylaws, during the intervals between
meetings of the Wyeth board of directors, to perform all duties
and exercise all powers of the board except those that are
required by law, our Certificate of Incorporation or our bylaws
to be performed or exercised by the entire Wyeth board of
directors.
5***
*
Mr. Critelli joined the Compensation Committee and the
Corporate Issues Committee upon joining the Wyeth board of
directors in April 2008. Mr. Ivan G. Seidenberg served on the
Compensation Committee, the Corporate Issues Committee and the
Executive Committee through his resignation from the Wyeth board
of directors in February 2008. Professor John D. Feerick served on the
Audit Committee and the Nominating and Governance Committee
through his retirement from the Wyeth board of directors in July
2008. Mr. Robert Essner served on the Executive Committee through
his retirement from the Wyeth board of directors in June 2008.
7
**
Each of Messrs. Amen, Ganzi and Mascotte has been
determined by the Wyeth board of directors to be an “audit
committee financial expert” as defined under applicable SEC
rules. Mr. Amen has served in a variety of finance and
other executive roles, including as president and controller of
International Paper Company and as chief executive officer of
International Flavors & Fragrances Inc., and has a
Master’s of Business Administration with a concentration in
finance, among many other qualifications. Mr. Ganzi
practiced as a Certified Public Accountant (CPA) at a national
public accounting firm, was the managing partner of a large law
firm and served as chief financial and legal officer of Hearst,
among many other qualifications. Mr. Mascotte is a CPA, was
a tax specialist at a national public accounting firm and has
served as chief executive officer of Blue Cross and Blue Shield
of Kansas City, Inc. and The Continental Corporation, among many
other qualifications.
***
The Executive Committee acted on one occasion in 2008 between
meetings of the Wyeth board of directors by unanimous written
consent. This action was specifically delegated in advance and
ratified by the full Wyeth board of directors.
Additional
Information Regarding the Compensation and Benefits Committee
The Compensation Committee assists the Wyeth board of directors in establishing the
compensation of our executive officers and setting the overall compensation philosophy and
objectives for Wyeth, and is actively involved in overseeing the design, review and updating, as
appropriate, of our compensation programs. The Compensation Committee
determines and approves the
compensation of our Chief Executive Officer.
The
Compensation Committee typically makes compensation decisions for our principal corporate
officers, including all of our named executive officers, with some decisions being ratified and/or
made by the full Wyeth board of directors upon recommendations from the Compensation Committee. In
this Form 10-K/A, the executive officers included in the compensation tables below
are referred to as our named executive officers. The Compensation Committee meets regularly
throughout the year, with the agenda for each meeting established
through consultation among the
Compensation Committee’s chairman, our Corporate Secretary and
senior management. Meetings are
regularly attended by our Chairman, President and Chief Executive Officer; our Senior Vice
President and Chief Financial Officer; our Senior Vice President, Human Resources; and our
Corporate Secretary. At each meeting, the Compensation Committee also meets in executive session
without any members of management present.
Pursuant
to authority granted under its charter, the Compensation Committee has engaged
Exequity LLP (Exequity), a nationally recognized compensation consulting firm to advise the
Compensation Committee and to assist it in assessing compensation
developments and trends and their
potential effects on Wyeth and our plans. The Compensation Committee
has sole responsibility for
engaging this consulting firm. Exequity regularly provides reports to
the Compensation Committee
regarding competitive compensation data, developments and trends. Exequity also participates in
Compensation Committee meetings and routinely meets with the Compensation Committee in executive
session. Exequity does not provide any other services to Wyeth. Wyeth management has engaged a
separate, nationally recognized compensation consulting firm, Towers, Perrin, Forster & Crosby,
Inc. to advise it on compensation matters, including the provision of peer competitiveness
data. The compensation consulting firm engaged by the Compensation Committee is not affiliated
with the compensation consulting firm engaged by management.
The
Compensation Committee meets in executive session for all compensation decisions made for
Mr. Poussot and, prior to his retirement, Mr. Essner. These determinations are made in
consultation with the Compensation Committee’s compensation consultant outside the presence of
management. For each other named executive officer, our Chief Executive Officer makes a
recommendation to the Compensation Committee regarding base salary, annual cash incentive awards
and long-term incentive awards, as applicable. In making these recommendations, our Chief
Executive Officer, in consultation with our Senior Vice President,
Human Resources, generally begins with each named executive officer’s base salary or award, as
applicable, and total compensation for the prior year and makes appropriate adjustments for the
current year based on, among other things, Wyeth’s performance, the executive’s individual
performance, trends in the marketplace, the executive’s
potential for advancement, retention,
experience, positioning relative to other executives, the relative difficulty of achieving
particular company or individual objectives and any other
considerations they deem relevant. These
recommendations are reviewed, discussed (including through a presentation made by the Chief
Executive Officer), modified as deemed appropriate by the Compensation Committee in consultation
with its compensation consultant, and then adopted by the Compensation Committee or recommended by
the Compensation Committee for adoption by the full Wyeth board of directors in an executive
session of the non-employee directors, as appropriate.
To
assist in its evaluation of our Chief Executive Officer’s recommendations and its
compensation decisions, the Compensation Committee generally is provided with the following
information for its review in advance of each meeting:
•
Current and historical data on base salaries, annual cash incentive awards and
long-term equity incentive awards for each named executive officer;
•
Peer competitiveness data, generally including both a median and a 75th percentile
analysis regarding each element of direct compensation and total direct compensation
(i.e., base salary, annual cash incentive awards and long-term incentive compensation);
•
An estimate of future pension benefits and the effect of base salary increases and
annual cash incentive awards on future pension benefits;
•
A report of Wyeth’s performance that includes a discussion of financial results,
research and development, operational efficiency, talent management, status of litigation,
manufacturing performance and other key developments; and
•
Information provided by the Compensation Committee’s compensation consultant and by
management’s compensation consultant, which may consist in part of the peer
competitiveness data referenced above as well as analyses from outside
the industry.
These
materials are intended to ensure that the Compensation Committee is informed in making
its decisions on each individual element in the context of the other elements of our
compensation programs (including pay mix) and total direct compensation, as well as prior years’
compensation and prevailing practices in our peer group. The pension
estimates are used as a
confirmatory measure to ensure that no particular compensation decision has a disproportionate
impact on pension benefits. The information presented in these materials often differs in form from
the required presentation in “Executive Compensation — Summary Compensation Table.” For example,
in reviewing long-term equity incentive awards, the Compensation Committee typically focuses on the
full potential value to the executive and expense to Wyeth associated with a particular award over
its lifetime rather than solely the impact on current year compensation expense as required to be
reflected in the “Summary Compensation Table” included
under “Item 11. Executive Compensation.” Similarly, with respect to
pension benefits, the Compensation Committee concentrates on ongoing monitoring of Wyeth’s pension
plans and the manner in which a particular compensation decision might impact future pension
benefits to an executive rather than the year-over-year change in pension value shown in
the “Summary Compensation Table” included
under “Item 11. Executive Compensation.”
In
administering our incentive compensation and equity incentive plans and overseeing our
other benefit plans, the Compensation Committee may delegate authority for administration of these
plans to our Chief Executive Officer or to any other committee, to the extent permitted under law,
and under conditions and limitations as the Wyeth board of directors
and Compensation Committee
may from time to time establish.
See
“Item 11. Executive Compensation — Compensation Discussion and Analysis” for additional
information regarding the Compensation Committee’s
determinations regarding executive compensation.
Additional
Information Regarding the Nominating and Governance Committee
The Nominating and Governance Committee acts as a screening and
nominating committee for candidates considered for nomination by
the Wyeth board of directors for election as directors. In this
capacity, the Nominating and Governance Committee considers the
composition of the Wyeth board of directors with respect to many
factors, including the balance of expertise and professional
experience. The Nominating and Governance Committee evaluates
prospective nominees identified on its own initiative as well as
self-nominated candidates and candidates referred or recommended
to it by members of the Wyeth board of directors, management,
stockholders and search companies. The Nominating and Governance
Committee uses the same criteria for evaluating candidates
proposed by other members of the Wyeth board of directors,
management and search companies and candidates proposed by
stockholders and self-nominated candidates in accordance with
the procedures identified below. The Nominating and Governance
Committee’s Criteria and Procedures for Board Candidate
Selection for the Board of Directors is set forth below.
If the merger is consummated, there will be no annual meeting of
Wyeth stockholders in 2010. If the merger is not consummated,
Wyeth will hold a 2010 Annual Meeting of Stockholders, in which
case stockholders may submit names of qualified candidates for
service on the Wyeth board of directors along with detailed
information on their backgrounds to our Corporate Secretary for
referral to the Nominating and Governance Committee. Under our
bylaws, nominations for elections to be held at an annual
meeting must be received no later than 90 days prior to the
anniversary date of the immediately preceding annual meeting.
In the case of elections to be held at a special
meeting, nominations must be received no later than the
10th day following the date notice is first given to
stockholders of the special meeting.
8
The following sets forth the complete text of Wyeth’s Criteria and Procedures
for
Board Candidate Selection
for the Board of Directors:
CRITERIA
AND PROCEDURES FOR BOARD CANDIDATE SELECTION FOR THE BOARD OF
DIRECTORS
It is the desire of Wyeth to select individuals for nomination
to the Board of Directors who, if elected, will best serve the
interests of the Corporation and its stockholders. The following
Criteria and Procedures for Board Candidate Selection are not
intended to be exclusive or exhaustive, but rather
representative of the scope of delegation by the Board of
Directors of Wyeth, to its Nominating and Governance Committee
in the fulfillment of the duties and responsibilities in
accordance with Section V(1) of its Charter. Certain
criteria should be met by all candidates for Board selection,
while only a portion of the Board need meet other criteria.
I.
Criteria for All Candidates
Among those characteristics to be sought in each candidate,
being mindful of the overall Board composition, are the
following:
•
Integrity and a commitment to ethical behavior.
•
Personal maturity and leadership skills in industry, education,
the professions, or government.
•
Independence of thought and willingness to deal directly with
difficult issues.
•
Fulfillment of the broadest definition of diversity, seeking
diversity of thought.
•
Broad business
and/or
professional experience, with an understanding of business and
financial affairs, and the complexities of business
organizations.
II.
Criteria
for a Portion of Candidates
Among those characteristics that may be sought in individual
board candidates, as needed to fulfill certain functions on the
Board from time to time, are the following:
•
Scientific accomplishment in medicine or pharmaceuticals.
•
Management experience and expertise.
•
Financial
and/or
accounting expertise, generally, and as necessary to fulfill the
financial requirements of the New York Stock Exchange and the
Securities and Exchange Commission.
•
Experience in other regulated industries.
•
Business and other experience relevant to large public companies.
III.
Procedures to be used in Board Candidate Selection
The Nominating and Governance Committee will include the
following among its procedures to be used in the selection of
candidates for the Board:
•
Evaluate qualifications under Section I, and any specific
needs under Section II, prior to commencement of the
recruitment process.
•
Develop a selection process specific to a candidate search to be
led by the Chairman of the Nominating and Governance Committee
with the assistance of a search firm, if deemed appropriate by
the Committee, to be identified and retained within the sole
discretion of the Committee.
9
•
Receive recommendations from other existing members of the Board
of Directors and other sources, including self-nominated
candidates, and submit such potential candidates for review
under the foregoing specific selection process.
•
Determine that a prospective candidate fulfills the independence
requirements of the New York Stock Exchange, the Securities and
Exchange Commission and the Internal Revenue Code, as applicable.
•
Review the education of the prospective candidate.
•
Evaluate the quality of experience and achievement of the
prospective candidate.
•
Review the prospective candidate’s current or past
membership on other boards.
•
Determine that the candidate has the ability, and the
willingness, to spend the necessary time required to function
effectively as a Director.
•
Determine that the candidate has a genuine interest in
representing the stockholders and the interests of the
Corporation overall.
There have been no changes in these procedures since they were
last published in our proxy statement dated
The following “Compensation Discussion and Analysis”
outlines our compensation objectives and philosophy, the key
components of our compensation programs and our compensation
decision-making process. It includes a discussion of how and why
2008 compensation decisions were made for our named executive
officers.
Overview
Compensation for named executive officers at Wyeth consists of
four key components — base salaries, annual cash
incentive awards (i.e., cash bonus), long-term equity incentive
awards and post-employment benefits. We also provide limited
perquisites. Our compensation programs are designed to focus our
executives on working toward achievement of our key objectives
of bringing to the world products that improve lives and deliver
outstanding value to our customers and stockholders. Our
industry is highly scientific, regulated, dynamic and
challenging, and our key employees are highly educated,
dedicated and experienced. Our long-term vitality requires
large, long-term investments in drug discovery and innovation
that are not expected to produce near-term returns, and our
compensation programs seek to reward and motivate both
short-term and long-term success. Our long-term equity incentive
program, in particular, is intended to both produce superior
long-term performance and drive long-term value for our
stockholders.
Our compensation programs serve four principal objectives:
•
Attract and retain outstanding executives with long-term
industry experience and who deliver superior performance;
•
Motivate our executives to achieve our business and strategic
goals, both financial and operational;
•
Reward our executives for achieving outstanding company and
individual performance and developing executive talent; and
•
Produce value for our stockholders by continuing to increase the
strength and sustainability of Wyeth.
The Wyeth board of directors and management believe that
fundamental changes in our business are necessary for our future
sustainability and success, particularly as a result of the
challenging regulatory, intellectual property and competitive
environment that our industry continues to confront.
Accordingly, in 2008, we launched Project Impact, which is a
company-wide program designed to initially address short-term
fiscal challenges, particularly the significant loss of sales
and profits resulting from the launch of generic versions of
Protonix. Longer term, Project Impact would include
strategic actions designed to fundamentally change how Wyeth
structures its operations to adapt to the continuously changing
business climate. The Compensation Committee is particularly
focused on these goals and, subject to our contemplated merger
with Pfizer Inc. (Pfizer), intends to judge management’s performance in
the coming years, at least in part, on management’s efforts
to reshape Wyeth for the future.
The Wyeth board of directors and management also believe that
our continued success requires leadership from every person in
every job at every location around the world. To this end, we
launched a company-wide set of leadership priorities —
aspire high, think broadly, be decisive, build talent and
execute flawlessly — recognizing that everyone at
Wyeth has the potential to be a leader, whether they are an
individual contributor, manager of people or a senior executive.
Our leadership priorities define the standard of behavior that
we believe is essential to reinforce in everything we do and are
important as an advancement of Wyeth’s culture. These
leadership priorities have been communicated across Wyeth in all
divisions and functions, and are being incorporated in our
employee performance and development systems.
11
We have a “pay-for-performance” philosophy that is
reflected in our compensation arrangements, in which a
significant portion of our executives’ total compensation
is at-risk, based on company and individual performance. To
drive our executives to produce results for Wyeth that create
long-term value for our stockholders, our performance-based compensation in 2008
included a mix of compensation opportunities and performance
measures to complement base salary, such that:
•
A portion of the value of an executive’s total direct
compensation (i.e., base salary, annual cash incentive awards
and annual long-term incentive awards) was discretionary based
on the Compensation Committee’s assessment of both
Wyeth’s performance and individual executive performance
(annual cash incentive awards);
•
A portion of the value of an executive’s total direct
compensation was based directly on our actual financial
performance against pre-set targets and total stockholder return
(TSR) versus our peers (performance share unit awards); and
•
A portion of the value of an executive’s total direct
compensation was tied directly to changes in our stock price
(stock options, restricted stock unit awards (RSUs) and performance share unit awards).
The Wyeth board of directors has a Compensation Committee
consisting entirely of independent directors. The composition of
the Compensation Committee underwent changes in 2008, with the
appointment of a new Compensation Committee Chairman and two new
members of the Wyeth board of directors joining the Compensation
Committee. As discussed further in the section entitled
“Committees of the Wyeth Board of
Directors” under “Item 10. Directors, Executive
Officers and Corporate Governance,” the Compensation Committee sets the overall
compensation philosophy and objectives for Wyeth and is actively
involved in assessing and overseeing the design of our
compensation programs. The Compensation Committee reviews and
recommends to the Wyeth board of directors the compensation and
benefits provided to each of our principal corporate officers
and also specifically reviews and approves corporate goals and
objectives for our Chief Executive Officer and evaluates his
performance in light of those goals. The Compensation Committee
meets regularly with our Chief Executive Officer and our Senior
Vice President, Human Resources and also engages a compensation
consultant for advice regarding compensation decisions. The
Compensation Committee meets in executive session at each
meeting without management present. In 2008, the Compensation
Committee continued to refine its compensation philosophy as
described more fully under “— Key Changes and
Other Actions in 2008.”
As discussed in greater detail below with respect to individual
compensation decisions, compensation for our named executive
officers in 2008 was driven primarily by:
•
Our successful strategic and financial response to the “at
risk” launch of generic versions of Protonix,
including the launch of our own generic version and the
deployment of Project Impact initiatives;
•
Our strong financial performance, highlighted by Wyeth exceeding
its earnings per share (EPS) goals for the year, in the face of
a challenging pharmaceutical industry and economic environment,
and our successful operating performance;
•
New product approvals, including Pristiq for the
treatment of major depressive disorder, Xyntha and
subcutaneous Relistor, and delays in the regulatory
review of several of our other pipeline products;
•
Year-over-year stock price decline and negative total
stockholder return performance during 2008, but which compared
favorably with total stockholder return performance of the
S&P 500 Index and the market-weighted Peer Group
Index — performing better than the S&P 500 Index
by 24.4 percentage points and the market-weighted Peer
Group Index by 10.2 percentage points;
•
Executive succession and key business changes that resulted from
the establishment of our new executive leadership team,
including the promotion and recruitment of important new key
executives, who quickly and seamlessly transitioned to full
functionality; and
•
Outstanding work of our named executive officers with respect to
our contemplated merger with Pfizer.
12
Components
of Compensation
Our executive compensation programs for named executive officers
consist of several elements, each of which complements the
others in providing a total compensation package designed to
support our core compensation objectives. These components are
summarized in the following table:
Pay Element
What Pay Element Rewards/Reflects
Primary Purpose of Pay Element
Base Salary
Performance of executive responsibilities; reflects experience
and tenure in role, skills and level of responsibility.
To provide a fixed amount of compensation commensurate with
market norms for similar jobs.
Annual Cash Incentive Awards
Annual company and individual performance and achievement of
Wyeth’s financial and other objectives.
To motivate executives to achieve superior company and
individual performance through a variable and discretionary
award design.
Long-Term Equity Incentives (Stock Options and Performance Share
Unit Awards)
Long-term focus, achievement of performance goals (e.g., EPS and total stockholder return ranking), increases in stockholder value, and continued employment during the vesting/holding period of an award:
— Three-year period applicable to performance share unit awards, with additional one-year holding period for the 2008 awards.
— Three-year phased vesting for stock options.
To motivate long-term performance, align executive compensation
with stock price performance and other performance measures and
retain key executives.
Restricted Stock Unit Awards
Long-term focus and continued employment during the vesting
period.
Awarded upon initial employment and major promotion or for
executive retention (not part of annual grant to named executive
officers).
Benefits (Primarily Defined Benefit Pension Plans and Defined
Contribution Savings Plans) and Perquisites
Long-term service and desire to keep executives focused.
To provide a competitive benefits program that addresses
employee health, welfare and retirement needs. Also to provide
executives with a meaningful level of post-employment income
consistent with their contribution to Wyeth’s success over
their careers, as well as to offer competitive perquisites that
enable executives to maximize efficiency.
Change in Control Severance Agreements
Need for retention and employment security in a dynamic industry.
To provide for company stability and continuity of management
during times of uncertainty (e.g., pending our contemplated
merger with Pfizer) and to allow us to attract and retain key
executives by providing protections consistent with the market
for executive talent.
13
Key
Changes and Other Actions in 2008
As part of its role, the Compensation Committee continually
reviews our compensation programs and, from time to time, makes
changes that are designed to better serve our compensation
philosophy and objectives, to reflect current industry practice,
to comply with changes in law, rules and regulations or to adopt
emerging best practices. As a result of these efforts, we made
the following key changes to our compensation and benefits
programs in 2008:
Benchmarking Philosophy. Prior to 2008, the
Compensation Committee considered a benchmark at or near the
75th percentile of our peer group for decisions related to
long-term equity incentives, adjusted for assessment of overall
performance against approved performance factors. Decisions
related to other compensation elements were generally targeted
to be between the median and the 75th percentile of our
peer group. During 2008, the Compensation Committee reevaluated
Wyeth’s historical benchmarking practices, and beginning
with the 2009 base salary decisions, the Compensation Committee
has articulated a philosophy of targeting total direct
compensation for named executive officers at or near the median
of our peer group, as described under “— Peer
Group Analysis.” As described more fully below, although
benchmarking provides a valuable point of reference, actual
compensation for any particular named executive officer may be
higher or lower than the benchmark as a result of Wyeth and
individual performance, experience, skills, potential for
advancement, relative tenure in position, current
responsibilities relative to other executives within Wyeth,
retention objectives, succession planning, fluctuations in stock
price and other factors that the Compensation Committee
considers relevant.
Alignment of Compensation Calendar. To
facilitate its focus on total direct compensation and to enhance
executive efficiency, the Compensation Committee approved a
management proposal to align the compensation planning calendar
beginning with compensation decisions to be made in 2009. As a
result of this effort, annual compensation decisions regarding
the components of total direct compensation — base
salaries, annual cash incentive awards and annual long-term
incentive awards — will be made during a single
consolidated time period each year.
Pay
for Performance
We implement our “pay-for-performance” culture through our pay mix, which is weighted significantly
toward performance-dependent forms of compensation. Our compensation opportunities include a mix
of approaches for implementing pay-for performance: performance evaluated in the discretion of the
Compensation Committee (e.g., annual cash incentive awards), stock price performance (e.g., stock
options), and performance against pre-established financial targets (e.g., performance share unit
awards).
The discretionary nature of our annual cash incentive award program for named executive officers
provides the Compensation Committee with the opportunity to evaluate and appropriately recognize
individual executive performance in the context of Wyeth’s overall performance for the completed
year, including performance with respect to key value drivers, which may include for a given year,
among other things, EPS, cost management, achievements in research and development, and regulatory
compliance. Notably, this discretionary evaluation of performance differs from the target-based
nature of our performance share unit awards, which are described below. For a detailed discussion
of our annual cash incentive award program and the key factors considered by the Compensation
Committee in making 2008 annual cash incentive award decisions, see “— Determination and Analysis
of 2008 Compensation for Named Executive Officers — Annual Cash Incentive Awards.”
Our long-term equity incentive program generally represents the
largest portion of the total annual compensation paid to our
executives, because we believe that equity-based compensation is
the most effective means to encourage our leaders to deliver
enhanced stockholder value over the long term. Our named
executive officers also are subject to stock ownership
guidelines as described below. Accordingly, named executive
officers have a significant amount of value and future pay at
risk based on our stock price performance. Because we only make
option grants with an exercise price at the current market price
of our common stock on the date of grant, an executive does not
realize any value from stock options unless and until our
stockholders benefit from an increase in share price following
the date of grant.
The ultimate value of performance share unit awards granted
under our long-term equity incentive award program depends upon
our EPS performance against internal targets and our relative
TSR ranking among our peer group, together with our stock price
at the time of conversion. In particular, as described more
fully below in the narrative to the table entitled
“— 2008 Grants of Plan-Based Awards,” the performance share unit awards
granted to our named executive officers in 2008 may be
converted to between 0% and 200% of a pre-set target number of
shares of our common stock (one share per unit) based primarily
on EPS performance in 2010 against a target that would be set by
the Compensation Committee in early 2010, subject to our
contemplated merger with Pfizer. The awards
generally are structured to allow the Compensation Committee
negative discretion to reduce the amount of the award that may
be earned based on EPS to reflect, among other factors it may
consider, our TSR ranking (top 2, middle 4, bottom 2) over
the period from January 1, 2008 through December 31,2010 compared with that of the peer group described in the
second paragraph under “— Peer Group
Analysis” below. We expect that these awards would operate
similarly to performance share unit awards granted to other key
employees in 2008, under which the number of shares that may be
earned based on EPS will be increased by 25 percentage
points if our TSR ranking is in the top two of our peer group
and generally will be decreased by 25 percentage points if
our TSR ranking is in the bottom two of our peer group, with a
TSR ranking in the middle category having no impact. This award
design, which utilizes a target number of shares that assumes
our achievement of 100% of the 2010 EPS target and a “top
2” TSR ranking for the three-year period (i.e., the target
number of performance share unit awards granted to named
executive officers was increased by 25%), was instituted for the
grants made to named executive officers in 2007 and 2008 and is
intended to preserve our ability to deduct this compensation
under Section 162(m) of the Internal Revenue Code.
14
Basing the number of shares earned upon conversion of
performance share unit awards primarily on EPS, with TSR ranking
serving as a key additional factor, reflects two important sets
of corporate objectives. First is Wyeth’s performance
against our internal goals and guidance to the financial
community. Second is our relative stock price and dividend
performance against that of our peer companies. We have selected
EPS as the financial measure of performance for performance
share unit awards, because we believe that the majority of
investors use EPS as the primary method for evaluating our
annual financial performance. The EPS target for a given year is
not established by formula. Rather, after considering
Wyeth’s business goals and anticipated challenges for the
year in question, during the first 90 days of the
applicable performance year the Compensation Committee sets a
target that is designed to encourage superior company
performance. Typically, the EPS target established by the
Compensation Committee has been consistent with our earnings
guidance range announced to the financial community. We use EPS
for a single performance year (i.e., the third year of the
award) rather than over a period of years due to the volatile
and dynamic nature of our industry where a single unexpected
event early in a performance period could predetermine whether
or not targets would be met over a longer period and thereby
dilute the intended incentive effect. This is particularly
evident in the case of a challenge to a patent during the patent
term of a blockbuster product, market reaction to clinical trial
results or negative publicity related to the perceived safety or
efficacy of a marketed product (whether or not supported by
medical evidence). This structure, coupled with our stock
ownership guidelines, reflects long-term performance and aligns
with stockholder interests.
The Compensation Committee retains the ability to exclude
certain significant items in determining whether EPS targets
were achieved and has, in the past, excluded both positive and
negative items in making this determination. These significant
items are excluded because they are considered to be
non-recurring or unusual in nature and are of such significance
or magnitude that their inclusion would not present an accurate
reflection of the underlying operating performance of Wyeth. For
example, in 2006, 2007 and 2008 we excluded charges related to
our productivity initiatives, and in 2006 we also excluded an
income tax credit related to a reduction of certain deferred tax
asset valuation allowances. The exclusion of these non-recurring
or unusual items is consistent with how we discuss our
performance with investors and analysts and our earnings
guidance to the financial community. We also specifically
exclude equity-based compensation from both the target and our
determination of EPS achieved for purposes of these awards.
For 2008, an average of approximately 76% of the total direct
compensation received by our named executive officers consisted
of performance-based compensation.
Determination
and Analysis of 2008 Compensation for Named Executive
Officers
The Compensation Committee made compensation decisions in 2008
on an
element-by-element
basis at different points during the year. However, the
Compensation Committee made decisions for each element in the
context of the total compensation package for each named
executive officer and the relationship of that element to the
other elements of compensation, including the impact on
retirement benefits. As described above, beginning in 2009,
Wyeth is implementing a compensation calendar alignment
initiative under which
the time period for making key compensation decisions for base
salary, annual cash incentive awards and annual long-term
incentive grants is being consolidated into a single cycle in
the first quarter of the year.
15
The Compensation Committee targets at or near the median of our
peer group (as described under “— Peer Group
Analysis”) for total direct
compensation, as may be adjusted by our Chief Executive
Officer’s and the Compensation Committee’s assessment
of the executive, which often takes into account Wyeth and
individual performance, experience, skills, potential for
advancement, relative tenure in position, current
responsibilities relative to other executives within Wyeth,
retention objectives, succession planning and other factors.
However, at times when merited by Wyeth and individual
performance as determined by the Compensation Committee based on
the facts and circumstances and after taking into account these
other factors, the Compensation Committee may award a total
direct compensation package in excess of the median. The
Compensation Committee may also consider fluctuations in stock
price and Wyeth’s performance relative to that of the other
companies within our peer group, including, for example,
comparative TSR or EPS performance or research and development
progress. In conducting its compensation analysis, the
Compensation Committee reviews the competitiveness of total
direct compensation, as well as of each individual element,
recognizing that each individual component may be higher or
lower than the median as a result of the above and other factors
with an ultimate target of total direct compensation at or near
the median.
In general, absent extraordinary circumstances and after taking
into account the above individual factors, base salary levels
typically approximate the peer group median, with annual cash
incentive awards and long-term equity incentive awards operating
as the potential mechanisms for distinction. In the case of
newly promoted executives, the Compensation Committee often sets
the new base salary at a level that allows the Compensation
Committee to recognize the promotion to a new role while at the
same time (1) reflecting relative experience in the new
role to that of individuals holding similar positions at peer
companies, and (2) providing the Compensation Committee the
opportunity to reward future performance and development. See
“Committees of the Wyeth Board of
Directors” under “Item 10. Directors, Executive Officers and Corporate Governance” for a discussion of
the Compensation Committee’s process for determining
compensation for our named executive officers.
The key decisions made by the Compensation Committee with
respect to 2008 compensation for our named executive officers
are described below. In each case, the Compensation Committee
viewed the individual compensation component and the resulting
total direct compensation for our named executive officers as
being within a reasonable range around the median of our peer
group, after accounting for the factors and considerations
described above.
Consistent with our objectives of attracting, retaining and
motivating top-tier performance from our executives, the
Compensation Committee generally does not view aggregate amounts
earned or benefits accumulated by an executive from prior
service with Wyeth as a significant factor in making current
compensation decisions. Rather, the Compensation Committee bases
current compensation decisions primarily on the current business
environment and performance of each executive and his or her
role in the overall performance of Wyeth during the subject
period. Amounts realized upon vesting or exercise of equity
awards do not impact pension benefits, which are determined by
reference to formulas set forth in our pension plans that do not
include equity in the calculations.
Base
Salary
Base salaries for senior executives in 2008 and 2009 were set in
the preceding November and typically apply for the entire
following calendar year, except in special circumstances, such
as when an executive is promoted
and/or
assumes increased responsibilities during the year. Pursuant to
the compensation calendar alignment initiative referenced above,
subject to our contemplated merger with Pfizer, we expect that
base salary decisions for our most senior executives, along with
annual cash incentive awards and long-term incentive awards,
will be made in the first quarter of each year beginning in 2010.
2008 Base Salary Determinations. In November
2007, the Compensation Committee determined the base salary
increases for our named executive officers that became effective
at the beginning of 2008. The Compensation Committee recognized
the promotion of Mr. Poussot to President and Chief
Executive Officer by setting his base salary at $1,450,000 for
2008, which was approximately 16% below the median of the peer
group. In determining Mr. Poussot’s salary increase,
the Compensation Committee reviewed, among other things, market
data regarding compensation arrangements for recently appointed
chief executive officers, Mr. Poussot’s long tenure
with Wyeth and his significant experience in the pharmaceutical
industry.
Mr. Norden’s 2008 base salary increase of
10% was intended to reflect his strong performance since his
promotion to Chief Financial Officer and, as a result, to bring
his salary closer to the peer group median. The Compensation
Committee increased Mr. Mahady’s 2008 base salary by
approximately 16% over his 2007 base salary as a result of his
promotion to Senior Vice President, Wyeth and President, Wyeth
Pharmaceuticals effective January 1, 2008, which gave him
additional responsibility for our Pharmaceuticals and Consumer
Healthcare manufacturing and distribution operations.
Mr. Essner’s base salary rate during the time of his
employment in 2008 remained unchanged from 2007, as provided in
his employment agreement. Mr. Stein’s 10% base salary
increase for 2008 was intended to reflect his experience, tenure
in role, and strong performance in managing company litigation
matters, as well as to bring his salary closer to the peer group
median. For Dr. Dolsten, who joined Wyeth in June 2008,
annual base salary was set at $750,000, in consideration of his
experience level, positioning against the peer group median and
internal senior executive pay levels. The Compensation Committee
approved a 3.5% increase in base salary for Dr. Ruffolo for
2008, which was consistent with the salary increases for other
executives.
16
2009 Base Salary Determinations. In November
2008, the Compensation Committee determined the base salary
increases for our named executive officers that became effective
at the beginning of 2009. The Compensation Committee recognized
the success of Mr. Poussot’s first year as President
and Chief Executive Officer, as well as his additional role as
Chairman beginning in June 2008, by increasing his base salary
by 6.9% to $1,550,000 for 2009, which is approximately 10% below
the median of the peer group. In addition, in determining
Mr. Poussot’s salary increase, the Compensation
Committee recognized Mr. Poussot’s leadership during
Wyeth’s response to the “at risk” launch of
generic competition to Protonix, including the deployment
of Project Impact. The Compensation Committee also considered
the tight clustering of CEO base salaries at our peer companies.
Mr. Norden’s 2009 base salary increase of 10.4% was
intended to reflect his continued strong performance in his
first full year as Chief Financial Officer and, as a result, to
continue to bring his salary closer to, but still approximately
7.5% below, the peer group median. The Compensation Committee
approved a 5.3% increase in base salary for Dr. Dolsten,
which is approximately 19% below the median of our peer group,
reflecting his tenure in the role. The Compensation Committee
also approved 4.0% increases in the base salaries for each of
Messrs. Mahady and Stein, which were consistent with the
range of salary increases for other executives.
Annual
Cash Incentive Awards
The Compensation Committee determines, and the Wyeth board of
directors ratifies, the annual cash incentive awards payable to
our named executive officers, which are paid following
completion of the fiscal year (following receipt of the audit
report for the fiscal year’s financial statements). These
awards generally are paid under our stockholder approved
Executive Incentive Plan. While the Executive Incentive Plan
sets the putative maximum amount for any individual annual cash
incentive award (two-tenths of one percent of consolidated net
earnings, if any, as adjusted for unusual or infrequent items in
accordance with U.S. generally accepted accounting
principles), each executive is evaluated based on his individual
performance and contribution to Wyeth’s overall performance
taking into account the context of the business environment, and
the Compensation Committee has full discretion (subject to the
maximum award amount) to determine the annual cash incentive
award to be paid to each executive. In recent years, annual cash incentive awards
for named executive officers have typically ranged between 100%
and 200% of base salary. Our annual cash incentive awards are
reported in the “— Summary Compensation
Table” as non-equity incentive
plan compensation.
In connection with annual cash incentive awards, during the
first quarter of each year, the Compensation Committee reviews
management’s business plan for Wyeth, which contains
performance objectives that are both short- and long-term in
nature and are reflective of the challenges in the
pharmaceutical industry. The Compensation Committee’s
review of the business plan generally focuses on financial goals
for Wyeth, product performance objectives, cost management, and
key research and development milestones.
With the assistance of management, the Compensation Committee tracks
performance against the plan during the year, including through
financial performance and research and development reviews that
highlight both progress and shortfalls. At the first
Compensation Committee meeting after the end of each year, both
the Compensation Committee and the Wyeth board of directors,
together with management, review Wyeth’s performance versus
the plan and also consider additional factors, such as
unanticipated events. The Compensation Committee also reviews
each individual named executive officer’s performance
relative to Wyeth’s financial and other objectives for the
prior year.
17
Annual cash incentive awards are not based on a formulaic
approach. Rather, annual cash incentive awards are based on the
Compensation Committee’s assessment of Wyeth’s
performance against the business plan during the calendar year,
the Compensation Committee’s assessment (as informed by its
interactions with these executives at various points in the
year) of each individual executive’s contribution to that
performance, and other individual accomplishments, taking into
account any unexpected developments impacting performance
against the business plan. The Compensation Committee does not
set a specific target for these awards and the ultimate award is
determined at the discretion of the Compensation Committee based
upon this analysis of Wyeth and individual performance, with
competitive market positioning considered as a guide to the
range of potential awards. The Compensation Committee relies
heavily on measurable performance criteria in evaluating company
performance, with achievement of our financial goals for Wyeth
overall typically the most significant factor in the
Compensation Committee’s determination of annual cash
incentive awards to our named executive officers. However, we do
not prospectively set all or any specific financial goal or
other element of the business plan as a specific Wyeth goal or
target for purposes of these awards.
In early 2009, the Compensation Committee made its
determinations of the annual cash incentive awards for our
senior executives for the 2008 performance year based on a
variety of factors, including Wyeth’s performance and the
competitiveness of total direct compensation.
The Compensation Committee awarded Mr. Poussot an annual
cash incentive of $2,750,000, an increase of 37.5% over 2007,
reflecting its assessment of combined 2008 company and
individual performance, including Wyeth’s financial results
for 2008 and Mr. Poussot’s performance in his first
year as Chairman, President and Chief Executive Officer. Among
the individual performance factors, the Compensation Committee
considered the deftness and competency displayed by
Mr. Poussot in responding to the “at risk” launch
of generic competition to Protonix, which the
Compensation Committee believes may contribute to Wyeth’s
ability to address future risks of generic competition to other
products; Wyeth’s positive response to challenges in the
research and development area of the business;
Mr. Poussot’s expansion of strategic planning to a
five-year cycle and his articulated vision for Wyeth based on a
strategy of innovation, diversification and accelerated growth
market expansion; and Mr. Poussot’s outstanding work
on the contemplated merger with Pfizer. The Compensation
Committee also considered the level of bonuses recommended for
our other named executive officers, market data for bonus and
cash compensation for chief executive officers at our peer
companies, the annual cash incentive award made to
Mr. Essner in 2007, and Mr. Poussot’s tenure as
Chief Executive Officer and Chairman. This resulted in total
direct compensation for Mr. Poussot approximately 15% below
the peer group median.
For Wyeth’s other named executive officers, the
Compensation Committee adopted the recommendations made by
Mr. Poussot. Mr. Norden’s 2008 annual cash
incentive award of $1,078,000, an increase of approximately 44%
over 2007 and resulting in total direct compensation
approximating the peer group median, reflects his performance
during his first full year as Senior Vice President and Chief
Financial Officer, including Wyeth exceeding its financial
targets; Mr. Norden’s sponsorship of Project Impact,
with targeted savings of $1.0 to $1.5 billion when fully implemented; his
execution of Wyeth’s foreign exchange hedging program; and
Mr. Norden’s outstanding work on the contemplated
merger with Pfizer. His award also reflects his leadership and
command of his role as Chief Financial Officer. Mr. Mahady
received an annual cash incentive award of $1,341,000, an
increase of approximately 22% over his 2007 award and resulting
in total direct compensation approximately 10% above the peer
group median, reflecting his strong performance in 2008. Key
individual performance factors considered in determining
Mr. Mahady’s award were: the 2% increase in 2008
Pharmaceutical division net revenues over 2007;
Mr. Mahady’s key role in Wyeth’s response to the
“at risk” launch of generic competition to
Protonix, including the launch of our own generic; the
expansion of Enbrel’s position as the top biotech product and the expansion of Prevnar sales
volume, which resulted in the highest
12-month
revenue attainment of any vaccine in history; and his
development and support of Project Impact initiatives.
For
Mr. Stein, who received an annual cash incentive award of
$978,000, an increase of approximately 9.9% over his 2007 award
and resulting in total direct compensation approximately 17%
above the peer group median, the Compensation Committee
considered Mr. Stein’s management of product liability
litigation, including diet drug and hormone therapy litigation
and patent litigation, such as our litigation relating to
Protonix and Effexor, as well as his development
and support of Project Impact initiatives and outstanding work
on the contemplated merger with Pfizer. Dr. Dolsten
received a 2008 annual cash incentive award of $750,000, the
guaranteed minimum bonus under the terms of his offer letter.
18
Under the terms of Mr. Essner’s employment agreement,
Mr. Essner was entitled to an annual cash incentive award
for 2008 of no less than his annual cash incentive award for
2007, prorated for time actually worked in 2008. Pursuant to
this agreement, the Compensation Committee awarded
Mr. Essner an annual cash incentive award of $1,600,000,
which represents an amount approximately equal to his 2007 bonus
prorated for the period of his employment in 2008.
Under the terms of Dr. Ruffolo’s consulting agreement,
Dr. Ruffolo was entitled to receive an annual cash
incentive award for 2008 (pro-rated for the period of his
employment during 2008), in an amount determined by the
Compensation Committee. Pursuant to that agreement, the
Compensation Committee approved an award of $645,000, which
represents an amount approximately equal to his 2007 annual cash
incentive award prorated for the period of his employment in
2008.
These determinations of annual cash incentive awards were made
against the backdrop of Wyeth’s overall performance in
2008, including the increase in worldwide net revenue of 2% to
$22.8 billion for the 2008 full year, driven by growth in
excess of 10% for Prevnar, Zosyn and nutritional
products and 27% growth for Enbrel and the favorable
impact of foreign exchange, with greater than 50% of net revenue
coming from outside the United States. The Compensation
Committee also considered the decrease in net income and diluted
earnings per share of 4% and 3%, respectively, for the 2008 full
year as compared to 2007, and that diluted earnings per share,
before certain significant items, for 2008 was comparable to
2007 and exceeded budget. In addition, the Compensation
Committee considered our total stockholder return, which was
negative 12.6% for the period from January 1, 2008 through
December 31, 2008, ranking fourth in our peer group, but
which compared favorably with total stockholder return
performance of the S&P 500 Index and the market-weighted
Peer Group Index — performing better than the S&P
500 Index by 24.4 percentage points and the market-weighted
Peer Group Index by 10.2 percentage points. The
Compensation Committee also considered the achievement of
certain research and development milestones, such as new product
approvals for Pristiq for the treatment of major
depressive disorder, Xyntha and subcutaneous
Relistor, and delays in the regulatory review of several
of our other pipeline products.
Long-Term
Equity Incentives
We aim to offer a long-term incentive opportunity to our named
executive officers that, if we achieve or exceed our performance
goals, conveys competitive value when compared with our peer
companies. However, the ultimate value of equity incentive
awards is determined by our performance, with the value
fluctuating both above and below our targets depending upon our
stock price and other performance metrics. The Compensation
Committee considers both prior years’ awards and the peer
group market in setting the grant levels of these awards, and as
a general matter, annual equity awards typically represent a
number of options and performance share units consistent with
the previous year’s award, unless there is a significant
change in performance, responsibility or market practices. In
2008, approximately 30% of the estimated value of long-term
equity incentive awards granted to current named executive
officers as part of the annual grant program (i.e., excluding
the special RSUs described below) was in the form of stock options, and
approximately 70% of the estimated value was in the form of
performance share unit awards.
2008 Grants. In April 2008, the Compensation
Committee granted the stock options and performance share unit
awards shown in the table labeled “2008 Grants of
Plan-Based Awards” to our named executive officers and
these grants were ratified by the Wyeth board of directors. In
addition, certain named executive officers also received RSUs in 2008.
The difference in magnitude
between Mr. Essner’s and Mr. Poussot’s 2008
equity grants and the grants to our other named executive
officers is primarily market driven, i.e., intended to represent
an opportunity consistent with the value of equity grants made
to other chairmen and chief executive officers in our peer group.
19
In determining the number of stock options and performance share
unit awards granted to Mr. Poussot in April 2008, the
Compensation Committee reviewed the market trends for equity
grants to chief executive officers, and awarded a grant that
approximated the median for peer group CEOs, reflecting
Mr. Poussot’s new position as Chief Executive Officer,
the Compensation Committee’s confidence in
Mr. Poussot, the deftness and competency displayed by
Mr. Poussot in handling difficult issues, such as the
“at risk” launch of generic competition to
Protonix, and Mr. Poussot’s role in assuming an
efficient and successful succession in leadership. In addition,
by awarding Mr. Poussot an equity grant equivalent to the
number of options and performance share unit awards granted to
Mr. Essner in his final year as our chief executive
officer, the Compensation Committee sought to acknowledge
Mr. Poussot’s leadership position and the forward
looking nature of equity compensation, as well as to address
internal pay equity considerations in connection with the 2008
grant to Mr. Essner. The Compensation Committee also
considered that the grant date fair value of the award made to
Mr. Poussot in 2008 was lower than the award made to
Mr. Essner in 2007 as a result of Wyeth’s lower stock
price.
Mr. Poussot also was granted a special award of 120,000
RSUs upon his promotion to Chief Executive Officer in January
2008. These units vest in one-third increments on the third,
fourth and fifth anniversaries of the grant date and do not
accelerate upon retirement. The Compensation Committee believes
that the structure of this award serves two principal purposes:
retention and rewarding increases in stockholder value. The
Compensation Committee approved the structure and value of this
award, in consultation with its compensation consultant,
following a review of stock awards granted to newly promoted or
hired chief executive officers at peer and Fortune
250 companies in an effort to review a broad data set of
recent chief executive officer appointments. This analysis
indicated that a majority of internally promoted chief executive
officers received a promotional equity grant and that the value
of the award to Mr. Poussot would be consistent with
prevailing market practice.
Mr. Norden’s 2008 grant reflects his first stock
option grant since becoming Chief Financial Officer, and
accordingly, represents a significant increase in number over
his prior year’s option grant. In addition, by increasing
the number of stock options and performance share unit awards
awarded over the numbers awarded in 2007, the Compensation
Committee rewarded Mr. Norden’s leadership and
financial performance after a full year as Chief Financial
Officer and sought to signal its confidence in
Mr. Norden’s capabilities and critical role.
Mr. Norden also received a special retention award of
19,250 RSUs, which will vest in one-third increments on the
first, second and third anniversaries of the date of grant. This
special grant was awarded to recognize Mr. Norden’s
highly marketable talent and bring his equity and total direct
compensation opportunity, when taken together with his other
grants, closer to the median for chief financial officers in the
peer group.
The Compensation Committee increased the number of options and
performance share unit awards granted to Mr. Mahady in each
case by approximately 25% over his 2007 award in an effort to
recognize Mr. Mahady’s expanded responsibilities in
2008, his overall strong and consistent performance in
pharmaceutical product revenue growth, and his long service and
experience with Wyeth. For Mr. Stein, the Compensation
Committee awarded an increase of approximately 10% in the number
of both stock options and performance share unit awards as
compared to his 2007 grant to reflect his strong performance. In
each case, the grant date fair value of the award in 2008 was
lower than in 2007 as a result of Wyeth’s lower stock price.
For Dr. Dolsten, who received an equity grant in connection
with his employment, the Compensation Committee’s goal was
to compensate Dr. Dolsten for value he was forfeiting by
leaving his prior employment, as well as to provide him with an
equity opportunity similar to that provided to Dr. Ruffolo
when he served as President, Wyeth Research.
20
The target number of performance share unit awards granted to
our named executive officers also reflects the “negative
discretion” design of these awards described under the
caption “— Pay for Performance” and in the
narrative to the table entitled “— 2008 Grants of
Plan-Based Awards.”
Under the terms of Mr. Essner’s employment agreement,
Mr. Essner was eligible to receive a long-term equity
incentive award in April 2008 as determined by the Compensation
Committee. In determining to award Mr. Essner a number of
stock options and performance share unit awards comparable to
his 2007 grant (after adjusting for tax related differences in
year-over-year award design), the Compensation Committee noted
that Mr. Essner exhibited a sustained and impressive level
of earnings growth throughout his tenure and effectively and
efficiently transitioned responsibilities to Mr. Poussot.
In addition, the Compensation Committee sought to compensate
Mr. Essner for his commitment to remain with Wyeth until
June 2008 as requested by the Wyeth board of directors and for
his continuing availability and assistance in connection with
ongoing litigation as set forth in his employment agreement. The
Compensation Committee considered both the number of options and
performance share unit awards relative to Mr. Essner’s
2007 grant, as well as the grant date fair value in determining
the final award.
The Compensation Committee also considered a number of
additional factors relating to Wyeth’s performance in
determining equity grants for all of our named executive
officers in April 2008, particularly the 6% increase in our
worldwide net revenue in the 2008 first quarter over the 2007
first quarter, despite the significant negative impact from
launches of infringing generic versions of Protonix,
driven by growth of Effexor, Enbrel, Prevnar
and nutritional products. The Compensation Committee also
considered the 5% and 3% decreases in our net income and diluted
EPS, respectively, for the 2008 first quarter over the 2007
first quarter as well as the 1% decrease in our net income,
before certain significant items, and the flat diluted EPS,
before significant items, for the 2008 first quarter over the
2007 first quarter. The Compensation Committee also considered
that TSR was negative 11.4% for the period from January 1, 2007
through December 31, 2007, performing lower than the peer
group described in the second paragraph under
“— Peer Group Analysis” by approximately 19 percentage points, and
1.5% for the period from January 1, 2008 through
April 16, 2008, outperforming the peer group described in
the second paragraph under “— Peer Group
Analysis” by approximately
11 percentage points. These calculations of TSR include
reinvestment of dividends. The Compensation Committee also noted
continued research and development progress, particularly the
FDA approval of Lybrel, Torisel, Pristiq
for major depressive disorder and Xyntha in the
preceding 12 months, as well as setbacks, such as the
termination of the collaboration agreement with Solvay
Pharmaceuticals for bifeprunox and the receipt of approvable
letters for Pristiq for the treatment of vasomotor
symptoms associated with menopause and Viviant for the
prevention of osteoporosis.
In anticipation of his retirement, the Compensation Committee
did not award any equity incentive compensation to
Dr. Ruffolo in 2008.
Conversion of Performance Share Unit Awards Granted in
2006. Performance share unit awards granted in
2006 were convertible to between 0% and 200% of a pre-set target
number of shares (one share per unit) based on EPS performance
in 2008 and TSR ranking from January 1, 2006 to
December 31, 2008. For the 2008 performance year, in early
2008 the Compensation Committee established an EPS target of
$3.58 per share and a corresponding EPS performance graph
detailing the resulting conversion of the performance share unit
awards at different levels of EPS achievement, both in excess of
and less than the EPS target. This EPS target was exclusive of
equity-based compensation. In setting the EPS target for 2008,
the Compensation Committee created a wider range around the
mid-point EPS target than in recent years in light of the
uncertainty surrounding the “at risk” generic
competition to Protonix, and also reviewed the
consistency with the assumptions made in Wyeth’s earnings
guidance. In early 2009, the Compensation Committee determined
that our actual EPS achievement, as adjusted, for 2008 was $3.68
per share (i.e., reported EPS of $3.27 for 2008, exclusive of
equity-based compensation of $0.15 per share-diluted after-tax
and charges of $0.26 per share-diluted after-tax related to our
productivity initiatives referred to as Project Impact, which
have been excluded because they are unusual due to their nature
and magnitude). In addition, the Compensation Committee
determined that our total stockholder return for the period from
2006-2008
placed us sixth among our peer group (i.e., in the middle four),
resulting in no effect upon the conversion of these awards.
Based on this achievement, performance share unit awards granted in 2006
were earned at 136% of target. See the table labeled
“— Option Exercises and Stock Vested in
2008” for a description of the
amount earned by each of our named executive officers. One
significant reason for the difference between the values shown
in the “Stock Awards” column in the
“— Summary Compensation Table” for 2008,
2007 and 2006 is the percentage of target at which performance
share unit awards were earned (i.e., 136% for 2008, 116.8% for
2007, and 200% for 2006).
21
Additional details regarding stock options and performance share
unit awards can be found in the tables labeled
“— 2008 Grants of Plan-Based Awards” and
“— Outstanding Equity Awards at
2008 Year-End” in this Form 10-K/A,
including a description of the performance share unit awards
granted in 2008, 2007 and 2006.
Post-Employment
Benefits
We offer defined benefit pension plans that provide a benefit
based on a participant’s years of service, base salary,
annual cash incentive award and age at retirement. As described
in detail in the section entitled “— Pension
Benefits” these programs reward
tenure (up to 30 years). Pension benefits vest upon
completion of five years of service and generally first become
available at age 55. If an executive (or another employee)
completes 10 or more years of service and reaches age 55
while employed, the individual becomes eligible for early
retirement and retiree medical benefits under our plans. We do
not include options, restricted stock or performance share unit
awards in calculating pension benefits.
As discussed in the section entitled “— Pension
Benefits” we maintain the
qualified Wyeth Retirement Plan — U.S., which is
available to all eligible non-union employees, the Supplemental
Executive Retirement Plan and the Executive Retirement Plan. We
also maintain a qualified 401(k) plan that provides for employee
contributions and Wyeth matching contributions of 50% up to the
first 6% of covered pay, thereby allowing employees to save for
their post-retirement economic needs. The Wyeth Supplemental
Employee Savings Plan provides a means for employees to make
contributions in excess of the Internal Revenue Code limits
applied to our qualified 401(k) plan and receive the benefit of
a Wyeth match on those contributions. See
“— Non-Qualified Deferred Compensation.” Similarly, we established
the Supplemental Executive Retirement Plan because the Wyeth
Retirement Plan — U.S. limits the benefit that
can be paid to plan participants in accordance with Internal
Revenue Code requirements. The Supplemental Executive Retirement
Plan provides a benefit for that portion of the pension benefit
based on a participant’s actual earnings that cannot be
paid from the Wyeth Retirement Plan — U.S. on
account of the Internal Revenue Code limitations. The Executive
Retirement Plan was established more than 10 years ago as a
tool to attract key experienced executives to Wyeth. The
Executive Retirement Plan provides, among other features, a
credit of three additional years of service beyond what the
executive actually has completed in computing his or her pension
benefit. This provision begins phasing out at age 62 and
completely phases out by age 65, facilitating succession.
The Executive Retirement Plan also provides for normal
retirement at age 60 rather than at age 65 (which is
the normal retirement age for our Supplemental Executive
Retirement Plan and the Wyeth Retirement Plan — U.S.).
In 2008, we amended the eligibility criteria for participation
in the Executive Retirement Plan to provide that our Chief
Financial Officer would be eligible to participate. Previously,
Mr. Norden was not eligible to participate solely as a
result of his age (he is not yet 55) though certain of the
executives who report directly to him participate in the plan as
do certain other executives who have not yet reached age 55
but were grandfathered into the plan under prior eligibility
criteria. The Compensation Committee determined that amending
the eligibility criteria to allow for CFO participation,
regardless of age, so long as the other eligibility criteria are
met, was advisable in order to achieve and maintain internal
compensation equity among Wyeth’s executive management
team. See “— Pension Benefits” for a detailed description of these plans.
We also maintain deferred compensation plans for our executives.
Our Deferred Compensation Plan allows any employee whose base
salary is in excess of $155,000 to defer a portion of his or her
base salary and annual cash incentive award in addition to what
he or she might contribute to our qualified 401(k) plan or the
Wyeth Supplemental Employee Savings Plan. This program provides
executives with a tax-advantaged manner to save for retirement
or a specific financial need.
22
Perquisites
We supply limited perquisites to our named executive officers,
which we believe are reasonable and competitive. These
perquisites include financial planning and tax preparation
services and an annual physical examination. For security and
other reasons, the Wyeth board of directors requires that, when
feasible, Mr. Poussot use the corporate aircraft for
personal flights. Prior to his retirement, this requirement also
applied to Mr. Essner. Mr. Essner is entitled to
limited continued use of the corporate aircraft pursuant to his
employment agreement as described under
“— Potential Payments upon Termination or Change
in Control.” Other executive
officers may, on rare occasions, use the corporate aircraft for
personal trips with the permission of the Chief Executive
Officer. In addition, we provided Mr. Essner with the use
of a company car and the occasional use of a car and driver
prior to his retirement, and we provide Mr. Poussot with a
car and driver. Mr. Essner is also entitled to occasional
post-employment use of a car and driver pursuant to his
employment agreement.
Our corporate headquarters is located in Madison, New Jersey,
and our Pharmaceuticals division headquarters is located in
Collegeville, Pennsylvania. As a result of their respective
promotions to President and Chief Executive Officer (January
2008) and Senior Vice President and Chief Financial Officer
(June 2007), Messrs. Poussot and Norden changed their
principal offices from Collegeville to Madison but continue to
work frequently in both locations. In lieu of relocation of
these executives from the Collegeville area to the Madison area,
beginning with their respective promotions, we are providing
Mr. Norden with a leased apartment and related expenses in
proximity to Madison and Mr. Poussot with a monthly housing
allowance to be used for housing in proximity to Madison. These
housing benefits were approved for a two-year period, following
which time the Compensation Committee intends to evaluate their
continued necessity. In addition, both of these executives are
provided with use of the corporate helicopter and company
automobiles and drivers for commuting purposes, and are
reimbursed for the tax liability for any related imputed income.
We also are providing certain relocation and commuting benefits
to Dr. Dolsten in connection with his employment.
As shown in the “— Summary Compensation
Table,” we generally reimburse
our named executive officers for the tax liability associated
with the perquisites related to, or provided in lieu of,
relocation, including commuting. We also historically have
reimbursed our Chairman and our President for the tax liability
associated with the use of a car and driver and personal (i.e.,
non-commuting and non-business) use of the corporate aircraft.
However, in order to reduce the overall cost to Wyeth,
Mr. Poussot elected not to receive a
“gross-up”
for income taxes associated with, and not to provide any
reimbursement to us for, his personal use of corporate aircraft
during 2008, resulting in net cash savings to Wyeth. See the
footnotes to the “— Summary Compensation
Table” for additional details
about these benefits.
Peer
Group Analysis
We review data, referred to as “benchmarking,” that
compares the compensation paid or awarded to our senior
executives, including our named executive officers, to that paid
or awarded to similarly situated executives at a peer group of
pharmaceutical companies consisting of Abbott Laboratories,
Amgen Inc., Bristol-Myers Squibb Company, Eli Lilly and Company,
Johnson & Johnson, Merck & Co., Inc., Pfizer
and Schering-Plough Corporation. We have selected this peer
group because these companies have a type and breadth of
activities and products, a complexity of operations and a
geographic scale similar to that of Wyeth, and we compete with
them for key experienced talent. We believe this peer
information is an important factor in ensuring the
competitiveness of our total compensation and the manner in
which we allocate compensation among the different elements.
Although benchmarking provides a valuable point of reference,
actual compensation for any particular named executive officer
may be higher or lower than the benchmark as a result of Wyeth
and individual performance, experience, skills, potential for
advancement, relative tenure in position, current
responsibilities relative to other executives within Wyeth,
retention objectives, succession planning, fluctuations in stock
price and other factors that the Compensation Committee
considers relevant.
23
As a result, the extent to which
benchmarking may impact a particular compensation decision may
vary by year and by position. In addition, benchmarking involves
inherent limitations and subjectivity, and it is often necessary
to take into account the impact of timing differences on the data
and to make judgments regarding comparability of positions and
other factors across companies. From time to time in prior years
(though not in 2008), we have considered data on a broader group
of international pharmaceutical companies for specific positions
where we did not believe that sufficient data were available
from our principal peer group.
For the total stockholder return ranking component of our
performance share unit awards, we evaluate our total stockholder
return ranking for a pre-defined three-year period against that
of a peer group of companies consisting of Abbott Laboratories,
Bristol-Myers Squibb Company, Eli Lilly and Company,
Johnson & Johnson, Merck & Co., Inc., Pfizer
and Schering-Plough Corporation. We utilize this smaller peer
group in analyzing Wyeth’s performance rather than the
larger benchmark group described above because we believe that
the investment community views this smaller group as most
comparable with Wyeth and evaluates their performance using
similar criteria. This group may be amended in the Compensation
Committee’s discretion due to mergers, consolidations or
other appropriate circumstances.
Post-Termination
Arrangements
As discussed in more detail under “— Potential
Payments upon Termination or Change in Control,” we have
entered into change in control severance agreements with members of senior management
(including our named executive officers) and other key employees
that provide for severance and other benefits following a change
in control if we or the surviving company terminates the
executive’s employment other than for “cause” or
the executive terminates his or her employment for “good
reason.” Executives and other U.S. employees who do
not have change in control severance agreements may be entitled
to severance under our Special Transaction Severance Plan if
their employment is terminated by the surviving company without
cause or the employee terminates his or her employment with good
reason following a change in control.
Our change in control severance agreements are designed to
attract and retain senior managers and other key employees and
to provide for continuity of management in the event of a
potential change in control of Wyeth, such as our contemplated
merger with Pfizer. These change in control agreements were
introduced in 1998 in order to help retain our executive
officers and key employees in an environment of publicized
potential merger discussions and growing concerns about the
potential impact of our diet drug litigation. These agreements
have proved critically important over the years in retaining and
continuing to attract key talent to successfully manage Wyeth
through industry consolidation, rapid change in the
pharmaceutical business environment, important new product
launches, the continued challenges of our diet drug litigation
and the negative impact on the revenue of our Premarin
family from the July 2002 hormone therapy subset of the
Women’s Health Initiative study. In response to the changed
circumstances of both Wyeth and the pharmaceutical industry, in
2006 the Compensation Committee undertook a review of the 1998
agreements. The Compensation Committee determined that, while
these agreements remained important in attracting and retaining
key executives in light of industry consolidation and
competitiveness and while they generally were consistent with
prevailing norms, the potential payments and benefits under the
1998 agreements could be reduced without compromising the
retention of our key employees or our competitiveness in
attracting key talent. Accordingly, the 2006 agreements sought
to align certain terms of these agreements more closely with the
then current industry benchmark and to streamline certain
provisions. The 2006 agreements continue to provide appropriate
protection to senior managers (including the named executive
officers) and other key employees if a change in control occurs
and the individual’s employment is terminated, allowing
these executives and employees to minimize individual employment
concerns when considering and facilitating corporate
transactions that are in the best interests of our stockholders.
These agreements also are intended to help retain executives and
other key employees during continued industry consolidation. For
a discussion of these agreements and the effects of various
terminations on outstanding equity awards, see
“— Potential Payments upon Termination or Change
in Control.” A discussion of
amounts potentially payable to our executive officers under the
change in control severance agreements in the event of a
qualifying termination after the closing of the contemplated
merger with Pfizer
will be set forth separately in the proxy statement to be mailed to
our stockholders relating to the approval of the transaction.
24
In December 2007, we entered into a letter agreement amending
Mr. Essner’s employment agreement in order to reflect
his announced retirement as Chief Executive Officer, effective
December 31, 2007, and his continued role as an employee
and Chairman of the Wyeth board of directors during 2008. The
amended agreement confirmed that Mr. Essner would not be
entitled to any severance payments or pension enhancements under
the agreement as a result of his retirement as Chief Executive
Officer. Among other things, the letter agreement set
Mr. Essner’s annual base salary rate for 2008 at his
2007 salary of $1,728,500 and provided that Mr. Essner
would be eligible for a cash incentive award in respect of 2008
that would be no less than the award he earned in respect of
2007, prorated as applicable. The amended employment agreement
provides Mr. Essner with specified post-employment benefits
for a five-year period following his retirement.
As part of the terms of Dr. Dolsten’s employment, we
agreed to provide him with two years of severance should his
employment be terminated for any reason without cause, other
than in connection with a change in control, in which case his
change in control severance agreement would apply. We also
entered into a consulting agreement with Dr. Ruffolo upon
his retirement in order to retain his continued consulting
services for a one-year period following his retirement. See
“— Potential Payments upon Termination or Change
in Control” for a description of
these agreements.
Other
Factors and Information Considered in Compensation
Decisions
Tax
Deductibility
In allocating compensation among base salary, annual cash
incentive awards and long-term equity incentive awards, the
Compensation Committee considers the potential tax deductibility
of various forms of compensation.
Section 162(m) of the Internal Revenue Code generally
disallows a tax deduction for public companies for
non-performance-based compensation of more than $1 million
paid in any year to the Chief Executive Officer and certain
other highly compensated officers required to be reported in our
annual proxy statement. Accordingly, base salaries and other
non-performance-based compensation as defined in
Section 162(m) in excess of $1 million paid to these
officers in any year is not deductible by Wyeth. There is an
exception under Section 162(m) for performance-based
compensation meeting specified requirements. Our stock options,
annual cash incentive awards and, beginning with the 2007 grants
to these officers, our performance share unit awards, are all
generally structured in a manner intended to preserve tax
deductibility.
We have paid, and in the future may pay, compensation that may
not be fully tax deductible for purposes of Section 162(m),
where such compensation is, in the judgment of the Compensation
Committee, consistent with our overall compensation objectives
and philosophy. For example, reflective of his performance and
leadership role within Wyeth, Mr. Poussot’s base
salary is in excess of $1 million. In addition, as
described above, in 2008 we made a special promotional grant of
service-vesting RSUs to Mr. Poussot in connection with his
promotion to Chief Executive Officer and a special grant of
service-vesting RSUs to Mr. Norden to adjust his total
equity opportunity to the market for chief financial officers,
which may not be tax deductible on account of
Section 162(m).
Accounting
Implications
Each element of the compensation we pay to our executives is
expensed in our financial statements as required by
U.S. generally accepted accounting principles. As one of
many factors, we consider the financial statement impact in
determining the amount of, and allocation among the elements of,
compensation.
Compensation
Consultant
See “Committees of the Wyeth Board of
Directors” under “Item 10. Directors, Executive
Officers and Corporate Governance” for a discussion of
the use of compensation consultants by the Compensation
Committee and management. The Compensation Committee’s
compensation consultant is not affiliated with the compensation
consultant engaged by management.
25
Timing
of Equity Grants and Equity Grant Policy
Equity awards typically are granted to all eligible employees,
including our named executive officers, on the date of a
regularly scheduled meeting of the Compensation Committee. In
2008 and prior years, these annual grants were made in
connection with our annual stockholders meeting (generally in
April of each year). The Compensation Committee sets the level
of the award and, in connection with stock option grants, the
exercise price on the date of the grant, which under the terms
of our various stock incentive plans, must be at or above the
closing price of our common stock on the grant date. In addition
to the annual grants, executives may receive equity awards in
connection with promotions or other extraordinary circumstances,
such as the grant to Mr. Poussot on January 2, 2008 in
connection with his promotion to Chief Executive Officer and the
special RSUs granted to Mr. Norden on April 24, 2008.
The Compensation Committee determined each of these awards at a
regularly scheduled meeting held on or prior to the grant date,
with a grant date of the effective date of the promotion for
Mr. Poussot and a grant date of the date of the meeting for
Mr. Norden. Newly hired executives also receive an equity
award in connection with their employment, such as the grant of
stock options and performance share unit awards made to
Dr. Dolsten in June 2008 in connection with his employment.
These awards are granted on the date of the Compensation
Committee meeting immediately following the date of hire or
promotion or, in some cases, on the first day of employment if
the Compensation Committee has acted on the matter at a meeting
in advance of such date of hire. In addition, the Compensation
Committee has delegated to the Special Interim Grant Committee,
on which only our Chief Executive Officer serves, the authority
to grant options and RSUs to middle management in connection
with initial employment, promotion, or first attainment of a
salary level entitling an employee to a grant of options
and/or RSUs.
Such options are granted on the date our Chief Executive Officer
approves them and have an exercise price equal to fair market
value on the date of grant. This delegated authority does not
extend to granting awards to our named executive officers or
other officers, any employee who is subject to Section 16
of the Exchange Act or any employee who is eligible to receive
grants in the Executive Grant Category. The Executive Grant
Category in 2008 covered employees with a minimum annual base
salary of $194,000.
We do not have a program, plan or practice of timing equity
grants to our executives in coordination with the release of
material non-public information. The vast majority of our equity
awards (to both our executive officers and other eligible
employees), including the annual grant, are granted at our
regularly scheduled Compensation Committee meetings. Because
these meetings generally are scheduled one year in advance, the
timing of disclosure by Wyeth of material non-public information
typically does not impact the timing of our equity grants.
However, before approving any grant of equity, including a
regularly scheduled annual grant, the Compensation Committee
views it as part of its responsibility to take into account all
facts and circumstances so as to ensure that the grant is
consistent with our compensation philosophy and objectives.
Policy
on the Recoupment of Incentive-Based Compensation
In September 2007, the Wyeth board of directors, upon the
recommendation of the Compensation Committee, adopted a policy
on the recoupment of performance-based compensation in
restatement situations. The policy provides that if the Wyeth
board of directors determines that a senior executive has
engaged in fraud or willful misconduct that caused or otherwise
contributed to the need for a material restatement of our
financial results, the Wyeth board of directors will review all
performance-based compensation awarded to or earned by that
senior executive on the basis of performance during fiscal
periods materially affected by the restatement. If, in the view
of the Wyeth board of directors, the performance-based
compensation would have been lower if it had been based on the
restated results, the Wyeth board of directors will, to the
extent permitted by applicable law, seek recoupment from that
senior executive of any portion of such performance-based
compensation as it deems appropriate after a review of all
relevant facts and circumstances. The Wyeth board of directors
may delegate one or more of the duties or powers under the
policy to one or more committees of the Wyeth board of directors
consisting solely of independent directors.
26
Executive
Stock Ownership Guidelines
In order to encourage significant ownership of stock in Wyeth by
senior executives and by virtue of that ownership align the
personal interests of senior executives with those of our
stockholders, we have adopted stock ownership guidelines for senior executives.
Authority to
administer these guidelines has been delegated to the Chief
Executive Officer, who reports periodically to the Compensation
Committee with respect to these matters. The guideline for our
Chairman and Chief Executive Officer is Wyeth share ownership
with a value of at least eight times base salary. Officers who
report directly to our Chief Executive Officer have a guideline
of Wyeth share ownership value of at least six times base
salary, and other executives who are members of the Management,
Law/Regulatory Review, Human Resources, Benefits and
Compensation, and Operations committees have a guideline of four
times base salary. Other executives and key employees also are
encouraged to maintain share ownership. Executives may increase
their share ownership through a variety of methods, including
the receipt and retention of the various forms of equity awards
granted by Wyeth (including a portion of the value of vested
in-the-money stock options and unvested performance shares), and
are expected to achieve target levels within five years. The
Compensation Committee reviews the guidelines and the state of
our senior executives’ compliance with the guidelines
regularly. In connection with its annual assessment undertaken
in November 2008, the Compensation Committee determined that as
a result of our then current stock price and recent market
activity, only some of our named executive officers met their
ownership guidelines, including Mr. Poussot who exceeded
his guideline by several multiples. Employees are not permitted
to enter into short sales or other transactions in derivatives
of our common stock.
27
Report of
the Compensation Committee of the Wyeth Board of
Directors
The Compensation and Benefits Committee of the Wyeth board of
directors has reviewed and discussed the section entitled
“— Compensation Discussion and Analysis”
with management and, based on such review and discussions, has
recommended to the Wyeth board of directors that the
“— Compensation Discussion and Analysis” be
included in this Form 10-K/A for filing with the
SEC.
COMPENSATION AND BENEFITS COMMITTEE
Victor F. Ganzi, Chairman
Robert M. Amen
Michael J. Critelli
John P. Mascotte
Gary L. Rogers
28
Summary
Compensation Table
The following table summarizes the total compensation earned for
2008, 2007 and 2006 by the persons serving in 2008 as our
Chairman, President and Chief Executive Officer
(Mr. Poussot), our Senior Vice President and Chief
Financial Officer (Mr. Norden), our former Chairman of the
Wyeth board of directors (Mr. Essner), our former Senior
Vice President and President, Wyeth Research (Dr. Ruffolo)
and our three next most highly paid executive officers
(Mr. Mahady, Mr. Stein and Dr. Dolsten),
calculated and presented in accordance with the rules and
regulations of the SEC. The table below shows
Mr. Norden’s compensation for 2008 and 2007 only, as
he first became a named executive officer in 2007, and
Mr. Stein’s and Dr. Dolsten’s compensation
for 2008 only, as they first became named executive officers in
2008. We refer to these seven persons throughout the
compensation tables as our named executive officers.
As discussed more fully under “— Compensation
Discussion and Analysis,”
compensation for our named executive officers consists of a
combination of base salary, annual cash incentive awards (i.e.,
cash bonuses), long-term equity incentive awards, pension
benefits and perquisites. Long-term equity incentive
compensation is awarded under our stock incentive plans,
generally in the form of annual grants of stock options and
performance share unit awards.
Non-Equity
Incentive
Change in
All
Stock
Option
Plan
Pension
Other
Name and
Salary (1)
Awards (2)
Awards (3)
Compensation (4)
Value (5)
Compensation(6)
Total
Principal Position
Year
($)
($)
($)
($)
($)
($)
($)
Bernard Poussot
2008
$
1,450,000
$
8,041,484
$
3,796,200
$
2,750,000
$
4,662,990
$
656,723
$
21,357,397
Chairman, President and
2007
$
1,050,400
$
4,349,760
$
2,590,040
$
2,000,000
$
2,400,863
$
263,845
$
12,654,908
Chief Executive Officer
2006
$
967,035
$
5,518,110
$
4,060,380
$
1,700,000
$
2,003,211
$
160,112
$
14,408,848
Gregory Norden
2008
$
770,000
$
2,454,967
$
600,310
$
1,078,000
$
2,629,028
$
199,370
$
7,731,675
Senior Vice President and Chief Financial Officer
2007
$
583,033
$
1,027,240
$
468,970
$
750,000
$
167,817
$
75,148
$
3,072,208
Joseph M. Mahady
2008
$
925,000
$
3,012,655
$
2,182,120
$
1,341,000
$
2,276,187
$
34,250
$
9,771,212
Senior Vice President and
2007
$
787,233
$
2,313,180
$
2,118,050
$
1,100,000
$
823,207
$
29,117
$
7,170,787
President, Wyeth Pharmaceuticals
2006
$
695,600
$
3,875,270
$
1,441,860
$
950,000
$
1,390,888
$
26,368
$
8,379,986
Lawrence V. Stein
2008
$
724,220
$
2,168,619
$
892,620
$
978,000
$
1,541,441
$
28,050
$
6,332,950
Senior Vice President and General Counsel
Mikael Dolsten, M.D., Ph.D.
2008
$
406,250
$
1,414,537
$
92,899
$
750,000
—
$
105,771
$
2,769,457
Senior Vice President and President, Wyeth Research
Robert Essner
2008
$
857,703
$
11,717,960
$
3,796,200
$
1,600,000
$
2,566,308
$
338,660
$
20,876,831
Former Chairman
2007
$
1,728,500
$
10,169,080
$
4,691,600
$
3,200,000
$
4,083,894
$
232,057
$
24,105,131
2006
$
1,662,000
$
18,201,380
$
5,305,400
$
3,000,000
$
4,531,044
$
147,138
$
32,846,962
Robert R. Ruffolo, Jr., Ph.D
2008
$
459,458
$
2,483,198
—
$
645,000
$
1,023,321
$
140,229
$
4,751,206
Former Senior
2007
$
756,100
$
2,509,610
$
1,394,800
$
1,100,000
$
880,411
$
23,183
$
6,664,104
Vice President and President,
Wyeth Research
2006
$
727,000
$
4,345,220
$
1,423,400
$
1,100,000
$
964,881
$
27,310
$
8,587,811
(1)
The amount shown in the “Salary” column for
Dr. Dolsten reflects payment of base salary at an annual
rate of $750,000 from his date of hire, and for Mr. Essner
and Dr. Ruffolo reflects payment of base salary at an
annual rate of $1,728,500 and $782,500, respectively, through
their dates of retirement. Each of our named executive officers
deferred a portion of his base salary into the Wyeth Savings
Plan, as amended (401(k)). Each of our named executive officers
(other than Dr. Dolsten) also deferred a portion of his
base salary into the Wyeth Supplemental Employee Savings Plan,
as amended (SESP), which is reflected in the “Non-Qualified
Deferred Compensation” table below.
In November 2008, the Wyeth board of directors set the 2009 base
salaries for our active named executive officers at $1,550,000
for Mr. Poussot, $850,000 for Mr. Norden, $962,000 for
Mr. Mahady, $753,000 for Mr. Stein and $790,000 for
Dr. Dolsten.
(2)
We recognize the expense associated with performance share unit
awards ratably from the date of grant through the completion of
the applicable performance period, initially assuming
achievement at 100% of target and ultimately reflecting actual
achievement.
29
The amounts shown in the “Stock Awards” column for
2008 represent:
•
the compensation cost in accordance with Statement of Financial
Accounting Standards No. 123R, “Share-Based Payment” (SFAS
No. 123R), disregarding the estimate of
forfeitures related to service-based vesting conditions, for
performance share unit awards granted in 2008 and in prior
years, thereby reflecting the pro rata expenses associated with
the 2006, 2007 and 2008 grants of performance share unit awards;
•
the following incremental amounts reflecting the conversion of
the 2006 performance share unit awards, which relate primarily
to the 2008 performance year, at 136% of target (rather than
100%): $1,404,288 for Mr. Poussot, $351,072 for
Mr. Norden, $667,037 for Mr. Mahady, $482,724 for
Mr. Stein, $2,984,112 for Mr. Essner and $719,698 for
Dr. Ruffolo, as a result of the determination by the
Compensation Committee in early 2009 that we achieved 2008 EPS,
as adjusted, of $3.68 per share (i.e., exclusive of equity-based
compensation and charges related to our productivity
initiatives) and a total stockholder return ranking in the
middle tier of our specified peer group of eight companies for
the period from January 1, 2006 to December 31, 2008.
The 2008 EPS target of $3.58 per share for the 2006 awards was
established by the Compensation Committee in early 2008; and
•
the compensation cost in accordance with
SFAS No. 123R, disregarding the estimate of
forfeitures related to service-based vesting conditions, for
RSUs as follows: for Mr. Poussot, the pro rata cost of a
special award granted to him in 2008 in connection with his
promotion to Chief Executive Officer, and for Mr. Norden,
the pro rata cost of awards granted to him in 2005, 2006 and
2007 prior to his promotion to Senior Vice President and Chief
Financial Officer and a special award granted to him in 2008
related to his promotion to Chief Financial Officer.
See notes 2 and 4 to “— Outstanding Equity
Awards at 2008 Year-End”
for a description of these awards.
The assumptions used for computing the compensation costs of
these awards were the same as those reflected for such years in
note 13 to our consolidated financial statements for the
year ended December 31, 2008, included in our 2008
Financial Report, which is incorporated by reference into
Wyeth’s Annual Report on
Form 10-K
for the year ended December 31, 2008.
(3)
Represents the compensation cost determined in accordance with
SFAS No. 123R, disregarding the estimate of forfeitures
related to service-based vesting conditions, for stock option
awards based upon the Black-Scholes option-pricing model, which
is recognized pro rata over the employee service period. The
vesting period for determining compensation cost generally is
the shorter of three years or the time period prior to when the
individual reaches the age and service required for retirement
eligibility. The amounts shown for 2008 represent:
•
for Messrs. Poussot, Stein and Essner, the full expense for
stock options granted in 2008 and do not include any expense for
prior year awards, as these executives satisfied the age and
service requirements for retirement eligibility prior to 2008;
•
for Mr. Norden, who does not become eligible for retirement
until October 2012, the pro rata costs of stock options granted
in 2005, 2006, 2007 and 2008;
•
for Mr. Mahady, who became eligible for retirement in April
2008, the pro rata costs of stock options granted in 2005, 2006
and 2007 and the full expense for stock options granted in 2008;
•
for Dr. Dolsten, who does not become eligible for
retirement until September 2013, the pro rata costs of stock
options granted in 2008 upon his date of hire; and
•
for Dr. Ruffolo, no expense because he did not receive a
grant of stock options in 2008 and he satisfied the age and
service requirements for retirement eligibility prior to 2008.
30
Prior to the implementation of SFAS No. 123R, we
recognized cost over the three-year vesting period without
regard to retirement eligibility. As allowed under
SFAS No. 123R, we have continued to recognize pre-2006
stock option expense on a pro rata basis over the three-year
vesting period; the
above amounts shown for 2008 do not include the pro rata cost
for pre-2006 stock option grants of approximately $153,879,
$80,285, $481,710 and $128,233, for Mr. Poussot,
Mr. Stein, Mr. Essner and Dr. Ruffolo,
respectively, which were expensed by us in 2008.
The assumptions used for computing the compensation costs of
these awards were the same as those reflected for such years in
note 13 to our consolidated financial statements for the
year ended December 31, 2008, included in our 2008
Financial Report, which is incorporated by reference into
Wyeth’s Annual Report on
Form 10-K
for the year ended December 31, 2008.
(4)
Reflects the annual cash incentive awards (i.e., cash bonuses)
earned for 2008, 2007 and 2006 under our stockholder-approved
Executive Incentive Plan, as amended, or, in the case of
Mr. Norden in 2007 and Dr. Dolsten and Mr. Essner
in 2008, under our Performance Incentive Award program, and paid
in the first quarter of 2009, 2008 and 2007, respectively. These
awards were determined and finalized by our Compensation
Committee in the February following the applicable completed
performance year and were paid shortly thereafter. The terms of
our Executive Incentive Plan, which is designed to preserve the
tax deductibility to Wyeth of annual cash incentive award
payments, provide that the maximum annual cash incentive award
that may be paid to any one participant in any one year is
two-tenths of one percent of our consolidated earnings, if any,
for the applicable year (adjusted to omit the effects of unusual
and infrequent items). As discussed in more detail under
“—Compensation Discussion and Analysis,” the Compensation Committee applies negative
discretion to determine the actual cash incentive award made to
each individual for the given fiscal year. None of the named
executive officers elected to defer his 2008, 2007 or 2006
annual cash incentive award.
(5)
Represents the aggregate change in actuarial present value of
each named executive officer’s accumulated benefits under
our defined benefit pension plans from December 31, 2007 to
December 31, 2008, December 31, 2006 to
December 31, 2007 and December 31, 2005 to
December 31, 2006, respectively, which are the measurement
dates used for financial statement reporting purposes for our
consolidated financial statements, based on the following
assumptions:
For the December 31, 2008 measurement date, eighty-five
percent (85%) of all retirees were expected to elect lump-sum
payments, and for the December 31, 2007 and the
December 31, 2006 measurement dates, seventy percent (70%)
of all retirees were expected to elect lump-sum payments; the
remainder were assumed to elect payments in an annuity form.
Amounts shown reflect valuations without taking into account any
distributions from the plans for retired executives during the
year.
None of our named executive officers were credited with any
above-market or preferential earnings on deferred compensation
in 2008, 2007 or 2006 under any of our plans.
31
(6)
For 2008, reflects amounts for personal use of company aircraft,
aircraft commuting, personal use of automobiles,
company-provided housing/relocation, reimbursement of taxes,
Wyeth’s matching contributions to the Wyeth Savings Plan
(401(k)) and the Supplemental Employee Savings Plan (SESP), and
other benefits, as follows:
Personal
Company-
Use of
Provided
Company
Aircraft
Personal Use of
Housing/
Reimbursement
401(k)
SESP
Total
Aircraft
Commuting
Automobiles
Relocation
of Taxes
Match
Match
Other
All Other
Name
(a)
(a)
(b)
(c)
(d)
(e)
(e)
(f)
Compensation
Mr. Poussot
$
189,986
$
18,235
$
10,504
$
132,000
$
147,876
$
6,900
$
37,913
$
113,309
$
656,723
Mr. Norden
—
$
5,757
$
11,369
$
72,504
$
77,076
$
6,900
$
17,075
$
8,689
$
199,370
Mr. Mahady
—
—
—
—
—
$
6,900
$
21,850
$
5,500
$
34,250
Mr. Stein
—
—
—
—
—
$
6,900
$
15,650
$
5,500
$
28,050
Dr. Dolsten
—
$
8,742
$
33,706
$
14,904
$
44,332
$
4,087
—
—
$
105,771
Mr. Essner
$
202,076
—
$
26,436
—
$
17,586
$
6,900
$
21,188
$
64,474
$
338,660
Dr. Ruffolo
—
—
—
—
—
$
6,900
$
7,829
$
125,500
$
140,229
a.
The Wyeth board of directors made it a requirement, for security
reasons, that Mr. Poussot and, prior to his retirement,
Mr. Essner, use the corporate aircraft for business and
personal travel where feasible. The Wyeth board of directors
believes that this requirement also enables more efficient use
of these executives’ travel time and helps to preserve
confidentiality. Mr. Essner is entitled to limited
post-employment usage of our corporate aircraft pursuant to his
employment agreement. See “—Potential Payments upon
Termination or Change in Control” for a description of Mr. Essner’s
employment agreement. Other executive officers may, on rare
occasions, use the corporate aircraft for personal trips with
the permission of the Chief Executive Officer.
As a result of their respective promotions to President and
Chief Executive Officer (January 2008) and Senior Vice
President and Chief Financial Officer (June 2007),
Messrs. Poussot and Norden, respectively, changed their
principal offices from Collegeville, Pennsylvania to Madison,
New Jersey but continue to work frequently in both locations.
Beginning with their respective promotions, Messrs. Poussot
and Norden use the corporate helicopter for periodic commuting,
as does Dr. Dolsten in connection with his relocation to
Collegeville, Pennsylvania.
We have valued the aggregate incremental cost of each of
Mr. Poussot’s and Mr. Essner’s personal use
of our corporate aircraft using a method that takes into account
the cost of fuel, trip-related maintenance, crew travel
expenses, on-board supplies and catering, landing fees,
trip-related expenses, any customs, foreign permit and similar
fees, and other variable costs, net of any reimbursements made
to Wyeth by the officer for his use of the aircraft in the case
of Mr. Essner. The aggregate incremental cost also includes
all such costs related to positioning flights. We valued the
aggregate incremental cost of aircraft commuting by allocating
the estimated total annual variable costs associated with use of
the helicopter for all helicopter trips on a per passenger basis
(i.e., by calculating the hourly per passenger variable cost for
all helicopter trips in 2008 and allocating it to the commuting
and/or personal trips made by the officer). Because our aircraft
are used primarily for business travel, in calculating
incremental cost, we do not include the fixed costs that do not
change based on personal usage. Aggregate incremental cost is
not the same as the valuation used for calculating taxable
income to the executives, which is calculated pursuant to U.S.
Treasury regulations. We have not included amounts related to
the loss of a tax deduction to Wyeth on account of personal use
of corporate aircraft in valuing this benefit.
b.
Costs related to automobile usage for commuting and/or personal
purposes by Mr. Poussot, Mr. Norden, Dr. Dolsten
and Mr. Essner, including post-employment use by
Mr. Essner pursuant to his employment agreement, are shown
at estimated aggregate incremental cost to Wyeth based upon the
number of miles traveled and the estimated incremental cost per
mile, including an estimate of allocable driver overtime costs
or, in the case of Dr. Dolsten, the cost of third-party-provided
transportation. Costs related to the company-owned automobile
provided to Mr. Essner prior to his retirement are shown at
full cost to Wyeth although the vehicle was used for business as
well as personal transportation.
32
c.
For Messrs. Poussot and Norden, amounts shown represent a
monthly housing allowance and payments for company-provided
housing, respectively, in lieu of relocation. Beginning with
their respective promotions, we provide Mr. Poussot with a
monthly housing allowance to be used for housing in proximity to
Madison, New Jersey and Mr. Norden with a leased apartment
and related expenses in proximity to Madison, New Jersey. For
Dr. Dolsten, amount shown represents company-paid living
expenses related to his relocation to Collegeville, Pennsylvania
in connection with his employment.
d.
Amounts shown represent reimbursement by us of taxes incurred by
the executive as a result of imputed income as follows: for
Mr. Poussot, from helicopter and automobile usage for
commuting/personal use, the monthly housing allowance and
specified air travel; for Mr. Norden, from helicopter and
automobile usage for commuting and company-provided housing; for
Dr. Dolsten, from the travel/commuting costs and living
expenses related to his relocation to Collegeville, Pennsylvania
in accordance with our relocation policy; and for
Mr. Essner, from his personal use of corporate aircraft
prior to his retirement. See “— Compensation
Discussion and Analysis — Determination and Analysis
of 2008 Compensation for Named Executive Officers —
Perquisites.”
e.
We provide matching contributions of 50% on the first 6% of
covered pay that the named executive officer contributes to the
Wyeth Savings Plan (401(k)) and the Supplemental Employee
Savings Plan.
f.
This column reports other benefits provided to named executive
officers. These other benefits include: (1) financial
planning, (2) home security for Mr. Poussot
($101,302), including installation costs in connection with his
promotion to Chief Executive Officer, and Mr. Essner
($14,602), (3) non-business activities for director spouses
in connection with our off-site board meeting (see
“—Director Compensation”)
and/or (4) an annual physical examination. In the case of
Mr. Essner, this column also includes an estimate of the
post-employment benefits that he received in 2008 under his
employment agreement ($43,000), with the exception of home
security, the use of a company-owned automobile and driver and
the company aircraft, which are included in the other applicable
columns. In the case of Dr. Ruffolo, these benefits include
payments in connection with his post-retirement consulting
agreement ($125,000). Please see “— Potential
Payments Upon Termination or Change in Control” for a description of the post-employment
benefits provided to Mr. Essner and Dr. Ruffolo under
their employment and consulting agreements.
For additional detail regarding the amounts shown for 2006 and
2007, please refer to our proxy statements for our 2007 and 2008
Annual Meetings of Stockholders.
2008
Grants of Plan-Based Awards
The following table provides a summary of grants of plan-based
awards made to our named executive officers in 2008.
The columns entitled “Estimated Potential Payouts under
Non-Equity Incentive Plan Awards” represent annual cash
incentive awards that are generally payable to named executive
officers under our stockholder-approved Executive Incentive
Plan. There are no future payouts associated with these awards
as payouts have already occurred and are shown in the
“— Summary Compensation Table.” See “— Compensation Discussion and
Analysis” and note 1 below
for additional details.
The columns entitled “Estimated Future Payouts under Equity
Incentive Plan Awards” represent performance share unit
awards for the 2010 performance year granted on April 24,2008 under our 2005 Amended and Restated Stock Incentive Plan to
Mr. Poussot, Mr. Norden, Mr. Mahady,
Mr. Stein and Mr. Essner and, on his June 16,2008 employment date, to Dr. Dolsten. These awards are
composed of units that may be converted to between 0% and 200%
of a pre-set target number of shares of our common stock (one
share per unit). Pursuant to these awards, in early 2010, the
Compensation Committee would set an EPS target for 2010, and in
early 2011, the Compensation Committee would compare the actual
EPS performance for 2010 against the target EPS to determine
what percentage of the target award may be earned. The awards
generally are structured to allow the Compensation Committee
negative discretion to reduce the amount of the award that may
be earned based on EPS performance to reflect, among other
factors it may consider, our total stockholder return ranking
(top 2, middle 4, bottom 2) compared with that of our peer
group listed in the second paragraph under
“— Compensation Discussion and
Analysis — Peer Group Analysis” over the period
from January 1, 2008 through December 31, 2010. The Compensation Committee set the target number of shares to assume
our achievement of 100% of the 2010 EPS target and a “top
2” TSR ranking for the three-year period, with the
Compensation Committee retaining the ability to reduce the
number of shares earned to reflect actual TSR ranking, among
other factors. If actual EPS achievement would result in 0% of
the target award being earned, an executive may still receive up
to 25% of the target award (assuming we have consolidated
earnings in 2010) at the discretion of the Compensation
Committee based on, among other factors, favorable TSR
performance. This award design is intended to preserve our
ability to deduct this compensation under Section 162(m) of
the Internal Revenue Code. The executives would forfeit these
performance share unit awards upon termination of employment
prior to conversion for any reason other than death, disability
or retirement (in which case the units would be converted if,
when and to the extent the performance criteria are satisfied).
These units generally would vest upon a change in control, such
as our contemplated merger with Pfizer (in which case the units
would be converted at 80% of target). In order to enhance the
long-term retention aspect of these awards, any shares received
upon conversion of the 2008 performance share unit awards are
subject to a one-year holding period, during which time these
shares would be subject to forfeiture upon termination, other
than on account of death, disability, retirement, change in
control or as determined in the discretion of the Compensation
Committee.
33
These columns also include 51,250 performance share units
granted on June 16, 2008 to Dr. Dolsten in connection
with his employment under our 2005 Amended and Restated Stock
Incentive Plan that will convert to shares of our common stock
based on the 2009 performance year. The performance share unit
awards for the 2009 performance year are described in
note 2 to the table entitled “— Outstanding
Equity Awards at 2008 Year-End” and in our proxy
statement for our 2008 Annual Meeting of Stockholders.
In connection with his promotion to Chief Executive Officer,
Mr. Poussot received a special grant of 120,000 RSUs on
January 2, 2008. Mr. Norden also received a special
grant of 19,250 RSUs on April 24, 2008 related to his
promotion to Chief Financial Officer. These grants were made
under our 2005 Amended and Restated Stock Incentive Plan.
Assuming continued employment, the units granted to
Mr. Poussot will vest and convert to shares of our common
stock in one-third increments on the third, fourth and fifth
anniversaries of the date of grant, and the units granted to
Mr. Norden will vest in one-third increments on the first,
second and third anniversaries of the date of grant. RSUs are
subject to earlier vesting in the event of death, disability,
retirement or a change in control, such as our contemplated
merger with Pfizer, although Mr. Poussot’s RSUs do not
vest upon retirement and accordingly would be subject to
forfeiture to the extent not vested on his retirement date.
These awards are shown under the column “All Other Stock
Awards.”
34
The column entitled “All Other Option Awards” reflects
our grant of stock options to our named executive officers under
our 2005 Amended and Restated Stock Incentive Plan on
April 24, 2008 and, in the case of Dr. Dolsten, on
June 16, 2008. Options expire 10 years from the date
of grant and become exercisable in one-third increments on the
first, second and third anniversaries of the date of grant,
provided that the named executive officer has at least two years
of service. Options would become fully vested earlier in the
case of retirement, death or disability or in the event of a
change in control.
All
Other
All Other
Stock
Option
Awards:
Awards:
Exercise
Grant Date
Estimated Potential Payouts
Estimated Future Payouts
Number of
Number of
or Base
Fair Value
Under Non-Equity Incentive Plan
Under Equity Incentive Plan
Shares
Securities
Price of
of Stock and
Awards(1)
Awards
of Stock
Underlying
Options
Options
Grant
Action
Threshold
Target
Maximum
Threshold
Target
Maximum
or Units
Options
Award
Awards(2)
Name
Date
Date
($)
($)
($)
(#)
(#)
(#)
(#)
(#)
($/Sh)
($)
Bernard Poussot
—
—
$
0
$
2,000,000
$
9,533,500
1/2/2008
1/2/2008
120,000
$
4,573,200
4/24/2008
4/24/2008
0
192,000
384,000
7,956,480
4/24/2008
4/24/2008
370,000
$
44.56
3,796,200
$
16,325,880
Gregory Norden
—
—
$
0
$
750,000
$
9,533,500
4/24/2008
4/24/2008
19,250
$
790,598
4/24/2008
4/24/2008
0
56,250
112,500
2,331,000
4/24/2008
4/24/2008
99,000
$
44.56
1,015,740
$
4,137,338
Joseph M. Mahady
—
—
$
0
$
1,100,000
$
9,533,500
4/24/2008
4/24/2008
0
62,500
125,000
$
2,590,000
4/24/2008
4/24/2008
138,000
$
44.56
1,415,880
$
4,005,880
Lawrence V. Stein
—
—
$
0
$
890,000
$
9,533,500
4/24/2008
4/24/2008
0
41,000
82,000
$
1,699,040
4/24/2008
4/24/2008
87,000
$
44.56
892,620
$
2,591,660
Mikael Dolsten, M.D., Ph.D.
—
—
(1
)
6/16/2008
*
4/24/2008
0
51,250
102,500
$
2,733,675
6/16/2008
**
4/24/2008
0
51,250
102,500
2,123,800
6/16/2008
4/24/2008
52,000
$
43.08
513,760
$
5,371,235
Robert Essner
—
—
$
0
$
1,600,000
$
9,533,500
4/24/2008
4/24/2008
0
153,600
307,200
$
7,148,544
4/24/2008
4/24/2008
370,000
$
44.56
3,796,200
$
10,944,744
Robert R. Ruffolo, Jr., Ph.D.
—
—
$
0
$
641,700
$
9,533,500
*
Represents grant for the 2009 performance year.
**
Represents grant for the 2010 performance year.
(1)
Annual cash incentive awards generally are paid to named
executive officers under our stockholder-approved Executive
Incentive Plan, which, in order to preserve tax deductibility to
Wyeth of this compensation, is designed as a so-called
“negative discretion” plan. There is no target or
maximum under the Executive Incentive Plan, other than a
putative maximum amount that may be paid to any one participant
in any one year of two-tenths of one percent of consolidated
earnings (adjusted to omit the effects of unusual and infrequent
items). Pursuant to SEC rules, the “maximum” amounts
shown in the table above reflect this putative maximum. The plan
permits the Compensation Committee to award any amount that does
not exceed the putative maximum. For purposes of presentation,
the amounts shown as “target” represent the annual
cash incentive awards actually paid to each named executive
officer for 2007 (pro-rated for actual months worked in 2008 in
the case of Mr. Essner and Dr. Ruffolo). Actual annual
cash incentive awards paid for 2008 are reported in the
“Non-Equity Incentive Plan Compensation” column of the
“— Summary Compensation Table,” and there
are no future payouts associated with these awards, which are
shown here in accordance with SEC rules. While
Dr. Dolsten’s annual cash incentive award was
determined in the same manner as awards under the Executive
Incentive Plan, Dr. Dolsten was not designated as a
participant in the Executive Incentive Plan in 2008 because he
became a named executive officer after the date of
designation for 2008. In addition, pursuant to the
offer letter in connection with his employment, Dr. Dolsten
was entitled to receive a minimum bonus of $750,000 for 2008.
For each of Mr. Essner and Dr. Dolsten, the actual
annual cash incentive award for 2008 was ultimately paid under
our Performance Incentive Award program. See
“— Compensation Discussion and Analysis”
for a discussion of the determination
of actual awards for 2008 under the Executive Incentive Plan and
the Performance Incentive Award program.
35
(2)
Represents the grant date fair value of performance share unit
awards (based on 100% of target achievement), RSUs and stock
options granted in 2008 computed in accordance with
SFAS No. 123R, disregarding the estimate of
forfeitures relating to service-based vesting conditions, using
the same valuation model and assumptions as applied for purposes
of our consolidated financial statements for the year ended
December 31, 2008, included in our 2008 Financial Report,
which is incorporated by reference into Wyeth’s Annual
Report on
Form 10-K
for the year ended December 31, 2008. These values
were developed solely for the purpose of comparative disclosure
in accordance with SEC rules and are not intended to predict
future performance, future prices of our common stock or our
future dividend distributions. The ultimate values of these
equity awards will depend on our future performance and the
future market price of our common stock and cannot be forecasted
with reasonable accuracy. The actual value, if any, a holder
will realize upon exercise of an option will depend on the
excess of the market value of our common stock over the exercise
price on the date the option is exercised. The actual value, if
any, a holder will realize upon sale of shares received upon
conversion of RSUs and performance share unit awards will depend
on the number of shares into which such award ultimately
converts (in the case of performance share unit awards) and the
market value of our common stock on the date of the sale.
The value of performance share unit awards granted on
April 24, 2008 for the 2010 performance year, based on 100%
of target achievement, was calculated to be $41.44 per unit or,
in the case of Mr. Essner, who received the form of award
granted to other key employees in light of his announced
retirement rather than the form of award for continuing named
executive officers, $46.54 per unit. The values of
Dr. Dolsten’s performance share unit awards granted on
June 16, 2008 for the 2009 performance year and the 2010
performance year, based on 100% of target achievement, were
calculated to be $53.34 and $41.44, respectively, per unit. The
value of Mr. Poussot’s RSUs granted on January 2,2008 was calculated to be $38.11 per unit; and the value of
Mr. Norden’s RSUs granted on April 24, 2008 was
calculated to be $41.07 per unit. For a discussion of the
assumptions used in determining grant date fair value of our
performance share unit awards and RSUs granted in 2008, please
see note 13 to our consolidated financial statements for
the year ended December 31, 2008, included in our 2008
Financial Report, which is incorporated by reference into
Wyeth’s Annual Report on
Form 10-K
for the year ended December 31, 2008.
For stock option awards granted on April 24, 2008 and
June 16, 2008, the values (equaling $10.26 and $9.88 per
option, respectively) were developed using the Black-Scholes
option pricing model in accordance with SFAS No. 123R
based on the assumptions set forth in note 13 to our
consolidated financial statements for the year ended
December 31, 2008, included in our 2008 Financial Report,
which is incorporated by reference into Wyeth’s Annual
Report on
Form 10-K
for the year ended December 31, 2008.
36
Outstanding
Equity Awards at 2008 Year-End
The following table provides a summary of equity awards
outstanding at December 31, 2008 for each of our named
executive officers. The table does not include our performance
share unit awards that were earned and vested in early 2009, as
these awards are presented in the table under
“— Option Exercises and Stock Vested in
2008” because they were earned
and vested based on 2008 performance.
Amounts shown in the table below for stock awards outstanding at
year-end represent granted but unvested performance share unit
awards shown at 100% of target and, in the case of
Messrs. Poussot and Norden, unvested RSUs. Performance
share unit awards will convert at between 0% and 200% of target
based on future performance as more fully described in
note 2 below and under “— Compensation
Discussion and Analysis.”
Option Awards
Stock Awards
Equity Incentive
Equity Incentive
Number
Number of
Number of
Plan Awards:
Plan Awards: Market
of Securities
Securities
Shares or
Number of
or Payout Value of
Underlying
Underlying
Units of
Market Value of
Unearned Shares,
Unearned Shares,
Unexercised
Unexercised
Option
Stock That
Shares or Units of
Units or
Units or Other
Options
Options
Exercise
Option
Have Not
Stock That
Other Rights
Rights That Have
(#)
(#)
Price
Expiration
Vested
Have Not Vested
That Have Not Vested (2)
Not Vested (3)
Name
Exercisable
Unexercisable
($)
Date(1)
(#)
($)
(#)
($)
Bernard Poussot
97,800
$
62.3125
5/20/2009
120,000
(4)
$
4,501,200
(4)
(2007
)
112,500
$
4,219,875
118,800
$
56.5938
4/27/2010
(2008
)
192,000
7,201,920
126,000
$
56.5250
4/26/2011
304,500
$
11,421,795
157,500
$
60.7050
4/25/2012
51,334
$
40.2200
4/22/2014
138,000
$
43.5700
4/21/2015
120,000
60,000
$
48.2200
4/27/2016
66,666
133,334
$
56.0000
4/26/2017
370,000
$
44.5600
4/24/2018
Total: 876,100
563,334
Gregory Norden
30,000
$
62.3125
5/20/2009
28,750
(4)
$
1,078,413
(4)
(2007
)
25,000
$
937,750
34,000
$
56.5938
4/27/2010
(2008
)
56,250
2,109,938
45,000
$
56.5250
4/26/2011
81,250
$
3,047,688
50,000
$
60.7050
4/25/2012
8,334
$
41.0500
4/24/2013
30,000
$
40.2200
4/22/2014
37,500
$
43.5700
4/21/2015
26,666
13,334
$
48.2200
4/27/2016
12,003
24,007
$
56.0000
4/26/2017
99,000
$
44.5600
4/24/2018
Total: 273,503
136,341
Joseph M. Mahady
66,600
$
62.3125
5/20/2009
(2007
)
49,940
$
1,873,249
76,500
$
56.5938
4/27/2010
(2008
)
62,500
2,344,375
76,500
$
56.5250
4/26/2011
112,440
$
4,217,624
90,000
$
60.7050
4/25/2012
38,000
$
40.2200
4/22/2014
103,000
$
43.5700
4/21/2015
68,666
34,334
$
48.2200
4/27/2016
36,000
72,000
$
56.0000
4/26/2017
138,000
$
44.5600
4/24/2018
Total: 555,266
244,334
Lawrence V. Stein
45,000
$
62.3125
5/20/2009
—
—
(2007
)
37,815
$
1,418,441
51,000
$
56.5938
4/27/2010
(2008
)
41,000
1,537,910
55,000
$
56.5250
4/26/2011
78,815
$
2,956,351
56,000
$
60.7050
4/25/2012
20,000
$
34.6750
10/28/2012
40,000
$
41.0500
4/24/2013
80,000
$
40.2200
4/22/2014
72,000
$
43.5700
4/21/2015
48,000
24,000
$
48.2200
4/27/2016
26,400
52,800
$
56.0000
4/26/2017
87,000
$
44.5600
4/24/2018
Total: 493,400
163,800
37
Option Awards
Stock Awards
Equity Incentive
Equity Incentive
Number
Number of
Number of
Plan Awards:
Plan Awards: Market
of Securities
Securities
Shares or
Number of
or Payout Value of
Underlying
Underlying
Units of
Market Value of
Unearned Shares,
Unearned Shares,
Unexercised
Unexerci sed
Option
Stock That
Shares or Units of
Units or
Units or Other
Options
Options
Exercise
Option
Have Not
Stock That
Other Rights
Rights That Have
(#)
(#)
Price
Expiration
Vested
Have Not Vested
That Have Not Vested (2)
Not Vested (3)
Name
Exercisable
Unexercisable
($)
Date(1)
(#)
($)
(#)
($)
Mikael Dolsten, M.D., Ph.D.
—
52,000
$
43.0800
6/16/2018
—
—
(2007
)
51,250
$
1,922,388
(2008
)
51,250
1,922,388
102,500
$
3,844,776
Robert Essner
177,800
—
$
62.3125
5/20/2009
—
—
(2007
)
192,000
$
7,201,920
207,000
$
56.5938
4/27/2010
(2008
)
153,600
5,761,536
360,000
$
56.5250
4/26/2011
345,600
$
12,963,456
630,000
$
62.4000
6/21/2011
540,000
$
60.7050
4/25/2012
600,000
$
41.0500
4/24/2013
480,000
$
40.2200
4/22/2014
432,000
$
43.5700
4/21/2015
410,000
$
48.2200
4/27/2016
370,000
$
56.0000
4/26/2017
370,000
$
44.5600
4/24/2018
Total: 4,576,800
Robert R. Ruffolo, Jr., Ph.D.
80,000
—
$
53.8500
1/23/2011
—
—
(2007
)
51,250
$
1,922,388
70,000
$
56.5250
4/26/2011
70,000
$
60.7050
4/25/2012
115,000
$
43.5700
4/21/2015
110,000
$
48.2200
4/27/2016
110,000
$
56.0000
4/26/2017
Total: 555,000
(1)
Options expire 10 years from the date of grant and, subject
to ongoing service, vest in one-third increments on the first,
second and third anniversaries of the date of grant, provided
the executive has completed two or more years of service.
Options would become fully vested earlier in the case of
retirement, death, disability or a change in control, such as
our contemplated merger with Pfizer. See “— 2008
Grants of Plan-Based Awards” for
more information on stock options.
(2)
Represents the 2007 and 2008 performance share unit awards,
shown at 100% of target, which generally were granted in 2007
and 2008 and which can be earned based on 2009 and 2010 EPS
performance among other factors, respectively, and remained
outstanding at December 31, 2008. These awards generally
were granted in connection with the annual grants under our
long-term incentive compensation program, except that a portion
of Mr. Norden’s 2007 performance share unit award was
granted to him in June 2007 in connection with his promotion to
Senior Vice President and Chief Financial Officer, and
Dr. Dolsten’s 2007 and 2008 performance share unit
awards were granted to him upon his employment in June 2008. The
2007 performance share unit awards may be earned in early 2010
based on 2009 EPS performance. The 2008 performance share unit
awards may be earned in early 2011 based on 2010 EPS
performance. The Compensation Committee may then apply negative
discretion to reduce the amount of the award that may be earned
based on EPS by applying other factors as deemed appropriate by
the Compensation Committee, including total stockholder return
ranking for the years
2007-2009
for the 2007 award and for the years
2008-2010
for the 2008 award, as more fully described under
“— 2008 Grants of Plan-Based Awards” and in
the section entitled “— Compensation Discussion
and Analysis.” The executives would forfeit these
performance share unit awards upon termination of employment
prior to conversion for any reason other than death, disability
or retirement (in which case the units would be converted if,
when and to the extent the performance criteria are satisfied).
These units also would vest upon a change in control, such as
our contemplated merger with Pfizer (in which case the units
generally would convert at 80% of target).
The table does not include performance share unit awards granted
in 2006, which were earned and vested in February 2009 based on
2008 performance. As these awards vested based on performance
completed in 2008, we have included these awards in the table
entitled “— Option Exercises and Stock Vested in
2008.”
38
(3)
Aggregate market or payout value of all performance share unit
awards not yet earned was computed by multiplying $37.51, the
closing market price of our common stock on the NYSE on
December 31, 2008, by the number of shares issuable upon
conversion of performance share unit awards at 100% of target.
(4)
For Mr. Poussot, represents a special award of 120,000 RSUs
granted on January 2, 2008 upon his promotion to Chief
Executive Officer, which vest and convert into shares of our
common stock in one-third increments on the third, fourth and
fifth anniversaries of the date of grant. For Mr. Norden,
includes RSUs granted prior to his promotion to Senior Vice
President and Chief Financial Officer as follows:
5,000 units on April 27, 2006 and 4,500 units on
April 26, 2007. These awards vest and convert into shares
of common stock on the third anniversary of the date of grant.
For Mr. Norden, also includes a special award of
19,250 units granted on April 24, 2008, which vest and
convert into shares of our common stock in one-third increments
on the first, second and third anniversaries of the date of
grant. All RSUs would vest earlier in the event of a change in
control, such as our contemplated merger with Pfizer. Unless
otherwise determined by the Compensation Committee, RSUs would
be forfeited upon termination of employment prior to vesting
(conversion) for any reason other than death, disability or
retirement (in which case the units would immediately vest).
However, Mr. Poussot’s units do not vest upon
retirement and accordingly would be subject to forfeiture to the
extent not vested on his retirement date. Recipients of RSUs are
not entitled to vote or receive dividends with respect to those
units unless and until the units vest and convert to shares of
common stock. The market value of these RSUs was computed based
on a per unit value of $37.51, the closing market price of our
common stock on the NYSE on December 31, 2008.
Option
Exercises and Stock Vested in 2008
The following table presents all stock awards that were earned
based on performance completed in 2008. As discussed in detail
in the section entitled “— Compensation
Discussion and Analysis” the
number of shares acquired on vesting of stock awards represents
performance share unit awards granted in 2006 that were
convertible at between 0% and 200% of a pre-set target number of
shares (one share per unit) of common stock based on performance
completed during 2008 and converted at 136% of target in early
2009. For Mr. Norden, the number of shares acquired on
vesting of stock awards also includes shares of common stock
acquired in 2008 upon vesting of RSUs granted in 2005. None of
our named executive officers exercised any stock options in 2008.
Option Awards
Stock Awards
Number
Number
of Shares Acquired
Value Realized on
of Shares Acquired
Value Realized
on Exercise
Exercise
on Vesting(1)(2)
on Vesting(2)(3)
Name
(#)
($)
(#)
($)
Bernard Poussot
—
—
108,800
$
4,476,032
Gregory Norden
—
—
31,890
$
1,329,730
Joseph M. Mahady
—
—
51,680
$
2,126,115
Lawrence V. Stein
—
—
37,400
$
1,538,636
Mikael Dolsten, M.D., Ph.D.
—
—
—
—
Robert Essner
—
—
231,200
$
9,511,568
Robert R. Ruffolo, Jr., Ph.D.
—
—
55,760
$
2,293,966
(1)
Represents, or in the case of Mr. Norden includes, shares
received upon conversion of performance share unit awards based
on performance completed in 2008. As described under
“— Compensation Discussion and Analysis,” in
early 2009, the Compensation Committee determined that Wyeth
achieved EPS, as adjusted, of $3.68 per share (exclusive of
equity-based compensation and charges related to our
productivity initiatives) and a total stockholder return ranking
against our peers in the middle tier, such that these units were
converted at 136% of the applicable target awards granted in
2006. For Mr. Norden, this
column also includes 4,690 RSUs awarded in April 2005, prior to
his promotion to Senior Vice President and Chief Financial
Officer that converted to shares of common stock on the
April 21, 2008 vesting date.
39
(2)
Does not include shares received at 116.8% of the applicable
target award upon conversion of performance share unit awards
granted in 2005 based upon the 2007 performance year, which the
Compensation Committee approved on February 28, 2008, based
on its determination that Wyeth exceeded the EPS target set by
the Compensation Committee for the 2007 performance year. These
shares are not included because they were earned based on
performance completed prior to January 1, 2008 and were
reported in the applicable tables in the proxy statement for our
2008 Annual Meeting of Stockholders.
(3)
Value realized upon vesting of these awards is based on the
closing price of our common stock on the trading day immediately
preceding the date of conversion. For the conversion of the 2006
performance share unit awards that was approved by the
Compensation Committee on February 26, 2009 and converted
into common stock upon filing of Wyeth’s Annual Report on
Form 10-K
for the year ended December 31, 2008, which was filed with
the SEC on February 27, 2009, the closing price of
Wyeth’s common stock on February 26, 2009 (the
immediately preceding trading day) was $41.14. For conversion of
the RSUs that were awarded to Mr. Norden in April 2005 and
vested on April 21, 2008, the closing price of our common
stock on the trading day immediately preceding the date of
conversion was $44.93.
Pension
Benefits
Our
Plans
We maintain three defined benefit pension plans in which our
named executive officers may be eligible to participate. The
Wyeth Retirement Plan — U.S. is our broad-based
tax-qualified defined benefit pension plan. The other two plans,
the Supplemental Executive Retirement Plan and the Executive
Retirement Plan, are nonqualified supplemental retirement plans.
Wyeth
Retirement Plan — U.S.
Under the Wyeth Retirement Plan — U.S., the benefit
accrued and payable following retirement is determined according
to the following formula:
•
Two percent multiplied by “final average annual pension
earnings” multiplied by the number of years of credited
service (up to 30 years), minus
•
A Social Security offset that is equal to 1/60th of the
annual Primary Social Security Benefit multiplied by the number
of years of credited service (up to 30 years).
In applying this formula, the amount of “final average
annual pension earnings” is the average of the five highest
annual pension earnings during the
10-year
period immediately preceding the retirement date. Compensation
used for determining pension earnings includes: (1) base
salary, (2) any annual cash incentive awards (i.e., cash
bonuses) paid and (3) sales commissions, sales bonuses or
overtime pay received in the prior calendar year. Equity awards
are not included in pension earnings.
Because this plan is a qualified plan, benefits are capped on
account of Internal Revenue Code limitations as described below.
Employees become participants in the Wyeth Retirement
Plan — U.S. upon the attainment of age 21
and the completion of one year of service and become vested in
their benefits after five years of service. Benefits become
payable at age 65. Additionally, a participant can retire
early and receive a benefit if he or she is at least
55 years old with five or more years of service.
If the participant retires at or after age 55 with 10 or
more years of service, he or she will receive upon early
commencement of his or her benefit, a subsidized benefit, which
provides that the benefit is reduced by three percent for each
year that payment starts before age 65 rather than a larger
annual reduction which applies absent the subsidy. For
participants with at least five years of service but less than
10 years of service at retirement between ages 55 and
65, the subsidy is not provided. Benefits at retirement can be paid out in various forms of
annuities as well as in a single lump sum.
40
Supplemental
Executive Retirement Plan
The Supplemental Executive Retirement Plan is an excess benefit
plan designed to provide that portion of an executive’s
pension benefit that cannot be paid under the Wyeth Retirement
Plan — U.S. on account of limitations imposed
upon the Wyeth Retirement Plan — U.S. by the
Internal Revenue Code. The law limits: (1) the amount of
annual earnings that may be used to determine benefits (the
compensation limitation for 2008 was $230,000) and (2) the
maximum benefit payable under a qualified plan at age 65.
Additionally, deferred compensation cannot be included when
determining benefits under the Wyeth Retirement Plan —
U.S.
The Supplemental Executive Retirement Plan’s material
terms, including the formula for determining the accrued
benefit, are the same as under the Wyeth Retirement
Plan — U.S. described above, except that the
above-referenced Internal Revenue Code limitations are not
applicable to the Supplemental Executive Retirement Plan. An
executive’s benefit under the Supplemental Executive
Retirement Plan is offset by the benefit payable under the Wyeth
Retirement Plan — U.S.
Executive
Retirement Plan
We also maintain the Executive Retirement Plan, which provides
to certain highly compensated executives, including each of our
named executive officers other than Dr. Dolsten, an
additional retirement benefit that is based upon the average of
the three highest annual pension earnings during the
10-year
period immediately preceding the retirement date.
Under the Executive Retirement Plan, the benefit accrued and
payable following retirement is determined according to the
following formula:
•
Two percent multiplied by “final average annual pension
earnings” multiplied by the number of years of credited
service with three additional years of service added (maximum
total credited service cannot exceed 30 years), minus
•
A Social Security offset equal to 1/60th of the annual
Primary Social Security Benefit multiplied by the number of
years of credited service with three additional years added
(maximum total credited service cannot exceed 30 years),
minus
•
Any benefits paid under the Wyeth Retirement Plan —
U.S., the Supplemental Executive Retirement Plan and any Wyeth
foreign pension plan.
The Executive Retirement Plan recognizes service with any
subsidiary or affiliate, including overseas operations. The
Executive Retirement Plan provides each executive with three
additional years of service that is reduced for each year (or
part thereof) that a participant works beyond age 62. As
with the Wyeth Retirement Plan — U.S. and the
Supplemental Executive Retirement Plan, the same payout options,
including a lump sum, are available.
In applying this formula, the amount of “final average
annual pension earnings” is the average of the three
(rather than five, as is the case of the Wyeth Retirement
Plan — U.S. and the Supplemental Executive
Retirement Plan) highest annual pension earnings during the
10-year
period immediately preceding the early or normal retirement
date. The same elements of compensation considered for the Wyeth
Retirement Plan — U.S. and the Supplemental
Executive Retirement Plan are used for the Executive Retirement
Plan.
An executive is eligible for participation in the Executive
Retirement Plan upon the attainment of age 55 and after
meeting one of the following requirements:
•
the executive has an annual base salary of $430,000 or greater
(in 2008) and $440,000 or greater (beginning in 2009),
which threshold may be adjusted upward annually;
•
the executive is a member of the Wyeth Management Committee (the
Wyeth board of directors approves Wyeth Management Committee
members); or
41
•
the executive is selected by the Chief Executive Officer for
inclusion in the Executive Retirement Plan and approved by the
Wyeth board of directors.
Certain executives, although not age 55 at
December 31, 2008, are participants in the Executive
Retirement Plan because they satisfied earlier eligibility
requirements and were grandfathered when the requirements were
changed. In addition, Mr. Norden, although not age 55
at December 31, 2008, is eligible to participate in the
Executive Retirement Plan pursuant to an amendment to the plan
providing that, subject to meeting the other eligibility
criteria for participation in the plan, the person serving as
our chief financial officer is eligible to participate in the
Executive Retirement Plan regardless of whether he or she has
reached the age of 55.
Eligibility for early retirement is the same as for the Wyeth
Retirement Plan — U.S. and the Supplemental
Executive Retirement Plan; however, normal retirement under the
Executive Retirement Plan is age 60 rather than
age 65. For a participant in the Executive Retirement Plan
retiring after age 55 with 10 or more years of service, the
reduction for early commencement is 3% for each year that
payments commence early, but the reduction is from age 60
rather than age 65. Benefits may first commence at or after
age 55.
Valuation
Method and Material Assumptions for All Plans
The assumptions used for calculating the present value of the
accumulated benefits payable at age 60 (the normal
retirement age under the Executive Retirement Plan in which all
of the named executive officers participate) are those used for
financial statement reporting purposes. For these purposes, it
was assumed that 85% of participants elect the lump-sum option,
with the remaining 15% electing a life annuity. Therefore, to
calculate the present value of the accumulated benefits, we
assumed a weighting of 85% at an interest rate of 4.0% and the
unloaded 1994 Group Annuity Mortality table projected to 2002
and blended 50% male and 50% female as referenced in Revenue
Ruling
2001-62
under the Internal Revenue Code (“GATT mortality”)
(assumptions used for valuing lump-sum cash payments under the
plans for financial statement reporting purposes) and 15% at an
interest rate of 6.25% and the 1994 Group Annuity Mortality
table (assumptions used for valuing annuities for financial
statement reporting purposes). These amounts then are discounted
back to the participant’s actual age using 6.25% per year.
The table below provides the present value of accumulated
benefits for each of our named executive officers, including the
number of years of credited service recognized under each of our
plans.
Number of
Present
Years of
Value of
Payments
Credited
Accumulated
During Last
Service(1)
Benefits
Fiscal Year
Name
Plan Name
(#)
($)
($)
Bernard Poussot
Wyeth Retirement Plan — U.S.
17.9
$
700,893
—
Supplemental Executive Retirement Plan
17.9
7,864,375
—
Executive Retirement Plan
25.3
7,823,305
—
Total
$
16,388,573
—
Gregory Norden
Wyeth Retirement Plan — U.S.
19.5
$
539,973
—
Supplemental Executive Retirement Plan
19.5
2,087,186
—
Executive Retirement Plan
22.5
1,378,286
—
Total
$
4,005,445
—
Joseph M. Mahady
Wyeth Retirement Plan — U.S.
29.6
$
1,072,845
—
Supplemental Executive Retirement Plan
29.6
7,608,874
—
Executive Retirement Plan
30.0
2,616,324
—
Total
$
11,298,043
—
Lawrence V. Stein
Wyeth Retirement Plan — U.S.
16.1
$
707,282
—
Supplemental Executive Retirement Plan
16.1
4,286,784
—
Executive Retirement Plan
19.1
2,734,540
—
Total
$
7,728,606
—
42
Number of
Present
Years of
Value of
Payments
Credited
Accumulated
During Last
Service(1)
Benefits
Fiscal Year
Name
Plan Name
(#)
($)
($)
Mikael Dolsten, M.D., Ph.D.
Wyeth Retirement Plan — U.S.
0.5
—
—
Supplemental Executive Retirement Plan
0.5
—
—
Executive Retirement Plan
—
—
—
Total
—
—
Robert Essner
Wyeth Retirement Plan — U.S.
18.7
—
$
929,298
Supplemental Executive Retirement Plan
18.7
—
*
Executive Retirement Plan
21.7
—
*
Total
—
*
Robert R. Ruffolo, Jr., Ph.D.
Wyeth Retirement Plan — U.S.
7.7
—
$
253,035
Supplemental Executive Retirement Plan
7.7
$
1,736,939
—
Executive Retirement Plan
10.7
2,956,882
—
Total
$
4,693,821
$
253,035
*
*
In accordance with the terms of the Supplemental Executive
Retirement Plan and the Executive Retirement Plan,
Mr. Essner elected to notionally roll over his entire
accrued benefits (minus applicable employment taxes) under the
Supplemental Executive Retirement Plan ($20,541,437) and the
Executive Retirement Plan ($8,907,502) into the Deferred
Compensation Plan. As a result of such notional rollover,
Mr. Essner did not receive any payments from the
Supplemental Executive Retirement Plan or the Executive
Retirement Plan in 2008. In addition, Wyeth’s obligations
to Mr. Essner under the Supplemental Executive Retirement
Plan and the Executive Retirement Plan were extinguished. Based
on the notional rollover election and in accordance with tax
rules (including 409A), Mr. Essner became eligible to receive
the amounts notionally rolled over (plus accrued interest) into
the Deferred Compensation Plan as follows: as of the first
quarter of 2009, $15,070,659 and as of July 1, 2009,
$14,378,280 (minus applicable employment taxes). The amount
Mr. Essner became eligible to receive in the first quarter of
2009 includes an increase in his accrued benefits under the
Supplemental Executive Retirement Plan and the Executive
Retirement Plan after December 31, 2008, as a result of the
annual cash incentive award (i.e., cash bonus) he earned for
2008. See “— Non-Qualified Deferred
Compensation.”
Dr. Ruffolo, who retired effective August 1, 2008,
elected to receive his Supplemental Executive Retirement Plan
and Executive Retirement Plan accrued benefits in the form of a
lump sum and did not elect to notionally roll over these
benefits into any other Wyeth plan. Based on this election and
in accordance with tax rules (including 409A), he became
eligible to receive these benefits as of the first quarter of
2009 in the amounts of $1,850,802 and $3,058,748 (minus
applicable employment taxes) from the Supplemental Executive
Retirement Plan and the Executive Retirement Plan, respectively,
plus accrued interest.
Each of Mr. Essner and Dr. Ruffolo received a lump-sum
payment under the Wyeth Retirement Plan — U.S. in
the amounts shown in the column entitled “Payments During
Last Fiscal Year” above in connection with his retirement.
(1)
The number of years of credited service in the Executive
Retirement Plan for Mr. Poussot includes the time that
Mr. Poussot worked for an international affiliate of Wyeth.
As discussed in detail in the narrative preceding this table,
the Executive Retirement Plan grants each participant three
additional years of service to a maximum of 30 years.
The present value of the accumulated benefits related to the
three additional years of service credited (maximum total
credited service cannot exceed 30 years) under the
Executive Retirement Plan for Mr. Norden, Mr. Mahady,
Mr. Stein and Dr. Ruffolo is $534,059, $156,930,
$1,214,980 and $1,387,543, respectively. For Mr. Essner,
the present value of the accumulated benefits related to the
three additional years of service credited under the Executive
Retirement Plan was $3,838,499. For Mr. Poussot, the
present value of accumulated benefits related to the additional
years of service credited under the Executive Retirement
Plan is $4,797,998, of which $1,940,755 is related to the three
additional years of service and $2,857,243 is related to his
4.4 years of service with an international affiliate of
Wyeth.
43
As of December 31, 2008, each of Messrs. Poussot,
Mahady and Stein satisfied the provisions of each of the three
plans that would permit them to retire (age 55 and five
years of service) and commence receipt of benefits. If each of
Messrs. Poussot, Mahady or Stein had retired effective as
of January 1, 2009 (i.e., a December 31, 2008
termination of employment), he could have elected to receive his
benefit in the form of a lump sum. The estimated amount of the
lump sum would have been as follows:
For Mr. Norden, who did not satisfy the provisions of the
plans that would permit him to retire and commence receipt of
benefits as of December 31, 2008, the estimated present
value as of January 1, 2009 of the lump sum that would be
payable at age 55 assuming a termination date as of
December 31, 2008, would be $3,954,639.
The discount rate and mortality table for determining lump sums
are different from the financial assumptions used to calculate
the present value of accumulated benefits displayed in the
larger “— Pension Benefits” table. The
actuarial assumptions used to determine the above estimated lump
sums at January 1, 2009 are a discount rate and a mortality
table as specified in the Wyeth Retirement Plan —
U.S. (GATT mortality). The discount rate is determined
quarterly as defined in the Wyeth Retirement Plan —
U.S. and was 4.5% for the preceding calculations.
Non-Qualified
Deferred Compensation
Our
Plans
We maintain two non-qualified deferred compensation plans in
which our named executive officers may participate: the
Supplemental Employee Savings Plan and the Deferred Compensation
Plan.
Supplemental
Employee Savings Plan
We maintain a tax-qualified 401(k) savings plan, the Wyeth
Savings Plan, which is our broad-based savings plan, in which
all non-union U.S. employees who have attained age 21
are eligible to participate. The Wyeth Savings Plan allows
employees to save up to 50% of covered pay (salary, overtime,
sales commissions or sales bonuses) on a before-tax basis,
after-tax basis, or a combination of both and receive a Company
match of 50% on the first 6% of covered pay that the employee
contributes.
The Supplemental Employee Savings Plan supplements the Wyeth
Savings Plan and provides a means for eligible employees to
receive the employer matching contribution on any salary, sales
commission or sales bonus that cannot otherwise be matched in
the Wyeth Savings Plan. The Wyeth Savings Plan is subject to
federal law that limits the amount of annual earnings that may
be used to determine contributions under the plan ($230,000 for
2008). In addition, the law limits the “annual
additions” (which include before-tax, after-tax and Company
matching contributions) that may be made to a savings plan. For
2008, the dollar limit on annual additions was $46,000. For
2008, there also was an annual limitation of $15,500 ($20,500
for employees over age 50) on employee pre-tax
contributions.
Participants in the Supplemental Employee Savings Plan may
choose from a number of investment options, which are the same
as those offered in the Wyeth Savings Plan and are as follows:
Fidelity International Discovery; Spartan U.S. Equity
Index; Fidelity Low Priced Stock; Morgan Stanley Institutional
Fund Trust Value Portfolio — Advisor Class;
Wyeth Common Stock Fund; Fidelity Magellan; Fidelity Real Estate
Investment; Fidelity Capital Appreciation; Oppenheimer
Developing Markets; Robertson Stephens Partners; Fidelity
Balanced; Interest Income; Fidelity High Income; Fidelity New
Markets Income; PIMCO
Total Return — Administrative Class; Fidelity Freedom
2005; Fidelity Freedom 2010; Fidelity Freedom 2015; Fidelity
Freedom 2020; Fidelity Freedom 2025; Fidelity Freedom 2030;
Fidelity Freedom 2035; Fidelity Freedom 2040; Fidelity Freedom
2045; Fidelity Freedom 2050.
44
Earnings are calculated based on an individual
participant’s investment selection. Participants may change
investment selections daily. Supplemental Employee Savings Plan
distributions generally are available only following termination
and only in a lump sum.
Deferred
Compensation Plan
We offer employees earning a base salary of $155,000 or more,
including our named executive officers, the ability to defer a
portion of their annual cash compensation, including salary,
annual cash incentive awards (i.e., cash bonuses), sales
commissions and sales bonuses. As with the Supplemental Employee
Savings Plan, earnings are calculated based on an individual
executive’s investment selection. The Deferred Compensation
Plan offers both in-service and retirement distribution options
and offers distributions in the form of lump sums and
installments. Participants may direct investments, and earnings
track the following types of fund options: Balanced Portfolio,
International Portfolio, Large Cap Portfolio, Large Cap Value
Portfolio, Small Cap Value Portfolio, S&P 500 Index
Portfolio, Company Stock Fund and Market Interest Option.
The following table presents a summary of the activity in the
Supplemental Employee Savings Plan and the Deferred Compensation
Plan for our named executive officers in 2008. The aggregate
balance at last fiscal year-end represents participant
contributions, Company match and earnings/losses on those
amounts, as well as, in the case of Mr. Essner, the
notional rollover of his accrued benefit under the Supplemental
Executive Retirement Plan and the Executive Retirement Plan into
the Deferred Compensation Plan in 2008 in connection with his
retirement.
w
Executive
Registrant
Aggregate
Aggregate
Contributions in
Contributions in
Earnings in
Aggregate
Balance at
Last Fiscal
Last Fiscal
Last Fiscal
Withdrawals/
Last Fiscal
Year(1)
Year(2)
Year(3)
Distributions
Year-End(4)
Name
Plan Name
($)
($)
($)
($)
($)
Bernard Poussot
Deferred Compensation Plan
—
—
—
—
—
Supplemental Employee Savings Plan
$
75,826
$
37,913
$
37,554
—
$
867,982
Total
$
75,826
$
37,913
$
37,554
—
$
867,982
Gregory Norden
Deferred Compensation Plan
—
—
—
—
—
Supplemental Employee Savings Plan
$
34,150
$
17,075
$
8,981
—
$
224,845
Total
$
34,150
$
17,075
$
8,981
—
$
224,845
Joseph M. Mahady
Deferred Compensation Plan
—
—
$
8,946
—
$
1,104,658
Supplemental Employee Savings Plan
$
43,700
$
21,850
(153,084
)
—
360,214
Total
$
43,700
$
21,850
$
(144,138
)
—
$
1,464,872
Lawrence V. Stein
Deferred Compensation Plan
—
—
—
—
—
Supplemental Employee Savings Plan
$
31,299
$
15,650
$
(106,438
)
—
$
260,675
Total
$
31,299
$
15,650
$
(106,438
)
—
$
260,675
Mikael
Dolsten, M.D., Ph.D.
Deferred Compensation Plan
—
—
—
—
—
Supplemental Employee Savings Plan
—
—
—
—
—
Total
—
—
—
—
—
Robert Essner
Deferred Compensation Plan
$
27,799,775
(5)
—
$
922,393
$
4,773,847
$
28,535,716
(6)
Supplemental Employee Savings Plan
42,376
$
21,188
69,675
—
1,504,301
Total
$
27,842,151
$
21,188
$
992,068
$
4,773,847
$
30,040,017
Robert R. Ruffolo, Jr., Ph.D
Deferred Compensation Plan
—
—
—
—
—
Supplemental Employee Savings Plan
$
15,658
$
7,829
$
14,755
—
$
324,304
Total
$
15,658
$
7,829
$
14,755
—
$
324,304
45
(1)
Represents the aggregate amount of each named executive
officer’s deferral contributions in 2008 as well as the
notional rollover of Mr. Essner’s accrued benefit
under certain of our pension plans. See notes 5 and 6
below. All of the Supplemental Employee Savings Plan
contributions for 2008 are included as part of salary in the
“— Summary Compensation Table.” Other than
Mr. Essner’s notional rollover, none of our named
executive officers elected to defer compensation into the
Deferred Compensation Plan in 2008. See
“— Pension Benefits.”
(2)
Represents the aggregate amount of Wyeth’s contributions in
2008 to the Supplemental Employee Savings Plan on behalf of each
named executive officer. These amounts are included as part of
total compensation in the “— Summary Compensation
Table” for 2008 under the column entitled “All Other
Compensation.”
(3)
Represents the dollar amount of aggregate interest or other
earnings/losses credited in 2008.
(4)
Represents account balances at December 31, 2008.
Supplemental Employee Savings Plan balances as of
December 31, 2008 were invested as follows: for
Mr. Poussot (invested in Interest Income); for
Mr. Norden (invested in Interest Income); for
Mr. Mahady (invested in Spartan U.S. Equity Index and Wyeth
Common Stock Fund); for Mr. Stein (invested in Interest
Income, Fidelity International Discovery, Fidelity Magellan,
Morgan Stanley Institutional
Fund Trust Value — Advisor Class, Spartan
U.S. Equity Index and Wyeth Common Stock Fund); for
Mr. Essner (invested in Interest Income) and for
Dr. Ruffolo (invested in Interest Income). Deferred
Compensation Plan balances as of December 31, 2008 were
invested as follows: for Mr. Mahady (invested in the
Balanced Portfolio, the International Portfolio, the Small Cap
Value Portfolio and the Market Interest Option) and for
Mr. Essner (invested in the Market Interest Option). Of
these account balances, the following amounts were reported to
the named executive officer in the “— Summary
Compensation Table” for 2006, 2007 and 2008 as salary and
all other compensation: for Mr. Poussot, $255,258, for
Mr. Norden, $83,448, for Mr. Mahady, $158,955, for
Mr. Essner, $328,659 and for Dr. Ruffolo, $116,916. In
addition, of these account balances, $46,949 was reported to
Mr. Stein in the “— Summary Compensation
Table” for 2008 as salary and other compensation. See
notes 1 and 2 above for additional information regarding
amounts reported as compensation in the
“— Summary Compensation Table” in 2008.
(5)
Represents Mr. Essner’s notional rollover of his
accrued benefit under the Supplemental Executive Retirement Plan
and the Executive Retirement Plan in the aggregate amount of
$28,398,149 (minus applicable employment taxes) to the Deferred
Compensation Plan in 2008 in connection with his retirement. An
additional aggregate amount of $1,050,790 (minus any applicable
employment taxes) under the Supplemental Executive Retirement
Plan and the Executive Retirement Plan was
notionally rolled over in the first quarter of 2009. This
additional aggregate amount reflects the increase in
Mr. Essner’s accrued benefits under these plans as a
result of the annual cash incentive award (i.e., cash bonus) he
earned for 2008.
(6)
Amounts include the $28,398,149 (exclusive of employment taxes)
notionally rolled over from the Supplemental Executive
Retirement Plan and the Executive Retirement Plan to the
Deferred Compensation Plan, of which $14,019,869 (minus
applicable employment taxes) was distributed in January 2009.
Certain of our named executive officers were required to defer
the receipt of shares under equity awards (other than options)
granted prior to April 21, 2005 until retirement or other
termination. For awards granted on or after April 21, 2005
but before November 15, 2007, deferral was permissive
rather than mandatory. Deferral is no longer a feature of our
equity awards. All such deferred shares were credited to a
restricted stock trust that is not credited with interest;
however, shares in the restricted stock trust are credited with
dividends, as and when dividends are issued to our stockholders
and at the same rate. As indicated in the table entitled
“Securities Owned by Management” in “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” many of our named
executive officers have a significant amount of Wyeth common
stock that has been earned in respect of prior performance but
that may not be received or disposed of by the executive prior
to termination. These deferred shares are not included in the
above table.
46
Potential
Payments upon Termination or Change in Control
Our generally applicable company policies and plans provide for
certain benefits upon retirement or a change in control. In
addition, we have entered into change in control severance
agreements with members of our senior management and other key
employees, which are described below. We also entered into an
employment agreement with Mr. Essner in January 2007 (which
was amended in December 2007), a post-employment consulting
agreement with Dr. Ruffolo and a severance arrangement with
Dr. Dolsten, each of which is described below.
Information regarding potential payments and benefits to our
executive officers and directors in connection with our
contemplated merger with Pfizer will be set forth separately in
the proxy statement to be mailed to our stockholders relating to the approval of the transaction.
The discussion below is
required to be included in the proxy statement for our annual
meeting each year and, in accordance with SEC rules, all
information described in this section is presented as if a
triggering event occurred on December 31, 2008, and does
not reflect our contemplated merger with Pfizer.
Generally
Applicable Company Policies and Plans
Severance. As described below, we have entered
into change in control severance agreements with members of
senior management and other key employees that provide for
severance and other benefits following a change in control if we
or the surviving company terminates his or her employment other
than for “cause” or he or she terminates his or her
employment for “good reason.” Executives and other
U.S. employees who do not have change in control severance
agreements may be entitled to severance under our Special
Transaction Severance Plan if their employment is terminated by
the surviving company without cause or the employee terminates
his or her employment with good reason following a change in
control. We have also agreed to provide specified benefits under
Mr. Essner’s amended employment agreement, payments
under Dr. Ruffolo’s post-employment consulting
agreement and severance under Dr. Dolsten’s severance
arrangement following termination of employment, each as
described below. In all other circumstances, our Compensation
Committee retains full discretion to provide or decline to
provide severance payments or benefits to named executive
officers upon termination of employment.
Pension Benefits. Our pension plans are
described under the section entitled “Pension
Benefits.” The disclosure in that section includes
estimated lump sums as of January 1, 2009 for each of
Messrs. Poussot, Mahady and Stein, and an estimate of the
present value as of January 1, 2009 of a lump sum payable at
age 55 for Mr. Norden under our pension plans. That
section also includes the actual lump-sum payment under the
Wyeth Retirement Plan — U.S. and a description of
the lump sum elections and estimated payments to which
Mr. Essner and Dr. Ruffolo will be entitled following
the six-month and one-year holding periods in connection with
their retirements. Incremental increases in pension benefits
under our change in control severance agreements are described
under “— Change in Control Severance
Agreements.”
Health and Welfare Benefits. Under
company-wide plans, U.S. employees who are both age 55
or older and have completed 10 or more years of service at the
time they separate from employment with Wyeth are eligible to
participate in our retiree medical program following retirement.
For Messrs. Poussot, Mahady and Stein, who by virtue of
their age and years of service are entitled to retiree medical
benefits upon any termination of employment, the estimated
present value of these benefits if any of them terminated for
any reason as of December 31, 2008 would have been
$194,537, $206,080 and $178,416, respectively. In addition,
Mr. Essner, who by virtue of his age and years of service
was entitled to retiree medical benefits in connection with his
retirement during 2008, is receiving retiree medical benefits
with an estimated present value of $160,883 as of
December 31, 2008. Dr. Ruffolo was not eligible for
retiree medical benefits in connection with his retirement, as
he did not satisfy the ten-year service requirement. In the
event of the death of Messrs. Poussot, Mahady, Essner or
Stein, respectively, as of such date, Mr. Poussot’s
spouse would have been entitled to receive medical benefits with
an estimated present value of $104,550, Mr. Mahady’s
spouse would have been entitled to receive medical benefits with
an estimated present value of $109,313, Mr. Essner’s
spouse would have been entitled to receive medical benefits with
an estimated present value of $90,219 and
Mr. Stein’s dependent children would have been
entitled to receive medical benefits with an estimated present
value of $98,135.
Mr. Norden and Dr. Dolsten did not
meet the age and service requirements for retiree medical
benefits as of December 31, 2008. See
“— Change in Control Severance Agreements”
for a discussion of continued health
and welfare benefits available as a result of those agreements.
47
Vesting
of Equity
Retirement. Under our company-wide stock
incentive plans, participants in the United States who are both
age 55 or older and who have completed at least five years
of service at the time they separate from employment with Wyeth
are entitled to vesting of outstanding stock options and RSUs
upon their retirement. Under the terms of the applicable award
agreements, the retiring individual is entitled to continue to
hold his or her stock options following retirement for the
balance of the original option term. For performance share unit
awards, as the performance cycle for each prior grant completes,
the units held by the retiring individual will convert, if, when
and to the extent performance is achieved. In each such case,
these awards are subject to certain non-competition
requirements. For RSUs, this generally means that the individual
is entitled to full conversion of the units into stock upon
retirement. However, the 120,000 RSUs awarded to
Mr. Poussot on January 2, 2008, in connection with his
promotion to Chief Executive Officer do not vest upon retirement
and accordingly would be subject to forfeiture to the extent not
vested on his retirement date prior to vesting.
For Messrs. Poussot, Mahady and Stein, who met the
eligibility requirements under our various stock incentive plans
for retirement as of December 31, 2008, the estimated value
of unvested equity awards that would have vested in the event of
retirement on December 31, 2008 would have been as follows
(assuming performance share unit awards are earned at target):
For Mr. Poussot — $0 for stock options and
$11,421,795 for performance share unit awards, for
Mr. Mahady — $0 for stock options and $4,217,624
for performance share unit awards, and for
Mr. Stein — $0 for stock options and $2,956,351
for performance share unit awards. For Mr. Essner and
Dr. Ruffolo, who met the eligibility requirements under our
various stock incentive plans for retirement as of their 2008
retirement dates, the value of unvested equity awards that
vested upon their respective retirement dates, together with the
estimated value of unvested performance share unit awards at
December 31, 2008 (assuming performance share unit awards
are earned at target) was as follows: For
Mr. Essner — $973,100 for stock options and
$12,963,456 for performance share unit awards, and for
Dr. Ruffolo — $0 for stock options and $1,922,388
for performance share unit awards. As of December 31, 2008,
Mr. Norden and Dr. Dolsten were not
retirement-eligible under our various stock incentive plans.
Change in Control. Under our company-wide
stock incentive plans, upon a change in control, such as our
contemplated merger with Pfizer, all unvested stock options,
performance share unit awards and RSUs immediately vest. In the
case of performance share unit awards granted in 2007 and 2008,
these awards would convert to shares of our common stock at 80%
of target upon a change in control, rather than 0% to 200% of
target based on future performance with respect to named
executive officers. Assuming a change in control had occurred on
December 31, 2008, the estimated value of unvested equity
awards that would have vested upon such change in control would
have been as follows: For Mr. Poussot — $0 for
stock options, $9,137,436 for performance share unit awards and
$4,501,200 for RSUs; for Mr. Norden — $0 for
stock options, $2,438,150 for performance share unit awards and
$1,078,413 for RSUs; for Mr. Mahady — $0 for
stock options and $3,374,025 for performance share unit awards;
for Mr. Stein — $0 for stock options and
$2,365,006 for performance share unit awards; and for
Dr. Dolsten — $0 for stock options and $3,075,820
for performance share unit awards. Mr. Essner’s and
Dr. Ruffolo’s performance share unit awards also would
have converted upon a change in control to shares of our common
stock at 80% of target in the case of the 2007 awards and at
100% of target in the case of the 2008 awards, rather than 0% to
200% of target based on future performance. Assuming a change in
control had occurred on December 31, 2008, the estimated
value of their performance share unit awards that would have
vested upon such a change in control would have been as follows:
For Mr. Essner — $11,523,072 and for
Dr. Ruffolo — $1,537,910.
48
Death. Under the terms of our equity awards,
death is afforded the same treatment as retirement other than
with respect to the 120,000 RSUs granted to Mr. Poussot in
connection with his promotion in January 2008, which would vest
upon death but not on retirement. Accordingly, if any named
executive officer had died as of December 31, 2008, his
equity awards would have become vested, and based on those same
assumptions, the estimated values would have been the same as
those set forth under “Retirement” above in the case
of Messrs. Poussot, Mahady and Stein, together with, in the
case of Mr. Poussot, $4,501,200 for RSUs, and would have
been as follows for Mr. Norden and Dr. Dolsten: for
Mr. Norden — $0 for stock options, $3,047,688 for
performance share awards and $1,078,413 for RSUs; and for
Dr. Dolsten — $0 for stock options and $3,844,775
for performance share unit awards. For Mr. Essner and
Dr. Ruffolo, the estimated values would have been the same
as those shown for their performance share unit awards under
“Retirement” above.
Computation of Values. The calculations in
this “Vesting of Equity” section are based on the per
share closing price of our common stock on the NYSE on
December 31, 2008, which was $37.51, except that
calculations for stock options vested upon the 2008 retirements
of Mr. Essner and Dr. Ruffolo are based on the per
share closing price of our common stock on the NYSE on their
respective July 1, 2008, and August 1, 2008 effective
retirement dates, which were $47.19 and $40.24, respectively. In
the case of stock options, these amounts represent the aggregate
spread (i.e., the difference between the exercise price and the
closing price of our common stock on December 31, 2008 or
their respective retirement dates); in the case of performance
share unit awards, these amounts represent an assumed full
conversion of these awards to shares of our common stock at 100%
of target except in the event of a change in control, in which
case, the performance share unit awards generally vest at 80% of
target (and not including performance share unit awards granted
in 2006 because these awards were converted to shares of our
common stock at 136% of target in February 2009 and are reported
in the table in the section titled “Option Exercises and
Stock Vested in 2008”); and in
the case of RSUs, these amounts represent the value of the
common stock issuable upon conversion of such units as of
December 31, 2008. In the case of retirement or death, the
actual number of shares received upon conversion of the
performance share unit awards could be between 0% and 200% of
target amounts.
Other
We also provide life insurance and other benefits to our named
executive officers on substantially the same basis as provided
to our other employees. Employees, including named executive
officers, may also purchase voluntary life insurance coverage.
Change
in Control Severance Agreements
We have entered into change in control severance agreements with
approximately 30 members of our senior management team,
including each of our named executive officers. We also have
entered into change in control severance agreements with
approximately 532 other key employees; however, these agreements
have important differences from those entered into with our
senior management team (e.g., the change in control severance
agreements entered into with our other key employees generally
provide for severance and other benefits on the basis of a
two-year severance period rather than a three-year severance
period). Because Mr. Essner’s and
Dr. Ruffolo’s change in control severance agreements
terminated in connection with their retirements, they are
excluded from the following discussion.
The change in control severance agreements are intended to
provide for continuity of management in the event of a potential
change in control of Wyeth, such as our contemplated merger with
Pfizer, and generally provide that if a change in control of
Wyeth occurs, the executive will receive a one-time, cash
severance payment, as well as other benefits, if we or the
surviving company terminates his or her employment other than
for “cause” or he or she terminates his or her
employment for “good reason” (each as described below).
49
The change in control agreements were introduced in 1998 in
order to help retain our executive officers and key employees in
an environment of publicized potential merger discussions and
growing concerns about the potential impact of our diet drug
litigation. In determining the severance multiples, other
benefits and triggering events under these agreements, the
Compensation Committee and the Wyeth board of directors surveyed
and evaluated similar arrangements at a wide range of large
companies, including many of the companies in our peer group,
and determined that these terms were consistent with prevailing
norms and appropriate in light of the Wyeth and industry
environment described above, after consultation with both
outside counsel and the Compensation Committee’s
compensation consultant. These agreements have proved critically
important over the years in retaining and continuing to attract
key talent to successfully manage our Company through industry
consolidation, rapid change in the pharmaceutical industry
environment, important new product launches, the challenges of
our diet drug litigation and the negative impact on the revenue
of our Premarin family from the July 2002 hormone therapy
subset of the Women’s Health Initiative study.
In response to the changed circumstances of both our Company and
the pharmaceutical industry, the Compensation Committee
undertook a review of the 1998 agreements in 2006. The
Compensation Committee, in consultation with both outside
counsel and its compensation consultant, determined that while
these agreements remained important in attracting and retaining
key executives in light of industry consolidation and
competitiveness and while they generally were consistent with
prevailing norms, the potential payments and benefits under the
1998 agreements could be reduced without compromising the
retention of our key employees or our competitiveness in
attracting key talent. Accordingly, the 2006 agreements sought
to align certain terms of these agreements more closely with the
then current industry benchmark and to streamline certain
provisions. The 2006 agreements continue to provide appropriate
protection to senior managers (including the named executive
officers) and other key employees if a change in control occurs
and the individual’s employment is terminated, allowing
these executives and employees to minimize individual employment
concerns when considering and facilitating corporate
transactions that are in the best interests of our stockholders.
These agreements also are intended to help retain executives and
other key employees during continued industry consolidation.
In August 2006, we gave notice to all employees (including both
the senior management team and the other key employees) with
whom we maintain these change in control severance agreements
that the change in control severance agreements established in
1998, which we refer to as the 1998 agreements, would not be
extended beyond the year ending December 31, 2008 (the
earliest possible termination date under the terms of the 1998
agreements). This meant that if we had undergone a change in
control on or prior to December 31, 2008, the provisions of
the 1998 agreements would have been applicable to that
transaction and would have governed a termination of employment
for 36 months thereafter. In connection with that notice,
we also entered into replacement change in control severance
agreements, which we refer to as the 2006 agreements, with those
members of senior management and other key employees that would
apply to change in control transactions occurring on or after
January 1, 2009. Newly hired executives (such as
Dr. Dolsten) who received a change in control severance
agreement following that notice received only the 2006
agreement, which applied immediately in their case. In 2007, we
further amended all change in control severance agreements to
comply with Section 409A of the Internal Revenue Code.
The 2006 agreements generally reduced the benefits available to
executives (as compared to the 1998 agreements) upon a
termination following a change in control by, among other
things, including only salary and bonus in the severance
calculation and eliminating from the severance calculation an
amount equal to the value of stock options and restricted stock
and/or
performance shares granted to the executive. The 2006 agreements
also changed the bonus component of the severance calculation by
moving from the highest bonus in the prior five years to the
average of the three highest bonuses over the prior five years.
The 2006 agreements also eliminated the provision in the 1998
agreements permitting a member of the senior management team
(including named executive officers) to terminate his or her
employment during the 90 days following the first
anniversary of a change in control for any reason, with that
termination constituting a termination for good reason and
thereby entitling the executive to payment of severance and
other benefits.
50
General
Description of Our Change in Control Severance
Agreements
The 2006 change in control severance agreements apply to change
in control transactions occurring on or after January 1,2009, and through December 31, 2011, and would govern
employment termination events for up to 36 months following
a change in control transaction. The 2006 agreements will
automatically extend in one-year increments unless we provide a
notice of non-renewal no later than September 30 in the year two
years prior to the December 31 termination date. A change in
control as defined in the agreements would include any of the
following events:
•
the acquisition of 20% or more of our voting securities by any
person or persons acting in concert;
•
the consummation of any merger or business combination involving
us, the sale or lease of our assets or any combination of the
foregoing unless in any case our stockholders retain at least
65% of the resulting entity; or
•
the replacement of a majority of our directors (or their
designees) during a two-year period.
The proposed merger with Pfizer, if consummated, would
constitute a change in control under these agreements.
The 2006 agreements generally provide that if a change in
control of Wyeth occurs, the executive will receive a one-time,
lump-sum cash severance payment, as well as other benefits, if
we or the surviving company terminate his or her employment
other than for “cause” or the executive terminates his
or her employment for “good reason.”
For the 30 members of senior management (including the named
executive officers), under the 2006 agreements, if following a
change in control the executive is terminated for any reason
other than for “cause” or if the executive terminates
his or her employment for “good reason,” then the
executive would be entitled to a one-time, lump-sum cash
severance payment equal to three times the sum of (x) the
executive’s annual base salary as in effect at the time of
the change in control (or, if increased thereafter, as in effect
at such time) and (y) the average of the executive’s
three highest bonuses (annual cash incentive awards) over the
prior five years, or if the executive has less than three years
of bonus history, the average of the actual years (the
“Bonus” amount). If however, the executive has not
been awarded one full-year’s bonus, then the
executive’s bonus would be equal to 100% of base salary for
the members of our senior management team. All of our named
executive officers other than Dr. Dolsten have more than
three years of bonus history. The executive also would receive a
lump-sum cash payment equal to the pro rata portion of the Bonus
amount for the year in which the executive’s employment
terminates, calculated through the date of termination. Under
the 2006 agreements, an executive would be entitled to these
severance and other benefits if, following the signing of an
agreement for a change in control as defined in
Section 409A (but prior to the consummation), he or she is
terminated without cause at the request of the other party to
the agreement or otherwise in anticipation of the change in
control.
Under the 2006 agreements, termination for “cause”
generally consists of a conviction of, or a plea of guilty or no
contest to, a felony, or willful engagement in gross misconduct
that is materially and demonstrably injurious to us. Under the
2006 agreements, an executive can terminate his or her
employment for “good reason” for, among other things,
removal of the executive from his or her position or a
substantial diminution in the nature or status of his or her
responsibilities, a reduction in the executive’s base
salary or a failure to continue in effect any incentive
compensation (or equitable alternative) on the terms and level
of benefit at least as favorable as the terms and level of
benefit provided prior to the change in control, specified
relocations of the executive’s place of business, failure
to pay deferred compensation when due, failure to provide
benefits (in the aggregate) as favorable as existed prior to the
change in control, and failure of our successor to assume the
severance agreement.
An executive also would be entitled to the following additional
benefits pursuant to the 2006 agreements in the event his or her
employment terminates under qualifying circumstances following a
change in control:
•
On the date of termination, the executive would be given three
additional years of credit for age and service for purposes of
calculating the pension benefit to which he or she is entitled
under our Wyeth
Retirement Plan — U.S., Supplemental Executive
Retirement Plan and, if applicable, Executive Retirement Plan
and assuming, in calculating the benefit, that the executive
earned annually during the three additional years of service,
the same compensation (base salary and bonus) the executive
earned in the 12 months preceding the termination date or,
if greater, in the 12 months preceding the change in
control. Further, this benefit would be determined without any
reduction for the receipt of benefits prior to the normal
retirement age of 65 or age 60, as applicable, provided
that this eligibility for an unreduced pension payable at
age 55 is achieved only if, at the executive’s
termination, the sum of the executive’s age and years of
service equals or exceeds 60, after adding three years to both
service and age. All of our named executive officers other than
Dr. Dolsten would be eligible for the unreduced pension, in
all cases commencing not earlier than age 55.
51
•
If, at the time of termination, either (1) the executive is
age 50 or older on the termination date, or (2) the
sum of the executive’s age and years of service equals or
exceeds 60, after adding three years to both service and age,
the executive would be entitled to retiree medical coverage.
Retiree medical coverage begins after the completion of the
executive’s three years of benefit continuation described
below. All of our named executive officers are over age 50.
•
For three years from the date of termination, the executive
would be given continued coverage under our health and welfare
benefit plans (but excluding our disability plans) in which the
executive was participating immediately prior to the
termination. However, if welfare benefits are provided by a
subsequent employer, our obligation to provide those benefits
would terminate.
•
The executive would be entitled to a one-time cash payment equal
to $60,000, in lieu of the continuation of any fringe benefits.
•
The executive would be provided with outplacement or executive
recruiting services at a cost to us of no more than 10% of the
executive’s base salary (but in no event exceeding $25,000)
and payment by us of all legal fees and expenses reasonably
incurred by the executive, if any, in enforcing the agreement.
Because legal fees are purely speculative, these fees have not
been displayed in the “Estimated Values of Post-Termination
Payments and Other Benefits under the 2006 Change in Control
Severance Agreements” table following this discussion.
In addition, if any RSUs or stock options are terminated or
forfeited upon or following the termination of the
executive’s employment under the terms of any plan, the
executive would receive for any terminated or forfeited RSUs or
stock options an amount equal to the total of:
•
the cashout value (as defined in the agreements) of all the
shares covered by the RSUs forfeited (with units converted to
shares based on the target awards); and
•
the excess of (a) the cashout value of all the shares
subject to stock options that were forfeited over (b) the
aggregate exercise price of the shares subject to the forfeited
stock options.
To comply with Section 409A of the Internal Revenue Code,
to the extent the severance and other benefits under the 2006
agreements are deemed to provide a deferral of compensation
under Section 409A and the executive is a “specified
employee” (as such term is defined under Section 409A)
at the time of his or her dismissal, no payments or benefits
would be provided until six months after the date of separation
from service, or, if earlier, the date of death, at which point
we would be required to make a one-time, lump-sum cash payment
of the delayed amounts plus interest.
In the event that any payments made in connection with a change
in control were subjected to the excise tax imposed on excess
parachute payments by the Internal Revenue Code, under the 2006
agreements we would be obligated to
“gross-up”
the executives’ payments for all of these excise taxes plus
any federal, state and local income tax applicable to the excise
tax “gross-up” and for penalties and applicable
interest only if payments (net after tax) exceed 110% of the
executives’ or key employees’ so-called
“safe-harbor amount” (which is generally three times
the historical
W-2
compensation). If payments are between 100% and 110% of the
safe-harbor amount, the executive or key employee would be cut
back to $1.00 below the safe harbor amount, and we would not
have a
“gross-up”
obligation.
52
Under the terms of the 2006 agreements, executives have agreed
not to divulge any of our confidential information and are
prohibited from soliciting Wyeth employees or exclusive
long-term contractors to leave employment with Wyeth for two
years following the date of termination.
Estimated
Values of Post-Termination Payments and Other Benefits under the
2006 Change in Control Severance Agreements
The following table presents the estimated values of the payments
and other benefits that would have been provided to each of our
named executive officers upon an involuntary termination
following a change in control under the terms of our 2006 change
in control severance agreements discussed above. Because our
1998 change in control severance agreements terminated on
December 31, 2008, we have not presented these agreements in the
table below. For additional detail on the 1998 agreements,
including calculations of severance and other benefits under
these agreements, see our proxy statement for our 2008 Annual
Meeting of Stockholders.
In preparing this table, in accordance with SEC rules, we have
assumed that a change in control occurred on December 31,2008, that the named executive officer was immediately
terminated, and that the 2006 change in control severance
agreements were in effect and applicable as of December 31,2008.
As further described in the narrative following the table, the
table below is intended to reflect only estimated incremental
post-termination payments and other benefits attributable to the
2006 change in control severance agreements and accordingly does
not include (1) estimated amounts that would be realized
upon vesting of stock options, performance share unit awards and
RSUs upon a retirement or a change in control for all
participants generally under our stock incentive plans
(estimates of these amounts are provided under “— Generally Applicable Company Policies and
Plans — Vesting of Equity”), (2) the estimated value of pension and health
and welfare benefits that would be received upon termination of
employment under our pension and health and welfare plans absent
the change in control severance agreements (estimates of these
amounts are provided under “— Pension
Benefits” and “— Generally Applicable
Company Policies and Plans”), and (3) previously
earned compensation the receipt of which was deferred until
retirement or other termination (which is reported in the table
in the section entitled “— Non-Qualified Deferred
Compensation” and the table entitled “Securities Owned
by Management” under “Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters”). Estimates of potentially required
“gross-up”
payments for excise and related taxes under our 2006 change in
control severance agreements are provided in the narrative
following the table.
The amounts presented in the following table are estimates only
and do not necessarily reflect the actual value of the payments
and other benefits that would be received by the named executive
officers, which would be known only at the time that employment
actually terminates and if a change in control were actually to
occur. Accordingly, see the narrative following the tables for
additional explanations and assumptions made in making these
estimates.
Estimated
Values of Post-Termination Payments and Other Benefits under
2006 Change in Control Severance Agreements Assuming a Change in
Control and Qualifying Termination as of December 31, 2008
(estimated values relating to our contemplated merger with
Pfizer will be set forth separately in the proxy statement to be
mailed to our stockholders relating to the approval of the transaction):
Termination
Year Cash
Incremental
Incentive
Incremental
Health and
Cash
Award (i.e.,
Pension
Welfare
Name
Severance
Bonus)
Benefits
Benefits
Perquisites
Total
Bernard Poussot
$
9,310,000
$
1,653,333
$
12,932,574
$
7,872
$
85,000
$
23,988,779
Gregory Norden
$
3,925,100
$
538,367
$
8,044,659
$
225,322
$
85,000
$
12,818,448
Joseph M. Mahady
$
5,690,300
$
971,767
$
5,601,159
$
6,390
$
85,000
$
12,354,616
Lawrence V. Stein
$
4,850,160
$
892,500
$
2,312,578
$
4,284
$
85,000
$
8,144,522
Mikael Dolsten, M.D., Ph.D.
$
4,500,000
$
750,000
$
496,838
$
225,193
$
85,000
$
6,057,031
53
Cash Severance. Amounts shown in the above
table represent estimated cash severance payments calculated in
accordance with the 2006 change in control severance agreements
assuming a transaction and termination at December 31, 2008.
Termination Year Cash Incentive Award (i.e.,
Bonus). Amounts shown in the above table
represent a pro-rated annual award (100% because termination is
assumed to occur as of December 31, 2008) based on the
average of the named executive officer’s three highest
annual cash incentive awards over the prior five years, or 100%
of base salary in the case of Dr. Dolsten.
Incremental Pension Benefits. Amounts shown in
the above table represent the estimated incremental pension
benefits associated with termination following a change in
control. Specifically, the amounts shown represent the
incremental increase under the agreements (from a retirement
absent a change in control) in the lump-sum value of benefits
based on a retirement following a change in control on
December 31, 2008 for Mr. Poussot, Mr. Mahady and
Mr. Stein and the incremental increase in the present value
of the lump-sum value payable at age 55 for Mr. Norden
and Dr. Dolsten.
Under our pension plans, individuals may elect to receive
pension benefits (including the incremental benefit from the
change in control severance agreements) in a lump sum or various
annuity forms. In accordance with the applicable plan documents,
the lump-sum benefits were calculated with a discount rate of
4.50%, which is determined quarterly, and GATT mortality. The
total (not incremental) annual single life annuity would be
$2,367,633 for Mr. Poussot, $1,346,600 for Mr. Mahady
and $742,233 for Mr. Stein commencing immediately, and for
Mr. Norden $931,648 and for Dr. Dolsten $40,077
commencing at age 55 and, absent a change in control, the
total single life annuity per year for their lives would be
$1,496,301 for Mr. Poussot, $978,142 for Mr. Mahady
and $580,187 for Mr. Stein commencing immediately, and
$307,043 for Mr. Norden commencing at age 55.
Dr. Dolsten did not meet the service requirement for
participation in Wyeth’s retirement plans as of
December 31, 2008. However, in the event of a change in
control, Dr. Dolsten would be granted additional service
credit making him eligible to receive retirement benefits under
the 2006 agreement.
Incremental Health and Welfare Benefits. As
described above, under retirement policies generally applicable
to all U.S. salaried employees, Messrs. Poussot,
Mahady and Stein by virtue of their age and years of service are
entitled to retiree medical benefits upon any termination. In
addition, under the 2006 change in control severance agreements,
three years of continuation of certain other welfare benefits
also would be provided, which comprise the incremental amounts
shown for Messrs. Poussot, Mahady and Stein in the above
table. Mr. Norden and Dr. Dolsten each would become
eligible for retiree medical benefits and three years of dental,
life insurance and other retiree benefits under the terms of the
2006 change in control severance agreements, and the amounts
shown in the table above represent the estimated value of these
benefits.
Perquisites. The amounts shown in the above
table represent a $60,000 payment in lieu of continuation of
perquisites and $25,000 for outplacement services.
“Gross-Up”
for Excise Taxes. The above table does not
include additional potentially required
“gross-up”
payments for excise and related taxes that might be payable in
connection with a change in control under our 2006 change in
control severance agreements. In general, Section 4999 of
the Internal Revenue Code imposes a 20% excise tax on an
executive on certain payments made to him or her in connection
with a change in control. Our 2006 change in control severance
agreements generally provide that we will put our executives in
the same after-tax position that they would have been in but for
the imposition of this excise tax (each executive officer
otherwise remains responsible for his or her own income taxes).
In general, this excise tax is imposed upon payments and
benefits paid to the executive that are contingent upon a change
in control transaction, which in our case would include payments
and benefits under our change in control severance agreements as
well as pursuant to the terms of our stock incentive plans.
The following are estimates of
“gross-up”
payments under the 2006 change in control severance agreements,
calculated as if a change in control transaction had occurred on
December 31, 2008 and the executive had been terminated on
the same day, calculated by Hewitt Associates LLC:
$17.3 million for
Mr. Poussot; $8.3 million for Mr. Norden;
$7.8 million for Mr. Mahady; $5.2 million for
Mr. Stein; and $4.6 million for Dr. Dolsten.
54
The foregoing estimates are based on a number of assumptions.
Facts and circumstances at the time of any change in control
transaction and termination thereafter as well as changes in the
applicable named executive officer’s compensation history
preceding such a transaction could materially impact whether and
to what extent the excise tax will be imposed and therefore the
amount of any potential
gross-up.
For purposes of performing these calculations, we have made the
following additional assumptions: for Messrs. Poussot and
Norden, an individual effective tax rate of 39.31% (composed of
a federal tax rate of 35.00%, a Pennsylvania state tax rate of
3.07% and FICA/FUTA of 1.45%), for Mr. Mahady, an
individual effective tax rate of 40.24% (composed of a federal
tax rate of 35.00%, a Pennsylvania state tax rate of 3.07%, a
local tax rate of 1.00% and FICA/FUTA of 1.45%), for
Mr. Stein, an individual effective tax rate of 44.79%
(composed of a federal tax rate of 35.00%, a New Jersey state
tax rate of 8.97% and FICA/FUTA of 1.45%), and for
Dr. Dolsten, an individual effective tax rate of 42.82%
(composed of a federal tax rate of 35.00%, a New York State tax
rate of 6.85% and FICA/FUTA of 1.45%) and 120% Applicable
Federal Semi-annual Rate (AFR) as of December 2008 (for
short-term 1.63%, mid-term 3.40% and long-term 5.28%). AFR is
applicable in determining the value of accelerating vesting of
stock options and RSUs in computing these excise taxes.
Other
Post-Employment Arrangements for Named Executive
Officers
Employment
Agreement — Mr. Essner
On January 25, 2007, we entered into an employment
agreement with Mr. Essner in order to secure
Mr. Essner’s continued services as our Chairman and
Chief Executive Officer and his agreement that, following
termination of his employment, he will assist us with litigation
and regulatory matters and refrain from competing against us. At
the time of entering into the agreement, the Wyeth board of
directors determined that entry into the agreement was an
important retention tool, that the payments and benefits
available to Mr. Essner under the agreement were
appropriate in light of Mr. Essner’s role and
contribution to Wyeth and that such terms were competitive and
consistent with employment agreements entered into with other
chief executive officers at other large companies. While we have
not entered into employment agreements with any of our other
executive officers, the Wyeth board of directors believed that
it was in the best interests of Wyeth to enter into this
agreement with Mr. Essner in order to secure his continued
services and to assist Wyeth in its succession planning. The
agreement was recommended by the Compensation Committee and
approved by the Wyeth board of directors.
On December 20, 2007, Mr. Essner and we entered into a
letter agreement amending certain terms of the employment
agreement to reflect his announced retirement as Chief Executive
Officer effective as of January 1, 2008. In this Form 10-K/A, we refer to the employment agreement as
amended by the letter agreement as Mr. Essner’s
amended employment agreement. The Compensation Committee
recommended and the Wyeth board of directors approved the
amended employment agreement in order to reflect
Mr. Essner’s announced retirement as Chief Executive
Officer and Mr. Essner’s agreement to remain as an
employee of Wyeth and as Chairman of the Wyeth board of
directors for a period of transition. The amended agreement
confirmed that Mr. Essner was not entitled to severance
payments or pension enhancements under the agreement as a result
of his retirement. Each of the Compensation Committee and
Mr. Essner utilized independent counsel to assist with the
development of the agreement and the amended agreement.
The amended employment agreement provided that Mr. Essner
would continue as an employee and Chairman of the Wyeth board of
directors until December 31, 2008, subject to earlier
termination (1) on 30 days’ notice (unless notice
is waived by the other party) at the election of Wyeth or
Mr. Essner or (2) on account of “cause” or
death. Under the agreement, termination for “cause”
generally consisted of a conviction of, or a plea of guilty or
no contest to, a felony, or willful engagement in gross
misconduct that is materially and demonstrably injurious to us.
Mr. Essner’s annual base salary rate for 2008 remained
unchanged from 2007 at $1,728,500, and he was eligible for an
annual cash incentive award (bonus) in respect of 2008 (no less
than the award he earned in respect of 2007, prorated for the
number of calendar days Mr. Essner was employed in 2008),
as determined by the Compensation Committee. This award was paid
in March 2009 and is reflected in the “Summary Compensation
Table.” Under the terms of the
amended employment agreement, Mr. Essner also was eligible to
receive a long-term equity incentive award in April 2008 as
determined by the Compensation Committee. This award was granted
in April 2008 and is reflected in the “2008 Grants of
Plan-Based
Awards” table.
55
The amended employment agreement provides that for a period of
five years after termination of his employment, Mr. Essner
will provide reasonable assistance to us with regulatory and
litigation matters as to which he had any particular knowledge
in connection with his employment at Wyeth. Mr. Essner also
has agreed not to compete against us or solicit any of our
employees or significant customers, clients or distributors
during this five-year period.
The amended employment agreement provided that, upon any
termination other than for cause or upon the expiration of the
term on December 31, 2008, Mr. Essner received his
salary through the date of termination and payment for any
accrued but unpaid vacation, he retained all of his rights to
benefits earned prior to termination under Company benefit plans
in which he participated, and he was entitled to payment of an
annual cash incentive award (bonus) for 2008 as described above,
prorated for the number of calendar days Mr. Essner was
employed in 2008. Mr. Essner also was entitled to vesting
of all outstanding time-based equity awards and
performance-based equity awards (if, when and to the extent
applicable performance targets are met) consistent with the
terms of our generally applicable Company equity plans and
retiree health and welfare benefits in accordance with our
generally applicable retirement policy. Until the earlier to
occur of (1) Mr. Essner’s death or (2) a
five-year period after any such termination of employment, we
also will provide to Mr. Essner reasonable home and
personal security, an office and secretarial support, up to
75 hours annually of personal use of company aircraft, and
access to a company-provided car and driver for occasional
personal use. To comply with Section 409A, the amended
agreement provided that Mr. Essner must pay for these
benefits for the first six months following termination and that
we would reimburse him for these payments following the end of
the six-month period. We are entitled to discontinue the
benefits referred to in the third sentence of this paragraph if
Mr. Essner fails to provide the post-termination assistance
or comply with the post-termination covenants described above.
Upon Mr. Essner’s retirement as an employee in June
2008, he became entitled to receive the benefits described in
the third sentence of the preceding paragraph, which had an
estimated value of $1.6 million as of his retirement date.
This amount is solely an estimate and does not necessarily
reflect the actual value of the benefits that Mr. Essner
will receive.
Consulting
Agreement — Dr. Ruffolo
In connection with Dr. Ruffolo’s retirement, we
entered into a consulting agreement with Dr. Ruffolo and
Ruffolo Consulting, LLC (a company owned by Dr. Ruffolo),
effective as of August 1, 2008, pursuant to which
Dr. Ruffolo consults with and advises us on matters within
his expertise as we may reasonably request from time to time,
including assistance in regulatory matters and litigation, new
products
and/or
licensing matters, candidate assessment and transition support,
with Dr. Ruffolo’s services being limited to no more
than 20% of the average level of services performed by him over
the 36 months immediately preceding his retirement. The
consulting agreement, which may be terminated by any party on
90 days’ notice, is for a term of one year and may
continue for additional one-year terms at our election.
During the initial one-year term, we will pay to Ruffolo
Consulting, LLC consulting fees consisting of $25,000 per month,
together with reimbursement of expenses, if applicable.
Following the initial one-year term, if the term of the
consulting agreement is extended, we will pay to Ruffolo
Consulting, LLC consulting fees at a mutually agreed upon daily
rate for actual services rendered on an as needed basis. In
addition, Dr. Ruffolo was entitled to receive an annual
incentive compensation award for 2008 (pro-rated for the period
of his employment during 2008), in an amount determined by the
Compensation Committee in its sole discretion. This award was
paid to Dr. Ruffolo in a lump sum in March 2009 and is
reflected in the “— Summary Compensation
Table.”
56
Offer
Letter — Dr. Dolsten
In connection with Dr. Dolsten’s employment, we agreed
that if Dr. Dolsten’s employment is terminated by us
for any reason other than gross misconduct, theft, conviction of
a felony, or under circumstances that would entitle him to any
payment under a change of control severance agreement, in
exchange for his execution of a waiver and release, we would
provide him with a severance benefit equal to two times his base
salary, at the rate in effect on the date immediately prior to
his termination. This severance benefit would be paid monthly
over a
24-month
period following such a termination; provided, however, that in
order to comply with Section 409A of the Internal Revenue
Code, if Dr. Dolsten were a “specified employee”
(specified employees are identified annually as our 100 highest
statutory
W-2
compensated employees) on his termination date, no severance
payments would be made until the first day of the seventh month
following termination and he would receive on such date a
payment equal to seven months of base salary (7/24th of
total severance) and the balance of the severance benefit would
be paid in equal portions monthly thereafter. If
Dr. Dolsten’s employment had been terminated as of
December 31, 2008, absent a circumstance under which he
would be entitled to any payment under a change in control
agreement, he would have been entitled to aggregate severance
payments of $1,500,000, paid as described in the preceding
sentence.
57
DIRECTOR
COMPENSATION
We use a combination of cash and equity-based incentive
compensation to attract and retain highly qualified candidates
to serve as non-employee directors on the Wyeth board of
directors. In setting non-employee director compensation, we
consider both the high level of expertise and the time
commitment that board service requires. Information
regarding the impact of our proposed merger with Pfizer on our
director compensation programs
will be set forth separately in the proxy statement to be mailed to
our stockholders relating to the approval of the transaction.
Mr. Poussot, our Chairman, President and Chief Executive
Officer, and Mr. Essner, our former Chairman, were Wyeth
employees during 2008. The 2008 compensation for each of
Messrs. Poussot and Essner is discussed below under
“Executive Compensation.”
Compensation
Framework for Non-Employee Directors
In 2008, we implemented a new compensation framework for
non-employee directors, which consists of the following:
•
a determination every two years by the Nominating and Governance
Committee of a total fixed annual dollar amount of compensation
to be provided to each non-employee director (set at $220,000
for 2008 and 2009);
•
the delivery of that total fixed annual compensation 40% in cash
and 60% in equity, with an annual cash retainer fee representing
the cash portion and deferred stock units (DSUs) representing the equity
portion; and
•
a separate annual cash committee chairman fee of $15,000, but no
other meeting or committee service fees.
Under this compensation framework, beginning in 2008, we no
longer grant stock options to non-employee directors. As part of
this compensation framework, the Wyeth board of directors
adopted the Wyeth 2008 Non-Employee Director Stock Incentive
Plan, which was approved by our stockholders at our 2008 Annual
Meeting of Stockholders. Under this plan, each non-employee
director was granted DSUs for 2008 with a value equal to 60% of
$220,000, measured using the closing price of our common stock
on the date of the grant, which was the date of the Wyeth 2008
Annual Meeting of Stockholders. Distribution of shares covered
by DSUs is deferred until the later of the termination of the
non-employee director’s service on the Wyeth board of
directors or a later date elected by the non-employee director.
Each annual DSU vests on the earlier of (1) the day
immediately prior to our next annual meeting of stockholders and
(2) 12 months from the date of grant, except that DSUs
granted to newly elected directors do not vest until the date
that is 12 months and 30 days from the date of grant.
However, if a director has not yet served for at least two
continuous years on the Wyeth board of directors, vesting is
delayed until he or she meets this two-year service requirement.
The DSUs also become immediately vested upon (1) the
termination of the director’s service on the Wyeth board or
directors (following at least two years of continuous service)
on account of death or mandatory retirement, (2) a change
in control, such as our contemplated merger with Pfizer or
(3) the exercise of discretion by the Compensation
Committee (as defined below) to accelerate vesting. DSUs are
credited to a bookkeeping account established for each
non-employee director, and a number of shares of our common
stock equal to the number of DSUs granted to each non-employee
director is contributed to a grantor trust on the grant date. On
each date that cash dividends are otherwise payable to the
holders of common stock, the DSUs are credited with dividend
equivalents. As the dividend equivalents in any deferred unit
account equal the value of additional full shares of stock, we
contribute shares of stock to the grantor trust. Directors have
the ability to direct the trustee of the grantor trust with
respect to the voting of the shares of common stock underlying
the DSUs, and the trustee does not have discretion to vote those
shares unless instructed to do so.
Under our 1994 Restricted Stock Plan for Non-Employee Directors,
each non-employee director first elected as a director prior to
April 27, 2006 is entitled to receive an initial grant of
800 shares of restricted stock and four subsequent annual
grants of 800 shares of restricted stock for a total of
4,000 shares of restricted stock over a five-year period.
These awards vest on the fifth anniversary of election to the
Wyeth board of directors and are subject to the terms and
conditions of the plan, which includes a provision for the
acceleration of vesting of outstanding restricted stock awards
upon a change in control.
Non-employee directors may elect to defer receipt of their shares following
the end of the vesting period, in which case these deferred
shares are contributed to a grantor trust following the end of
the vesting period. Non-employee directors first elected on or
after April 27, 2006 do not receive these awards. Four of
our continuing non-employee directors received 800 share
annual grants in 2008 as scheduled under this plan.
58
Directors’
Deferral Plan
We also maintain our Directors’ Deferral Plan, under which
non-employee directors’ fees may be deferred in amounts
specified by each non-employee director. The deferred amounts
accrue interest, compounded quarterly, at a market rate set
annually (equal to 120% of the applicable federal long-term
rate) or may be allocated to phantom stock units on a quarterly
basis. Phantom stock units accrue dividend equivalents that are
credited quarterly and are paid in cash upon distribution from
the plan.
Other
Benefits
During 2008, non-employee directors were entitled to participate
in our medical, dental, vision and prescription drug plans by
paying the full applicable premium associated with their
coverage. Wyeth directors also receive business travel and
accident insurance coverage and may participate in our
charitable matching gift program, which currently provides that
Wyeth matches 50%, up to a maximum of $12,500 per year, of
charitable gifts by directors. We provide or reimburse directors
for first-class air travel to and from meetings of the Wyeth
board of directors. We invited directors’
spouses/significant others to attend one off-site meeting of the
Wyeth board of directors in 2008, and we paid the costs of this
attendance in order to encourage attendance and foster social
interaction among the members of the Wyeth board of directors.
2008 Directors’
Compensation Table
The following table presents compensation information for our
non-employee directors for the fiscal year ended
December 31, 2008. The table presents compensation
information for all non-employee directors who served on the
Wyeth board of directors during 2008; however, Professor Feerick
and Messrs. Critelli and Seidenberg served on the Wyeth
board of directors for only part of the year. Mr. Critelli
was elected to the Wyeth board of directors at the
April 24, 2008 Annual Meeting of Stockholders. Professor
Feerick retired effective July 31, 2008 in connection with
the mandatory retirement provisions of the Wyeth Corporate
Governance Guidelines and Mr. Seidenberg resigned
effective February 29, 2008.
Fees Earned or Paid
Stock
Option
All Other
in Cash(1)
Awards(2)
Awards(2)
Compensation(3)
Total
Name
($)
($)
($)
($)
($)
Robert M. Amen
$
88,000
$
63,124
—
$
7,500
$
158,624
Michael J. Critelli
$
60,440
$
45,397
—
—
$
105,837
John D. Feerick
$
81,000
$
152,822
$
13,395
$
18,500
$
265,717
Frances D. Fergusson, Ph.D.
$
103,000
$
159,413
$
13,395
$
10,159
$
285,967
Victor F. Ganzi
$
103,000
$
142,528
$
13,395
$
2,102
$
261,025
Robert Langer, Sc.D.
$
88,000
$
195,451
$
13,395
$
21,418
$
318,264
John P. Mascotte
$
103,000
$
112,085
$
13,395
$
26,448
$
254,928
Raymond J. McGuire
$
88,000
$
126,310
$
22,159
—
$
236,469
Mary Lake Polan, M.D., Ph.D., M.P.H.
$
103,000
$
112,085
$
13,395
$
12,638
$
241,118
Gary L. Rogers
$
88,000
$
145,699
$
13,395
—
$
247,094
Ivan G. Seidenberg
$
22,000
$
(46,410
)
$
(29,130
)
$
12,500
$
(41,040
)
John R. Torell III
$
103,000
$
112,085
$
13,395
$
5,761
$
234,241
(1)
Reflects the aggregate dollar amount of annual retainer and
committee chairman fees earned and payable in cash. Non-employee
directors are permitted to defer director fees and, for 2008,
under the Directors’ Deferral Plan, directors deferred the
following amounts: $88,000 for Mr. Amen, $103,000 for
Mr. Ganzi and $22,000 for Mr. Seidenberg.
59
(2)
The column entitled “Stock Awards” represents the
compensation cost recognized for financial statement reporting
purposes in 2008 in accordance with SFAS No. 123R, disregarding the
estimate of forfeitures related to service-based vesting
conditions, for restricted stock granted in 2008 and prior years
under the 1994 Restricted Stock Plan for Non-Employee Directors
and DSUs granted in 2007 and 2008 under both our prior and new
non-employee director compensation frameworks. The column
entitled “Option Awards” represents the compensation
cost recognized for financial statement reporting purposes in
2008 in accordance with SFAS No. 123R, disregarding
the estimate of forfeitures related to service-based vesting
conditions, for stock options granted in 2007 under our prior
non-employee director compensation framework. DSUs were granted
under our 2006 Non-Employee Director Stock Incentive Plan and
our 2008 Non-Employee Director Stock Incentive Plan, and stock
options were granted under our 2006 Non-Employee Director Stock
Incentive Plan. Amounts shown for Mr. Seidenberg reflect
the reversal of compensation cost in accordance with
SFAS No. 123R, resulting from his forfeiture of
unvested DSUs and unvested stock option awards upon his
resignation from the Wyeth board of directors. The expense for
restricted stock and DSUs is based upon the share price of our
common stock on the grant date of the award and is recognized
pro rata over the vesting period. Stock option expense is
determined based upon the Black-Scholes option pricing model
based on the following assumptions and is recognized pro rata
over the vesting period:
2007 Grant
Expected Life of Options
5.5 Years
*
Expected Volatility
19.91%
*
Expected Dividend Yield
2.11%
Risk-Free Rate
4.58%
*
*
Due to the mandatory retirement age of 72 set forth in the
Wyeth Corporate Governance Guidelines, for Professor
Feerick, assumptions for the 2007 grant were an expected life of
the options of 4.0 years, expected volatility of 19.24% and
a risk free rate of 4.55%.
The following table shows equity grants awarded in 2008 to
non-employee directors:
1994 Restricted Stock Plan
2008 Non-Employee
for Non-Employee Directors
Director Stock Incentive Plan
Total Grant Date
Grant
Number of
Grant Date
Grant
Number of
Grant Date
Fair Value of Stock
Name
Date
Shares
Fair Value*
Date
Units
Fair Value*
Awards*
Mr. Amen
—
—
—
4/24/2008
2,963
$
132,031
$
132,031
Mr. Critelli
—
—
—
4/24/2008
2,963
$
132,031
$
132,031
Prof. Feerick
—
—
—
4/24/2008
2,963
$
132,031
$
132,031
Dr. Fergusson
01/02/2008
800
$
35,112
4/24/2008
2,963
$
132,031
$
167,143
Mr. Ganzi
12/01/2008
800
$
25,720
4/24/2008
2,963
$
132,031
$
157,751
Dr. Langer
01/02/2008
800
$
35,112
4/24/2008
2,963
$
132,031
$
167,143
Mr. Mascotte
—
—
—
4/24/2008
2,963
$
132,031
$
132,031
Mr. McGuire
—
—
—
4/24/2008
2,963
$
132,031
$
132,031
Dr. Polan
—
—
—
4/24/2008
2,963
$
132,031
$
132,031
Mr. Rogers
10/01/2008
800
$
30,456
4/24/2008
2,963
$
132,031
$
162,487
Mr. Seidenberg
—
—
—
—
—
—
—
Mr. Torell
—
—
—
4/24/2008
2,963
$
132,031
$
132,031
*
Grant date fair value for restricted stock and DSUs was computed
by multiplying the number of shares by the market value of our
common stock on the grant date. The grant date fair values were
developed solely for the purpose of comparative disclosure in
accordance with SEC rules using the same valuation model and
assumptions, disregarding the estimate of forfeitures relating
to service-based vesting conditions, as applied for purposes of
our consolidated financial statements for the year ended
December 31, 2008 and are not intended to predict future
prices of our common stock or our future dividend distributions.
The ultimate values of these equity
awards will depend on the
future market price of our common stock and cannot be forecasted with reasonable accuracy. The actual value,
if any, a holder will realize upon sale of restricted stock and
the stock received upon conversion of DSUs will depend on the
market value of our common stock on the date of sale.
60
The following table presents all outstanding stock option awards
held at December 31, 2008 by each person who served as a
non-employee director during 2008. In each case, these stock
options were granted prior to 2008 under our former compensation
programs for non-employee directors.
Number of
Securities Underlying
Unexercised Options
Option Exercise
(#)
Price
Option
Name
Exercisable*
($)
Expiration Date
Mr. Amen
—
—
—
Mr. Critelli
—
—
—
Prof. Feerick
3,000
$
65.1875
4/22/2009
3,000
$
56.5938
4/27/2010
4,000
$
56.5250
4/26/2011
4,000
$
60.7050
4/25/2012
4,000
$
41.0500
4/24/2013
4,000
$
40.2200
4/22/2014
4,000
$
43.5700
4/21/2015
3,500
$
48.2200
7/31/2011
3,500
$
56.0000
7/31/2011
Total:
33,000
Dr. Fergusson
4,000
$
43.5700
4/21/2015
3,500
$
48.2200
4/27/2016
3,500
$
56.0000
4/26/2017
Total:
11,000
Mr. Ganzi
3,500
$
48.2200
4/27/2016
3,500
$
56.0000
4/26/2017
Total:
7,000
Dr. Langer
4,000
$
40.2200
4/22/2014
4,000
$
43.5700
4/21/2015
3,500
$
48.2200
4/27/2016
3,500
$
56.0000
4/26/2017
Total:
15,000
Mr. Mascotte
3,000
$
65.1875
4/22/2009
3,000
$
56.5938
4/27/2010
4,000
$
56.5250
4/26/2011
4,000
$
60.7050
4/25/2012
4,000
$
41.0500
4/24/2013
4,000
$
40.2200
4/22/2014
4,000
$
43.5700
4/21/2015
3,500
$
48.2200
4/27/2016
3,500
$
56.0000
4/26/2017
Total:
33,000
Mr. McGuire
3,500
$
56.0000
4/26/2017
61
Number of
Securities Underlying
Unexercised Options
Option Exercise
(#)
Price
Option
Name
Exercisable*
($)
Expiration Date
Dr. Polan
3,000
$
65.1875
4/22/2009
3,000
$
56.5938
4/27/2010
4,000
$
56.5250
4/26/2011
4,000
$
60.7050
4/25/2012
4,000
$
41.0500
4/24/2013
4,000
$
40.2200
4/22/2014
4,000
$
43.5700
4/21/2015
3,500
$
48.2200
4/27/2016
3,500
$
56.0000
4/26/2017
Total:
33,000
Mr. Rogers
3,500
$
48.2200
4/27/2016
3,500
$
56.0000
4/26/2017
Total:
7,000
Mr. Seidenberg
3,000
$
65.1875
4/22/2009
3,000
$
56.5938
4/27/2010
4,000
$
56.5250
4/26/2011
4,000
$
60.7050
4/25/2012
4,000
$
41.0500
4/24/2013
4,000
$
40.2200
4/22/2014
4,000
$
43.5700
4/21/2015
3,500
$
48.2200
2/28/2011
Total:
29,500
Mr. Torell
3,000
$
65.1875
4/22/2009
3,000
$
56.5938
4/27/2010
4,000
$
56.5250
4/26/2011
4,000
$
60.7050
4/25/2012
4,000
$
41.0500
4/24/2013
4,000
$
40.2200
4/22/2014
4,000
$
43.5700
4/21/2015
3,500
$
48.2200
4/27/2016
3,500
$
56.0000
4/26/2017
Total:
33,000
* Non-employee directors did
not hold any unexercisable stock options at December 31,2008.
In addition, at December 31, 2008, each current
non-employee director had 2,963 DSUs granted in 2008 that had
not yet vested; Dr. Fergusson, Mr. Ganzi and
Mr. Rogers had 3,200 shares of restricted stock that
had not yet vested; and Dr. Langer had 4,000 shares of
restricted stock that had not yet vested, but which subsequently
vested in January 2009.
62
(3)
Represents Wyeth’s matching contributions under our
charitable matching gift program, the aggregate incremental cost
to us of non-business activities in connection with the offsite
meeting of the Wyeth board
of directors in 2008 and the reimbursement by us of taxes
incurred by the director as a result of such attendance as
follows:
Non-Business
Matching
Activities at
Charitable
Off-Site Board
Reimbursement
Total All Other
Name
Contributions
Meeting
of Taxes
Compensation
Mr. Amen
$
7,500
—
—
$
7,500
Mr. Critelli
—
—
—
—
Prof. Feerick
$
18,500
*
—
—
$
18,500
Dr. Fergusson
$
1,500
*
$
1,289
$
7,370
$
10,159
Mr. Ganzi
—
$
1,117
$
985
$
2,102
Dr. Langer
$
10,000
$
985
$
10,433
$
21,418
Mr. Mascotte
$
12,500
$
1,170
$
12,778
$
26,448
Mr. McGuire
—
—
—
—
Dr. Polan
$
10,750
$
1,003
$
885
$
12,638
Mr. Rogers
—
—
—
—
Mr. Seidenberg
$
12,500
*
—
—
$
12,500
Mr. Torell
$
250
$
985
$
4,526
$
5,761
*
Amount for Professor Feerick includes $6,000 in matching
contributions paid by Wyeth in 2008 for donations made by
Professor Feerick in late 2007; amount for Dr. Fergusson
represents matching contributions paid by Wyeth in 2009 for
donations made by Dr. Fergusson in late 2008; and amount
for Mr. Seidenberg represents matching contributions paid
by Wyeth in 2008 for donations made by Mr. Seidenberg in
late 2007.
We invited directors’ spouses/significant others to attend
one off-site meeting of the Wyeth board of directors in 2008,
and we paid the costs of this attendance in order to encourage
attendance and foster social interaction among the members of
the Wyeth board of directors, which we view as a legitimate
business purpose, and accordingly, we have not included the
costs of travel, lodging and activities that we considered to be
business-related. Amounts shown reflect the aggregate
incremental cost to us of non-business activities at the meeting.
63
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Ganzi, Amen, Critelli, Mascotte and Rogers and, prior to his retirement,
Mr. Seidenberg served on the Compensation Committee during 2008. There were no Compensation Committee interlocks during 2008.
64
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
SECURITIES
OWNED BY MANAGEMENT
The table below shows the number of shares of Wyeth common stock
beneficially owned on February 2, 2009, by:
•
each of our current directors;
•
each of our named executive officers; and
•
all of our current directors and executive officers as a group.
We calculate beneficial ownership by including shares owned in
each director’s or executive officer’s name (or by any
member of his or her immediate family sharing his or her home).
We also include shares held by a broker for the benefit of the
officer or director and securities which the officer or director
could purchase within 60 days (such as exercisable or
potentially exercisable stock options, which are listed in a
separate column). Amounts shown below do not include phantom
stock units (as they are not “beneficially owned”
under applicable rules) or additional shares acquired after
February 2, 2009, except that shares of common stock issued
to the executive officers in connection with the February 2009
conversion of certain performance share unit awards that are
described in the section entitled “Executive
Compensation — Option Exercises and Stock Vested in
2008” under “Item 11. Executive Compensation” have been included. Amounts shown in the table below
include common stock that has been earned but the receipt of
which has been deferred into a “restricted stock
trust” for the benefit of certain of our executive officers
and directors under which they have sole voting power but do not
have dispositive power prior to distribution. No director or
executive officer owns shares of our preferred stock.
65
Potentially
Name of Beneficial Owner
Wyeth Common Stock
Exercisable Options
Percent of Class
Directors:
Robert M. Amen
3,028
(1)
—
*
Michael J. Critelli
4,099
(1)
—
*
Frances D. Fergusson, Ph.D.
9,585
(2)
11,000
*
Victor F. Ganzi
18,826
(3)
7,000
*
Robert Langer, Sc.D.
9,563
(2)
15,000
*
John P. Mascotte
14,468
(4)
33,000
*
Raymond J. McGuire
4,329
(5)
3,500
*
Mary Lake Polan, M.D., Ph.D., M.P.H.
11,296
(4)
33,000
*
Bernard Poussot
402,252
(6)
1,439,434
*
Gary L. Rogers
8,763
(3)
7,000
*
John R. Torell III
11,168
(7)
33,000
*
Other Named Executive Officers:
Gregory Norden
38,198
273,503
*
Joseph M. Mahady
269,736
(8)
799,600
*
Lawrence V. Stein
47,390
(9)
454,750
(9)
*
Mikael Dolsten, M.D., Ph.D.
—
—
*
Robert Essner
738,897
(10)
4,576,800
*
Robert R. Ruffolo, Jr., Ph.D.
179,589
555,000
*
All current executive officers and directors as a group
(26 persons)
1,187,620
(11)
5,259,416
*
*
Less than one percent (1%).
(1)
Includes or, in the case of Mr. Amen, represents 2,963 DSUs
awarded under our 2008 Non-Employee Director Stock Incentive
Plan (plus accrued dividend equivalents) held in the restricted
stock trust. In the case of Mr. Critelli, also includes
71 shares held by, or jointly with, his spouse.
(2)
Represents 2,400 DSUs awarded under our 2006 Non-Employee
Director Stock Incentive Plan and 2,963 DSUs awarded under our
2008 Non-Employee Director Stock Incentive Plan (in each case,
plus accrued dividend equivalents) held in the restricted stock
trust and 4,000 shares of restricted stock awarded under
our 1994 Restricted Stock Plan for Non-Employee Directors
(1,600 shares of which, plus accrued dividend equivalents,
are held in the restricted stock trust in the case of
Dr. Fergusson).
(3)
Includes or, in the case of Mr. Rogers, represents 2,400
DSUs awarded under our 2006 Non-Employee Director Stock
Incentive Plan and 2,963 DSUs awarded under our 2008
Non-Employee Director Stock Incentive Plan (in each case, plus
accrued dividend equivalents) held in the restricted stock trust
and 3,200 shares of restricted stock awarded under our 1994
Restricted Stock Plan for Non-Employee Directors
(2,400 shares of which, plus accrued dividend equivalents,
are held in the restricted stock trust in the case of
Mr. Ganzi).
(4)
Includes 4,000 shares of restricted stock awarded under our
1994 Restricted Stock Plan for Non-Employee Directors, 2,400
DSUs awarded under our 2006 Non-Employee Director Stock
Incentive Plan and 2,963 DSUs awarded under our 2008
Non-Employee Director Stock Incentive Plan (in each case, plus
accrued dividend equivalents) held in the restricted stock trust.
(5)
Includes 1,200 DSUs awarded under our 2006 Non-Employee Director
Stock Incentive Plan and 2,963 DSUs awarded under our 2008
Non-Employee Director Stock Incentive Plan (in each case, plus
accrued dividend equivalents) held in the restricted stock trust.
66
(6)
Includes 7,982 shares owned jointly with
Mr. Poussot’s spouse and 259,086 shares held in
the restricted stock trust.
(7)
Represents 4,000 shares of restricted stock awarded under
our 1994 Restricted Stock Plan for Non-Employee Directors, 2,400
DSUs awarded under our 2006 Non-Employee Director Stock
Incentive Plan and 2,963 DSUs awarded under our 2008
Non-Employee Director Stock Incentive Plan (in each case, plus
accrued dividend equivalents) held in the restricted stock trust
and 700 shares owned by Mr. Torell’s spouse.
(8)
Includes 199,732 shares held in the restricted stock trust.
(9)
Does not include certain securities, including certain
securities shown as outstanding under “Executive
Compensation — Outstanding Equity Awards at 2008
Year-End” under “Item 11. Executive Compensation,” that are
subject to a domestic relations order pursuant to which the
economic interest in certain shares held in the restricted stock
trust and the economic interest in certain stock options was
transferred to Mr. Stein’s former spouse (i.e., such
stock options were retained by Mr. Stein due to plan
restrictions on transfer, but his former spouse will receive the
economic benefit from, and has discretion with respect to,
exercises and sales).
(10)
Includes 614,859 shares owned jointly with
Mr. Essner’s spouse.
(11)
Includes 572,631 shares held in the restricted stock trust.
SECURITIES
OWNED BY CERTAIN BENEFICIAL OWNERS
Based on a review of Schedules 13D and 13G filed by holders with
the SEC, we are not aware of any person or entity beneficially
owning more than 5% of Wyeth’s outstanding common stock or
preferred stock.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about our common stock that may be issued upon the exercise of options and rights (including performance share unit awards, restricted stock unit awards and deferred stock unit awards) under all of our existing equity compensation plans as of December 31, 2008, including the 1996, 1999 and 2002 Stock Incentive Plans, the 2005 Amended and Restated Stock Incentive Plan,
the 2006 Non-Employee Director Stock Incentive Plan, the 1994 Restricted Stock Plan for
Non-Employee Directors, the Management Incentive Plan, the Stock Option Plan for Non-Employee Directors and the 2008 Non-Employee Director Stock Incentive Plan.
Number of
Securities
Remaining
Number of
Weighted
Available for
Securities to be
Average
Future
Issued upon
per Share
Issuance under
Exercise of
Exercise Price
Equity Compensation
Outstanding
of Outstanding
Plans Excluding
Options and Rights
Options and
Securities Reflected
Plan Category
(Column A)(#)
Rights(1)($)
in Column A(#)
Equity Compensation
Plans Approved by
Stockholders
150,583,319
(2)(3)
$
51.04
54,953,421
(4)
Equity Compensation
Plans Not Approved
by Stockholders
226,000
(5)
$
50.59
24,000
(5)
Total
150,809,319
$
51.04
54,977,421
(1)
Shares issuable pursuant to outstanding performance share unit awards, restricted stock unit
awards and deferred stock unit awards are not included in the calculation of weighted average
exercise price, as there is no exercise price for these shares.
(2)
Issued under our 1996, 1999 and 2002 Stock Incentive Plans, 2005 Amended and Restated Stock
Incentive Plan, 2006 and 2008 Non-Employee Director Stock Incentive Plans and 1994 Restricted Stock Plan for Non-Employee
Directors. Performance share unit awards are reflected at 100% of target.
(3)
Also includes shares of common stock underlying outstanding awards under our Management
Incentive Plan that will vest upon retirement or termination of each participant. These awards will
be paid in shares of common stock. No additional awards are being made under the Management
Incentive Plan, which has been replaced by our Performance Incentive Award Program and Executive
Incentive Plan.
(4)
Includes 46,400 shares that remain available for issuance under the 1994 Restricted Stock Plan
for Non-Employee Directors. No further grants are being made under this plan other than continuing
annual grants to three non-employee directors who joined the Board prior to April 27, 2006 until
they reach their total award of 4,000 shares. Excludes 206,000 shares that remained available for
issuance under the 2006 Non-Employee Director Stock Incentive Plan, as no further grants are being
made under this plan effective with the approval by our stockholders of the Wyeth 2008 Non-Employee
Director Stock Incentive Plan.
(5)
Issued under our Stock Option Plan for Non-Employee Directors, which is described below.
Although 24,000 shares remain available for issuance under this plan, no further grants are being
made under this plan.
Stock Option Plan for Non-Employee Directors
Our Stock Option Plan for Non-Employee Directors was adopted in 1999 by the Board to attract
and retain qualified persons who were not our employees or former employees for service as
members of the Board by providing them with an interest in our success and progress by granting
them 10-year term, non-qualified options to purchase common stock. Under the plan, directors
who were not our current or former employees received an annual grant of stock options on the
date of the annual meeting. The price of the options was the fair market value on the date the
options were granted. The options became exercisable at the date of the next annual meeting or
earlier in the event of the termination of the director’s service due to death, disability or
retirement, provided in each case that the director had completed at least two years of
continuous service at the time of exercise or termination. The plan also provides for
acceleration of vesting of awards in the event of a change in control of Wyeth. While the
aggregate maximum number of shares of common stock that may be granted under the plan is
250,000 shares, of which 24,000 remain available, no further grants are being made under the
Stock Option Plan for Non-Employee Directors. Outstanding options held by non-employee
directors will continue to be governed by the terms of this plan and the award agreements
pursuant to which they were granted.
67
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSAND DIRECTOR INDEPENDENCE
TRANSACTIONS
WITH MANAGEMENT AND OTHERS
We retained the law firm of Pepper Hamilton LLP in connection
with various legal matters in 2008 and have paid or are expected
to pay approximately $3.35 million for these services. In
2009, we have retained and expect to continue to retain this
firm, with net billings of approximately $544,000 as of March
2009. Nina
M. Gussack is a partner at Pepper Hamilton and the
sister-in-law
of Lawrence V. Stein, Senior Vice President and General Counsel
of Wyeth. As part of Pepper Hamilton’s overall
representation of Wyeth, Ms. Gussack has provided
specialized legal advice regarding clinical trial and drug
development to Wyeth. Following Mr. Stein’s promotion
to General Counsel of Wyeth as of July 1, 2003, the Audit
Committee of the Wyeth board of directors established procedures
for hiring Pepper Hamilton while Mr. Stein is General
Counsel. Under these procedures, which require the approval of
the Chief Executive Officer or Chief Financial Officer for
retention, Mr. Stein is not directly involved in
determinations to retain Pepper Hamilton, although as General
Counsel he has a right to veto any retention which has been
approved.
In addition, in 2007 we entered into an employment agreement
with Mr. Essner, our former Chairman and Chief Executive
Officer, and in 2008 we entered into a consulting agreement with
Dr. Ruffolo, our former Senior Vice President and
President, Wyeth Research, and Ruffolo Consulting LLC, each of
which is described under “Executive
Compensation — Potential Payments upon Termination or
Change in Control” under “Item 11. Executive
Compensation.”
Information regarding vesting of equity and estimates of
payments and benefits that our executive officers and directors
may receive as a result of the contemplated merger with Pfizer,
if consummated, will be set forth separately in the proxy
statement to be mailed to our stockholders relating to the approval of the transaction.
Review
and Approval of Transactions with Management and
Others
We maintain various policies and procedures relating to the
review, approval or ratification of transactions in which Wyeth
is a participant and in which any of our directors, executive
officers, 10% stockholders (if any) or their family members have
a direct or indirect material interest. We refer to these
individuals and entities in this Form 10-K/A as
related persons. The Wyeth Code of Conduct, which is
available on our Internet Web site at www.wyeth.com,
prohibits Wyeth employees, including our executive officers,
and, in some cases, their family members, from engaging in
specified activities without prior written consent from the
Wyeth Ethics Office. These activities typically relate to
situations where a Wyeth employee, and, in some cases, an
immediate family member, may have significant financial or
business interests in another company competing with or doing
business with Wyeth, or who stands to benefit in some way from
such a relationship or activity. The Wyeth Code of Conduct
also requires that our independent directors disclose
potential conflicts of interest to us for evaluation by the
Wyeth board of directors.
Each year, we require our directors and executive officers to
complete a questionnaire, among other things, to identify any
transactions or potential transactions with us in which a
director or an executive officer or one of their family members
or associated entities has an interest. We also require that
directors and executive officers notify our Corporate Secretary
of any changes during the course of the year to the information
provided in the annual questionnaire as soon as possible.
The Audit Committee of the Wyeth board of directors, pursuant to
its charter, has responsibility for reviewing and approving,
ratifying or making recommendations to the Wyeth board of
directors regarding related person transactions as defined under
SEC regulations to the extent not delegated to another committee
of the Wyeth board of directors. In addition, the Wyeth board of
directors annually determines the independence of directors
based on a review by the directors and the Nominating and
Governance Committee as described under “Independence of
Directors.” Additionally, the
Wyeth board of directors has adopted a specific set of
procedures designed to ensure the continued independence of any
director whose employer does, or potentially may do, significant
business with Wyeth.
We believe that these policies and procedures collectively
ensure that all related person transactions requiring disclosure
under SEC rules are appropriately reviewed and approved or
ratified. Each of the transactions disclosed above in this
section has been reviewed and approved or ratified by the Wyeth
board of directors.
68
INDEPENDENCE
OF DIRECTORS
The Wyeth board of directors annually determines the
independence of our directors based on a review by the directors
and the Nominating and Governance Committee. The NYSE Corporate
Governance Standards require that a majority of the board be
independent and that for a director to qualify as independent,
the board must affirmatively determine that the director has no
material relationship with Wyeth, either directly or as a
partner, shareholder or officer of an organization that has a
relationship with us. In determining whether a material
relationship exists, the Wyeth board of directors and the
Nominating and Governance Committee broadly consider all
relevant facts and circumstances brought to their attention
through the processes described below. In addition, the Wyeth
board or directors has a specific set of procedures designed to
ensure the continued independence of any director whose employer
does, or potentially may do, significant business with Wyeth.
The Wyeth Corporate Governance Guidelines adopted by the
Wyeth board of directors contain standards of independence that
meet or exceed the NYSE Corporate Governance Standards. These
independence standards are set out in detail in
Section II.b. of the Wyeth Corporate Governance
Guidelines available on the Corporate Governance section of
our Internet Web site at www.wyeth.com and generally
provide that a director will not be considered independent if:
•
the director is, or has been within the last three years, an
employee of Wyeth, or an immediate family member of the director
is, or has been within the last three years, an executive
officer of Wyeth;
•
the director, or an immediate family member of the director, has
received more than $120,000 in any
12-month
period in the last three years in direct compensation from
Wyeth, other than director fees and pension or other forms of
deferred compensation for prior service;
•
the director is a current partner or employee of our internal or
external auditor, the director has an immediate family member
who is a current partner of such a firm, the director has an
immediate family member who is a current employee of such a firm
and personally works on our audit, or the director or an
immediate family member of the director was within the last
three years (but is no longer) a partner or employee of such a
firm and personally worked on our audit within that time;
•
the director or an immediate family member of the director is,
or in the last three years has been, employed as an executive
officer of another company where any of Wyeth’s current
executives serve on that company’s compensation
committee; or
•
the director is employed by another company (other than a
charitable organization), or an immediate family member of the
director is employed as an executive officer of a company, that
has made payments to, or received payments from, Wyeth for
property or services in an amount which, in any of the last
three years, exceeds the greater of $1 million and 2% of
such other company’s consolidated gross revenue.
Please consult the Wyeth Corporate Governance Guidelines
for specific information on how we apply these standards.
The Wyeth Corporate Governance Guidelines also provide
that the following relationships will not be considered material
relationships that would impair a director’s independence:
•
if a director of Wyeth is an executive officer or an employee,
or the director’s immediate family member is an executive
officer, of another company that makes payments to, or receives
payments from, Wyeth for property or services in an amount
which, in any single fiscal year, does not exceed the greater of
(i) $1 million and (ii) 2% of such other
company’s consolidated gross revenues;
•
if a director of Wyeth is an executive officer or employee of
another company that is indebted to Wyeth, or to which Wyeth is
indebted, and the total amount of the indebtedness is less than
2% of the consolidated assets of the company wherein the
director serves as an executive officer or employee;
•
if a director of Wyeth is an executive officer of another
company in which Wyeth owns an equity interest and the amount of
the equity interest held by Wyeth is less than 10% of the total
shareholders’ equity of the company at which the director
serves as an executive officer; or
69
•
if a director of Wyeth serves as a director, officer or trustee
of a charitable organization and Wyeth’s contributions to
the organization in the most recently completed fiscal year are
less than the greater of (i) $1 million and
(ii) 2% of that organization’s gross revenue.
Pursuant to the Wyeth Corporate Governance Guidelines and
the categorical standards of independence that they set forth,
the Wyeth board or directors reviewed the independence of each
of its directors in February 2009, taking into account potential
conflicts of interest, transactions or other relationships that
would reasonably be expected to potentially compromise any of
our directors’ independence. In performing this review, the
Wyeth board of directors, together with the Nominating and
Governance Committee, reviewed a memorandum prepared by
Wyeth’s internal audit and law departments, which included
an analysis of directors’ responses to a questionnaire
inquiring about, among other things, their relationships (and
those of their immediate family members) with us, their
affiliations with other companies and other potential conflicts
of interest.
As a result of this review, the Wyeth board of directors, based
on the recommendation of the Nominating and Governance
Committee, affirmatively determined that all of Wyeth’s
directors are independent of Wyeth and its management under the
standards set forth in the Wyeth Corporate Governance
Guidelines, with the exception of Mr. Poussot, who is
not independent because of his employment as our Chairman,
President and Chief Executive Officer.
In making independence determinations with regard to our
non-employee directors, the Wyeth board or directors and the
Nominating and Governance Committee considered the following
categories and types of transactions, relationships and
arrangements:
•
With respect to Mr. Ganzi, who previously served as a
director and the President and Chief Executive Officer of The
Hearst Corporation, and Dr. Polan, whose spouse serves as
the current Chief Executive Officer and Vice Chairman of the
Board and Chairman of the Executive Committee of Hearst, certain
arm’s-length, ordinary course commercial transactions
between Wyeth and Hearst;
•
With respect to Mr. Mascotte, a pledge of cash donations
and product supplies by Wyeth to the Ghana Essential Medicines
Initiative, a charitable initiative to support the availability
of pharmaceutical supplies in Ghana supported by The Population
Council, leading pharmaceutical companies and The Mascotte
Family Fund of the Aspen Community Foundation; and
•
With respect to Mr. McGuire, who serves as Co-Head, Global
Investment Banking at Citi, certain arm’s-length, ordinary
course commercial banking, financial advisory, underwriting and
other financial services arrangements and transactions between
Wyeth and Citi.
In each case, the transactions, relationships and arrangements
considered were determined to be within the applicable
categorical independence standards under the Wyeth Corporate
Governance Guidelines.
In addition, Mr. Essner, who served as the Chairman of the
Wyeth board of directors until June 27, 2008, was
considered not independent by the Wyeth board of directors
because of his employment as our Chairman through that date and
his prior role as our Chief Executive Officer. Professor
Feerick, who served on the Wyeth board of directors until
July 31, 2008, and Mr. Seidenberg, who served on the
Wyeth board of directors until February 29, 2008, were
considered independent by the Wyeth board of directors. In
determining the independence of Mr. Seidenberg, who serves
as Chairman and Chief Executive Officer of Verizon
Communications Inc., the Wyeth board of directors and the
Nominating and Governance Committee considered certain
arm’s-length, ordinary course commercial transactions
between Wyeth and Verizon. These relationships were determined
to be within the applicable categorical independence standards
under the Wyeth Corporate Governance Guidelines.
In November 2008, the Wyeth board of directors amended the
Wyeth Corporate Governance Guidelines to establish the
role of the lead director, which will be active and filled by an
independent director whenever our Chairman does not qualify as
an independent director under the Wyeth Corporate Governance
Guidelines. The first lead director will be appointed
following the next annual meeting of Wyeth stockholders for a one-year term, subject to
renewal for a maximum of two additional twelve-month periods.
The lead director will receive a cash retainer of $20,000 per
year, paid in quarterly installments (prorated for the portion
of any calendar quarter served). The Charter of the Lead Director
is available on the Wyeth Internet Web site at www.wyeth.com.
70
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
On February 28, 2008, the Audit Committee of the Wyeth
board of directors appointed PricewaterhouseCoopers LLP as our
independent registered public accounting firm for 2008, as
ratified by stockholders at the 2008 Annual Meeting of
Stockholders. PricewaterhouseCoopers LLP also has acted in this
capacity since 2001. The information below includes amounts
billed or expected to be billed for these services.
Audit
Fees
The aggregate fees billed or expected to be billed by
PricewaterhouseCoopers LLP for professional services rendered
for the audit of our annual financial statements for the fiscal
years ended December 31, 2008 and December 31, 2007
were $12.5 million and $11.1 million, respectively.
Audit-Related
Fees
The aggregate fees billed or expected to be billed by
PricewaterhouseCoopers LLP for audit-related services to Wyeth,
for the fiscal years ended December 31, 2008 and
December 31, 2007, were $1.9 million and
$2.1 million, respectively. These services consist
primarily of employee benefit plan audits, assistance with
registration statements, consents and comfort letters related to
debt issuances, assistance with divestitures and other services
approved by the Audit Committee.
Tax
Fees
The aggregate fees billed or expected to be billed by
PricewaterhouseCoopers LLP for tax services to Wyeth for the
fiscal years ended December 31, 2008 and December 31,2007 were $2.1 million and $1.5 million, respectively.
These services primarily relate to the analysis and review of
consolidated and local foreign tax provisions, preparation of
local foreign tax returns, assistance on foreign tax audits, as
well as foreign transfer pricing documentation.
All Other
Fees
There were no fees billed by PricewaterhouseCoopers LLP relating
to any other services for the years ended December 31, 2008
and December 31, 2007.
It is the Audit Committee’s policy to approve in advance
the types of audit, audit-related, tax and any other services to
be provided by Wyeth’s independent registered public
accounting firm. In situations when it is not possible to obtain
full Audit Committee approval, the Audit Committee has delegated
to the Chairman of the Audit Committee authority to grant
pre-approvals of audit, audit-related, tax and all other
services. All such pre-approved decisions are required to be
reviewed with the full Audit Committee at its next scheduled
meeting.
The Audit Committee has approved all of the aforementioned
independent registered public accounting firm’s services
and fees for 2008 and 2007 and, in doing so, has considered
whether the provision of such services is compatible with
maintaining independence.
Credit Agreement, dated as of August 2, 2007, among the Company, the banks and other financial institutions from time to time parties
thereto, J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., as Co-lead Arrangers and Joint Bookrunners, Citicorp USA Inc.,
as Syndication Agent, Bank of America, N.A., The Bank of Nova Scotia and UBS Securities LLC, as Co-documentation Agents and JPMorgan
Chase Bank, N.A., as Administrative Agent for the lenders, is incorporated by reference to Exhibit 10.1 of the Company’s Current Report
on Form 8-K, dated August 8, 2007.
(10.2)
First Amendment to Credit Agreement, dated as of June 3, 2008, among the Company, various lenders from time to time party to the Credit
Agreement, and JPMorgan Chase Bank, N.A., as Administrative Agent, is incorporated by reference to Exhibit 10.1 of the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
Seventh Amendment, dated July 21, 2004, to the Nationwide Class Action Settlement, dated November 18, 1999, as amended, is incorporated
by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated January 11, 2005.
License Agreement, dated as of January 13, 2006, by and among the Company, acting through its Wyeth Pharmaceuticals Division, Wyeth
Pharmaceuticals Company, Inc., Wyeth-Whitehall Pharmaceuticals Inc. and Wyeth Pharmaceuticals Company (on the one hand) and Teva
Pharmaceutical Industries Ltd. and Teva Pharmaceuticals USA, Inc. (on the other hand) is incorporated by reference to Exhibit 10.9 to
the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2005, filed on April 30, 2009.
Form of Performance Share Award Agreement (409A Replacement for Outstanding 2006 Awards) is incorporated by reference to Exhibit 10.14
of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(10.17)*
Form of Performance Share Award Agreement for named executive officers and certain other officers (409A Replacement for Outstanding 2007
Awards) is incorporated by reference to Exhibit 10.15 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,2008.
(10.18)*
Form of Performance Share Award Agreement for certain other officers and other key employees (409A Replacement for Outstanding 2007
Awards) is incorporated by reference to Exhibit 10.16 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,2008.
(10.19)*
Form of Performance Share Award Agreement for certain other officers and other key employees (Form for 2007 Awards-without Deferral) is
incorporated by reference to Exhibit 10.17 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(10.20)*
Form of 2008 Performance Share Award Agreement for named executive officers and certain other executive officers is incorporated by
reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.
(10.21)*
Form of 2008 Performance Share Award Agreement for certain other executive officers is incorporated by reference to Exhibit 10.5 of the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(10.22)*
Form of 2008 Performance Share Award Agreement for certain other officers and other key employees is incorporated by reference to
Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
73
Exhibit No.
Description
(10.23)*
Form of 2008 Performance Share Award Agreement for certain other officers and other key employees not receiving the agreement referred
to in Exhibit 10.22 is incorporated by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2008.
(10.24)*
Form of Restricted Stock Unit Award Agreement (three-year cliff vesting) (409A Replacement for Outstanding 2006 Awards) is incorporated
by reference to Exhibit 10.18 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(10.25)*
Form of Restricted Stock Unit Award Agreement (three-year cliff vesting) (409A Replacement for Outstanding 2007 Awards) is incorporated
by reference to Exhibit 10.19 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(10.26)*
Form of 2008 Restricted Stock Unit Award Agreement (three-year phased vesting) is incorporated by reference to Exhibit 10.8 of the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(10.27)*
Form of 2008 Restricted Stock Unit Award Agreement (three-year cliff vesting) is incorporated by reference to Exhibit 10.9 of the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(10.28)*
Form of Restricted Stock Unit Award Agreement under the 1999 Stock Incentive Plan with Bernard Poussot dated January 2, 2008 (phased
vesting) (409A Replacement Agreement) is incorporated by reference to Exhibit 10.20 of the Company’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008.
(10.29)*
Form of Restricted Stock Unit Award Agreement under the 2002 Stock Incentive Plan with certain executive officers dated January 23, 2008
(phased vesting) (409A Replacement Agreement) is incorporated by reference to Exhibit 10.21 of the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2008.
Wyeth 1994 Restricted Stock Plan for Non-Employee Directors
(as amended through December 15, 2008) was filed as Exhibit 10.31 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(10.32)*
Form of Restricted Stock Grant Agreement under the Wyeth 1994 Restricted Stock Plan for Non-Employee Directors
was filed as Exhibit 10.32 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(10.33)*
Form of Restricted Stock Unit Grant Agreement under the Wyeth 1994 Restricted Stock Plan
for Non-Employee Directors was filed as Exhibit 10.33 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
Form of Stock Option Agreement under the Stock Option Plan for Non-Employee Directors is incorporated by reference to Exhibit 10.30 of
the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.
74
Exhibit No.
Description
(10.38)*
Form of Stock Option Award Agreement under the 2006 Non-Employee Director Stock Incentive Plan is incorporated by reference to Exhibit
10.2 of the Company’s Current Report on Form 8-K, dated May 1, 2006.
(10.39)*
Form of Deferred Stock Unit Award Agreement under the 2006 Non-Employee Director Stock Incentive Plan (Existing Director) (409A
Replacement for Outstanding 2006 and 2007 Awards) is incorporated by reference to Exhibit 10.22 of the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008.
(10.40)*
Form of Deferred Stock Unit Award Agreement under the 2006 Non-Employee Director Stock Incentive Plan (New Director) (409A
Replacement for Outstanding 2006 and 2007 Awards) is incorporated by reference to Exhibit 10.23 of the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008.
(10.41)*
Form of Deferred Stock Unit Award Agreement under the 2008 Non-Employee Director Stock Incentive Plan (Existing Director) is
incorporated by reference to Exhibit 10.12 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(10.42)*
Form of Deferred Stock Unit Award Agreement under the 2008 Non-Employee Director Stock Incentive Plan (New Director) is incorporated
by reference to Exhibit 10.13 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
Amendment to Restricted Stock Trust Agreement under Wyeth Stock Incentive Plans is incorporated by reference to Exhibit 10.1 of the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.
(10.46)*
Second Amendment to Restricted Stock Trust Agreement under Wyeth Stock Incentive Plans,
dated December 15, 2008 was filed as Exhibit 10.46 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
Form of 2006 Severance Agreement for Executive Officers and Certain Key Employees entered into by the Company and such individuals in
August 2006 in replacement for the 1998 severance agreements is incorporated by reference to Exhibit 10.8 of the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2006.
(10.60)*
Form of Amendment to existing 2006 Severance Agreements (Section 409A) for Executive Officers and Certain Key Employees entered into
between the Company and all executive officers and certain key employees relating to the forms of Severance Agreements incorporated by
reference as Exhibit 10.59 above is incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.
(10.61)*
Form of 2006 Severance Agreement for Other Key Employees entered into by the Company and such individuals in August 2006 in
replacement for the 1998 severance agreements is incorporated by reference to Exhibit 10.9 of the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2006.
(10.62)*
Form of Amendment to 2006 Severance Agreements (Section 409A) for Other Key Employees entered into between the Company and other
key employees relating to the forms of Severance Agreements incorporated by reference as Exhibit 10.61 above is incorporated by reference
to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
(10.63)*
Form of 2006 Severance Agreement for Other New Key Employees entered into by the Company and such individuals from time to time
following August 2006 is incorporated by reference to Exhibit 10.11 of the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006.
(10.64)*
Form of Amendment to 2006 Severance Agreements (Section 409A) for Other New Key Employees entered into between the Company and
other key employees relating to the forms of Severance Agreements incorporated by reference as Exhibit 10.63 above is incorporated by
reference to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
(10.65)*
Form of Severance Agreement for New Executive Officers and Certain New Key Employees that have not entered into existing Severance
Agreements to be entered into between the Company and such individuals from time to time following September 2007 is incorporated by
reference to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
(10.66)*
Form of Severance Agreement for Other New Key Employees that have not entered into the Severance Agreement referred to in Exhibit 10.65
and that have not entered into existing Severance Agreements to be entered into between the Company and such individuals from time to
time following September 2007 is incorporated by reference to Exhibit 10.10 of the Company’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2007.
Wyeth 2009 Cash Long-Term Incentive
Plan was filed as Exhibit 10.69 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(10.70)*
Form of 2009 Cash Long-Term
Incentive Award Letter was filed as Exhibit 10.70 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
Computation of Ratio of Earnings to
Fixed Charges
was filed as Exhibit 12 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(13)
2008 Financial Report
was filed as Exhibit 13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. Such report, except for those portions thereof that are expressly incorporated by reference herein, is furnished
solely
for the information of the Commission and is not to be deemed “filed” as part of this filing.
Certification of disclosure as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2)**
Certification of disclosure as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1)
Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 was filed as Exhibit 32.1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(32.2)
Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 was filed as Exhibit 32.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
Joint Motion of Wyeth and Claims Facilitating Committee Pursuant to New Settlement Process to Approve Proposed Stay Procedure in Diet
Drug Cases, together with supporting documentation, all as filed with the U.S. District Court for the Eastern District of Pennsylvania on
January 18, 2005 is incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K, dated January 19, 2005.
Amended and Restated Promotion Agreement, dated as of December 16, 2001, by and between Immunex Corporation, the Company and
Amgen Inc. (filed as Exhibit 10.1 to Amgen’s Registration Statement on Form S-4 (File No. 333-81832) on January 31, 2002 is incorporated
by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K, dated July 29, 2002).
(99.7)
Description of Amendment No. 1 to Amended and Restated Promotion Agreement, effective July 8, 2003, by and among the Company,
Immunex Corporation and Amgen Inc. (filed as Exhibit 10.94 to Amgen’s Annual Report on Form 10-K (File No. 0-12477) for the fiscal
year ended December 31, 2003 is incorporated by reference to Exhibit 99.1 of the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004).
(99.8)
Description of Amendment No. 2 to Amended and Restated Promotion Agreement, effective April 20, 2004, by and among the Company,
Immunex Corporation and Amgen Inc. (filed as Exhibit 10.93 to Amgen’s Amended Registration Statement on Form S-4/A (File No.
333-114820) filed on June 29, 2004 is incorporated by reference to Exhibit 99.2 of the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004).
(99.9)
Description of Amendment No. 3 to Amended and Restated Promotion Agreement, effective as of January 1, 2005, by and among the
Company and Amgen Inc. (filed as Exhibit 10.16 to Amgen’s Quarterly Report on Form 10-Q (File No. 0-12477) for the quarter ended
March 31, 2005) is incorporated herein by reference.
(99.10)
Eighth Amendment, dated August 4, 2004, to Final Nationwide Class Action Settlement
Agreement, dated November 18, 1999, as amended, was filed as
Exhibit 99.10 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(99.11)
Ninth Amendment, dated May 18, 2005, to Final Nationwide Class Action Settlement Agreement,
dated November 18, 1999, as amended, was filed as Exhibit 99.11 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
+
Confidential treatment
requested as to certain portions, which portions have been separately filed with
the Securities and Exchange Commission.
*
Denotes management contract or
compensatory plan or arrangement required to be filed as an exhibit
hereto.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
