Corporate Governance
Summary director compensation table
The following table sets forth a summary of the compensation of the Company’s non-employee directors for 2019:
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Name
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Fees
Earned or
Paid in Cash
($)
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Stock
Awards
($)(1)
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Option
Awards
($)
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Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
|
All Other Compensation
($)(2)
|
Total
($)
|
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Nelson J. Chai
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$150,000
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$195,052
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—
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—
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$15,563 (3)
|
$360,615
|
|
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C. Martin Harris
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$125,000
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$195,052
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—
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—
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$2,063 (4)
|
$322,115
|
|
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Tyler Jacks
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$140,000
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$195,052
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—
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—
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$15,563 (3)
|
$350,615
|
|
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Judy C. Lewent
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$140,000
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$195,052
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—
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—
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$16,125 (5)
|
$351,177
|
|
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Thomas J. Lynch
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$140,000
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$195,052
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—
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—
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$15,563 (3)
|
$350,615
|
|
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Jim P. Manzi
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$295,000
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$195,052
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—
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—
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$15,563 (3)
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$505,615
|
|
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James C. Mullen(6)
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$125,000
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$195,052
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—
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—
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$563
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$320,615
|
|
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Lars R. Sørensen
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$140,000
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$195,052
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—
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—
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$563
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$335,615
|
|
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Debora L. Spar(7)
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$39,492
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$—
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—
|
—
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$—
|
$39,492
|
|
|
Scott M. Sperling(8)
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$125,000 (9)
|
$195,052
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—
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—
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$27,275 (10)
|
$347,327
|
|
|
Elaine S. Ullian
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$125,000
|
$195,052
|
—
|
—
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$21,214 (11)
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$341,266
|
|
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Dion J. Weisler
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$125,000 (12)
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$195,052
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—
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—
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$1,718 (13)
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$321,770
|
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(1)
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These amounts represent the aggregate grant date fair value of stock awards granted to directors in 2019, calculated in accordance with the
Company’s financial reporting practices. For information on the valuation assumptions with respect to these awards, refer to note 6 of the Thermo Fisher financial statements in the Form 10-K for the year ended December 31, 2019,
as filed with the SEC. These amounts do not represent the actual amounts paid to or realized by the directors for these awards during 2019. In May 2019, each non- management director on the Board at that time received a grant of
718 restricted stock units, having a grant date fair value of $195,052, all of which is included in the “stock awards” column.
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No stock option awards were granted to any of our non-employee directors during their respective service periods in 2019 and no stock option awards
were outstanding as of December 31, 2019.
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(2)
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These amounts include $563 of dividends accrued in the form of dividend equivalents on restricted stock units held by each non- employee
director, except for Dr. Spar, for whom the amount is $0.
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(3)
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Includes matching Company contributions of $15,000 under the Matching Charitable Donation Program for Directors.
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(4)
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Includes matching Company contributions of $1,500 under the Matching Charitable Donation Program for Directors.
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(5)
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Includes matching Company contributions of $15,000 under the Matching Charitable Donation Program for Directors and $563 of Company dividends
accrued in the form of dividend equivalents in 2019 on deferred stock units held in the Directors Deferred Compensation Plan.
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(6)
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As a result of the end of his service to Patheon upon the Company’s acquisition of Patheon, Mr. Mullen was entitled to receive severance pay
of 24 months’ base salary ($2,200,000 in the aggregate) pursuant to his employment agreement with Patheon, payable in 24 monthly installments following the date of termination. These severance payments, which he continued to
receive in monthly installments through August 2019, are not included in the table above because they were not contingent on continued service and related solely to Mr. Mullen’s service prior to the Company’s acquisition of
Patheon.
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(7)
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Dr. Spar was elected to the Board effective September 5, 2019.
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(8)
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Does not include amounts paid to Mr. Sperling under the Fisher Retirement Plan for Non-Employee Directors because such amounts relate solely to
Mr. Sperling’s service as a director of Fisher prior to the Fisher Merger.
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(9)
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Represents compensation deferred and issued as 425 deferred stock units pursuant to the Directors Deferred Compensation Plan.
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(10)
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Includes matching Company contributions of $15,000 under the Matching Charitable Donation Program for Directors and $11,712 of Company
dividends accrued in the form of dividend equivalents in 2019 on deferred stock units held in the Directors Deferred Compensation Plan.
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(11)
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Includes matching Company contributions of $15,000 under the Matching Charitable Donation Program for Directors and $5,651 of Company
dividends accrued in the form of dividend equivalents in 2019 on deferred stock units held in the Directors Deferred Compensation Plan.
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(12)
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Represents compensation deferred and issued as 425 deferred stock units pursuant to the Directors Deferred Compensation Plan.
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(13)
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Includes $1,155 of Company dividends accrued in the form of dividend equivalents in 2019 on deferred stock units held in the Directors
Deferred Compensation Plan.
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2020 Proxy Statement
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At Thermo Fisher, everything we do begins with our Mission - to enable our customers to make the world healthier, cleaner and safer. Our products, technologies and services benefit the
environment and society globally, but creating a better world starts with the way we run our business - and we are committed to doing so the right way. We take deliberate actions to address sustainability issues today in order to strengthen
our business for tomorrow’s customers, colleagues and communities around the world.
Our approach to sustainability
Our Corporate Social Responsibility (“CSR”) team sits within the Company’s Corporate Strategy function, led by a member of the Company leadership team. The CSR team drives corporate
strategy, processes and reporting for sustainability topics, championing and coordinating Thermo Fisher’s commitment to sustainability throughout the Company. Our 4i Values of Integrity, Intensity, Innovation and Involvement create a culture
in which our colleagues can share their talents and perspectives and are empowered to make a difference for our customers, for each other, for our communities and for the environment.
CSR strategy
Our corporate social responsibility strategy is our commitment to doing business the right way to enable a sustainable future for all stakeholders. Our approach is built on a framework
of four key pillars - Operational Integrity, Colleagues, Communities and Environment - that reinforce our Mission, align with our strategy and are material to our stakeholders.
Operational integrity
We take measures to ensure strong global citizenship practices both internally and across all our business relationships. We are committed to conducting our business ethically
and in full compliance with our internal systems and the laws of the countries where we operate with rigor around governance and ethics, supply chain transparency, and compliance with environmental, health and safety regulations
and quality management standards.
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Colleagues and human capital management
Creating a culture where our 75,000+ colleagues are able to make connections and work as one global team is vital to Thermo Fisher because it generates better outcomes for our colleagues
and for our customers. That’s why we strive to connect our teams in new and innovative ways, embrace unique perspectives, empower our colleagues to improve our business and culture, and provide resources to allow our colleagues to reach their
full potential. We measure the employee experience through our annual Employee Involvement Survey (“EIS”) which asks colleagues to provide feedback.
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Diversity and inclusion
Diversity and inclusion (“D&I”) is vital to the future success of our organization. It’s not just something we do, it’s who we are. It enables our colleagues to openly share the wide
range of perspectives they represent, creating an environment where differences are truly valued, authenticity is a state-of-being, and everyone feels they belong and can do their best work.
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Our Employee Resource Groups (“ERGs”) - company-supported groups of colleagues - are key partners in attracting, developing and retaining diverse talent to bring an essential
variety of experiences and perspectives into our organization. ERGs are championed by an executive sponsor and partner with the D&I team to foster organizational culture, reinforce infrastructure and create personal
accountability. We added three new ERGs in 2019: our Asian ERG, Working Parent ERG and Data Science BRG (Business Resource Group) joined the African Heritage, Latino Hispanic Heritage, LGBTA, Millennials, PossAbilities, Women’s and
Veterans ERGs.
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Talent
We believe that talent is the differentiator for our growth and success as an organization and as such, we take a holistic view to managing our talent. We have defined a standard set of
competencies for all Thermo Fisher colleagues that provide clear, shared behavioral expectations. Our competencies are founded in our 4i Values and integrated into each stage of the Company’s talent management lifecycle so that our colleagues
understand how to grow within the Company and our people leaders have a consistent framework for developing and managing talent. We updated our competencies in 2019 to meet the talent needs of our growing company and ensure our framework is
clear and consistent for our global colleagues.
We are committed to talent development and enhancing the skills and knowledge of our colleagues to achieve current and future business objectives. We’ve instituted a range of tools,
technologies and programs to support the growth of our colleagues, whether it is job-specific, professional, people manager or leadership development. We also have programs for critical talent pipelines, such as R&D and General Managers.
The result is more personalized learning - we enable our colleagues to access what they need when they need it.
Communities
We are proud to invest in the communities where our colleagues live and work. Our key strategy to strengthening our communities is to foster employee-led Community Action Councils
(“CACs”) at our sites around the world. This model drives our collaborative culture and empowers our colleagues to connect directly with their local community to ensure the Company’s impact is widespread yet tailored to the needs of each
market where we operate. In 2019, nearly 18% of our colleagues contributed volunteer hours (up five percentage points from 2018), working with over 1,600 global non-profit organizations. We also engage our colleagues through giving programs,
with over $1.8 million raised through our matching gift program and a $1.2 million investment in scholarships that benefited over 275 students in 2019.
STEM Education
Our goal is to inspire a new generation of innovators that will allow us to continue to enable our customers to make the world healthier, cleaner and safer. By leveraging our colleagues,
products and expertise, we have developed signature STEM (science, technology, engineering and math) education programs to support interactive learning at the primary and secondary level. Global CAC utilization of our signature STEM education
portfolio helped the Company implement over 800 STEM education events worldwide in 2019, up 2.2x from 2018, demonstrating the critical role our colleagues play in support of our STEM education strategy.
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Environment
At Thermo Fisher, we recognize our opportunity to minimize impacts on the environment and thus environmental stewardship is foundational to our business. Our commitment is reflected in
both our Mission, or what we do, as well as our CSR strategy, or how we do it. This is reinforced and communicated to our global colleagues through our Environmental, Health and Safety policy and annual Company goal tree, which is used to set
priorities for all global colleagues and measure Company success.
Through our portfolio of environmental analysis technologies, our customers are monitoring the environment to ensure a cleaner and safer environment, while our Thermo Fisher
Scientific™ Nalgene™ reusable water bottles reduce the use of single-use plastics. Many of our customers also utilize our portfolio for unique applications to address important environmental challenges.
We continually look for ways to be a more responsible business partner for our customers and help them achieve greater environmental sustainability in their own labs and businesses. We
strive to provide eco-enhancements to products, packaging and delivery, as well as service solutions for our customers. Our greener product alternatives can reduce environmental impacts as well as improving safety and reducing costs. The
Company has focused on packaging and delivery for cold shipments, with several innovative solutions for our customers including a paper cooler and a reusable cooler that can replace more traditional expanded polystyrene foam coolers.
Operations optimization
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Our efforts to protect the environment start with our own operations. We focus on the efficient use of resources in running our business and reduction of our impact in the communities where we
operate. Our commitment to stewardship, culture of continuous improvement and engaged colleagues inspire innovations that reduce the energy and water we consume and the waste we generate.
We are committed to reducing our carbon footprint and have set a target to reduce our scope 1 and 2 emissions by 30% by the end of the decade. Our approach to achieving this target
is anchored in the framework of process optimization, built environment efficiency and renewable sourcing.
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Public policy engagement and political participation
Engaging in public policy
We operate in a highly regulated and competitive industry. It is fundamental to our business, our colleagues, our customers and our shareholders that we engage globally on public policy
issues that may affect our ability to meet customers’ needs and enhance shareholder value. These issues include funding biomedical research; supporting healthcare innovation; protecting intellectual property rights; ensuring patient access to
care and therapies; boosting environmental protections; and supplying government regulators with the most advanced tools for keeping citizens safe. We regularly work with governments to create and maintain an environment where innovation is a
priority, our customers are well supported and governments function and do not inhibit growth.
Thermo Fisher is also a member of several broad-based industry and trade groups, including the National Association of Manufacturers, MedTech Europe, the U.S.-China Business Council,
various American chambers of commerce globally, several state biotech trade associations. United for Medical Research, the Personalized Medicine Coalition, the Alliance for Regenerative Medicine, the Health Industry Distributors Association
and the Institute of Clean Air Companies. These organizations, along with the others to which we belong, represent both our industry and the business community at large to bring about consensus on policy issues that can impact our
business. Our support of these organizations is evaluated annually by the Company’s government relations leaders as we assess these organizations’ policy expertise and advocacy on Thermo Fisher’s issues. In addition to their positions on
specific policy issues that relate to Thermo Fisher’s interests, these organizations may engage on a broad range of other issues that extend beyond the scope of issues of primary importance to Thermo Fisher. If concerns arise about a
particular issue, we are able to voice our concerns, as appropriate, through our colleagues who serve on the boards and committees of these organizations. Thermo Fisher’s participation as a member of these organizations comes with the
understanding that we may not always agree with the positions of the organization and/ or its members.
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Corporate political contributions
Thermo Fisher complies fully with all federal, state and local laws and reporting requirements governing corporate political contributions. We also request that trade associations
receiving total payments of $25,000 or more from Thermo Fisher annually report the portion of Thermo Fisher dues and special assessments that were used for activities that are not deductible under section 162(e) of the Internal Revenue Code.
Political contributions that use corporate funds are published annually in the Company’s Political Contributions report in compliance with Thermo Fisher’s Political Contributions Policy.
Policies and procedures for approval and oversight of corporate and PAC political expenditures
The Thermo Fisher Scientific Political Action Committee (“PAC”) is a non-partisan employee-funded organization that provides opportunities for a legally-restricted group of employees to
participate in the American political process. All corporate and PAC political spending decisions undergo a rigorous review process conducted by the Company’s Vice President, Global Government Relations & Public Affairs, the General
Counsel, and the Vice President, Corporate Communications. These executives ensure that contributions are not based on the political preferences or views of any individual colleague within Thermo Fisher.
The PAC looks for candidates who demonstrate integrity and intensity, support innovation and understand Thermo Fisher’s involvement in the policymaking process. The PAC considers factors
including candidates’ views on issues relevant to our Company and Mission, committee assignments and the presence of Thermo Fisher employees in their districts.
Federal and state lobbying activity
The Company’s government relations leaders are responsible for the Company’s U.S. lobbying activities. All colleague communications with government and regulatory officials are governed
by Thermo Fisher’s internal policies and procedures, which include guidelines published in our Code of Business Conduct and Ethics.
We file quarterly reports on our federal lobbying activity in compliance with the Lobbying Disclosure Act, the Honest Leadership and Open Government Act of 2007 and the Justice Against
Corruption on KStreet Act of 2018 (“JACK Act”). In addition to our federal lobbying activity, the amount we report also includes the amount spent on federal lobbying activity by trade associations of which Thermo Fisher is a member. These
reports are available to the public at www.senate.gov under “Public Disclosure.”
With regard to Thermo Fisher’s state, municipal and international lobbying activity, we comply with state registration and reporting requirements where we are active.
We are committed to an active and robust shareholder engagement program. We believe that understanding the perspectives of our shareholders is a key component of good corporate
governance. The goals of our shareholder engagement program include:
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・
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Providing visibility and transparency into our business, our financial and operational performance and our strategy;
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・
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Determining which issues are important to our shareholders and sharing our views on those issues; and
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・
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Discussing and seeking feedback on our business and our executive compensation and corporate governance policies and practices, and our sustainability initiatives.
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We approach shareholder engagement as an integrated, year-round process involving our investor relations team, senior management and a member of the Board as appropriate and/or requested.
This includes participation in investor conferences and other formal events and one-on-one meetings and conference calls throughout the year.
Throughout 2019 and into 2020 we engaged with shareholders representing over 50% of our outstanding shares to solicit their feedback on our business and financial performance, governance
and executive compensation programs, and environmental and social matters. Members of our investor relations team and senior management participated in each discussion, with certain engagements including a member of our Board.
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Communications from shareholders and other interested parties
The Company has a process in place for shareholders and other interested parties to send communications to the Board or any individual director or groups of directors, including the
Chairman of the Board and the independent directors.
Shareholders and other interested parties who desire to send communications to the Board or any individual director or groups of directors should write to the Board or such individual director or group of
directors care of the Company’s Corporate Secretary, Thermo Fisher Scientific Inc., 168 Third Avenue, Waltham, Massachusetts 02451. The Corporate Secretary will relay all such communications to the Board, or individual director or group of
directors, as the case may be.
Key topics discussed with shareholders
In the engagements with our shareholders during 2019 and early 2020, we gained valuable feedback on several issues and topics of mutual interest, including those listed below.
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What We Learned from our Meetings with Shareholders
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・ Shareholders appreciated being engaged on governance in general and specifically on executive compensation policies and design, corporate
governance issues and environmental and social issues, and suggested that we enhance our proxy statement disclosure to provide a better picture of the Company’s practices in these areas.
・ A strong majority of the institutional shareholders we spoke with expressed support for our executive compensation program
and generally commented that they viewed it as aligned with performance and shareholder interests. They suggested we enhance our proxy statement disclosure to provide greater transparency on our program.
・ Some investors preferred we target market median in our executive compensation programs and use separate metrics in our short
and long term incentive programs, and suggested we explain our reasoning if taking a different approach.
・ Shareholders understand our Mission and the role that our environmental, social and
governance (“ESG”) practices play in that. They acknowledged our strong ESG practices and suggested enhancements to the breadth and depth of our disclosures in this area.
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Governance and Compensation Enhancements Informed by Shareholder Input
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Our Board evaluates and reviews input from our shareholders in considering their independent oversight of management and our long-term strategy. As part of our
commitment to constructive engagement with investors, we evaluate and respond to the views voiced by our shareholders. Our dialogue has led to enhancements in our corporate governance, ESG, and executive compensation activities, which
our Board believes are in the best interest of the Company and our shareholders. For example, after considering input from shareholders and other stakeholders, we:
・ Enhanced our shareholder engagement efforts to include a greater number of
discussions regarding corporate governance, executive compensation and environmental and social issues, including conducting our first “ESG Roadshow” on which management from our investor relations, governance and compensation and
corporate social responsibility teams spent several days meeting with shareholders to gather feedback on the Company’s Sustainability program
・ Changed market reference point for compensation paid to our NEOs to median (other than
our CEO, for whom the market reference point was already median)
・ Replaced adjusted EPS with adjusted net income as a performance metric in our 2019 annual incentive plan
・ Enhanced our Compensation Discussion and Analysis disclosure to help readers better
understand the compensation program features and rationale for metric selection, and to better enable readers to tie the overall business strategy to pay results
・ Enhanced our ESG disclosure by including more detail about our ESG program in our proxy statement
・ Amended our Corporate Governance Guidelines to include the following:
・ a limit on the number of boards on which our directors may sit
・ a requirement that our Nominating and Corporate Governance Committee seek to include diverse candidates including women and
minority candidates, in the pool of candidates from which it recommends director nominees
・ an increase in the stock ownership requirement for our CEO and other executive officers
・ Expanded the clawback in our equity awards to
allow the Company to recoup compensation in additional circumstances
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Executive compensation
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Approval of an advisory vote on executive compensation
Your board of directors recommends a vote FOR approving the compensation of our Named Executive
Officers.
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Every year, we provide our shareholders the opportunity to vote to approve, on an advisory, non-binding basis, the compensation of our Named Executive Officers as disclosed in this proxy
statement in accordance with the SEC’s rules. This proposal is required by Section 14A of the Exchange Act.
Our “Compensation Discussion and Analysis,” starting below, describes in detail our executive compensation programs and the decisions made by the Compensation Committee with respect to
the year ended December 31, 2019.
As an advisory vote, this proposal is not binding. The outcome of this advisory vote does not overrule any decision by, create or imply any change to the fiduciary duties of, or create or
imply any additional fiduciary duties for the Company or the Board of Directors (or any committee thereof). However, our Compensation Committee and Board of Directors value the opinions expressed by our shareholders in their vote on this
proposal and will consider the outcome of the vote when making future compensation decisions for Named Executive Officers.
At the Company’s 2019 Annual Meeting of Shareholders, our shareholders approved our say-on-pay with an 86% favorable advisory vote. While this level of support indicates that a sizable
majority of our shareholders continue to support our overall compensation philosophy and executive compensation practices, it represents a decline from the 90+% levels of shareholder support we received for many years. Consequently, our
investor relations team, with participation from our CEO, CFO and a member of our Board in certain engagements, met with shareholders representing over 50% of our outstanding shares to ensure that we heard firsthand their perspectives and
concerns specifically related to our executive compensation programs. We value our shareholders’ input, and our goal is to continue to receive strong support for our compensation programs.
Our shareholders appreciated being engaged on the topic, and these meetings reinforced their support of our compensation programs. The meetings also served to highlight opportunities for
enhanced disclosure, and to improve the impact of our proxy statement by better-presenting our approach to governance topics, including compensation. Pages 35 and 36 of this proxy statement provide detailed information on our shareholder
engagement program, what we learned from our 2019 and early 2020 meetings with shareholders, and changes we made to our governance and compensation programs based on shareholder input.
Looking to the future, the Company is committed to maintaining ongoing communication with our major shareholders specifically focused on executive compensation, to ensure we continue to
remain fully aware of shareholder expectations and concerns.
The Board recommends that shareholders vote in favor of the following resolution:
RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission,
including the compensation discussion and analysis, the compensation tables and any related material disclosed in this proxy statement, is hereby approved.
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Compensation discussion and analysis
Executive overview
The Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program and reviews compensation decisions for our CEO, CFO and three other most highly
compensated executive officers for 2019. Pursuant to SEC rules, information is also provided this year for two additional officers that would have been among the most highly- compensated executive officers if they had been still serving as an
executive officer at year-end 2019 (all seven together, the “Named Executive Officers” or “NEOs”).
The compensation of our Named Executive Officers with respect to 2019 is explained in the following sections and the Summary Compensation Table that follows.
Named Executive Officers
Our NEOs are as follows:
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Named Executive Officer
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Title
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to Current Role
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Tenure
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Marc N. Casper
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Chairman, President and Chief Executive Officer
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October 2009
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18 years
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Stephen Williamson
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Senior Vice President and Chief Financial Officer
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August 2015
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18 years
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Mark P. Stevenson
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Executive Vice President and Chief Operating Officer
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August 2017
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28 years
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Michel Lagarde
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Executive Vice President
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September 2019
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4 years
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Syed A. Jafry
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Senior Vice President
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September 2017
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15 years
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Patrick M. Durbin(1)
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Senior Vice President
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October 2015
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14 years
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Gregory J. Herrema(2)
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Senior Vice President
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January 2014
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18 years
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(1)
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Mr. Durbin’s employment with the Company terminated on October 1, 2019.
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(2)
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Mr. Herrema was no longer an executive officer on December 31, 2019.
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Program overview
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・
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Core elements of compensation comprise base salary, annual cash incentive and long-term incentives delivered in the form of time-based restricted stock units, performance-based restricted stock
units and stock options
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・
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Performance measures include organic revenue growth, adjusted operating margin, adjusted net income, adjusted EPS, free cash flow and other drivers of shareholder value creation of strategic
significance
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Compensation philosophy and objectives
The primary objectives of our executive compensation program are to:
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attract and retain the best possible executive talent;
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promote the achievement of key strategic and financial performance;
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motivate long-term value creation; and
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align executive officers’ interests with those of our shareholders.
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We achieve these objectives through the design of our programs, including:
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・
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competitive positioning of pay versus our peers;
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・
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delivery of a significant portion of pay in the form of variable, at-risk compensation;
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・
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alignment of performance measures with our strategy;
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・
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use of a combination of vehicles that collectively promote the achievement of business results, retention and sustainable long-term value creation; and
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・
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use of stock ownership guidelines, a clawback policy, a stock holding requirement for our CEO, and other risk mitigation tools.
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Executive compensation decision-making process
Compensation oversight
The Compensation Committee, chaired by Dion J. Weisler and comprised of five independent directors, is responsible for discharging the Board’s responsibilities relating to compensation of
our executive officers, including the Chief Executive Officer.
The Committee has overall responsibility for approving and evaluating all of our compensation plans, policies and programs as they affect our executive officers. This includes reviewing
and approving the compensation of the Named Executive Officers, approving performance goals, reviewing the achievement of performance goals at year end, stock plan administration and management succession.
Key duties and activities
The Compensation Committee undertakes a number of activities each year. The primary areas of focus are discussed in more detail below.
Q1
・ Review of executive bonus pool
・ Review Company and NEO performance and approve year-end compensation (annual bonus and equity programs)
・ Approve annual equity incentive program performance metric selection for current year
・ Approve officer cash compensation (base salary) and target bonus for current year
・ Proxy statement review
・ Conduct annual risk assessment on our global compensation programs and policies
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Q2
・Review proxy advisory firms’ analyses of current proxy statement
・Discuss investor outreach regarding executive compensation
・Propose director equity grants for current year
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Q4
・ Committee self-evaluation
・ Committee charter review
・ Equity program and pool review
・ Consider shareholder feedback from outreach discussions
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Q3
・ Management talent and succession plan review and discussion
・ Confirmation of compensation peer group
・ Engagement of independent compensation consultant
・ Review results of executive competitive assessment
・ Confirmation of executive compensation philosophy/review of potential changes
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Annual compensation review
Typically during the first quarter of each calendar year, the Compensation Committee conducts an annual compensation review. As part of this review, the Committee reviews information
provided by Pearl Meyer and recommendations presented by the Chief Executive Officer with respect to annual salary increases, bonuses and annual equity awards for the other executive officers.
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In reaching decisions, the Committee applies its judgment to determine and set the appropriate mix and level of compensation for the executive officers. A range of perspectives is taken
into account, including the peer group information provided by Pearl Meyer, Company and business unit performance, individual performance, prevailing market trends, feedback from shareholders and the views of both the Chief Executive
Officer and the other independent directors of the Board. The Committee will then approve any changes to base salary, bonus opportunities, and equity grant sizes and mix. As a final step, the Committee considers each element of pay in
isolation and collectively, to ensure that in combination the overall total compensation is aligned with the Company’s compensation philosophy.
For 2019, the Committee concluded that all elements of compensation – both in isolation and in combination – were aligned to our strategic market positioning. The Committee will continue
to review this on an annual basis to ensure compensation remains market competitive and aligned with the Company’s compensation philosophy.
Target setting
We set rigorous annual goals based on Company and industry outlook for the year, historical and projected growth rates for the Company and its peers, and performance expectations from
analysts. The annual incentive plan is aligned with the Company’s annual operating plan and is designed so that target payout requires achievement of a high degree of business performance without encouraging excessive risk-taking. The
Company’s annual operating and three-year strategic plans serve as the basis of the annual earnings guidance we communicate to investors. The annual operating plan builds on the prior year’s results and is based on the anticipated business
environment.
The Compensation Committee followed the process described above when establishing our 2019 performance targets. Consistent with prior years, our 2019 targets considered analyst
expectations and competitors’ publicly disclosed projected performance.
Compensation peer group
The Compensation Committee reviews the companies that are included in the compensation peer group (“the Peer Group”), which is used to review and set executive compensation. In
determining appropriate companies for inclusion in the Peer Group, the Committee considers a number of factors, including revenue and market capitalization as a means to assess size relative to the Company. This resulted in the following
Peer Group (which is unchanged from the prior year):
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2019 Peer Group
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・ Honeywell International
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The following chart illustrates the Company’s size compared to the Peer Group median of revenues, market capitalization and number of employees, using data provided to the Compensation
Committee by Pearl Meyer. The Peer Group companies ranged from 0.6x to 1.8x of Thermo Fisher’s revenue and 0.4x and 1.9x of its market capitalization.
Thermo Fisher Positioning Relative to Peer Group
The Committee validated with Pearl Meyer that the resulting Peer Group was reasonable and appropriate for the purpose of gathering references and insights into compensation practices in the market. The
Committee will keep the Peer Group under periodic review, with an eye to stability, appropriateness from a size standpoint and continued relevance with respect to business operations.
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2020 Proxy Statement
thermofisher.com
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Strategic pay positioning
The Committee considers compensation data based on practices in the Peer Group when reviewing executive compensation for the Named Executive Officers. While this reference is just one
consideration in the decision making process, the Committee has established guidelines around the strategic positioning of pay within a range that is deemed to be market competitive.
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Base Salary
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median
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Annual Incentive
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Not defined
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Target Total Cash(1)
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median
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Target Long-Term Incentive (“LTI”)
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Not defined
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Target Direct Compensation(2)
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median
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Target Compensation(3)
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median
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(1)
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Base salary and target annual incentive
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(2)
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Base salary, target annual incentive and target LTI
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(3)
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Base salary, target annual incentive, target LTI, change in pension value and nonqualified deferred compensation earnings, and all other
compensation
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Naturally, the individual positioning of pay will still vary as the Committee takes into account a range of factors (e.g. tenure, experience, performance, scope of role) when determining
pay levels.
Managing compensation risk
The Committee believes that the Company’s executive compensation program supports the executive compensation objectives described in this report, without encouraging management to take
unreasonable risk with respect to our business. The Committee has reviewed the Company’s key compensation policies and practices and concluded that any risks arising from our policies and programs are not reasonably likely to have a
material adverse effect on the Company. In particular, the following features are noted as having a positive impact in managing compensation risk.
Support long-term
view and
sustainability of
Company
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・Equity compensation in the form of stock options and restricted stock units
・Stock ownership requirement (increased in 2020)
・Stock holding requirement on 50% of shares delivered upon vesting applied to all CEO time- and performance-based restricted stock units
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Ability to take action
to affect current and
recoup prior
compensation
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・Full Committee discretion to reduce awards and payouts under our annual incentive plan and stock incentive plans to zero for certain
conduct detrimental to the Company
・Clawback policy (expanded in 2020)
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Committee Oversight
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• Annual risk assessment presented to the Committee by General Counsel and VP Executive Compensation
・Assessment considers program design and payouts
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Clawback policy
We have the right to claw back incentive-based compensation to the extent it was awarded in the prior three years on the achievement of financial results subject to an accounting
restatement that should have resulted in the executive receiving a lower amount of compensation had our financial results been properly reported.
Our equity award agreements also provide for the recoupment of all or part of any proceeds received upon the sale of vested awards in the prior 12 months, if there is a breach by the
executive of the award agreement or any non-competition, non-solicitation, confidentiality or similar covenant or agreement with us.
In early 2020 we revised our equity agreements such that grants made from 2020 onwards also provide for the recoupment of all or part of any proceeds received upon
the sale of vested awards in the prior 12 months, in the case of a termination of any executive for cause or a breach by an executive of his or her fiduciary duty to the Company.
2020 Proxy Statement
thermofisher.com
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