DEF 14A 1 d107323ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.                )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

Edwards Lifesciences Corporation

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

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Title of each class of securities to which transaction applies:

     

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Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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Amount Previously Paid:

     

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LOGO

Edwards Lifesciences Corporation 2021 Notice of Annual Meeting and Proxy Statement


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     LOGO  

Edwards Lifesciences Corporation

 

One Edwards Way

Irvine, California 92614

Phone: 949.250.2500

www.edwards.com

 

      LOGO   

March 23, 2021

 

Dear Fellow Stockholders:

 

On behalf of the Edwards Board of Directors, it is my pleasure to invite you to attend our 2021 Annual Meeting of Stockholders. This year’s Annual Meeting will be held virtually via webcast at www.proxydocs.com/EW, beginning at 10:00 a.m. PT on Tuesday, May 4, 2021. A transcript with video and audio of the entire Annual Meeting will be made available at http://ir.edwards.com. Edwards will not hold an in-person meeting in order to ensure the health and well-being of our stockholders, employees and Board during the COVID-19 pandemic.

 

Details of the business to be conducted at the Annual Meeting are included in the attached Notice of 2021 Annual Meeting of Stockholders and Proxy Statement. Stockholders may also access the Notice of 2021 Annual Meeting of Stockholders and the Proxy Statement via the Internet at www.edwards.com.

 

Even in the midst of these challenging times, 2020 was another successful year for Edwards, thanks to the flexibility, resiliency, resourcefulness and passion of our employees and partners. We are pleased that we did not make staff reductions as a result of COVID. Instead, we grew our global team, invested in long-term programs and continued to pursue bold innovations for structural heart disease and critical care monitoring.

 

Our performance translated to 2020 total stockholder returns of 17%, with 3-year and 5-year returns of 143% and 247%, respectively, which continue to outpace the broader market. At the Annual Meeting, I look forward to reviewing our 2020 performance as well as our commitment to our long-term growth strategy.

 

This year also provided opportunities for Edwards to reflect on how we support our employees, our partners and our communities. I am extremely proud of Edwards’ inclusive culture and our excellent track record of valuing diversity. However, we continue to challenge ourselves to keep improving. We recognize that meaningful actions must be taken, and we look forward to sharing with you our initiatives and commitments that will help us continue a strong legacy of fostering a culture of diversity, inclusion and belonging.

 

Although we expect the pandemic to have a lingering impact on the global healthcare system, our team’s commitment and success has demonstrated their resiliency, and I am more optimistic than ever before about Edwards’ future. Our consistent growth demonstrates the strong demand for the work we do and the power of the triple win—innovations that extend life, improve quality of life and are more efficient for the health care system. Our focus on our innovation strategy presents tremendous opportunity to continue creating value and improving lives for patients around the world.

 

Thank you for your continued investment in Edwards.

 

Sincerely,

 

 

LOGO

Michael A. Mussallem

Chairman of the Board and

Chief Executive Officer


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LOGO

  

Dear Fellow Stockholders:

 

On behalf of the Board of Directors, I would like to thank you for your continued investment in Edwards.

 

Over the past year, I have had the honor to serve as the Board’s Lead Independent Director following the retirement of Wesley von Schack. I am proud to work with such an experienced and skilled Board, providing independent oversight and leadership in support of Edwards’ long-term value creation.

 

During an unprecedented year, our Board remained actively engaged in guiding Edwards’ response to the COVID-19 pandemic. The Board met 12 times, both virtually and in-person, and received regular updates from our leadership team as the pandemic unfolded. Throughout this time, we have supported Edwards’ focus on protecting the health and well-being of our employees, serving our hospitals and clinical partners, and supporting our communities.

 

Our Board remains committed to ensuring we have the appropriate skills, experience and diversity to independently guide and oversee Edwards’ long-term strategy. As a result of our ongoing board refreshment efforts, we were pleased to appoint Ramona Sequeira and Paul LaViolette to our Board in the past year. Ramona and Paul both bring decades of valuable experience in the healthcare industry, and also provide unique perspectives to our Board and committees.

 

In keeping with years past, we have maintained our robust track record of engaging with our stockholders to solicit feedback on a variety of key themes. We value these conversations, and your perspectives help inform the Board’s decisions on topics related to governance, compensation, sustainability and strategy. I had the opportunity to speak with some of you during this past year, and I look forward to hearing from more of you in the future.

 

Edwards’ motivation continues to be caring for patients in need. Our commitment to delivering patient-focused innovation has created transformative medical technologies, improved patient care and resulted in exceptional long-term value creation. We are proud of our leading technologies and are confident we will continue to generate value for our stockholders in the future.

 

Thank you for your continued trust and support.

 

Sincerely,

 

 

 

LOGO

Martha H. Marsh

Lead Independent Director


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EDWARDS LIFESCIENCES CORPORATION

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS

 

Date and Time    Location    Record Date
May 4, 2021    Virtual    March 10, 2021
10:00 a.m. PT   

A live webcast of the Annual Meeting will be available at www.proxydocs.com/EW.

 

You will not be able to attend the Annual Meeting in person. Please see “Virtual Annual Meeting” on the following page for additional information.

  

Matters to be voted on at the 2021 Annual Meeting of Stockholders (the “Annual Meeting”):

 

  1.

Election of eight director nominees named in the attached Proxy Statement to serve until our next annual meeting of stockholders and until their respective successors are duly elected and qualified

 

  2.

Approval, on an advisory basis, of the named executive officer compensation disclosed in the attached Proxy Statement

 

  3.

Approval of the Amendment and Restatement of the Company’s 2001 Employee Stock Purchase Plan for United States Employees (the “U.S. ESPP”) to increase the total number of shares of common stock available for issuance under the U.S. ESPP by 3,300,000 shares

 

  4.

Approval of the Amendment and Restatement of the Company’s 2001 Employee Stock Purchase Plan for International Employees (the “International ESPP”) to increase the total number of shares of common stock available for issuance under the International ESPP by 1,200,000 shares

 

  5.

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021

 

  6.

Consider two stockholder proposals, if properly presented at the Annual Meeting

 

  7.

Other business as may properly come before the Annual Meeting, and any postponement or adjournment of the Annual Meeting

The Proxy Statement accompanying this notice describes each of the items of business in more detail.

Record Date: If you were a holder of record of the common stock of Edwards Lifesciences Corporation at the close of business on March 10, 2021, you are entitled to notice of, and to vote at, the Annual Meeting.

Your vote is very important. Please submit your proxy or voting instructions as soon as possible to ensure that your shares will be represented at the Annual Meeting, whether or not you expect to attend the Annual Meeting. Stockholders may participate in the Annual Meeting by logging in at www.proxydocs.com/EW. Please see “Virtual Annual Meeting” below for additional information regarding participation in the virtual meeting.

List of Stockholders: A list of stockholders as of the record date for the Annual Meeting may be accessed during the virtual meeting by following the instructions you receive via email after you register in advance of the meeting. Instructions on viewing the list of stockholders will be provided to you approximately one hour prior to the start of the Annual Meeting.

 

How to Vote Your Shares
LOGO   

By Internet

Go to www.proxypush.com/EW and follow the instructions

   LOGO   

By Telephone

Call 1-866-892-1604 and follow the instructions

LOGO   

By Mail

Complete, sign, date, and return your proxy card or voting instruction form in the envelope provided

   LOGO   

In Person (Virtual)

Attend our Annual Meeting, which will be conducted virtually, via live webcast, and vote online; see “Virtual Annual Meeting” for more information

By Order of the Board of Directors,

 

LOGO

Linda J. Park

Vice President, Associate General Counsel, and Corporate Secretary

March 23, 2021

 

Important notice regarding the availability of proxy materials for our 2021 Annual Meeting of Stockholders to be held on May 4, 2021:

Our Proxy Statement and 2020 Annual Report to stockholders are available on the Internet at

www.proxydocs.com/EW.

Edwards Lifesciences Corporation     One Edwards Way, Irvine, CA 92614     www.edwards.com


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VIRTUAL ANNUAL MEETING

The Annual Meeting will be held in a virtual-only meeting format, via live video webcast that will provide stockholders with the ability to participate in the Annual Meeting, vote their shares and ask questions. In light of concerns and restrictions on travel related to the COVID-19 pandemic, we are implementing a virtual-only meeting format to enhance stockholder access to the Annual Meeting. We believe that the virtual-only meeting format will give stockholders the opportunity to exercise the same rights as if they had attended an in-person meeting and believe that these measures will enhance stockholder access and encourage participation and communication with our Board of Directors and management.

ATTENDANCE AT THE VIRTUAL ANNUAL MEETING

 

 

Only stockholders of record and beneficial owners of shares of our common stock as of the close of business on March 10, 2021, the record date, may attend and participate in the Annual Meeting, including voting and asking questions during the virtual Annual Meeting. You will not be able to attend the Annual Meeting physically in person.

 

 

In order to attend the Annual Meeting, you must register in advance of the meeting at www.proxydocs.com/EW. Upon completing your registration, you will receive further instructions via email, including a unique link that will allow you access to the Annual Meeting and to vote and submit questions during the Annual Meeting.

 

   

As part of the registration process, you must enter the control number located on your proxy card, voting instruction form, or Notice of Internet Availability. If you are a beneficial owner of shares registered in the name of a broker, bank or other nominee, you will also need to enter your uniquely assigned control number at www.proxydocs.com/EW as part of the registration process.

 

 

If you were a stockholder as of the close of business on March 10, 2021, the record date, you may vote shares held in your name as the stockholder of record or shares for which you are the beneficial owner but not the stockholder of record electronically during the Annual Meeting through the online virtual annual meeting platform by following the instructions provided when you log onto the online virtual annual meeting platform.

 

 

On the day of the Annual Meeting, Tuesday, May 4, 2021, stockholders may begin to log onto the virtual-only Annual Meeting beginning at 9:50 a.m. local (Pacific) time, and the Annual Meeting will begin promptly at 10:00 a.m. local (Pacific) time. Please allow ample time for online login.

 

 

We will have technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting. If you encounter any difficulties accessing the virtual-only Annual Meeting platform, including any difficulties voting or submitting questions, you may call the technical support number that will be posted in your instruction email.

QUESTIONS AT THE VIRTUAL ANNUAL MEETING

 

 

Stockholders of record and beneficial owners as of the close of business on March 10, 2021, the record date, will have the ability to submit questions before and during the Annual Meeting. During a designated question and answer period at the Annual Meeting, we will respond to appropriate questions submitted by stockholders.

 

 

We will respond to as many stockholder-submitted questions as time permits, and any questions that we are unable to address during the Annual Meeting will be published and addressed on our website following the meeting, with the exception of any questions that are irrelevant to the purpose of the Annual Meeting or our business or that contain inappropriate or derogatory references which are not in good taste. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.

YOU WILL NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON.


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TABLE OF CONTENTS

 

    Page  

PROXY SUMMARY

    i  

GENERAL MEETING AND VOTING INFORMATION

    1  

BOARD OF DIRECTORS MATTERS

    5  

PROPOSAL 1 – ELECTION OF DIRECTORS

    5  

Corporate Governance Policies and Practices

    12  

Active Stockholder Engagement Program

    12  

Director Independence

    12  

Corporate Governance Guidelines

    13  

Board Leadership Structure

    13  

Lead Independent Director’s Role and Responsibilities

    13  

Board Role In Risk Oversight

    14  

Meetings of the Board

    15  

Board Composition

    15  

Committees of the Board

    15  

Succession Planning

    17  

Communications with the Board

    17  

Corporate Social Responsibility

    18  

Director Compensation

    20  

Director Compensation Table – 2020

    20  

Retainers and Fees

    20  

2020 Nonemployee Directors Stock Incentive Program

    21  

Deferral Election Program

    21  

Directors’ Stock Ownership Guidelines and Holding Requirement

    22  

Expense Reimbursement Policy

    22  

Outstanding Nonemployee Director Equity Awards

    22  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    24  

EXECUTIVE COMPENSATION AND OTHER INFORMATION

    25  

Executive Officers

    25  

Compensation Discussion and Analysis

    27  

Executive Summary

    27  

Compensation Philosophy and Objectives for NEOs

    32  

Compensation Process

    33  

Independent Compensation Consultant

    33  

Use of Competitive Data

    34  

Elements of Compensation

    35  

Stock Ownership Guidelines and Holding Requirement

    42  

Prohibition on Pledging and Hedging

    42  

Market Timing of Equity Awards

    42  

Benefits and Perquisites

    42  

Deferred Compensation

    43  
    Page  

Employment and Post-Termination Agreements

    43  

Tax Implications – Policy Regarding Section 162(m)

    44  

Compensation and Governance Committee Report

    44  

Executive Compensation

    45  

Summary Compensation Table

    45  

Grants of Plan-Based Awards in Fiscal Year 2020

    48  

Non-Equity Incentive Plan Awards

    48  

Equity Incentive Plan Awards

    48  

Outstanding Equity Awards at 2020 Fiscal Year-End

    52  

Option Exercises and Stock Vested in Fiscal Year 2020

    54  

Pension Benefits

    54  

Nonqualified Deferred Compensation Plans

    55  

Potential Payments Upon Termination or Change in Control

    55  

CEO Pay Ratio

    59  

PROPOSAL 2 –  ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

    60  

EQUITY COMPENSATION PLAN INFORMATION

    62  

PROPOSAL 3 –  AMENDMENT AND RESTATEMENT OF THE U.S. ESPP

    63  

PROPOSAL 4 –  AMENDMENT AND RESTATEMENT OF THE INTERNATIONAL ESPP

    68  

AUDIT MATTERS

    73  

PROPOSAL 5  – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    73  

Audit Committee Report

    74  

OTHER MATTERS AND BUSINESS

    76  

PROPOSAL 6  – STOCKHOLDER PROPOSAL REGARDING ACTION BY WRITTEN CONSENT

    76  

PROPOSAL 7  – STOCKHOLDER PROPOSAL TO ADOPT A POLICY TO INCLUDE NON-MANAGEMENT EMPLOYEES AS PROSPECTIVE DIRECTOR CANDIDATES

    81  

Additional Information

    85  

Related Persons Transactions

    85  

Indemnification of Directors and Officers

    85  

Deadline for Receipt of Stockholder Proposals and Director Nominations for the 2022 Annual Meeting

    85  

Annual Report on Form 10-K

    86  

Delivery of the Proxy Materials

    86  

APPENDIX A – Non-GAAP Financial Information

    A-1  

APPENDIX B – U.S. ESPP

    B-1  

APPENDIX C – International ESPP

    C-1  
 

 

 


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This Proxy Statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements contained in this Proxy to be covered by the safe harbor provisions of such Acts. Some statements other than statements of historical fact in this Proxy or referred to or incorporated by reference into this Proxy are “forward-looking statements” for purposes of these sections. These statements include, among other things, the expected impact of COVID-19 on our business, any predictions, opinions, expectations, plans, strategies, objectives and any statements of assumptions underlying any of the foregoing relating to our current and future business and operations, including, but not limited to, financial matters, development activities, clinical trials and regulatory matters, manufacturing and supply operations, and product sales and demand. These statements can sometimes be identified by the use of the forward-looking words, such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “should,” “anticipate,” “plan,” “goal,” “continue,” “seek,” “pro forma,” “forecast,” “intend,” “guidance,” “optimistic,” “aspire,” “confident,” other forms of these words, or similar words or expressions or the negative thereof. Statements of past performance, efforts or results about which inferences or assumptions may be made can also be forward-looking statements and are not indicative of future performance or results; these statements can be identified by the use of words such as “preliminary,” “initial,” “diligence,” “industry-leading,” “compliant,” “indications,” or “early feedback” or other forms of these words or similar words or expressions or the negative thereof. These forward-looking statements are subject to substantial risks and uncertainties that could cause our results or future business, financial condition, results of operations, or performance to differ materially from our historical results or experiences or those expressed or implied in any forward-looking statements contained in this Proxy. These risks and uncertainties include, but are not limited to: uncertainties regarding the severity and duration of the COVID-19 pandemic and its impact on our business and the economy generally; clinical trial or commercial results or new product approvals and therapy adoption; inability or failure to comply with applicable regulations; unpredictability of product launches; competitive dynamics; changes to reimbursement for the company’s products; the company’s success in developing new products and avoiding manufacturing and quality issues; the impact of currency exchange rates; the timing or results of research and development and clinical trials; unanticipated actions by the U.S. Food and Drug Administration and other regulatory agencies; unexpected litigation impacts or expenses; and other risks listed in Edwards’ Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and our other reports filed with the Securities and Exchange Commission, to which your attention is directed. These forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections.

Edwards, Edwards Lifesciences, the stylized E logo, HemoSphere, INSPIRIS, INSPIRIS RESILIA, KONECT, PARTNER, PARTNER 3, PASCAL, RESILIA, SAPIEN, and SAPIEN 3 are trademarks of Edwards Lifesciences Corporation. All other trademarks are the property of their respective owners.

 

 


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PROXY SUMMARY

This summary contains highlights about Edwards Lifesciences Corporation (“Edwards”) and the upcoming 2021 Annual Meeting of Stockholders (the “Annual Meeting”). This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement prior to voting.

 

2021 Annual Meeting of Stockholders
Date and Time   Location   Record Date
May 4, 2021   Virtual   March 10, 2021
10:00 a.m. PT  

A live webcast of the Annual Meeting will be available at www.proxydocs.com/EW.

 

You will not be able to attend the Annual Meeting in person. Please see “Virtual Annual Meeting” for additional information.

 

  If you were a holder of record of the common stock of Edwards at the close of business on March 10, 2021, you are entitled to notice of, and to vote at, the Annual Meeting.

STOCKHOLDER VOTING MATTERS (Page 1)

 

Proposal

       Board’s Voting
Recommendation

Proposal 1:

  

Election of Directors

 

LOGO     FOR

each nominee

Proposal 2:

  

Advisory Vote to Approve Named Executive Officer Compensation

 

LOGO     FOR

Proposal 3:

  

Approval of the Amendment and Restatement of the Company’s 2001 Employee Stock Purchase Plan for United States Employees (the “U.S. ESPP”) to Increase the Total Number of Shares of Common Stock Available for Issuance under the U.S. ESPP by 3,300,000 Shares

 

LOGO     FOR

Proposal 4:

  

Approval of the Amendment and Restatement of the Company’s 2001 Employee Stock Purchase Plan for International Employees (the “International ESPP”) to Increase the Total Number of Shares of Common Stock Available for Issuance under the International ESPP by 1,200,000 Shares

 

LOGO     FOR

Proposal 5:

  

Ratification of Appointment of Independent Registered Public Accounting Firm

 

LOGO     FOR

Proposal 6:

  

Advisory Vote on a Stockholder Proposal Regarding Action by Written Consent

 

  AGAINST

Proposal 7:

  

Advisory Vote on a Stockholder Proposal to Adopt a Policy to Include Non-Management Employees as Prospective Director Candidates

 

  AGAINST



 

 

 
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BOARD OF DIRECTOR NOMINEES (Page 5)

The Board of Directors (the “Board”) has selected the following eight persons as its nominees for election for a one-year term to the Board at the Annual Meeting. The following chart provides key information on each of our director nominees as of the date of this Proxy Statement. Each director nominee was elected as a director at the Company’s annual meeting held on May 7, 2020, to hold office until the next annual meeting, other than Mr. LaViolette who was appointed to the Board on July 13, 2020.

 

 
                

Committee Memberships

   

Name

  Age   Director
Since
  Independent   Audit
Committee*
 

Compensation

and Governance
Committee

 

Other Public

Company
Boards

Kieran T. Gallahue

Former Chairman and CEO,

CareFusion Corporation

  57   2015   Yes   LOGO     3

Leslie S. Heisz

Former Managing Director,

Lazard Frères & Co

  60   2016   Yes   LOGO     2

Paul A. LaViolette

Managing Partner and
COO, SV Health Investors LLC

  63   2020   Yes     LOGO   2

Steven R. Loranger

Former Chairman, President and
CEO ITT Corporation

  69   2016   Yes   LOGO     1

Martha H. Marsh**

Retired President and CEO,

Stanford Hospital & Clinics

  72   2015   Yes     LOGO   1

Michael A. Mussallem

Chief Executive Officer and Chairman,

Edwards Lifesciences Corporation

  68   2000   No       0

Ramona Sequeira

President of the U.S. Business Unit and

Global Portfolio Commercialization,

Takeda Pharmaceuticals USA, Inc.

  55   2020   Yes   LOGO     0

Nicholas J. Valeriani

Former CEO, West Health Institute

Former EVP, Johnson & Johnson

  64   2014   Yes       LOGO   1

 

*

Each member of the Audit Committee is an audit committee financial expert

 

**

Lead Independent Director

 

 

Future Chairperson upon Dr. Link’s retirement from the Board at the Annual Meeting

 

C

Chairperson



 

 

 
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Our Board strives to maintain a highly independent, balanced, and diverse group of directors that collectively possesses the expertise to ensure effective oversight of management. Our director nominees are:

 

LOGO     LOGO     LOGO     LOGO   LOGO

 

Diverse Range of Qualifications and Skills Represented by Our Directors

Medical Technology

Industry Experience

 

Executive International

Experience

  Corporate Governance

Regulatory and

Compliance

  Senior Leadership   Operations Management
Innovation/Technology   Risk Management   Risk Oversight

Finance and Financial

Industry

  Human Capital Resources   Financial Reporting

 



 

 

 
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CORPORATE GOVERNANCE HIGHLIGHTS (Page 12)

Our commitment to good corporate governance practices and accountability to stockholders is described below.

 

 

LOGO

WHAT WE DO

   
LOGO   Annual election of directors
   
LOGO   Ongoing Board refreshment and director skill set aligned with corporate strategy
   
LOGO   Majority vote standard in uncontested elections, with director resignation policy
   
LOGO   Special stockholders meetings can be called by stockholders owning at least 15% of our outstanding shares
   
LOGO   Proxy access right to permit a stockholder, or a group of up to 30 stockholders, owning at least 3% of our outstanding shares continuously for at least 3 years, to nominate up to the greater of 2 directors or 20% of our Board for inclusion in our annual meeting proxy statement
   
LOGO   Independent Board, all but our Chief Executive Officer
   
LOGO   Commitment to Board Diversity
   
LOGO   Executive session of independent directors held at each regularly scheduled Board and committee meeting
   
LOGO   Lead Independent Director provides strong independent leadership of our Board
   
LOGO   Retirement policy for directors
   
LOGO   Annual Board and committee self-evaluations and peer reviews
   
LOGO   Encourage continuing director education with designated annual reimbursement policy
   
LOGO   Formal director orientation and continuing education program
   
LOGO   Nonemployee directors expected to hold net shares upon vesting or exercise of equity awarded after 2011 until Board service ends
   
LOGO   Senior management succession planning considered at each regularly scheduled Board meeting
   
LOGO   Active stockholder engagement
   
LOGO   Robust code of ethics in our Global Business Practice Standards
   
LOGO   Active Board oversight of enterprise risks and risk management
   
LOGO   Corporate sustainability report and receipt of numerous recognitions for our sustainability practices
   
LOGO   “Clawback” policy for performance-based compensation

 

 

LOGO

WHAT WE DON’T DO

   
  No pledging or hedging of Edwards’ securities by members of the Board, employees with a title of “vice president” equivalent or above, and any other employees designated as “Designated Insiders” under our insider trading policy
   
  No stockholder rights plan (“poison pill”)
   
  No supermajority voting provisions in the Company’s organizational documents


 

 

 
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ACTIVE STOCKHOLDER ENGAGEMENT PROGRAM (Page 12)

 

Edwards’ Board and management are committed to engaging with Edwards’ stockholders and incorporating feedback into their decision-making processes. Throughout the year, our CEO, CFO, and Vice President of Investor Relations meet, by phone and face-to-face, with current and prospective stockholders to discuss Edwards’ strategy, business, and financial

results. Our CFO, Corporate Secretary, and Vice President of Investor Relations, together with other members of management and our Lead Independent Director, engage stockholders to solicit their views and feedback on, among other things, corporate governance, compensation, sustainability, corporate social responsibility, human capital management, diversity, inclusion and belonging, succession planning, and other related matters and to discuss the issues that matter most to our stockholders. During this past outreach season, which occurred from October to December 2020, we also discussed the Company’s response to the COVID-19 pandemic. Stockholder feedback is shared with the Board and its committees, which enhances our corporate governance practices, facilitates future dialogue between stockholders and the Board, and provides additional transparency to our stockholders. Since the 2020 annual meeting of stockholders, our CFO, Corporate Secretary, and Vice President of Investor Relations contacted our top stockholders representing approximately 55% of our outstanding shares and engaged with stockholders representing approximately 29% of our outstanding shares.

  

 

 

LOGO

Over time, we have amended our Charter and Bylaws to adopt various stockholder rights and to align our corporate governance practices with our stockholders’ interests.

 

Topic   Action Taken in Response to Stockholder Feedback

Lead Independent

Director

Responsibilities

 

  Expanded the role of the Presiding Director position, and, in light of the additional responsibilities, designated the position, Lead Independent Director

Proxy Access  

  Amended our Bylaws to provide for proxy access at 3% and 3-year ownership and holding period duration thresholds

Right to Call

Special Meetings

 

  Amended our Bylaws to permit stockholders to call a special meeting

 

  In response to a non-binding stockholder proposal requesting the right to act by written consent, engaged with stockholders representing over 50% of shares then outstanding to better understand investor views and, in response to feedback received, reduced the minimum ownership threshold to call a special meeting from 25% to 15%

Declassified Board  

  Amended our Charter to eliminate the classified board

No Supermajority

Voting

 

  Amended our Charter to eliminate supermajority voting

Poison Pill  

  Did not renew poison pill when it expired in March 2010

Majority Voting

in Director

Elections

 

  Amended our Bylaws to provide for majority voting in uncontested director elections



 

 

 
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CORPORATE SOCIAL RESPONSIBILITY (Page 18)

At Edwards, our commitment to corporate responsibility and sustainability is foundational, and expressed in the words of our mission statement, known as our Credo: “Through our actions, we will become trusted partners with customers, colleagues and patients—creating a community unified in its mission to improve the quality of life around the world. Our results will benefit customers, patients, employees and shareholders.” Our Compensation and Governance Committee of the Board (the “Compensation Committee”) maintains formal oversight responsibilities for our Sustainability program, with regular discussions at meetings of the full Board. More details on our sustainability efforts can be found in our Sustainability Report posted on our website at www.edwards.com under “About Us—Corporate Responsibility.”

We received numerous recognitions for our sustainability and environmental responsibilities practices in 2020, some of which are highlighted below:

 

 

2020 marks the inaugural appearance of Edwards on Barron’s third annual list of the 100 Most Sustainable Companies in the United States. Significant performance indicators included the designation of funds for community support, the hiring of minority employees, and improvements in workplace inclusivity.

 

For the fourth consecutive year, named one of America’s Most JUST Companies from Forbes and JUST Capital—United States largest publicly traded companies are ranked on the issues Americans care about most.

 

Named as one of the Management Top 250 by the Wall Street Journal in partnership with the Drucker Institute—listed #29 out of 886 companies ranked according to their overall effectiveness of “doing the right things well.” Edwards achieved high marks in all five dimensions of corporate performance: Customer Satisfaction, Employee Engagement and Development, Innovation, Social Responsibility and Financial Strength.

 

In 2020, once again recognized by the Investor’s Business Daily 50 Best ESG Companies for superior Environmental, Social and Governance (ESG) ratings in addition to strong fundamental and technical performance.

 

Constituent of the DJSI ESG World and North America Indices—the Dow Jones Sustainability World index tracks the performance of the top 10% of the 2,500 largest companies in the S&P Global Broad Market Index that lead the field in sustainability.

EXECUTIVE COMPENSATION (Page 25)

Executive Summary.    Edwards is the global leader in patient-focused medical innovations for structural heart disease and critical care monitoring. Driven by a passion to help patients, we partner with the world’s leading clinicians and researchers and invest in research and development to transform care for those impacted by structural heart disease or who require hemodynamic monitoring during surgery or in intensive care.

Pay-for-Performance Philosophy.    The Compensation Committee strives to create a pay-for-performance culture and strongly believes that executive compensation should be tied not only to performance, but also directly to the successful implementation of our long-term corporate strategy. As a direct result of our strategy, we have introduced therapies such as transcatheter aortic valve replacement, novel resilient surgical heart valves and noninvasive advanced hemodynamic monitoring, and strengthening our leadership positions. Successfully managing our business in a challenging, highly regulated, dynamic environment requires talented and energetic leaders who champion our strategy and deliver on our commitments.

2020 Financial and Operating Performance.    Following the outbreak of COVID-19, we continued to remain fully committed to our patient-focused innovation strategy; the pandemic did not stop us from doing the right thing for patients. Guided by our Credo, our priorities during the pandemic have been to protect the health and well-being of our employees, to continue to serve our patients, hospitals and clinical partners, and to support our communities.

We intentionally did not take any actions that would negatively impact our employees’ compensation and benefits as a result of the crisis. In fact, the Company, with the support of the Board, is paying typical bonuses to hourly employees in our supply chain and is protecting the majority of the incentive pay of the field organization to recognize their commitment and resilience. In addition, across the Company, our employees generally received typical bonuses, salary increases and continuing equity grants for 2020. In light of our long-term strategy that includes the development of technologies over many years, we intentionally did not take any actions to significantly reduce investments that would disrupt programs that we expect will benefit all stakeholders, including patients, over time.

Our financial results and operating performance in 2020 were significantly impacted by COVID-19. We faced headwinds most severely beginning in March 2020 when procedure rates were highly variable around the globe, leading to a sharp,



 

 

 
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temporary decline in sales. Treatments were delayed due to hospital prioritization of COVID-19 patients, hospital closures, and patients deferring treatment as a result of the pandemic. Although we began recovering towards the end of the second quarter and continued to recover from the financial impact through the second half of the year, our financial performance was below original expectations. Despite the impact of the pandemic, our total sales for fiscal year 2020 was $4.4 billion, an increase in underlying revenue growth for the year of approximately 1% over the prior year, and our total stockholder return for the year was 17%.1

Even with the challenges we faced during the global pandemic, we continued to make important progress on future advancements for patients:

 

 

Extended leadership in transcatheter aortic valves with the continued strong adoption of our SAPIEN 3 valve technology, particularly in Europe, and the launch of this therapy in China;

 

In transcatheter mitral and tricuspid therapies, we aggressively pursued a portfolio of differentiated technologies supported by the establishment of rigorous clinical evidence;

 

Extended our leadership in aortic surgical valves through the continued adoption of our newest technologies, INSPIRIS RESILIA aortic valve and the launch of KONECT aortic valve conduit; and

 

Advanced leadership in critical care with the continued introduction of advanced monitoring technology and smart recovery algorithms for patients.

Stock Performance.    As a general indicator of our pay-for-performance culture, the Compensation Committee considers how Edwards’ cumulative total return to stockholders (“TSR”) compares to both the S&P 500 Index and the S&P Healthcare Equipment Select Industry Index (the “SPSIHE”). The table below illustrates our 5-year cumulative TSR on common stock with the cumulative total returns of the S&P 500 Index and the SPSIHE.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*

 

LOGO

  *

$100 invested at market close on December 31, 2015 in stock or index, including reinvestment of dividends. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

 

 

 

1 

“Underlying growth rate” is a non-GAAP item. Refer to the Appendix A for a reconciliation to the most directly comparable GAAP financial measure.



 

 

 
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2020 Annual Incentive Plan Outcomes and Long-Term Incentives.    The Company’s Annual Incentive Plan consists of three elements:

 

 

the corporate financial measurement (based on underlying revenue growth, adjusted net income and adjusted free cash flow targets),

 

the Key Operating Drivers (“KODs”) (quantifiable strategic milestones that include financial objectives and are tracked using a points system across our entire organization), and

 

individual performance.

The KODs contemplate near and long-term objectives of our multi-year strategy, and the KODs are how we translate these strategic goals into quantifiable metrics to be achieved in any given year, holding all employees, including executives, accountable for the Company’s and their own performance; approximately 20% of the KODs include a financial component.

Due to the impacts of, and the circumstances surrounding, the COVID-19 pandemic and the considerations discussed in “2020 Annual Incentive Plan” on page 29 of this Proxy Statement, the Compensation Committee approved the use of discretion for the 2020 Annual Incentive Plan funding and determined it was appropriate to use the KOD results as the primary mechanism to determine 2020 Annual Incentive Plan payouts across the entire organization, and to not include the corporate financial measurement element, which, if used, would have resulted in a funding at 0%. The Compensation Committee also adjusted the bonus potential downwards by 35% for the CEO and 25% for the rest of the executive group, including the other named executive officers (“NEOs”), to further calibrate the results to the financial outcomes and underscore the executive team’s commitment to, and responsibility for, the Company’s performance. With a 2020 KOD achievement of 70%, our cash incentive plan funded at 70% for corporate employees, 52.5% for the executive group, and 45.5% for the CEO, and also took into account each individual’s performance, more fully described under “Elements of Compensation—Annual Cash Incentive Payment.” The Performance-Based Restricted Stock Units (“PBRSU”) that vested in 2020 were granted in 2017 and measured performance based on Edwards’ TSR over a three-year period compared to that of companies in a subset of the SPSIHE, as discussed in more detail under “Compensation Discussion and Analysis” below. These PBRSUs paid out at 175% of the targeted vesting level.



 

 

 
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COMPENSATION PROGRAM HIGHLIGHTS (Page 32)

Compensation Program Highlights.    The Compensation Committee believes that its executive compensation and benefits philosophy and objectives have resulted in programs that align executives with stockholder interests.

 

 

LOGO

WHAT WE DO

   
LOGO   Pay-for-Performance. Approximately 89% of the target total direct compensation of our CEO, and an average of 78% of the target total direct compensation of our other NEOs, was performance-based in 2020.
   
LOGO   Linkage Between Performance Measures and Strategic Imperatives. Performance measures for incentive compensation are linked to our Strategic Imperatives through achievement of KODs and are designed to create long-term stockholder value and hold executives accountable for their individual and Edwards’ performance.
   
LOGO   Performance-Based Equity. Our PBRSUs vest based on our relative TSR over a three-year period.
   
LOGO   Minimum Three-Year Vesting. Equity compensation is structured to vest over a minimum period of three years, subject to limited exceptions.
   
LOGO   Robust Executive Stock Ownership Guidelines with Holding Period Requirements. Executives are required to hold Edwards’ stock with a value not less than six-times salary for our CEO and three-times salary for each other NEO. Fifty percent of net shares received as equity compensation must be retained until the guideline has been met.
   
LOGO   CEO Stock Ownership. Our CEO far exceeds his six-times salary ownership guideline and has continued to increase his ownership of Edwards’ stock each year.
   
LOGO   Modest Perquisites. We provide modest perquisites and have a business rationale for the perquisites that we do provide.
   
LOGO   “Double Trigger” in the Event of a Change in Control. Severance benefits are paid, and equity compensation awarded starting in May 2015 accelerates in connection with a severance, only upon a “double trigger” in connection with a change in control (meaning a termination of the executive’s employment is required, in addition to the occurrence of a change in control, in order for the benefits to be triggered).
   
LOGO   Use of Tally Sheets. The Compensation Committee annually reviews summaries of prior and potential future compensation levels (referred to as “tally sheets”) when making compensation decisions.
   
LOGO   “Clawback” Policy. We maintain a recoupment policy for performance-based compensation.
   
LOGO   Independent Compensation Consultant. The Compensation Committee engages an independent compensation consulting firm that provides us with no other services.

 

 

LOGO

WHAT WE DON’T DO

   
  No excise tax gross-ups for executive officers.
   
  No repricing or buyout of underwater stock options.
   
  No pledging of Edwards’ securities by members of the Board, employees with a title of “vice president” equivalent or above, and any other employees designated as “Designated Insiders” under our insider trading policy.
   
  No hedging of Edwards’ securities by members of the Board, employees with a title of “vice president” equivalent or above, and any other employees designated as “Designated Insiders” under our insider trading policy.

 

   

We ALIGN executive compensation

with the interests of our

stockholders.

 

We DESIGNED executive compensation programs to avoid excessive risk

and foster long-term value creation.

 

We ADHERE to strong executive

compensation and corporate governance practices.



 

 

 
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EDWARDS LIFESCIENCES CORPORATION

 

 

PROXY STATEMENT FOR THE

2021 ANNUAL MEETING OF STOCKHOLDERS

GENERAL MEETING AND VOTING INFORMATION

Our Board is soliciting your proxy for use at the Annual Meeting to be held at 10:00 a.m. PT, on Tuesday, May 4, 2021, which will be conducted virtually, via live webcast.

Unless the context otherwise requires, references in this Proxy Statement to “Edwards,” “the Company,” “we,” “our,” “us,” and similar terms refer to Edwards Lifesciences Corporation, a Delaware corporation.

Important Notice Regarding the Availability of Proxy Materials for Our 2021 Annual Meeting of Stockholders to be Held on May 4, 2021

We are pleased to take advantage of Securities and Exchange Commission (the “SEC”) rules that allow us to furnish our proxy materials, including our 2020 Annual Report and this Proxy Statement (collectively, the “Proxy Materials”), over the Internet. As a result, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of the Proxy Materials. The Notice contains instructions on how to access those documents over the Internet and how to submit your proxy via the Internet. The Notice also contains instructions on how to request a paper copy of the Proxy Materials. All stockholders who do not receive the Notice will receive a paper copy of the Proxy Materials by mail or an electronic copy of the Proxy Materials by e-mail. This process allows us to provide our stockholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing the Proxy Materials. This Proxy Statement and our 2020 Annual Report are available at http://ir.edwards.com/annuals-proxies.cfm.

The Notice and the Proxy Materials are first being made available to stockholders on or about March 23, 2021.

Voting Matters and the Recommendations of the Board

The items of business scheduled to be voted on at the Annual Meeting and our Board’s recommendation on each item are as follows:

 

Proposal

       Board’s Voting
Recommendation

Proposal 1.

  

Election of Directors

 

LOGO     FOR

each nominee

Proposal 2.

  

Advisory Vote to Approve Named Executive Officer Compensation

 

LOGO     FOR

Proposal 3.

  

Approval of the Amendment and Restatement of the Company’s 2001 Employee Stock Purchase Plan for United States Employees (the “U.S. ESPP”) to Increase the Total Number of Shares of Common Stock Available for Issuance under the U.S. ESPP by 3,300,000 Shares

 

LOGO     FOR

Proposal 4.

  

Approval of the Amendment and Restatement of the Company’s 2001 Employee Stock Purchase Plan for International Employees (the “International ESPP”) to Increase the Total Number of Shares of Common Stock Available for Issuance under the International ESPP by 1,200,000 Shares

 

LOGO     FOR

Proposal 5.

  

Ratification of Appointment of Independent Registered Public Accounting Firm

 

LOGO     FOR

Proposal 6.

  

Advisory Vote on a Stockholder Proposal Regarding Action by Written Consent

 

    AGAINST

Proposal 7.

  

Advisory Vote on a Stockholder Proposal to Adopt a Policy to Include Non-Management Employees as Prospective Director Candidates

 

   AGAINST

 

 

 
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GENERAL MEETING AND VOTING INFORMATION

 

Stockholders will also be asked to consider and transact such other business as may properly come before the Annual Meeting or any postponement or adjournment thereof. Pursuant to our Bylaws, the chairman of the Annual Meeting will determine whether any business proposed to be brought before the Annual Meeting has been properly presented. If the chairman determines that the business was not properly brought before the Annual Meeting, the chairman will declare at the Annual Meeting that such business was not properly brought and such business will not be transacted.

Record Date and Stockholders List

The Board has fixed the close of business on March 10, 2021 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. A list of stockholders of record entitled to vote at the Annual Meeting will be available for inspection by any stockholder, for any purpose germane to the meeting, during normal business hours, for a period of 10 days prior to and including the date of the Annual Meeting, at our corporate headquarters located at One Edwards Way, Irvine, California 92614.

How to Attend

The Annual Meeting will be held on Tuesday, May 4, 2021 at 10:00 a.m. PT in a virtual-only meeting format, via live video webcast. To ensure the health and well-being of our stockholders, employees and Board during the COVID-19 pandemic, we have determined that the Annual Meeting will be held solely in a virtual meeting format via the Internet. You will be able to attend and participate in the Annual Meeting online by visiting www.proxydocs.com/EW and registering in advance of the meeting. See “Virtual Annual Meeting” above following the Notice of 2021 Annual Meeting of Stockholders for further information.

Who Can Vote

You are entitled to vote your shares at the Annual Meeting if our records show that you held your shares as of the close of business on the record date, March 10, 2021. At the close of business on that date, 622,036,179 shares of our common stock were outstanding and entitled to vote at the Annual Meeting. We have no other class of voting securities outstanding. Each stockholder is entitled to one vote per share on each proposal to be voted upon at the Annual Meeting.

How to Vote

You may hold Edwards’ shares in multiple accounts and therefore receive more than one set of the Proxy Materials. To ensure that all of your shares are voted, please submit your proxy or voting instructions for each account for which you have received a set of the Proxy Materials.

Shares Held of Record.    If you hold your shares in your own name as a holder of record with our transfer agent, Computershare, you may authorize that your shares be voted at the Annual Meeting in one of the following ways:

 

By Internet

 

If you received the Notice or a printed copy of the Proxy Materials, follow the instructions in the Notice or on the proxy card.

By Telephone

 

If you received a printed copy of the Proxy Materials, follow the instructions on the proxy card.

By Mail

 

If you received a printed copy of the Proxy Materials, complete, sign, date, and mail your proxy card in the enclosed, postage-prepaid envelope.

In Person (Virtual)

 

You may also vote virtually while attending the meeting through www.proxydocs.com/EW. To attend the Annual Meeting and vote your shares, you must register for the Annual Meeting in advance of the meeting and provide the control number located on your Notice or proxy card. See “Virtual Annual Meeting” above following the Notice of 2021 Annual Meeting of Stockholders for further information.

Shares Held in Street Name.    If you hold your shares through a broker, bank or other nominee (that is, in street name), you will receive instructions from your broker, bank or nominee that you must follow in order to submit your voting instructions and have your shares voted at the Annual Meeting. If you want to vote in person virtually at the Annual Meeting, you may be required to obtain a legal proxy from your broker, bank or other nominee, and you must also register in advance of the meeting at www.proxydocs.com/EW.

Shares Held in Our 401(k) Plan.    If you participate in the Edwards Lifesciences Corporation 401(k) Savings and Investment Plan or the Edwards Lifesciences Technology Sarl Retirement Savings Plan, you will receive a request for voting instructions

 

 

 
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GENERAL MEETING AND VOTING INFORMATION

 

with respect to the shares allocated to your plan account. You are entitled to direct the plan trustee how to vote your plan shares. If the plan trustee does not receive voting instructions for shares in your plan account, the shares attributable to your account will be voted in the same proportion as the allocated shares for which voting instructions have been received.

Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy or voting instructions in advance of the Annual Meeting as described above so that your vote will be counted if you later decide not to attend or are unable to attend the Annual Meeting.

Deadline to Vote

If you are a stockholder of record, your proxy must be received by telephone or the Internet prior to the start of the meeting in order for your shares to be voted at the Annual Meeting. If you are a stockholder of record and you received a printed copy of the Proxy Materials, you may instead mark, sign, date and return the enclosed proxy card, which must be received before the polls close at the Annual Meeting.

If you hold your shares in street name through a broker, bank or other nominee, please follow the instructions provided by the broker, bank or other nominee who holds your shares. If you hold shares in one of our 401(k) plans, to allow sufficient time for voting by the plan trustees, your voting instructions must be received by telephone or the Internet by 11:59 p.m. ET on April 29, 2021.

Appointment of Proxies

The Board has appointed Martha H. Marsh and Michael A. Mussallem to serve as proxy holders to vote your shares according to the instructions you submit. If you properly submit a proxy but do not indicate how you want your shares to be voted on one or more items, your shares will be voted on such items in accordance with the recommendations of our Board as set forth above under “Voting Matters and the Recommendations of the Board.” With respect to any other matter properly presented at the Annual Meeting, your proxy, if properly submitted, gives authority to the proxy holders to vote your shares on such matter in accordance with their best judgment.

Revocation of Your Proxy

If you are a holder of record, you may revoke your proxy at any time before it is voted at the Annual Meeting by delivering written notice of revocation to the Corporate Secretary of the Company by submitting a subsequently dated proxy by mail, telephone or the Internet in the manner described above under “How to Vote,” or by attending the Annual Meeting and voting in person virtually. Attendance at the Annual Meeting will not itself revoke an earlier submitted proxy. If you hold your shares in street name, you must follow the instructions provided by your broker, bank or nominee to revoke your voting instructions, or, if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares at the Annual Meeting, by participating in the Annual Meeting virtually.

Any change to your proxy or voting instructions that is provided by telephone or the Internet must be submitted prior to the Annual Meeting, except that if you are voting shares held in one of our 401(k) plans, the deadline is 11:59 p.m. ET on April 29, 2021.

Broker Voting

Brokers holding shares of record for their customers are entitled to vote on certain routine matters, such as the ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”), our independent registered public accounting firm (Proposal 5), without instructions from their customers. However, these brokers are generally not entitled to vote on non-routine matters, including the election of directors, matters relating to equity compensation plans or executive compensation, and certain corporate governance proposals, unless their customers submit voting instructions. If you hold your shares in street name through a broker and the broker does not receive your voting instructions, the broker will not be permitted to vote your shares in its discretion on any of the proposals at the Annual Meeting other than the proposal to ratify the appointment of PwC (Proposal 5). If you do not submit voting instructions and your broker votes your shares on Proposal 5 in its discretion, your shares will constitute “broker non-votes” on each of the other proposals.

 

 

 
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GENERAL MEETING AND VOTING INFORMATION

 

Quorum

The presence at the Annual Meeting, in person or by proxy, of holders of at least a majority of the outstanding shares of common stock entitled to vote is necessary to constitute a quorum to transact business at the Annual Meeting. Shares represented at the Annual Meeting are counted toward a quorum even if the holder of such shares abstains from voting. Shares held through brokers are not counted toward a quorum unless the broker has authority to vote, and votes such shares, upon at least one matter at the Annual Meeting.

Vote Required on Proposals

The following summary describes the vote required to approve each of the proposals at the Annual Meeting.

 

Voting Item

       Vote Standard  

Treatment of Abstentions and

Broker Non-Votes

Proposal 1.

  Election of Directors  

  Majority of votes cast

 

  Abstentions and broker non-votes not counted as votes cast

Proposal 2.

  Advisory Vote to Approve Named Executive Officer Compensation  

  Majority of shares represented at the Annual Meeting and entitled to vote on the proposal

 

  Abstentions will have the effect of votes “against”

  Broker non-votes will not be counted as shares entitled to vote on the proposal

Proposal 3.

  Approval of the Amendment and Restatement of the Company’s 2001 Employee Stock Purchase Plan for United States Employees (the “U.S. ESPP”) to Increase the Total Number of Shares of Common Stock Available for Issuance under the U.S. ESPP by 3,300,000 Shares

Proposal 4.

  Approval of the Amendment and Restatement of the Company’s 2001 Employee Stock Purchase Plan for International Employees (the “International ESPP”) to Increase the Total Number of Shares of Common Stock Available for Issuance under the International ESPP by 1,200,000 Shares

Proposal 5.

  Ratification of Appointment of Independent Registered Public Accounting Firm

Proposal 6.

  Advisory Vote on a Stockholder Proposal Regarding Action by Written Consent

Proposal 7.

  Advisory Vote on a Stockholder Proposal to Adopt a Policy to Include Non-Management Employees as Prospective Director Candidates

Proxy Solicitation Costs

Your proxy for the Annual Meeting is being solicited on behalf of our Board, and the Company will bear the cost of solicitation. At our expense, we will also request brokers and other custodians, nominees and fiduciaries to forward proxy soliciting materials to the beneficial owners of shares held of record by such persons. In addition, we have retained Georgeson Inc. (“Georgeson”) to assist with the distribution and solicitation of proxies for a fee of $20,000, plus expenses for these services. We also agreed to indemnify Georgeson against liabilities and expenses arising in connection with the proxy solicitation unless caused by Georgeson’s gross negligence or intentional misconduct. Georgeson and our officers, directors and regular employees may also solicit proxies by telephone, facsimile, e-mail and personal solicitation. We will not pay additional compensation to our officers, directors and regular employees for these activities.

 

 

 
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BOARD OF DIRECTORS MATTERS

PROPOSAL 1 – ELECTION OF DIRECTORS

 

     LOGO

  

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR.

General.    Our Board currently consists of nine directors forming one single class of directors.

The Board has nominated the eight individuals below for election to the Board at the Annual Meeting, to serve a one-year term until the next annual meeting of stockholders and until their respective successors are elected and qualified, or until their earlier resignation or removal. In anticipation of the retirement policy in our Corporate Governance Guidelines and in furtherance of our director succession plans, our Board did not nominate Dr. Link for reelection at the Annual Meeting. Dr. Link will retire from the Board immediately prior to the Annual Meeting, at which point the Board intends to decrease the size of the Board to eight directors. As a result, stockholders may not vote for more than eight nominees.

Each of the nominees standing for election is currently a director and, with the exception of Mr. LaViolette who was appointed to the Board on July 13, 2020 after last year’s annual meeting of stockholders, each nominee was previously elected to the Board by our stockholders. Each of the director nominees has consented to serve as a director if elected. However, if any nominee becomes unable or unwilling for good cause to serve before the election, the shares represented by proxy may be voted for a substitute nominee designated by the Board. No arrangement or understanding exists between any nominee and any other person or persons pursuant to which any nominee was or is to be selected as a director or nominee, and none of our directors has any family relationship with any other director or with any of our executive officers. More information regarding the Board, the committees of the Board, director independence, and related matters follows this Proposal 1.

Identification and Evaluation of Director Candidates.    Our Board carefully considers the skills, experiences, and diversity of its members as part of its robust director evaluation and Board refreshment process. Even though our Compensation Committee makes recommendations to the Board regarding candidates for election as directors of the Company, all members of the Board are very engaged in the process of, and discussions regarding, refreshment.

The Compensation Committee maintains formal criteria for selecting director nominees who will best serve the interests of the Company and its stockholders. These criteria are described in more detail below under “Board Criteria and Diversity Policy.” In addition to these requirements, the Compensation Committee also evaluates whether the candidate’s skills and experience are complementary to the existing Board members’ skills and experience, recognizing that the Board’s skills evolve in order to align with the Company’s strategy as well as emerging risks and opportunities. Some or all of the members of the Compensation Committee interview candidates that meet the criteria, and the Compensation Committee selects nominees that it believes best suit the needs of the Board. As a result of the Board’s thoughtful and deliberate process of refreshment, seven new directors have been added to the Board since 2014, including two new directors in 2020. This process has involved the participation of all directors, taking advantage of their broad range of expertise and experience as part of the decision-making process.

The Board previously retained Spencer Stuart to commence a search for qualified director candidates to be considered for possible appointment to the Board. Spencer Stuart identified potential candidates and provided the Board with background information and its assessment of the qualifications of potential candidates, which included Mr. LaViolette. The Board then followed the evaluation and screening process discussed above, including interviewing and then reviewing the candidates against the formal criteria for selecting director nominees, and then discussed the potential candidates. The Board then met, discussed and appointed Mr. LaViolette as a member of the Board and a member of the Compensation Committee in July 2020. Mr. LaViolette, as a director nominee, will stand for election by stockholders for the first time at the Annual Meeting.

The Compensation Committee will consider qualified candidates for director nominees suggested by the Company’s stockholders. Stockholders can suggest qualified candidates for director nominees by writing to the Corporate Secretary of the Company at One Edwards Way, Irvine, California 92614. Submissions should include the information about the director candidate and the stockholder making the submission that would otherwise be required by Article I, Section 2(f)

 

 

 
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PROPOSAL 1 — ELECTION OF DIRECTORS

 

of our Bylaws if the stockholder was nominating the individual for election to our Board. Submissions received that include such information, and provided that the recommended candidate meets the criteria described below, are forwarded to the Compensation Committee for further review and consideration. The Compensation Committee may also request additional information concerning the director candidate that it deems reasonably required to determine the eligibility and qualification of the director candidate to serve on our Board. Stockholders suggesting director candidates for consideration by our Board in connection with the next annual meeting of stockholders should provide their submission no earlier than January 4, 2022 and no later than February 3, 2022. The Compensation Committee does not intend to evaluate candidates proposed by stockholders any differently from other candidates.

Board Criteria and Diversity Policy.    Our Board, led by the Compensation Committee, is responsible for assessing, identifying, evaluating, and, ultimately, recommending to the stockholders, individuals qualified to be directors of the Company. We believe that diverse backgrounds and experiences strengthen Board performance and promote long-term stockholder value creation.

The Compensation Committee charter sets forth the membership criteria against which potential director candidates are evaluated. These written membership criteria state that the Company “seeks a Board with diversity of background among its members as determined by the Board in its business judgment, which may include diversity of experience, gender, race, ethnic or national origin, age or other factors as the Board determines appropriate.” In performing this responsibility, the Compensation Committee considers women and minority candidates, consistent with the membership criteria and the Company’s non-discrimination policies.

The Compensation Committee also seeks director candidates and nominees with the following qualities:

 

 

intelligence,

 

 

honesty,

 

 

perceptiveness,

 

 

good judgment,

 

 

maturity,

 

 

high ethics and standards,

 

 

integrity,

 

 

fairness,

 

 

responsibility,

 

 

a background that demonstrates an understanding of business and financial affairs and the complexities of a large, multifaceted, global business, governmental or educational organization, and

 

 

independent opinions and the willingness to state them in a constructive manner.

Of significant importance, the Compensation Committee and the Board seek individuals who are compatible and able to work well with other directors and executives. The satisfaction of these criteria is implemented and assessed through ongoing consideration of directors and potential nominees by the Compensation Committee and the Board, with a discussion of Board succession planning held at regularly scheduled meetings of the Board and certain specially called meetings. These discussions have included reviews of current director skills against an established skills matrix and consideration of each director’s retirement horizon, as well as the Board’s self-evaluation and peer evaluation processes, as described below under “Board Evaluations.” Based upon these activities and its review of the current composition of the Board, the Compensation Committee and the Board believe that the nominating criteria have been satisfied. As a result, the Board believes its members represent diverse backgrounds and experience that are aligned with our Company’s strategy, including financial, industrial, entrepreneurial, and international experience.

Board Evaluations.    The Board conducts an annual Board and Committee self-evaluation every July or August, soliciting each director’s views on, among other things, Board and Committee performance and effectiveness, size, composition, agenda, processes and schedule. In addition, the directors conduct annual peer evaluations focusing on each individual

 

 

 
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director’s personal interactions and skills. This is a robust process that culminates in one-on-one meetings during which peer feedback is provided to each director by the General Counsel. Our Board views the self- and peer-evaluation processes as an integral part of its commitment to cultivating excellence and best practices in its performance.

Board Retirement Policy.    As set forth in the Corporate Governance Guidelines, the Board has adopted a retirement policy that no director shall stand for election to the Board after reaching the age of 75, except in special circumstances specifically approved by the Board.

In light of the robust process described above, our Board believes our nominees’ skills, expertise, and experience and their mix of qualifications and attributes strengthen our Board’s independent leadership and effective oversight of management.

 

LOGO     LOGO     LOGO     LOGO   LOGO

 

Diverse Range of Qualifications and Skills Represented by Our Directors

Medical Technology

Industry Experience

 

Executive International

Experience

  Corporate Governance

Regulatory and

Compliance

  Senior Leadership   Operations Management
Innovation/Technology   Risk Management   Risk Oversight

Finance and Financial

Industry

  Human Capital Resources   Financial Reporting

Our Board strives to maintain a highly independent, balanced, and diverse group of directors that collectively possesses the expertise to ensure proper oversight.

 

 

 
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BOARD OF DIRECTOR NOMINEES

 

LOGO  

Michael A. Mussallem

 

Age:    68

Director Since:    2000

 

Edwards Board Role:

 

  Chairman of the Board

 

 

Select Professional Experience and Highlights:

 

  Edwards Lifesciences Corporation

 

–  Chairman and Chief Executive Officer, since 2000

 

  Baxter International Inc.

 

–  Group Vice President, Cardiovascular businesses, from 1994 to 2000

 

–  Group Vice President, Biopharmaceutical business, from 1998 to 2000

 

–  Held a variety of positions with increasing responsibility in engineering and product development, from 1979 to 1994

 

  Advanced Medical Technology Association (AdvaMed)

 

–  Member of the Board, since 2001

 

–  Member of the Executive Committee, since 2006

 

–  Chairman, from 2008 to 2010

 

  University of California, Irvine Foundation

 

–  Member of the Board of Trustees, since 2008

 

  Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California

 

–  Advisory Member of the Board, since 2014

 

  Rose-Hulman Institute of Technology

 

–  Member of the Board of Trustees, since 2017

 

 

  CEO Leadership Alliance

 

–  Vice Chairman, since 2017

 

  California Healthcare Institute

 

–  Member of the Board, from 1996 to 2014

 

–  Chairman, from 2004 to 2005

 

  Forum for Corporate Directors Hall of Fame

 

  University of California Irvine Medal Award

 

  The Phoenix Conference Lifetime Achievement Award

 

  WomenHeart Excellence in Corporate Leadership Wenger Award

 

Select Skills and Qualifications:

 

Mr. Mussallem has extensive knowledge of the medical technology industry in general, and of the people, operations, processes and products of the Company in particular, and he built an over 40-year career with the Company and its predecessor. In addition, in his roles with AdvaMed and other healthcare-related organizations, he has become a recognized leader in the medical technology industry, making important contributions to healthcare policy discussions in California, the United States and the key global markets that the Company serves. These experiences have established relationships, which are helpful in developing our Board’s strategic perspective, and enhanced his leadership of the Company and contributions to our Board.

 

LOGO  

Martha H. Marsh

 

Age:    72

Director Since:    2015

 

Edwards Board Roles:

 

  Lead Independent Director

 

  Compensation and Governance Committee Member

 

 

Other Current Public Company Directorships:

 

  AMN Healthcare Services, Inc., since 2010

 

–  Member of the Compensation Committee, since 2010

 

–  Member of the Corporate Governance Committees, from 2010 to 2019

 

–  Chair of the Compensation Committee, since 2012

 

Other Public Company Directorships Previously Held:

 

  Owens & Minor, Inc., from 2012 to 2019

 

  Thoratec Corporation, from 2014 to 2015

 

Select Professional Experience and Highlights:

 

  Stanford Hospital & Clinics

 

–  President and Chief Executive Officer, from 2002 until her retirement in 2010

 

  University of California Davis Medical Center

 

–  Chief Executive Officer, from 1999 to 2002

 

  University of California Davis Health System

 

–  Chief Operating Officer, from 1999 to 2002

 

  University of Pennsylvania Health System

 

–  Senior Vice President for Professional Services and Managed Care, from 1996 to 1998

 

–  Vice President for Managed Care, from 1994 to 1996

 

Select Skills and Qualifications:

 

Ms. Marsh’s experience of more than 30 years in an increasingly complex and evolving healthcare system as a president and chief executive officer, combined with years of board experience that includes corporate governance chairmanships, provide a unique perspective as our Board considers the execution of our patient-focused innovation strategy.

 

 

 
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LOGO  

Kieran T. Gallahue

 

Age:    57

Director Since:    2015

 

Edwards Board Role:

 

  Audit Committee Member

 

 

Other Current Public Company Directorships:

 

  Envista Holdings Corporation, since 2019

 

–  Chair of the Nominating and Governance Committee, since 2019

 

  Arena Pharmaceuticals, Inc., since 2018

 

–  Member of the Audit Committee, since 2018

 

  Intersect ENT, Inc., since 2015

 

–  Chairman of the Board, since 2020

 

–  Member of the Audit Committee, since 2015

 

Other Public Company Directorships Previously Held:

 

  CareFusion Corporation, from 2011 to 2015

 

  Volcano Corporation, from 2007 to 2015

 

  ResMed, Inc., from 2008 to 2011

 

Select Professional Experience and Highlights:

 

  CareFusion Corporation, a global medical technology company (acquired by Becton, Dickinson and Company in March 2015)

 

–  Chairman and Chief Executive Officer, from 2011 until his retirement in 2015

 

  ResMed, Inc.

 

–  Chief Executive Officer, from 2008 to 2011

 

–  President, from 2004 to 2011

 

–  President and Chief Operating Officer, Americas, from 2003 to 2004

 

  Nanogen, Inc.

 

–  Various positions, including President and Chief Financial Officer, from 1998 to 2002

 

  Prior to 1998, various marketing, sales, and financial positions within Instrumentation Laboratory, the Procter & Gamble Company, and the General Electric Company

 

  Served on the Board and Executive Committee, and as Chairman of the International Committee and Treasurer of Advanced Medical Technology Association (AdvaMed)

 

Select Skills and Qualifications:

 

Mr. Gallahue provides valuable insights and direction to our Board gained through extensive executive management experience at medical technology companies. His leadership roles on other public company boards and committees and prior experience as a public company chief financial officer also enable him to contribute valuable financial and accounting perspectives to our Board and Audit Committee.

 

LOGO  

Leslie S. Heisz

 

Age:    60

Director Since:    2016

 

Edwards Board Role:

 

  Chair of the Audit Committee

 

 

Other Current Public Company Directorships:

 

  Capital Group Private Client Services and certain American Funds, since 2019

 

–  Member of the Audit Committee, since 2019

 

–  Member of the Contracts Committee, since 2019

 

  Public Storage, Independent Trustee, since 2017

 

–  Member of the Audit Committee, from 2017 to 2020

 

–  Member of the Nominating/Corporate Governance Committee, since 2017

 

–  Member of the Long-Term Planning Committee, since 2020

 

Other Public Company Directorships Previously Held:

 

  Ingram Micro Inc., from 2007 to 2016

 

  Towers Watson & Co., from 2012 to 2016

 

  HCC Insurance Holdings, Inc., from 2010 to 2014

 

Select Professional Experience and Highlights:

 

  Kaiser Foundation Hospitals and Kaiser Foundation Health Plan, Inc., since 2015

 

–  Member of the Audit and Compliance Committee, since 2015

 

–  Member of the Finance Committee, since 2018

 

–  Member of the Governance and Community Benefit Committees, from 2015 to 2017

 

  Lazard Freres & Co., from 2003 to 2010

 

–  Served as Senior Advisor then Managing Director for six years

 

  Dresdner Kleinwort Wasserstein (and its predecessor Wasserstein Perella & Co.), Mergers & Acquisitions and Corporate Finance, from 1995 to 2002

 

–  Served as Director then Managing Director for six years

 

  Salomon Brothers Inc., from 1987 to 1995

 

–  Served as Associate then Vice President, Corporate Finance for four years

 

  PricewaterhouseCoopers LLP, from 1982 to 1986

 

–  Served as Staff Consultant then Senior Consultant for two years

 

  National Association of Corporate Directors’ Directorship 100 Award

 

Select Skills and Qualifications:

 

Ms. Heisz’s career in the banking industry, in-depth knowledge of capital markets, and previous public company board and audit committee experience enhance our Board’s ability to effectively oversee financial reporting, enterprise and operational risk management, as well as corporate finance, tax, treasury, and governance matters.

 

 

 
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LOGO  

Paul. A. LaViolette

 

Age:    63

Director since:    2020

 

Edwards Board Role:

 

  Compensation and Governance Committee Member

 

 

Other Current Public Company Directorships:

 

  Misonix, Inc., since 2019

 

–  Chairman of the Board, since 2019

 

  TransEnterix, Inc., since 2014

 

–  Chairman of the Board, since 2014

 

Other Public Company Directorships Previously Held:

 

  Thoratec, from 2009 to 2015

 

Select Professional Experience and Highlights:

 

  SV Health Investors LLC, a specialist healthcare fund management company, since 2009

 

–  Managing Partner and Chief Operating Officer, since 2014

 

  Advanced Medical Technology Association (AdvaMed), from 1998 to 2008

 

  Boston Scientific Corporation, from 1994 to 2008

 

–  Various executive positions, including serving as Chief Operating Officer, from 2004 to 2008

 

  C.R. Bard Inc., from 1984 to 1993

 

–  Various marketing and general management positions

 

  Kendall, Inc., from 1980 to 1984

 

–  Various marketing positions

 

  Medical Device Manufacturers Association

 

–  Chairman of the Board, from 2016 to 2019

 

  Innovation Advisory Board for the Mass General Brigham Health System

 

–  Chairman of the Board, since 2015

 

Select Skills and Qualifications:

 

Mr. LaViolette brings significant executive experience in global medical technology, and his experience working with large, global organizations and start-ups provides him with a unique perspective on strategy and innovation. In addition, Mr. LaViolette’s service on boards, including numerous chairmanships, has enabled him to be an immediate contributor, offering valuable insight to our Board and the Compensation and Governance Committee.

 

LOGO  

Steven R. Loranger

 

Age:    69

Director Since:    2016

 

Edwards Board Role:

 

  Audit Committee Member

 

 

Other Current Public Company Directorships:

 

  Xylem Inc., since 2011

 

–  Member of the Compensation and Personnel Committee, since 2018

 

–  Chair of the Finance, Innovation, and Technology Committee, since 2017

 

–  Member of the Audit Committee, from 2011 to 2018

 

–  Member of the Nominating and Governance Committee, from 2011 to 2017

 

Other Public Company Directorships Previously Held:

 

  FedEx Corporation, from 2006 to 2014

 

  ITT Exelis, Inc., from 2011 to 2013

 

Select Professional Experience and Highlights:

 

  Xylem Inc., a global water technology provider

 

–  Interim Chief Executive Officer and President, from 2013 until his retirement in 2014

 

  ITT Corporation

 

–  Chairman, President and Chief Executive Officer, from 2004 to 2011

 

  Textron, Inc.

 

–  Executive Vice President and Chief Operating Officer, from 2002 to 2004

 

  Honeywell International Inc. and its predecessor company, AlliedSignal, Inc.

 

–  Various executive positions, including serving as President and Chief Executive Officer of its Engines, Systems and Services businesses, from 1981 to 2002

 

  Senior Advisor to the Chief Executive Officer of FlightSafety International, from 2014 to 2020, and serves on the Boards of the Smithsonian National Air and Space Museum and the Congressional Medal of Honor Foundation (Emeritus)

 

Select Skills and Qualifications:

 

Mr. Loranger is a seasoned executive with global manufacturing and operational experience in highly regulated, high-tech industries. His decades of experience leading large, global innovation-focused corporations with intensive data privacy components is particularly valuable to our Board.

 

 

 
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LOGO  

Ramona Sequeira

 

Age:    55

Director Since:    2020

 

Edwards Board Role:

 

  Audit Committee Member

 

 

Select Professional Experience and Highlights:

 

  Takeda Pharmaceuticals USA, Inc., a biopharmaceutical company, since 2015

 

–  President of the U.S. Business Unit and Global Portfolio Commercialization, since 2020

 

–  President, from 2015 to 2020

 

–  Business Review Committee and Pipeline Review Committee, since 2015

 

–  Commercialization and Launch Committee, since 2020

 

  Pharmaceutical Research and Manufacturers of America (PhRMA), since 2015

 

–  Member of the Board, since 2015

 

–  Vice Chair, since 2020

 

–  Treasurer, since 2019

 

  Eli Lilly & Company

 

–  Vice President – Lilly USA, from 2013 to 2015

 

–  General Manager, UK/Northern Europe, from 2010 to 2012

 

–  Vice President, Sales – Lilly Canada, from 2005 to 2009

 

–  Associate Director, Neuroscience Marketing, from 2003 to 2005

 

  Member of the Board of Trustees for Lake Forest Academy, since 2017

 

  Member of the Board of Trustees for Harvey Mudd College, since 2020

 

  Member of the Board of Matter, from 2017 to 2020

 

  Member of the Board of Chicago Executives Club, from 2017 to 2019

 

Select Skills and Qualifications:

 

Ms. Sequeira has over 25 years of experience in the pharmaceutical industry through her work with Takeda and, prior to that, with Eli Lilly. She is a seasoned executive, currently leading the multi-billion dollar U.S. business for Takeda. She has led businesses in Canada, Europe and the U.S. Her experience in leadership roles in multiple markets, across cultures and within different healthcare systems where she has successfully launched products, transformed businesses, and delivered sustainable growth is particularly valuable for our global business. Also, Ms. Sequeira’s industry experience with pharmaceutical innovation and patient access aligns with the execution of our patient-focused innovation strategy.

 

LOGO  

Nicholas J. Valeriani

 

Age:    64

Director Since:    2014

 

Edwards Board Role:

 

  Future Chair of Compensation and Governance Committee

 

 

Other Current Public Company Directorships:

 

  Surgalign Holdings, Inc. (formerly known as RTI Surgical Holdings, Inc.)

 

–  Member of the Compensation Committee, since 2016

 

–  Member of the Nominating and Governance Committee, since 2019

 

–  Member of the Sciences and Technology Committee, from 2016 to 2020

 

Other Public Company Directorships Previously Held:

 

  Roka Bioscience, Inc., from 2015 to January 2018

 

Select Professional Experience and Highlights:

 

  Gary and Mary West Health Institute, an independent, nonprofit medical research organization that works to create new, more effective ways of delivering care at lower costs

 

–  Chief Executive Officer, from 2012 until his retirement in 2015

 

  Johnson & Johnson

 

–  Company Group Chairman, Ortho Clinical Diagnostics, from 2009 to 2012

 

–  Member of the Executive Committee

 

–  Vice President, Office of Strategy and Growth, from 2007 to 2009

 

–  Served 34 years in key positions, including Worldwide Chairman, Medical Devices and Diagnostics, and Corporate Vice President, Human Resources

 

  Member of the Boards of the Gary and Mary West Health Institute and the Gary and Mary West Health Policy Center, since 2012

 

  Member of the Board of AgNovos Healthcare, LLC, since 2016

 

  Member of the Board of SPR Therapeutics, Inc., since 2018

 

  Served on the Boards of the Robert Wood Johnson University Hospital, from 2008 to 2016, and the Center for Medical Interoperability, from 2013 to 2015

 

Select Skills and Qualifications:

 

Mr. Valeriani’s 40 years of medical technology industry experience in a large and complex global company and experience directing strategy inform his contribution to the development of our innovation strategy and assessment of future business opportunities. In addition, his background in human resources enables him to contribute valuable insights to the Compensation and Governance Committee.

 

     LOGO

  

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR.

 

 

 
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CORPORATE GOVERNANCE POLICIES AND PRACTICES

The Company and the Board take seriously our commitment to good corporate governance. We believe the regular review of our corporate governance practices with current issues and trends in mind, the discussions we hold with our stockholders and advisers, and the practice enhancements we consider as a result, help us to compete more effectively, sustain our successes and build long-term value for our stockholders.

Active Stockholder Engagement Program.    The Board and management are committed to engaging with Edwards’ stockholders and incorporating feedback into their decision-making processes. Throughout the year our CEO, CFO and Vice President of Investor Relations meet, by phone and face-to-face, with current and prospective stockholders to discuss Edwards’ strategy, business and financial results. Our CFO, Corporate Secretary, and Vice President of Investor Relations, together with other members of management and our Lead Independent Director, engage stockholders to solicit their views and feedback on, among other things, corporate governance, compensation, sustainability, corporate social responsibility, human capital management, succession planning, and other related matters and to discuss the issues that matter most to our stockholders. Stockholder feedback is shared with the Board and its committees, which enhances our corporate governance practices, facilitates future dialogue between stockholders and the Board and provides additional transparency to our stockholders. Since the 2020 annual meeting of stockholders, our CFO, Corporate Secretary, and Vice President of Investor Relations contacted our top stockholders representing approximately 55% of our outstanding shares and engaged with stockholders representing approximately 29% of our outstanding shares. In this engagement, we received feedback from stockholders on a range of topics including corporate governance, executive compensation, and corporate social responsibility.

Over time, we have amended our Charter and Bylaws to adopt various stockholder rights and to align our corporate governance practices with our stockholders’ interests.

 

Topic   Action Taken in Response to Stockholder Feedback

Lead Independent

Director

Responsibilities

 

  Expanded the role of the Presiding Director position, and, in light of the additional responsibilities, designated the position, Lead Independent Director

Proxy Access  

  Amended our Bylaws to provide for proxy access at 3% and 3-year ownership and holding period duration thresholds

Right to Call

Special Meetings

 

  Amended our Bylaws to permit stockholders to call a special meeting

 

  In response to a non-binding stockholder proposal requesting the right to act by written consent, engaged with stockholders representing over 50% of shares then outstanding to better understand investor views and, in response to feedback received, reduced the minimum ownership threshold to call a special meeting from 25% to 15%

Declassified Board  

  Amended our Charter to eliminate the classified board

No Supermajority

Voting

 

  Amended our Charter to eliminate supermajority voting

Poison Pill  

  Did not renew poison pill when it expired in March 2010

Majority Voting

in Director

Elections

 

  Amended our Bylaws to provide for majority voting in uncontested director elections

Director Independence.    Under the corporate governance rules of the New York Stock Exchange (“NYSE”), a majority of the members of the Board must satisfy the NYSE criteria for independence. No director qualifies as independent unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder, or officer of an organization that has a relationship with the Company). After review of information

 

 

 
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supplied in the director questionnaires which are provided on an annual basis, the Board has determined that each of Mr. Gallahue, Ms. Heisz, Mr. LaViolette, Mr. Loranger, Ms. Marsh, Ms. Sequeira and Mr. Valeriani, the nominees for election at the Annual Meeting, and Dr. Link is independent under the NYSE rules. In addition, Mr. Von Schack, who retired from the Board immediately prior to our 2020 annual meeting of stockholders, was also independent under the NYSE rules during the period of his service on the Board in 2020. Mr. Mussallem is not independent as a result of his position as our Chief Executive Officer.

Corporate Governance Guidelines.    Our Board has adopted a set of Corporate Governance Guidelines (the “Governance Guidelines”) to assist the Board and its committees in performing their duties and serving the best interests of the Company and its stockholders. The Governance Guidelines cover topics including, but not limited to, director selection and qualification, director responsibilities and operation of the Board, director access to management and independent advisors, director compensation, director orientation and continuing education, succession planning, recoupment of performance-based compensation and the annual evaluations of the Board. The Governance Guidelines are available on our website at www.edwards.com under “Investors—Corporate Governance.”

Board Leadership Structure.    The independent directors evaluate the Board’s leadership structure on a regular basis to ensure that the approach continues to provide independent oversight of the Company and serves the best interests of stockholders.

Our Chief Executive Officer also serves as the Chairman of the Board. Our Board believes this leadership structure has been and continues to be effective for our Company. Under this model, the Company has experienced strong financial and operational growth over its 20 years as a public company, most recently providing a cumulative TSR of 247% to stockholders from 2015 to 2020. Our Chairman and Chief Executive Officer is seen by hospitals, physicians, business partners, investors and others as providing strong leadership for the Company in the communities we serve and in our industry. Our Board believes that our current leadership structure is effective because it fosters a constructive and cooperative relationship between the independent directors and management that allows our Board to most effectively carry out its oversight duties. Our Board also believes that, given its size and constructive working relationships, changing the existing structure would not improve the Board’s performance. The directors bring a broad range of leadership experience to the boardroom and regularly contribute to the thoughtful discussion involved in overseeing the affairs of the Company. All directors are well-engaged in their responsibilities, express their views, and are open to the opinions expressed by other directors.

Our Board believes that it is important to have an active, engaged and independent Board. Our Governance Guidelines provide that a substantial majority of our Board and all members of our Audit Committee and Compensation Committee will be independent under the applicable rules of the NYSE. All members of our Board, other than the Chairman, are independent. In order to assure that the independent directors are not inappropriately influenced by management, the non-management members of the Board meet in executive session, without management, in conjunction with each regularly scheduled meeting of the Board and each committee, and otherwise as deemed necessary. These executive sessions allow directors to speak candidly on any matter of interest, without the CEO or other members of management present.

Lead Independent Director’s Role and Responsibilities.    Our Governance Guidelines provide that if our Chairman is not independent, our independent directors shall annually select an independent director to serve as Lead Independent Director (formerly referred to as our presiding director). Each year, the Lead Independent Director’s performance is assessed. As part of this review, the Compensation Committee evaluates the criteria for nominees for the Lead Independent Director role and assesses any needed changes. In selecting the Lead Independent Director, the Compensation Committee considers relevant leadership, operational and corporate governance experience, relationships with other Board members and external commitments. In addition, the Lead Independent Director is expected to have a thorough understanding of the Company’s business operations and history.

Ms. Marsh is currently designated as the Lead Independent Director and, as such, she presides at the executive sessions of the Board.

In addition, in discharging responsibilities under our Governance Guidelines, the Lead Independent Director:

 

 

reviews and approves Board meeting agendas and relevant information provided to the Board;

 

 

 
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reviews and approves Board meeting schedules to assure there is sufficient time for discussion of all agenda items;

 

 

serves as a liaison between the independent members of the Board and the Chairman and other members of management;

 

 

provides feedback to management from the Board’s executive sessions;

 

 

coordinates the activities of the independent directors, including calling meetings of the independent directors as necessary and appropriate to address their responsibilities;

 

 

provides advice and counsel to the Chairman; and

 

 

consults and directly communicates with major stockholders, as appropriate, including participation in the Company’s stockholder outreach efforts.

Board Role in Risk Oversight.    Effective risk oversight is an important priority of the Board. Its role includes understanding the critical risks in the business, allocating the responsibilities for risk oversight among the full Board and its committees, evaluating the Company’s risk management processes and facilitating open communication between management and the directors.

While the Board oversees risk management, the Company’s management is charged with managing risk and bringing to the Board’s attention emerging risks as well as the most material risks. We have internal processes designed to facilitate the identification and management of risks and assure regular communication with the Board and the Audit Committee. At least once per quarter, the Company’s management provides the full Board with an analysis of the Company’s most significant risks. The Board implements its risk oversight function both as a whole and through delegation to its committees. Both committees play significant roles in carrying out the risk oversight function.

The Audit Committee oversees risks related to the financial statements and the financial reporting process, including internal control over financial reporting and accounting matters. It also regularly reviews Edwards’ risk management processes and enterprise-wide risk management, focusing on manufacturing processes and supplier quality, product development processes and systems, continuity of our operations and regulatory compliance. The Audit Committee also regularly reviews treasury risks (insurance, credit, debt, currency risk and hedging programs), legal and compliance risks, and other risk management functions; senior leaders of the Company present at least twice a year, and sometimes more frequently as applicable, on information technology infrastructure and cybersecurity and information security risks. In addition, the Audit Committee considers risks to the Company’s reputation and has established procedures related to the reporting of ethical and compliance issues, including maintenance of a confidential, anonymous reporting hotline. The Audit Committee periodically receives reports on, and discusses, the risk management and escalation process, and reviews significant risks and exposures identified by management, the internal auditors, or the independent public accountants, including the steps management has taken to monitor and control such risks and exposures.

The Compensation Committee considers risks related to succession planning, human capital management, including diversity, inclusion and belonging, the attraction and retention of talent, and risks relating to the design of compensation programs and arrangements. As part of its normal review of these risks, the Compensation Committee considers the Company’s compensation policies and practices to determine if their structure or implementation provides incentives to employees to take unnecessary or inappropriate risks that could have a material adverse effect on the Company. The Compensation Committee also reviews compensation and benefits plans affecting employees, in addition to those applicable to executive officers. The Compensation Committee has determined that the implementation and structure of the compensation policies and practices do not encourage unnecessary and inappropriate risks that could have a material adverse effect on the Company. The Compensation Committee further determined that the Company’s compensation programs and practices appropriately encourage employees to maintain a strong balance sheet, improve operating performance and create value for stockholders, without encouraging unreasonable or unrestricted risks. In making these determinations, the Compensation Committee considered the views of the Company’s compensation staff, legal counsel and internal audit team, as well as its Compensation Consultant (as defined below). In addition, the Compensation Committee oversees risks associated with the Company’s political activities and expenditures, as well as risks related to corporate social responsibility principles, programs and practices, including environmental and social affairs. Moreover, the Compensation Committee oversees the Company’s program for engaging with stockholders on corporate governance and other matters relating to meetings of the Company’s stockholders.

 

 

 
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The full Board considers strategic risks and opportunities and regularly receives reports from the committees regarding risk oversight in their areas of responsibility. Our Board believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks and, therefore, do not materially affect its choice of leadership structure as described under “Board Leadership Structure” above.

Meetings of the Board.    During the year ended December 31, 2020, the Board held 12 meetings. Each director attended at least 75% of the total of all meetings of the Board and any applicable committee held during the period of his or her tenure in 2020.

The Company encourages, but does not require, its directors to attend annual meetings of stockholders. All of our then-current directors attended the 2020 annual meeting.

Board Composition.    In connection with the Annual Meeting, our Board expects to fix the number of directors at eight.

The Board regularly assesses its composition, including in connection with the Board evaluation process, as further described above in “Identification and Evaluation of Director Candidates.” The ages of our director nominees range from 55 to 72, with an average age of approximately 64. We believe in a balanced approach to director tenure that allows the Board to benefit from a mix of newer directors who bring fresh perspectives and seasoned directors who bring continuity and a deep understanding of our business. For our nominees, lengths of service on our Board range from 0 years to approximately 20 years, with an average tenure of approximately 7 years. In addition, 37.5% of our nominees are female, and 25% of our nominees are ethnically diverse. None of the nominees currently serve on the boards of directors of more than three other public companies.

Committees of the Board.    To facilitate independent director review, and to make the most effective use of the directors’ time and capabilities, we have established the Audit Committee and the Compensation and Governance Committee. The Board is permitted to establish other committees from time to time as it deems appropriate.

Audit Committee

 

Audit Committee Membership
Leslie S. Heisz, Chair
Kieran T. Gallahue
Steven R. Loranger
Ramona Sequeira

Key Highlights.

 

 

Each member is “independent,” “financially literate,” and an “audit committee financial expert” under applicable rules of the NYSE and the SEC.

 

 

The Audit Committee held nine meetings in 2020.

Purpose.    The Audit Committee assists the Board in fulfilling its oversight responsibilities relating to, among other things:

 

 

the integrity of the Company’s financial statements;

 

 

compliance with legal and regulatory requirements;

 

 

monitoring the independent registered public accounting firm’s qualifications, performance and independence;

 

 

the performance of the Company’s internal audit function;

 

 

the Company’s investment and hedging activities; and

 

 

enterprise-wide risks and management practices related to those risks, including, but not limited to, manufacturing processes and supplier quality, product development processes and systems, continuity of our operations and information technology infrastructure and cybersecurity and information security risks.

 

 

 
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The Company has a full-time internal audit function that reports to the Audit Committee and the CFO, and is responsible for, among other things, objectively reviewing and evaluating the adequacy, effectiveness and quality of the Company’s system of internal controls. The Company also has a Chief Responsibility Officer who manages the Company’s ethics and compliance programs and reports to the Audit Committee and the CEO.

The Audit Committee appoints, retains, terminates, determines compensation for, and oversees the independent registered public accounting firm, reviews the scope of the audit by the independent registered public accounting firm and inquiries into the effectiveness of the Company’s accounting and internal control functions. The Audit Committee also assists the Board in establishing and monitoring ethics and compliance with the Global Business Practice Standards of the Company. The Company’s Global Business Practice Standards are posted on our website at www.edwards.com under “About Us—Corporate Responsibility.” The Audit Committee also reviews, with management and the independent registered public accounting firm, the Company’s policies and procedures with respect to risk assessment and risk management and reviews and approves or ratifies any related party transactions, as described under “Other Matters and Business—Related Party Transactions” below.

The full responsibilities of the Audit Committee are included in its written charter, which is posted on our website at www.edwards.com under “Investors—Corporate Governance.”

Compensation and Governance Committee

 

Compensation and Governance
Committee Membership
William J. Link, Ph.D., Chair*
Paul A. LaViolette
Martha H. Marsh
Nicholas J. Valeriani

*  Not a director nominee at the Annual Meeting. Mr. Valeriani will succeed Dr. Link as Compensation and Governance Committee Chair.

Key Highlights.

 

 

Each member is “independent” under the rules of the NYSE and a “nonemployee director” under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

 

The Compensation Committee held five meetings in 2020.

Purpose.    The Compensation Committee’s responsibilities include, among other things:

 

 

determining the compensation of executive officers and recommending to the Board the compensation of outside directors;

 

 

overseeing management of succession planning, attraction and retention of talent, and risks related to the design of executive compensation programs and arrangements;

 

 

developing and recommending to the Board corporate governance guidelines for the Company;

 

 

identifying, evaluating and recommending individuals qualified to be directors to the Board;

 

 

overseeing the evaluation of the Board and management;

 

 

overseeing the Company’s principles, programs and practices on sustainability topics, including environmental and social affairs; and

 

 

overseeing the Company’s program for engaging with stockholders on corporate governance and other matters relating to meetings of the Company’s stockholders.

In making its decisions regarding compensation of the NEOs (other than the CEO), the Compensation Committee considers recommendations provided by our CEO and Corporate Vice President of Human Resources, as further described

 

 

 
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under “Compensation Discussion and Analysis—Compensation Process” below. The Compensation Committee has also delegated to (i) the CEO the authority to grant stock options or other equity awards to eligible employees who are not executive officers, and (ii) the Administrative and Investment Committee the administrative and fiduciary functions related to the Company’s employee benefit plans, including the review of funding and investment of plan funds, and the authority to approve amendment to the plans, appoint trustees and enter into trust agreements.

In 2020, the Compensation Committee retained the services of Semler Brossy Consulting Group as its independent compensation consultant (“Compensation Consultant”). See “Compensation Discussion and Analysis—Independent Compensation Consultant” for additional information regarding the Compensation Committee’s engagement of its Compensation Consultant.

The Compensation Committee also advises the Board on Board committee structure and membership and corporate governance matters. It evaluates the governance environment, receives feedback from management interactions with stockholders, and reviews and recommends to the Board corporate governance enhancements that are in the best interest of the Company and its stockholders.

The Compensation Committee also oversees Edwards’ political activities, including the periodic review of its policy on political expenditures and its payments that may be used for political purposes, and receives reports regarding compliance with the policy. In addition, the Compensation Committee reviews and oversees Edwards’ principles, programs and practices on corporate social responsibility topics, including environmental and social affairs, as well as the Company’s public reporting on these topics. Reports concerning political activities and sustainability efforts and metrics are presented periodically to the Compensation Committee.

The full responsibilities of the Compensation Committee are included in its written charter, which is posted on our website at www.edwards.com under “Investors—Corporate Governance.”

Succession Planning.    Our Board is actively engaged and involved in talent management to identify and cultivate our future leaders. At every regularly scheduled Board meeting, directors discuss the Company’s leadership and talent development. Our directors also have an opportunity to meet with Company leaders, including executive officers, business group leaders and functional leaders through regular reports to the Board from senior management, technology showcases and meals with management. In addition, Board members have freedom of access to all employees, and have made site visits to meet local management.

We maintain a robust mid-year and annual performance review process for our employees, as well as a leadership development program that cultivates leadership principles in our future leaders. Management develops leadership at lower levels of the organization by identifying key talent and exposing them to the skills and capabilities that will allow these individuals to become future leaders.

Communications with the Board.    Stockholders and other interested parties who desire to contact any member of the Board, including the Lead Independent Director or the non-management members of the Board as a group, may write to any member or members of the Board at: Board of Directors, c/o Corporate Secretary, Edwards Lifesciences Corporation, One Edwards Way, Irvine, California 92614. Communications will be received by the Corporate Secretary of the Company and, after initial review and determination of the nature and appropriateness of such communications, will be distributed to the appropriate members of the Board depending on the facts and circumstances described in the communication.

 

 

 
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CORPORATE SOCIAL RESPONSIBILITY

At Edwards, our commitment to corporate responsibility and sustainability is foundational, and expressed in the words of our mission statement, known as our Credo: “Through our actions, we will become trusted partners with customers, colleagues and patients – creating a community unified in its mission to improve the quality of life around the world. Our results will benefit customers, patients, employees and shareholders.” Our Compensation and Governance Committee of the Board (the “Compensation Committee”) maintains formal oversight responsibilities for our Sustainability program, with regular discussions at meetings of the full Board.

 

Board Oversight Over Environmental, Sustainability, and Corporate Social Responsibility

 

Our Board has designed robust internal processes to oversee our

Company’s sustainability principles, strategies, and initiatives

 

LOGO

Edwards’ Sustainability Report discusses our programs and practices designed to promote ethical business practices, good corporate governance, and the well-being and health of our environment, employees, and the communities in which we live and work. We continue to align our sustainability efforts with our aspirations and patient-focused innovation strategy. In 2020, we integrated sustainability factors into our strategic planning process to ensure future sustainability goals continue to be closely aligned with our business strategy and aspirations. We conducted a comprehensive materiality assessment refresh through engagement with internal and external stakeholders that helped to identify the sustainability topics that matter most for the Company. Our team continues to assess and report progress on our goals annually.

We received numerous recognitions for our sustainability and environmental responsibilities practices in 2020, some of which are highlighted below:

 

 

2020 marks the inaugural appearance of Edwards on Barron’s third annual list of the 100 Most Sustainable Companies in the United States. Significant performance indicators included the designation of funds for community support, the hiring of minority employees, and improvements in workplace inclusivity.

 

 

For the fourth consecutive year, named one of America’s Most JUST Companies from Forbes and JUST Capital—United States largest publicly traded companies are ranked on the issues Americans care about most.

 

 

 
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Named as one of the Management Top 250 by the Wall Street Journal in partnership with the Drucker Institute—listed #29 out of 886 companies ranked according to their overall effectiveness of “doing the right things well.” Edwards achieved high marks in all five dimensions of corporate performance: Customer Satisfaction, Employee Engagement and Development, Innovation, Social Responsibility and Financial Strength.

 

 

In 2020, once again recognized by the Investor’s Business Daily 50 Best ESG Companies for superior Environmental, Social and Governance (ESG) ratings in addition to strong fundamental and technical performance.

 

 

Constituent of the DJSI ESG World and North America Indices—the Dow Jones Sustainability World index tracks the performance of the top 10% of the 2,500 largest companies in the S&P Global Broad Market Index that lead the field in sustainability.

More details on our sustainability efforts can be found in our Sustainability Report posted on our website at www.edwards.com under “About Us—Corporate Responsibility.” A complete list of recognitions can be found under “About Us—Awards & Recognitions.”

 

 

 
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DIRECTOR COMPENSATION

Director Compensation Table – 2020

The following table presents the 2020 compensation paid or awarded to each individual who served as a nonemployee director at any time during 2020. The compensation paid to Mr. Mussallem is presented in the “Executive Compensation” disclosures beginning on page 45. Mr. Mussallem does not receive additional compensation for his service as a director.

 

Name

   Fees Earned or
Paid in Cash
($)(1)
   Stock
Awards
($)(2)
   Option
Awards
($)(2)
  

Total

($)

Mr. Gallahue

     $ 80,155      $ 239,842             $ 319,997

Ms. Heisz

       93,932        239,842               333,774

Mr. LaViolette

       62,500                      62,500

Dr. Link

       93,155        239,842               332,997

Mr. Loranger

       71,109        239,842               310,951

Ms. Marsh

       110,000        239,842               349,842

Ms. Sequeira

       80,000        239,842               319,842

Mr. von Schack*

                           

Mr. Valeriani

       75,000        239,842               314,842

 

*

Mr. von Schack retired from the Board in connection with our 2020 annual meeting of stockholders which was held on May 7, 2020.

 

(1)

Consists of annual retainer fees and meeting fees for service as a director and a member of Board committees. Please see the section “Retainers and Fees” below. Director fees that would have been paid in cash, but, at the election of the director, converted to restricted stock or option awards are included in this “Fees Earned or Paid in Cash” column.

 

(2)

Amounts disclosed in these columns reflect the aggregate grant-date fair value of the restricted stock award or option award, as applicable, granted to our nonemployee directors during 2020 (excluding restricted stock and option awarded granted in lieu of cash and as to which the corresponding retainer fees have been included in the “Fees Earned or Paid in Cash” column), as determined under the principles used to calculate the grant-date fair value of equity awards for purposes of our financial statements in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. For a discussion of the assumptions and methodologies used to value the awards reported in these columns, please see the discussion of restricted stock awards and option awards contained in Note 14 of the “Notes to Consolidated Financial Statements” in the 2020 Annual Report.

 

 

Please see the information under “2020 Nonemployee Directors Stock Incentive Program” and “Outstanding Nonemployee Director Equity Awards” below for the grant-date fair value of each restricted stock and option award granted to our nonemployee directors in 2020 as well as the restricted stock and option awards held by each nonemployee director at the end of 2020.

Retainers and Fees.    Nonemployee directors received the following retainers and fees in 2020:

 

Nonemployee Director Retainers and Fees

    

Annual Retainers

    

Nonemployee Director

     $ 75,000

Lead Independent Director

     $ 35,000

Audit Committee Chair

     $ 25,000

Audit Committee Member

     $ 5,000

Additional Meeting Fees if meetings exceed the following:

     $ 1,500 *

– 10 meetings for the Board

    

– 10 meetings for the Audit Committee

    

– 7 meetings for the Compensation and Governance Committee

    

Compensation and Governance Committee Chair

     $ 18,000

 

*

Per meeting; meeting fees cannot be deferred.

 

 

 
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A director may elect to receive stock options or restricted shares in lieu of the annual cash retainers as described in “Deferral Election Program” below. Meeting fees, however, cannot be deferred. Retainers are paid in advance. Directors beginning service during the year receive a prorated amount of the retainer.

2020 Nonemployee Directors Stock Incentive Program.    In order to align the nonemployee directors’ interests more closely with the interests of our stockholders, we maintain our 2020 Nonemployee Directors Stock Incentive Program (the “Nonemployee Directors Program”), pursuant to which each nonemployee director receives an annual grant of options for up to 120,000 shares of our common stock, or Restricted Stock Units (“RSU”) for up to 48,000 shares of our common stock, or a combination of options and RSUs with a maximum grant-date value as of 2019 of approximately $240,000. The Compensation Committee recommends to the Board for its approval the actual amount and type of award for each year.

The annual equity award is granted on the day after our annual meeting. The option exercise price is the closing price of our common stock on the grant date. Options are valued as of the grant date using the Black-Scholes valuation model, and the RSUs are valued at the fair market value of the common stock on the grant date. The Board has discretion to determine whether an award will be granted to a director who joins the Board mid-year and to determine the terms and conditions of any such award.

On May 8, 2020, each nonemployee director who was serving on that date received 3,303 RSUs as an annual grant (the grant-date fair value of such award was $239,842, determined as noted in footnote 2 to the Director Compensation Table above).

These RSUs vest 100% upon the earlier of the one-year anniversary of the grant date and the date of the next regular annual meeting of stockholders at which members of the Board are to be elected, subject to earlier vesting in the event of the nonemployee director’s death or disability or in connection with a change of control of Edwards. Once the RSUs vest, the shares must be held until the nonemployee director no longer serves on the Board.

Prior to 2017, upon a nonemployee director’s initial election to the Board, the new nonemployee director received a grant of the numbers of RSUs or stock options determined by dividing $200,000 by the fair value of a share on the grant date for RSUs, or the fair value of an option on the grant date, estimated using the Black-Scholes valuation model, and in either case rounding up to the nearest whole share, provided that in no event shall such number exceed sixty thousand (60,000) shares. Initial stock option awards vest one-third each year over three years from the grant date, subject to the nonemployee director’s continued service on the Board, and subject to earlier vesting in the event of the nonemployee director’s death or disability. The exercise price of an option is the closing price of our common stock on the date of the award. With respect to initial stock option awards granted after May 14, 2013, the shares of our common stock issued upon exercise of the options must be held until the nonemployee director no longer serves on the Board.

Deferral Election Program.    In lieu of all or part of a nonemployee director’s annual cash retainer, the director may elect to receive either stock options or restricted stock awards under the Nonemployee Directors Program. If a director makes a timely election to receive stock options, such options are granted on the date the cash retainer would otherwise have been paid, and the number of shares subject to the option is equal to four times the number of shares that could have been purchased on the grant date with the amount of the director’s cash retainer that was foregone to receive the award. The options are exercisable and vested in full on the grant date, and the exercise price per share is the fair market value of the common stock on the grant date. If a director makes a timely election to receive a restricted share award, the shares are granted on the date the cash retainer would otherwise have been paid, and the number of shares granted is equal to the portion of the cash retainer to be paid in the form of restricted shares divided by the fair market value per share of the common stock on the grant date. The restrictions on the restricted shares lapse upon the earlier of the one-year anniversary of the grant date and the date of the next regular annual meeting of stockholders at which members of the Board are to be elected, subject to earlier vesting in the event of the nonemployee director’s death or disability or in connection with a change in control of Edwards.

On May 8, 2020, Ms. Heisz and Mr. Loranger received 3,099 and 4,134 stock option shares, respectively, in lieu of their annual cash retainer (the grant-date fair value of each such award was $50,182 and $66,942, respectively, determined as noted in footnote 2 to the Director Compensation Table above). On the same date, each of Mr. Gallahue and Dr. Link received a grant of 1,035 restricted shares in lieu of his annual cash retainer (the grant-date fair value of each such award was $75,155, determined as noted in footnote 2 to the Director Compensation Table above).

 

 

 
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Directors’ Stock Ownership Guidelines and Holding Requirement.    Under the stock ownership guidelines, each nonemployee director is expected to own shares of our common stock equal to $500,000. This amount equals almost six times the annual cash retainer for each nonemployee director. Stock that is counted toward meeting the guideline includes any shares owned outright, restricted stock, RSUs and 25% of the value of vested, in-the-money stock options. Upon vesting or exercise of equity awarded after 2011, each director is required to hold the underlying common stock (net of any shares sold to cover the exercise price and applicable taxes) until the director’s Board service ends. The holding requirement does not apply to equity awards directors elect to receive in lieu of their cash retainers.

Expense Reimbursement Policy.    Directors are reimbursed for travel expenses related to their attendance at Board and committee meetings as well as for the costs of attending director continuing education programs. The Board may change compensation arrangements for nonemployee directors from time to time.

Outstanding Nonemployee Director Equity Awards

The following table sets forth, as of December 31, 2020, the stock options and unvested stock awards (RSUs and restricted shares) held by each nonemployee director who served on the Board in 2020.

 

          Option Awards    Stock Awards    

Name

   Grant Date    Exercise
Price
($)
   Unvested
Option
Awards
(#)
   Option Awards
Vested and
Outstanding
(#)
   Stock Awards
Not Vested
(#)
   

Mr. Gallahue

       02/19/2015        22.2867               32,256           
       05/12/2017        36.8633               7,056           
       05/08/2020                             3,303 (1)     
       05/08/2020                             1,035 (2)     
              

 

 

      

 

 

      

 

 

     

Total

                         —        39,312        4,338    
              

 

 

      

 

 

      

 

 

     

Ms. Heisz

       07/14/2016        35.6767               19,671           
       05/12/2017        36.8633               7,056           
       05/18/2018        45.3167               5,739           
       05/08/2020        72.6133               3,099 (3)            
       05/08/2020                             3,303 (1)     
              

 

 

      

 

 

      

 

 

     

Total

                        35,565        3,303    
              

 

 

      

 

 

      

 

 

     

Dr. Link

       05/08/2020                             3,303 (1)     
       05/08/2020                             1,035 (2)     
              

 

 

      

 

 

      

 

 

     

Total

                               4,338    
              

 

 

      

 

 

      

 

 

     

Mr. Loranger

       05/18/2018        45.3167               5,739           
       05/08/2020        72.6133               4,134 (3)            
       05/08/2020                             3,303 (1)     
              

 

 

      

 

 

      

 

 

     

Total

                        9,873        3,303    
              

 

 

      

 

 

      

 

 

     

Ms. Marsh

       11/19/2015        25.9883               28,722           
       05/08/2020                             3,303 (1)     
              

 

 

      

 

 

      

 

 

     

Total

                        28,722        3,303    
              

 

 

      

 

 

      

 

 

     

Ms. Sequeira

       05/08/2020                             3,303 (1)     
              

 

 

      

 

 

      

 

 

     

Total

                               3,303    
              

 

 

      

 

 

      

 

 

     

Mr. Valeriani

       11/13/2014        20.7583               22,608           
       05/08/2020                             3,303 (1)     
              

 

 

      

 

 

      

 

 

     

Total

                        22,608        3,303    
              

 

 

      

 

 

      

 

 

     
                                                                  

 

 

 
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(1)

Annual awards vest on the earlier of the one-year anniversary of the grant date and the date of the next regular annual meeting of stockholders at which members of the Board are to be elected, subject to earlier vesting in the event of the nonemployee director’s death or disability or in connection with a change in control of Edwards.

 

(2)

Annual retainer fees deferred into restricted shares under the Deferral Election Program vest on the earlier of the one-year anniversary of the grant date and the date of the next regular annual meeting of stockholders at which members of the Board are to be elected, subject to earlier vesting in the event of the nonemployee director’s death or disability or in connection with a change in control of Edwards.

 

(3)

Annual retainer fees deferred into stock options under the Deferral Election Program are vested upon grant.

 

 

 
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of the Company’s common stock by each stockholder known by the Company to own beneficially more than 5% of the Company’s common stock as of January 31, 2021.

 

Principal Stockholder Name and Address

Total Shares

Beneficially

Owned

Percentage

of Class

The Vanguard Group(1)

100 Vanguard Blvd.

Malvern, PA 19355

  48,347,685   7.76 %

BlackRock, Inc.(2)

55 East 52nd Street

New York, NY 10055

  58,596,560   9.40 %

 

(1)

Based solely on information contained in the Schedule 13G/A filed with the SEC by The Vanguard Group, on its own behalf, on February 10, 2021. The Schedule 13G/A indicates The Vanguard Group has shared voting power for 1,075,814 shares, sole dispositive power for 45,572,591 shares and shared dispositive power for 2,775,094 shares as of December 31, 2020.

 

(2)

Based solely on information contained in the Schedule 13G/A filed with the SEC by BlackRock, Inc. on its own behalf, on January 29, 2021. The Schedule 13G/A indicates BlackRock, Inc. has sole voting power for 51,687,237 shares and sole dispositive power for 58,596,560 shares as of December 31, 2020.

The following table sets forth certain information regarding beneficial ownership of the Company’s common stock as of January 31, 2021 by (i) each of the NEOs (as named below); (ii) each of our current directors and director nominees; and (iii) all of our current directors and executive officers as a group. Percent of beneficial ownership is based upon 624,518,873 shares of the Company’s common stock outstanding as of January 31, 2021.

Under the column “RSUs and Shares Underlying Options,” we include the number of shares that could be acquired within 60 days of January 31, 2021 pursuant to the exercise of stock options or the vesting of stock unit awards. These shares are not deemed outstanding for purposes of computing the beneficial ownership of any other person. Unless otherwise indicated, we believe that the stockholders listed have sole voting and investment power with respect to all shares, subject to applicable community property laws.

 

Named Executive Officers, Executive Officers and Directors

   Outstanding
Shares
Beneficially
Owned(1)
   RSUs and
Shares
Underlying
Options
   Total
Shares
Beneficially
Owned
  

    Percentage    

of Class

Mr. Mussallem

       3,399,525        2,150,847        5,550,370        *

Mr. Bobo

       188,205        439,761        627,966        *

Mr. Wood

       340,579        181,725        522,304        *

Mr. Ullem

       229,251        189,225        418,476        *

Mr. Lemercier

       124,557        191,436        315,993     

Mr. Gallahue

       52,413        39,312        91,725        *

Mr. Loranger

       58,662        9,873        68,535        *

Dr. Link

       62,025               62,025        *

Ms. Heisz

       15,969        35,565        51,534        *

Ms. Marsh

       20,859        28,722        49,581        *

Mr. Valeriani

       41,985               41,985        *

Ms. Sequeira

                            *

Mr. LaViolette

                            *

All current directors and executive officers as a group (16 persons)

       4,620,282        3,876,376        8,496,658        1.35 %

 

*

Less than 1%

 

(1)

Includes shares held by family trust, members of his or her household, in the 401(k) Plans, or jointly, as follows: Mr. Mussallem, 3,285,316; Mr. Ullem, 229,251; Mr. Bobo, 161,897; Mr. Lemercier, 45,000; Mr. Wood, 495; Mr. Gallahue, 52,413; Mr. Loranger, 15,000; and Dr. Link, 32,316.

 

 

 
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EXECUTIVE COMPENSATION AND OTHER INFORMATION

EXECUTIVE OFFICERS

Set forth below is the biographical information regarding our current executive officers, other than Mr. Mussallem, whose biographical information is set forth under “Proposal 1—Election of Directors—Director Nominees” above. None of the executive officers has any family relationship with any other executive officer or any of our directors.

 

LOGO   

Donald E. Bobo, Jr., age 59. Mr. Bobo has been Corporate Vice President since 2007 and is currently responsible for Edwards’ corporate strategy and corporate development functions. In addition, Mr. Bobo has executive responsibility for the Company’s heart failure initiatives, as well as the U.S. healthcare solutions and commercial services team. Mr. Bobo has more than 30 years of experience in the medical products and healthcare industry and has served in various operating roles at Edwards, including leading the surgical heart valve business and valve manufacturing operations, and establishing corporate disease awareness and the Company’s transcatheter mitral portfolio. Prior to joining Edwards in 1995, Mr. Bobo held a variety of roles with increasing levels of responsibility with American Hospital Supply and Baxter Healthcare Corporation, including research and development, business development, operations and general management. He has served on the board and executive committee of the California Life Sciences Association since 2015 and served as its chairman of the board from 2017 to 2018.

LOGO   

Daveen Chopra, age 42. Mr. Chopra has been Corporate Vice President, Surgical Structural Heart since May 2018. Prior to joining Edwards, Mr. Chopra held various roles with increasing levels of responsibility at Medtronic, LLC, a medical technology, services and solutions company, from 2005 to 2018, culminating in a global leadership role as Vice President and General Manager of Medtronic’s Aortic Franchise. Mr. Chopra’s previous roles at Medtronic include Vice President of Global Marketing, leading Medtronic’s Endovascular Therapies Business. While in Medtronic’s Endovascular Therapies Business, he served as Vice President, U.S. Commercial Operations, Director of Program Management Office, Senior Business Manager for the Endovascular and Peripheral Business in Asia-Pacific, Global Group Product Manager for Thoracic Stent Grafts, and International Aortic Product Manager. Prior to Medtronic, Mr. Chopra served as an international strategy consultant at The Parthenon Group supporting clients in various industries ranging from education to industrial manufacturing.

LOGO   

Jean-Luc Lemercier, age 63. Mr. Lemercier has been Corporate Vice President, EMEA (Europe, Middle East and Africa), Canada and Latin America since July 2017. Prior to assuming his current role, Mr. Lemercier served as Vice President of Transcatheter Heart Valves EMEA from 2008 to 2017. Under his leadership, Edwards has successfully built its leadership position in Europe. Prior to joining Edwards, Mr. Lemercier served in various leadership roles with Johnson & Johnson Cordis from 1996 to 2008, including leader of the structural heart disease group in the United States, Vice President of New Business Development in Europe, Vice President of the Cordis Cardiology Division in Belgium, and General Manager of Cordis France. Mr. Lemercier has more than 30 years of medical technology experience, beginning with Baxter in France, and held several sales and marketing management positions within Baxter in both Europe and the United States. Mr. Lemercier has served on the board of CARMAT since 2017.

 

 

 
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LOGO   

Catherine M. Szyman, age 54. Ms. Szyman has been Corporate Vice President, Critical Care since 2015. Under her leadership, Edwards has experienced successful sales growth in the Critical Care business unit. Prior to 2015, she was employed for more than 20 years at Medtronic, LLC, where she served as its Senior Vice President and President of Medtronic’s Global Diabetes business from 2009 to 2014, overseeing research, development, operations, sales and marketing for Medtronic’s insulin infusion pumps and continuous glucose monitoring systems. Prior to that, she held a variety of leadership roles at Medtronic, including Senior Vice President of Corporate Strategy and Business Development, General Manager of Endovascular Innovations and Vice President of Finance for the Cardiovascular Business. Ms. Szyman serves on the boards of Inari Medical Inc., Octane, and the American Heart Association of Orange County, and previously served on the boards of Tornier, Inspire Medical Systems, and the California Healthcare Institute.

LOGO   

Scott B. Ullem, age 54. Mr. Ullem has been Corporate Vice President, Chief Financial Officer since January 2014. In addition, Mr. Ullem has executive responsibility for the Company’s information technology, information security, risk management, indirect sourcing, and corporate services teams. Prior to joining Edwards, he served as Chief Financial Officer of Bemis Company Inc., a Fortune 500 publicly traded global supplier of packaging and pressure sensitive materials used in leading food, consumer, and healthcare products, from May 2010 to December 2013. Mr. Ullem also had leadership responsibility for one of Bemis’ three business segments and the company’s information technology function. Prior to Bemis, Mr. Ullem spent 17 years in investment banking, serving as Managing Director at Goldman Sachs and later at Bank of America. He has served on the board and compensation committee of Berry Global Inc. since 2016, and is a Henry Crown Fellow at the Aspen Institute.

LOGO   

Huimin Wang, M.D., age 64. Dr. Wang has been Corporate Vice President, Japan, Asia and Pacific since 2010. From 2004 to 2010, he served as Corporate Vice President, Japan and Intercontinental Regions and, from 2000 to 2004, served as Corporate Vice President, Japan. Prior to joining Edwards, he served in a number of roles with Baxter Healthcare Corporation, including Senior Manager of Strategy Development, Director of Product/Therapy for the Renal Division in Japan, and President of Medical Systems and Devices in Japan, and was a representative director of Baxter Limited, a Japan corporation, from 2000 to 2002. Prior to Baxter, Dr. Wang was a senior associate with Booz, Allen & Hamilton in Chicago, Vice President of Integrated Strategies, a consulting and venture management firm which he co-founded, and an associate with McKinsey & Company. Prior to that, Dr. Wang was a resident and staff physician in anesthesiology at Keio University Hospital in Tokyo. Dr. Wang serves on the board of The Ascend Foundation.

LOGO   

Larry L. Wood, age 55. Mr. Wood has been Corporate Vice President, Transcatheter Aortic Valve Replacement (TAVR) since 2007. Under his leadership, Edwards has experienced extraordinary growth in the global TAVR business, and the Edwards SAPIEN heart valve has won numerous awards, including the Prix Galien “Best Medical Technology Product” award. Prior to assuming his current role, he served as Vice President and General Manager, Percutaneous Valve Interventions, from 2004 to 2007. Mr. Wood has more than 30 years of experience in the medical technology industry at both Edwards and Baxter Healthcare Corporation in positions including manufacturing management, regulatory affairs and strategic and clinical marketing, primarily for the surgical heart valve therapy business. Mr. Wood is also a passionate supporter of the United Way Orange County’s Destination Graduation Program which encourages at-risk high school students to graduate and pursue higher education.

 

 

 
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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes and provides disclosure about the objectives and policies underlying our executive compensation programs.

Edwards’ 2020 NEOs are as follows:

 

NEO Names and Positions

Michael A. Mussallem

Chairman and Chief Executive Officer

Scott B. Ullem

Corporate Vice President, Chief Financial Officer

Donald E. Bobo

Corporate Vice President, Strategy and Corporate Development

Jean-Luc Lemercier

Corporate Vice President, EMEA (Europe, Middle East and Africa), Canada and Latin America

Larry L. Wood

Corporate Vice President, Transcatheter Aortic Valve Replacement

Executive Summary

Edwards is the global leader in patient-focused medical innovations for structural heart disease and critical care monitoring. Driven by a passion to help patients, we partner with the world’s leading clinicians and researchers and invest in research and development to transform care for those impacted by structural heart disease or who require hemodynamic monitoring during surgery or in intensive care.

Pay-for-Performance Philosophy.    The Compensation Committee strives to create a pay-for-performance culture and strongly believes that executive compensation should be tied not only to annual performance but also directly to the successful implementation of our long-term corporate strategy.

We are driven by our culture that puts patients first and our long-term corporate strategy that creates value with therapies that transform care and focuses on large, under-treated diseases. Our annual plan is essential to executing our strategy and seeks to balance doing the right thing for patients, identifying unmet clinical needs and developing breakthrough therapies, while maintaining trusted relationships with our stakeholders. As a direct result of our strategy, we have introduced therapies such as transcatheter aortic valve replacement, novel resilient surgical heart valves and noninvasive advanced hemodynamic monitoring, and strengthening our leadership positions. Successfully managing our business in a challenging, highly regulated, dynamic environment requires talented and energetic leaders who champion our strategy and deliver on our commitments.

Our executive compensation programs are designed to emphasize performance-based compensation, reward financial performance and the implementation of our corporate strategy and align the financial interests of our executives with those of our long-term stockholders.

Response to COVID-19.    Following the outbreak of COVID-19, we continued to remain fully committed to our patient-focused innovation strategy; the pandemic did not stop us from doing the right thing for patients. Guided by our Credo, our priorities during the pandemic have been to protect the health and well-being of our employees, to continue to serve our patients, hospitals and clinical partners, and to support our communities.

With respect to our employees, our Company is part of the essential healthcare infrastructure, and many of our employees are “essential” workers who cannot work remotely. We created safe-on-site working conditions; these included extensive safety practices and procedures to ensure the delivery of our life-saving technologies in over 100 countries. We also utilized remote work options for those employees who could work remotely.

 

 

 
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For our patients, we worked to ensure that our life-saving technologies continued to be accessible during the pandemic with customer support provided by our committed field team that participated in procedures in hospitals all over the world. We worked with investigators, clinicians, hospitals and trial sites to continue and reengage patient treatments.

We intentionally did not take any actions that would negatively impact our employees’ compensation and benefits as a result of the crisis. In fact, the Company, with the support of the Board, is paying typical bonuses to hourly employees in our supply chain and is protecting the majority of the incentive pay of the field organization to recognize their commitment and resilience. In addition, across the Company, our employees generally received typical bonuses, salary increases and continuing equity grants for 2020. In light of our long-term strategy that includes the development of technologies over many years, we intentionally did not take any actions to significantly reduce investments that would disrupt programs that we expect will benefit all stakeholders, including patients, over time.

Within our communities, among other actions taken, we donated critical care technologies to help underserved patients around the world. We also supported charitable organizations working on the front-line. We took steps to address community hardship through giving efforts and accelerated grants, including $1 million in emergency community grants to partner organizations.

2020 Financial and Operating Performance.    Our financial results and operating performance in 2020 were significantly impacted by COVID-19. We faced headwinds most severely beginning in March 2020 when procedure rates were highly variable around the globe, leading to a sharp, temporary decline in sales. Treatments were delayed due to hospital prioritization of COVID-19 patients, hospital closures, and patients deferring treatment as a result of the pandemic. Although we began recovering towards the end of the second quarter and continued to recover from the financial impact through the second half of the year, our financial performance was below original expectations. Despite the impact of the pandemic, our total sales for fiscal year 2020 was $4.4 billion, an increase in underlying revenue growth for the year of approximately 1% over the prior year, and our total stockholder return for the year was 17%.2

Even with the challenges we faced during the global pandemic, we continued to make important progress on future advancements for patients:

 

 

Extended leadership in transcatheter aortic valves with the continued strong adoption of our SAPIEN 3 valve technology, particularly in Europe, and the launch of this therapy in China;

 

 

In transcatheter mitral and tricuspid therapies, we aggressively pursued a portfolio of differentiated technologies supported by the establishment of rigorous clinical evidence;

 

 

Extended our leadership in aortic surgical valves through the continued adoption of our newest technologies, INSPIRIS RESILIA aortic valve and the launch of KONECT aortic valve conduit; and

 

 

Advanced leadership in critical care with the continued introduction of advanced monitoring technology and smart recovery algorithms for patients.

Stock Performance.    One indicator of our pay-for-performance culture is the relationship of our NEOs’ target total direct compensation to total stockholder return. Over the past five years, on average, 89% of the CEO’s target total direct compensation has been performance-based, and 74% has been tied to the performance of Edwards’ stock. As a general indicator, the Compensation Committee considers how Edwards’ cumulative total return to stockholders compares to both the S&P 500 Index and the SPSIHE. The table below illustrates our Company’s 5-year cumulative total stockholder return on common stock with the cumulative total returns of the S&P 500 Index and the SPSIHE. The cumulative total return listed below assumes an initial investment of $100 at the market close on December 31, 2015 and reinvestment of dividends. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

 

 

2 

“Underlying growth rate” is a non-GAAP item. Refer to Appendix A for a reconciliation to the most directly comparable GAAP financial measure.

 

 

 
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COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*

 

LOGO

 

* $100 invested at market close on December 31, 2015 in stock or index, including reinvestment of dividends.

   The stock price performance included in this graph is not necessarily indicative of future stock price performance.

2020 Annual Incentive Plan.    The Company’s Annual Incentive Plan consists of three elements:

 

 

the corporate financial measurement (based on underlying revenue growth, adjusted net income and adjusted free cash flow targets),

 

 

the Key Operating Drivers (“KODs”) (quantifiable strategic milestones that include financial objectives and are tracked using a points system across our entire organization), and

 

 

individual performance.

The corporate financial measurement targets were set prior to the pandemic, and reflected a strong financial plan that was built on successes from prior years. The COVID-19 pandemic dramatically altered the Company’s ability to execute on the financial plan. With hospital closures, elective surgeries stalled, and patients deferring treatment as a result of the pandemic, the financial targets set at the start of the year were not achieved. For the 2020 year, the Company focused its efforts and energy on protecting our employees and investing in our long-term innovations by continuing to implement our patient-focused innovation strategy in areas that were not limited by the pandemic and working toward long-term solutions that will serve patients.

 

 

 
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The Company ended the 2020 year with an increase in underlying revenue growth for the year of approximately 1% over the prior year, adjusted net income of $1.113 million, and adjusted free cash flow of $666 million, which are all below their respective minimum threshold set in the beginning of 2020 on the financial measure component of the Annual Incentive Plan.3 The annual incentive funding is determined by multiplying the three elements of the plan—that is, achievement on the financial measurements, KODs and individual performance. With a 0% financial measure achievement, the Annual Incentive Plan would fund at 0%.

In light of the unusual circumstances surrounding 2020, the Compensation Committee, with input from its Compensation Consultant, discussed whether a 0% funding result driven largely by factors beyond management’s control would be consistent with its intent to create a pay-for-performance culture that compensates executives and employees for the successful implementation of our corporate strategy. The Compensation Committee determined that Edwards’ accomplishments on the KODs were a strong and quantifiable indicator of the Company’s value creation and success in 2020.

The KODs are a rigorous set of milestones and metrics that are used throughout the Company to manage annual objectives at a more granular level. Annually, the Board approves the Company’s Strategic Imperatives, and it is from these Strategic Imperatives that the KODs are derived. The KODs contemplate near and long-term objectives of our multi-year strategy, and the KODs are how we translate these strategic goals into quantifiable metrics to be achieved in any given year, holding all employees, including executives, accountable for the Company’s and their own performance.

In 2020, there were four Strategic Imperatives from which the KODs were derived:

 

 

Lead the expansion of Transcatheter Aortic Valve Replacement (“TAVR”) and accelerate the treatment of aortic stenosis

 

 

Transform the treatment of mitral and tricuspid valve disease

 

 

Strengthen global leadership in surgical heart valve and critical care

 

 

Strengthen capabilities and talent to execute key initiatives

Underlying these Strategic Imperatives are approximately 75 specific KOD metrics and milestones relating to, among other things, research and development, commercial and financial milestones in each of the four business units, key initiatives to increase patient access to our therapies and specific milestones for global supply chain as it relates to launches of products, supply, capacity, quality, productivity, service and capabilities. Approximately 20% of the KODs include a financial component. The aggregate KOD multiplier may not exceed 150%.

 

 

3 

“Underlying growth rate” is a non-GAAP item. Adjusted net income used in setting and determining compensation is not calculated in accordance with GAAP and excludes intellectual property litigation expenses, amortization of intangible assets, fair value adjustments to contingent consideration liabilities, the purchase of intellectual property, impairment of long-lived assets, and the tax benefit from stock-based compensation. Adjusted free cash flow used in setting and determining compensation is also a non-GAAP financial measure that is defined as cash flows from operating activities less capital expenditures and excluding the tax benefit from stock based compensation and payments related to a litigation settlement, net of the associated tax benefit. As to each measure, the percentage of achievement is determined on a straight-line basis for actual performance between the minimum and target, or between the target and maximum, levels, and the corporate financial measurement is the average of those three percentages. The threshold (25% of targeted payout), target (100% of targeted payout) and maximum (175% of targeted payout) performance levels established for the corporate financial measures under the 2020 Annual Incentive Plan were as follows: 9%, 13%, and 18%, respectively, for the underlying revenue growth measure; $1.204 million, $1.267 million, and $1.331 million, respectively, for the adjusted net income measure; and $959 million, $1.034 million, and $1.109 million, respectively, for the adjusted free cash flow measure.

 

 

 
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We are not disclosing our KODs in detail because we believe doing so would cause a meaningful competitive disadvantage. However, we are providing additional transparency on the structure and outcomes of the KODs with specific illustrative examples of milestones in the table below to provide the nature and types of milestones included in our KODs.

 

Strategic Imperatives

   Points
Achieved
   Illustrative Examples of KODs Underlying the Strategic Imperatives

Lead the expansion of TAVR and accelerate the treatment of aortic stenosis

       18   

  Missed revenue thresholds due to the impact of COVID on the health care system

 

  Achieved milestones on the advancement of next-gen development of product portfolio

 

  Achieved TAVR product launch in high-potential emerging market on time

Transform the treatment of mitral and tricuspid valve disease

       17   

  Achieved milestones around new approvals of mitral and tricuspid therapies in a market outside of the United States

 

  Missed on some clinical trial enrollment goals due to the impact of COVID on the health care system

 

  Achieved milestones around clinical advancements in tricuspid replacement therapies

Strengthen global leadership in surgical heart valve and critical care

       11   

  Achieved milestones in SAVR even through a challenged market:

 

–  Launched novel aortic surgical therapy

 

–  Increased mix of most advanced premium surgical aortic replacement therapy

 

  Achieved milestones around advancement of Critical Care technologies including hardware and algorithm development

Strengthen capabilities and talent to execute key initiatives

       24   

  Substantial progress achieved on new manufacturing facilities

 

–  Costa Rica facility received regulatory approval for commercial products in both United States and Europe

 

–  New Ireland facility completed construction and is ready for validation

 

  Achieved global supply chain milestones through innovative efforts that enabled continuous production of life-saving heart valve therapies

Total

       70   

  Missed overall revenue thresholds due to COVID interruptions

 

  Achieved long-term strategic initiatives and milestones through collective creative problem solving

2020 Executive and Corporate Annual Incentive Plan Outcomes.    In determining the right approach for defining the Annual Incentive Plan outcomes, both for executives and across the full organization, the Compensation Committee and Board considered, among other things, the following:

 

 

Ensuring that management is not disincentivized for creating long-term value (e.g., protecting employees, not taking actions that would disrupt development programs that would advance our long-term strategy and providing care/relief for patients);

 

 

Rewarding the prompt and proactive actions taken by the management team to protect employee health while maintaining our commitment to patients, as well as the other actions taken by management during the pandemic as described above under “Response to COVID-19”;

 

 

Rewarding the Company’s operational execution in that the Company’s financial performance improved from fiscal year 2019 to fiscal year 2020 despite the impact of the COVID-19 pandemic, with a total stockholder return of 17%;

 

 

Paying for performance and execution by using the KODs approved by the Board prior to the COVID-19 pandemic, as the basis for funding;

 

 

 
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Being consistent with the Compensation Committee’s intention to continue a pay-for-performance culture that compensates executives and employees for the successful implementation of our corporate strategy;

 

 

The fact that the headwinds the Company faced were largely outside the control of the employees; and

 

 

Engagement and retention considerations for our dedicated employees.

In light of these considerations, the Compensation Committee applied its discretion and determined that it was appropriate to use the KOD results to set the overall funding for the 2020 Edwards Incentive Plan payouts across the entire organization, and to not include the corporate financial measurement element. The Compensation Committee also adjusted the bonus potential downwards by 35% for the CEO and 25% for the rest of the executive group, including the other NEOs, to further calibrate the results to the financial outcomes and underscore the executive team’s commitment to, and responsibility for, the Company’s performance. With a 2020 KOD achievement of 70%, our cash incentive plan funded at 70% for corporate employees, 52.5% for the executive group, and 45.5% for the CEO, and also took into account each individual’s performance, more fully described under “Elements of Compensation—Annual Cash Incentive Payment.”

2021 Annual Incentive Plan.    In addition, as a result of the expected continued impact of COVID-19 in fiscal year 2021 and the considerations enumerated above, after review and input from the Compensation Consultant and other advisors, the Board determined that it was also appropriate to use the results of the KOD achievement as the primary mechanism to determine 2021 annual incentive payouts.

Consideration of Say-on-Pay Vote Results.    At our 2020 annual meeting, our stockholders cast an advisory vote on the compensation of our NEOs (a “say-on-pay” vote). Approximately 94% of the votes cast on this proposal voted in favor of our NEO compensation. We believe this vote reflects stockholders’ continued strong support of compensation programs for our NEOs. The Compensation Committee will continue to consider the results of say-on-pay votes along with the feedback received from stockholders received through the stockholder outreach program when making future compensation decisions for the NEOs.

Compensation Philosophy and Objectives for NEOs.    Our compensation programs are designed to attract, retain, motivate and engage executives with superior leadership and management capabilities to enhance stockholder value. Within this overall philosophy, our objectives are to:

 

 

offer programs that place a higher emphasis on performance-based compensation than fixed compensation;

 

 

align the financial interests of executives with those of our long-term stockholders; and

 

 

provide compensation that is competitive.

We strongly believe that a significant amount of compensation for the NEOs should be composed of short-term and long-term incentives, or at-risk pay, to focus the executives on near-term goals and strategic initiatives. The amount of such short-term and long-term incentive compensation is dependent on achievement of our annual goals, individual performance, and long-term increases in the value of our stock. In this Proxy Statement, “target total direct compensation” for each NEO consists of (i) base salary, (ii) Incentive Pay Objective (as defined under “Elements of Compensation—Annual Cash Incentive Payment” below), and (iii) long-term incentive awards (presented in the charts below using their target equity mix values).

 

 

 
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The charts below illustrate the percentage weighting of each compensation vehicle that comprise the 2020 target total direct compensation for the CEO and the average for the other NEOs.

 

LOGO    LOGO

Compensation Process.    The Compensation Committee is responsible for discussing, evaluating and approving the compensation of the CEO and the other NEOs, including the specific objectives and target performance levels to be included in our executive compensation plans. The CEO and other members of the executive leadership team develop our Strategic Imperatives as well as the KODs that measure our achievement of these imperatives. The Board reviews and approves the Strategic Imperatives and KODs at the start of every year. The CEO provides input to the Compensation Committee after year-end regarding achievement of our Strategic Imperatives and KODs. In addition, the CEO and the Corporate Vice President of Human Resources provide recommendations to the Compensation Committee regarding compensation of the NEOs (other than the CEO). The Compensation Committee then determines the compensation of the CEO and reviews and approves the compensation of the other NEOs.

The CEO and the Corporate Vice President of Human Resources are invited to, and regularly attend, Compensation Committee meetings as non-voting guests. The Compensation Committee regularly meets in executive session without participation by the CEO or other management representatives. In addition, our CEO and Corporate Vice President of Human Resources meet with the Compensation Consultant as well as the Chair of the Compensation and Governance Committee in preparation for Compensation Committee meetings, and the Compensation Consultant also regularly attends Compensation Committee meetings and participates in executive sessions with the Compensation Committee.

Independent Compensation Consultant.    The Compensation Consultant, Semler Brossy Consulting Group, has been retained by and reports to the Compensation Committee and provides executive and director compensation consulting services to the Compensation Committee.

Semler Brossy’s responsibilities for 2020 generally included:

 

 

Annual and periodic reviews of executive total compensation relative to peers;

 

 

Annual and periodic reviews of director total compensation;

 

 

Annual and periodic reviews of the Company’s comparator group;

 

 

Report on proxy advisory firms around say-on-pay and other compensation matters;

 

 

Presentations on specialized topics, as requested or applicable;

 

 

Reports to the Compensation Committee on market trends and best practices in compensation; and

 

 

Attendance and participation in all Compensation Committee meetings and stockholder consultations, as requested.

The Compensation Consultant does not provide any other services to the Board or the Company. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to the NYSE rules and determined

 

 

 
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that the Compensation Consultant is independent, and free of conflicts of interest with us or any of our directors or executive officers.

Use of Competitive Data.    In determining the appropriate positioning level of each NEO’s target total direct compensation and each component of compensation for an NEO, the Compensation Committee takes into account its assessment of the Company’s or business unit’s general performance, as applicable for each executive, and the executive’s tenure, experience, level of individual performance and potential to contribute to our future growth. Accordingly, an NEO’s actual compensation may be higher or lower than the median for the position based on the Compensation Committee’s assessment of these other factors. If the Compensation Committee determines that changes are appropriate, it has the flexibility to make adjustments for one or more executives.

Consistent with our philosophy of emphasizing pay for performance, annual cash incentive payments are designed to be above Incentive Pay Objectives when we exceed our goals and below the Incentive Pay Objectives when we do not achieve our goals. In the event threshold levels of performance are not attained, no annual incentive payment is generally earned.

For purposes of establishing the value of equity awards, stock options are valued as of the grant date using the Black-Scholes valuation model. RSUs and PBRSUs are valued at the fair market value of the underlying shares on the grant date. Except as otherwise noted above or described below, the Compensation Committee’s executive compensation determinations are subjective and the result of the Compensation Committee’s business judgment, which is informed by the experiences of the members of the Compensation Committee as well as the input from the Compensation Consultant and peer group data provided by the Compensation Consultant. In order to establish competitive compensation market data for the NEOs, the Compensation Consultant uses public proxy information from companies primarily in the medical technology industry. These peer companies are chosen based on the Compensation Committee’s assessment of their market capitalization, revenue, business focus, complexity, geographic location and the extent to which the Compensation Committee believes they compete with us for executive talent (the “Comparator Group”). The composition of the Comparator Group is reviewed annually to monitor the appropriateness of the profiles of the companies included so that the group continues to reflect our competitive market and provides statistical reliability.

The review of the Comparator Group for pay decisions in 2020 was conducted in July 2019. After evaluating a series of qualitative and quantitative factors among other publicly traded U.S. companies in our industry, including scale, talent, business, and operational characteristics and overlap among peers, the Compensation Committee determined that the Comparator Group used in making 2019 executive compensation decisions remained appropriate in size and composition for 2020 executive compensation decisions. For 2020, the Comparator Group consisted of the following companies:

 

Edwards’ 2020 Comparator Group

Abbott Laboratories

 

IDEXX Laboratories, Inc.

ABIOMED, Inc.

 

Illumina, Inc.

Agilent Technologies, Inc.

 

Intuitive Surgical, Inc.

Alexion Pharmaceuticals, Inc.

 

Medtronic plc

Align Technology, Inc.

 

ResMed Inc.

Baxter International Inc.

 

Stryker Corporation

Becton, Dickinson and Company

 

Teleflex, Inc.

Boston Scientific Corporation

 

Varian Medical Systems, Inc.

The Cooper Companies, Inc.

 

Waters Corporation

DENTSPLY SIRONA, Inc.

 

Zimmer Biomet Holdings, Inc.

Hologic, Inc.

   

As of June 30, 2019, Edwards ranked at the 64th percentile of this group in terms of market capitalization. Compensation data are generally regressed for market capitalization to ensure that the data are not distorted by larger companies. Regression analysis is a commonly used technique to size-adjust data, which allows for more statistically valid comparisons. The key measure used in our regression model is market capitalization. Based on this measure, the

 

 

 
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regression formula correlates and adjusts the raw data for base salary, total cash compensation and total direct compensation to predict those items based on the market capitalization for each of the Comparator Group companies.

Although data from the Comparator Group are the primary data input for compensation decisions for the NEOs, consideration is given to compensation data for companies in healthcare-related industries as reported in nationally recognized Radford Global Technology and Global Lifesciences Compensation Surveys. The Compensation Committee considers both survey data that is healthcare-specific and also general industry data for companies within a similar size scope to Edwards. The Compensation Committee believes it is appropriate to refer to these additional data because we compete with these types of companies for executive talent.

We do not target any one specific percentile but instead consider the market data along with factors like the individual’s performance and context from the talent market more broadly to determine our target total direct compensation and the elements of compensation for our NEOs.

Elements of Compensation.    The compensation package for each NEO consists primarily of (i) base salary, (ii) an annual cash incentive payment based on attainment of pre-established financial measures, operating goals, and individual performance, and (iii) long-term stock-based incentive awards. Each of these three components of compensation is intended to promote one or more of our objectives of designing executive compensation that is performance-based, is competitive, and aligns the interests of the executives with our stockholders, as further described in the Elements of Compensation Summary chart below.

Elements of Compensation Summary

 

Element of Compensation

  Why We Pay this Element               Compensation Committee’s Evaluation Criteria    

Base Salary

 

  Provides fixed compensation component payable in cash

 

  Provides a certain level of security and continuity from year to year

 

  Helps attract and retain qualified executives

       

  In addition to competitive data, the executive’s responsibilities, tenure, prior experience and expertise, individual performance, future potential, and internal equity are considered

 

Annual Cash Incentive Payment

(see sections “Executive Summary” above for specific considerations pertaining to fiscal years 2020 and 2021, and “Annual Cash Incentive Payment” below)

 

  Provides variable compensation component payable in cash to motivate and reward executives for annual performance against established corporate financial measures, operating and strategic goals, and individual objectives

 

  Recognizes executives based on their individual contributions

 

  Is performance-based and not guaranteed

       

  Incentive plan funding is determined by multiplying:

 
       

Financial Measurement Achievement

(based on underlying revenue growth, adjusted net income,
and adjusted free cash flow targets
set at the beginning of the year)

   
        X  
       

KOD Achievement

(based on strategic, corporate, and
business unit objectives determined at
the beginning of the year)

The aggregate KOD multiplier
may not exceed 150%

   
        X  
       

Individual Performance Objective Achievement

(determined at the beginning of the year)

Up to a maximum of 200% of
pre-established Incentive Pay Objective

   

 

 

 
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Element of Compensation

  Why We Pay this Element               Compensation Committee’s Evaluation Criteria    

Long-Term Incentive Awards

 

  55% Stock Options

 

  20% RSUs

 

  25% PBRSUs

 

  Aligning executives’ interests directly with those of stockholders; provides executives with an incentive to manage the Company from the perspective of an owner

 

  Stock options tie executive pay directly to stockholder value creation over the long term, promote executive retention, and are consistent with our focus on top-line growth, innovation and our longer-term investment horizon and product pipeline

 

  RSUs promote stability and retention of our executives over the long term

 

  PBRSUs are measured against relative TSR, which links compensation to our performance over a three-year period against the performance of other companies

 

  Since RSUs and PBRSUs are paid in shares of Edwards stock, these awards also further link executives’ interests with those of our long-term stockholders

 

  Retains qualified employees

 

  Is performance- or stock price-based and value is not guaranteed

       

  The size and composition of long-term incentive awards are determined annually by the Compensation Committee, taking into account competitive total direct compensation pay positioning guidelines using market reference data from the Comparator Group, along with the individual executive’s level of responsibilities, ability to contribute to and influence our long-term results, and individual performance

 

Benefits

 

  Provides a safety net to protect against financial catastrophes that can result from illness, disability or death

 

  A benefit program that is competitive with companies with which we compete for executive talent supports recruitment and retention of executives

       

  Executives are eligible to participate in benefit programs on terms as are generally offered to other Company employees

 

Perquisites

 

  Assists in attracting and retaining executives by enhancing the competitiveness of the executive’s compensation in a relatively inexpensive way

 

  Enables executives to perform their responsibilities efficiently, maximize their working time, and minimize distractions

             

  Modest perquisites, consistent with market practices

   

Base Salary.    The Compensation Committee generally reviews each NEO’s base salary in February and any approved changes are effective with the first pay period in April. The base salary for the CEO is established in a similar manner and is described more fully under “Employment and Post-Termination Agreements” below. Base salaries paid to the NEOs increased between 2.5% and 4.5% in 2020 over the level in effect in 2019 to help maintain market competitiveness and based on the Compensation Committee’s assessment of internal roles and contributions.

 

 

 
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Annual Cash Incentive Payment.    All of the NEOs and many other management and non-management-level employees (approximately 13,160 employees) participated in the 2020 Edwards Incentive Plan (the “Incentive Plan”).

The Compensation Committee establishes for each NEO the amount of incentive payment that will be earned for targeted performance, referred to as the “Incentive Pay Objective.” The Compensation Committee utilizes the Incentive Pay Objective so that the total cash compensation (base salary plus incentive payment for expected performance) for the NEOs will be at approximately the median of the Comparator Group. The Compensation Committee then considers performance results to determine the actual cash incentive payments.

The accompanying “Grants of Plan-Based Awards in Fiscal Year 2020” table reports the Incentive Pay Objective (called the “Target” in the table) established for each NEO for 2020 as well as the maximum amount that could have been earned by each NEO under the Annual Incentive Plan for 2020 had the maximum performance levels been attained.

As described above in “Compensation Discussion and Analysis—Executive Summary” on pages 27 through 32 of this Proxy Statement, the Board reflected on the impact of the COVID-19 pandemic on the Company in fiscal year 2020 and the expected continued impact of COVID-19 in fiscal year 2021. After review and input from the Compensation Consultant and other advisors as well as feedback from stockholders during the stockholder outreach conducted from October to December 2020, the Board determined that the implementation of the annual cash incentive payment as structured was not consistent with its intention to create a pay-for-performance culture that compensates executives and employees for the successful implementation of our corporate strategy. Therefore, the Board used discretion and determined that the compensation structure change as provided above should be applied for both fiscal years 2020 and 2021.

Individual Performance.    Individual performance objectives for the CEO are established collaboratively by the CEO and the Compensation Committee, and the individual performance objectives for the other NEOs are established collaboratively by the CEO and each such executive. The Compensation Committee believes each executive has an appropriate number of meaningful individual performance objectives. The individual performance objectives are chosen to create goals, the attainment of which is designed to implement our strategic and operating plans, with a focus on the achievement of the financial measures and operational goals within each executive’s individual area of responsibility.

These objectives are considered in the aggregate to determine an overall performance assessment for each NEO for the purposes of determining compensation. Although some of the individual performance objectives are expressed in qualitative terms that require subjective evaluation, objectives also include several quantitative measures. However, the assessment of the overall performance for each NEO involves a subjective process. The CEO reviews the performance of each NEO (other than the CEO) with the Compensation Committee and recommends a performance assessment for each executive. The Compensation Committee assesses the CEO’s performance. The Compensation Committee then exercises subjective judgment, reviewing the individual performance objectives, the overall performance of the individual executive against all of his or her individual objectives, taken together, and the executive’s performance relative to the environment and to other executives. There is no formal weighting of the individual performance objectives. Individual performance may impact an executive’s cash incentive payment, subject to an overall cap on incentive payments of 200% of the Incentive Pay Objective.

 

 

 
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The individual performance objectives for the CEO and the other NEOs and the factors considered by the Compensation Committee for 2020 are described below.

 

NEO

  

2020 Performance Objectives and Factors Considered by the Compensation Committee

Mr. Mussallem

  

  Develop and deploy strategy; drive our strategic imperatives through KOD achievement; achieve Company financial goals; increase long-term shareholder value; attract and retain a diverse, talented team; promote a strong culture consistent with our Credo and Aspirations; and provide leadership as Board Chairman.

  

  Though the COVID pandemic significantly impacted Edwards’ planned financial performance, the Compensation Committee found that Mr. Mussallem led a remarkable patient-focused team who, as a member of the critical healthcare infrastructure, never stopped working to deliver sustained financial results similar to 2019 with an unwavering commitment to our patients and innovation strategy. Continued focus on important therapy innovations and infrastructure-related strategic initiatives intended to drive longer term growth and success were executed as the Company was recognized for our sustainability program and significant community engagement. The Company fortified our strong patient-focused culture and expanded our diversity and inclusion initiatives to strengthen our innovation strategy. The Company continued to focus on delivering long-term shareholder returns while prioritizing the protection of employee jobs and investing in our technology pipeline and future initiatives.

Mr. Ullem*

  

  Ensure the Company’s financial reporting maintains the highest integrity; drive to achieve 2020 strategic imperatives, KODs and financial goals; maintain a high standard of investor relations; optimize capital deployment; enhance stockholder returns; execute Company-wide Information Technology and enterprise risk management initiatives; attract and retain a diverse, talented team; and promote a strong culture consistent with our Credo and Aspirations.

  

  The Compensation Committee noted that even under difficult circumstances of the pandemic, Mr. Ullem demonstrated strong overall performance in the role of Chief Financial Officer. Specifically, he led the continued development of solid financial planning and issuance of timely and accurate financial reports, continued to build investor confidence, improved risk mitigation through enterprise risk management, deployed several global information technology enhancements to strengthen Edwards’ infrastructure, and focused on global talent development.

 

   *Mr. Ullem was also paid a discretionary bonus in the amount of $49,583 for his extraordinary contributions in obtaining a legal settlement.

Mr. Bobo

  

  Develop and implement Edwards’ corporate strategy, establish and execute business development goals that advance our strategy, provide leadership to our U.S. Healthcare solution team, develop and advance our emerging heart failure and disease awareness initiatives; attract and retain a diverse, talented team; and promote a strong culture consistent with our Credo and Aspirations.

  

  The Compensation Committee noted Mr. Bobo’s leadership in the strengthening and execution of our innovation-driven strategy including advancing our global disease awareness initiatives, the successful execution of business development transactions that advanced our pipeline, strengthened key initiatives and complemented our internal investments, and leadership of our new strategic initiatives including investment analysis, strategic fit analysis, and alliance management.

 

 

 
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NEO

  

2020 Performance Objectives and Factors Considered by the Compensation Committee (Continued)

Mr. Lemercier

  

  Develop, evolve and execute the regional business strategy for Europe, Canada, and Latin America; drive new product introductions, consistently deliver sales growth and achieve financial goals for Europe, Eastern Europe, Middle East, Africa, Canada, and Latin America; drive innovation and enhance leadership in key franchises; attract and retain a diverse, talented team; and promote a strong culture consistent with our Credo and Aspirations.

  

  The Compensation Committee noted that despite unprecedented circumstances of the pandemic, Mr. Lemercier’s leadership continually achieves solid regional results, specifically driven by multiple product launches, a focus on regulatory and government affairs, and patient engagement. In particular, there was improved adoption and expansion for Transcatheter Aortic Valve Replacement, continued introduction of transformative Transcatheter Mitral and Tricuspid therapies, as well as driving strong surgical structural heart and critical care initiatives. His team also enhanced customer operations and had continued focus on talent development and community philanthropy across all geographies.

Mr. Wood

  

  Develop, evolve and execute the strategy for the Transcatheter Aortic Valve Replacement business to strengthen our leadership position; consistently deliver sales growth and achieve the financial goals for the Transcatheter Aortic Valve Replacement business; drive innovation and 2020 product development KODs; attract and retain a diverse, talented team; and promote a strong culture consistent with our Credo and Aspirations.

  

  The Compensation Committee noted that under Mr. Wood’s leadership, achieving planned revenue targets was challenging as a result of the pandemic, but Edwards continued its strong patient focus with on-site case support globally and was present in over 95% of the cases in the US in all 50 states. His team continued to expand our SAPIEN 3 ULTRA platform globally and strengthened our leadership position as Edwards became the first multinational to receive TAVR approval in China as well as achieved important progress on our pulmonic program. The focus on new technology has also established groundwork for a new clinical trial to study patients with moderate aortic stenosis, which is a population that could benefit from earlier intervention.

      

Committee Review Process.    The Compensation Committee generally meets each February to review and approve annual incentive payments for the prior year and to set incentive performance targets for the current year. The Compensation Committee may adjust the incentive payment levels based on financial measure achievement, KOD achievement, individual performance, and TSR. In February 2021, the Compensation Committee awarded incentive payments to the NEOs that ranged from 45.5% to 55.1% of the Incentive Pay Objectives for the NEOs. The amount awarded to each NEO for 2020 is reported in the accompanying “Summary Compensation Table.” The incentive payments were paid in March 2021.

Long-Term Incentive Awards.    The mix of long-term incentive awards granted to our NEOs in 2020 included stock options, PBRSUs and RSUs. The Compensation Committee views stock options as performance-based equity compensation, tying our executives’ pay directly to stockholder value creation over the long term because the value of our common stock must increase after the date of grant of the options in order for the options to have any value. Having a seven-year time horizon, stock options also promote the retention of our executives and are consistent with our focus on top-line growth, innovation and our longer-term investment horizon and product pipeline. PBRSU awards measure relative TSR, which the Compensation Committee believes is a straightforward and objective metric for our stockholders to evaluate our performance against the performance of other companies and to align with stockholder interests. As the RSU awards have value regardless of stock price performance, they help promote the stability and retention of a strong executive team over the longer term (vesting schedules generally require continuous service over multiple years, as described below).

Of the total 2020 long-term incentive awards granted to each of our NEOs, the grant values approved by the Compensation Committee were weighted 55% stock options, 25% PBRSUs, and 20% time-based RSUs. We believe measuring a combination of absolute TSR (through stock options) and relative TSR (through PBRSUs), and providing stock-denominated time-based vesting RSUs, results in a balance between these incentives that appropriately aligns our executives’ pay with stockholder value while promoting the stability and retention of the executive team. Given the

 

 

 
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different risk and reward characteristics of these three types of awards and our executive compensation philosophy, the Compensation Committee believes that the equity awards granted to executives should comprise a greater proportion of stock options and PBRSUs relative to RSUs.

Stock Options.    Stock options granted in 2020 to Messrs. Ullem and Wood vest annually over four years and have a seven-year term. Stock options granted to Messrs. Mussallem, Lemercier and Bobo vest monthly over 36 months, consistent with the vesting standards established by the Company for its stock option grants to executives who are retirement-eligible, and have a seven-year term. Stock options granted during 2020 have an exercise price equal to the closing price on the day of the regular Board meeting held on the next day following Compensation Committee approval.

PBRSUs.    PBRSUs awarded in 2020 are based on relative TSR performance as measured for the performance period beginning April 30, 2020 and ending April 30, 2023. The percentage of the target PBRSU awards that will vest at the end of the three-year performance period depends on the percentage by which our annualized TSR exceeds or falls short of the median annualized TSR (calculated assuming dividend reinvestment) of the SPSIHE Subset (as defined below). The chart below illustrates the maximum, target and threshold performance levels and the PBRSU payout at each level (with the payout level determined on a pro-rata basis between points for actual performance between the levels shows in the chart).

 

2020 PBRSU

Performance

Levels

  Annualized TSR vs Median of SPSIHE Subset  

Payout as a

     Percentage of     

Target Award

Maximum

 

    +7.5% points from median

      175 %

Target

 

    Median

      100 %

Threshold

 

    -7.5% points from median

      25 %

No Payout

 

    More than -7.5% points from median

      0 %

The maximum and threshold performance levels applicable to the awards were set at levels that the Compensation Committee believed were consistent with the historical 75th and 25th percentile levels, respectively, for the TSRs of the SPSIHE Subset. The “SPSIHE Subset” is a subset of 26 companies in the S&P Healthcare Equipment Select Industry Index that are also on the S&P 500 Index or S&P 400 Midcap Index. We believe this group is a strong comparator for performance purposes as it includes companies of comparable size with similar business models.

RSUs.    RSUs awarded in 2020 to the NEOs vest 25% annually over four years on each anniversary of the award date, subject to continued employment of the award recipient through the applicable vesting date. RSUs awarded prior to February 2020 vest 50% on the third and fourth anniversaries of the award date, subject to continued employment of the award recipient through the applicable vesting date.

At the Compensation Committee meeting immediately preceding the stockholder meeting in May of each year, the Compensation Committee generally determines the size of the long-term incentive award for each NEO. In keeping with our commitment to provide a total compensation package that emphasizes at-risk components of pay, long-term incentives for 2020 comprised, on average, 67% of the value of the NEO’s target total direct compensation package.

For 2020, the CEO evaluated each NEO’s performance (other than his own), as discussed previously (see “Compensation Process” above), and established specific recommendations for the Compensation Committee’s consideration. Accordingly, the Compensation Committee established awards for the NEOs (other than the CEO) based on these recommendations and the Compensation Committee’s assessment of the factors noted above for each executive. The Compensation Committee, with input from the full Board, evaluated the CEO’s performance using the same criteria as discussed above in “Compensation Process” to establish the appropriate award for the CEO. Equity awards are granted under the Company’s Long-Term Stock Incentive Compensation Program (the “Long-Term Stock Program”), which was last approved by the stockholders in May 2017. The equity awards granted to the NEOs for 2020 are set forth in the accompanying “Grants of Plan-Based Awards in Fiscal Year 2020” table below.

Value of Equity Awarded in 2020.    In granting equity awards, the Compensation Committee values stock options as of the grant date using the Black-Scholes valuation model, and RSUs and PBRSUs are valued at the fair market value of the

 

 

 
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underlying shares on the grant date with the value of PBRSUs based on the “target” level of performance. Under applicable accounting rules, however, the grant-date fair value of the PBRSUs awarded to our NEOs is calculated using a Monte Carlo simulation pricing model. The PBRSUs are included as compensation for our NEOs in the “Summary Compensation Table” based on this valuation methodology. For information on the assumptions used in this fair value computation, refer to Note 14 of the “Notes to Consolidated Financial Statements” in our 2020 Annual Report. The Compensation Committee does not apply the Monte Carlo simulation when it determines the number of PBRSUs to be awarded to an executive (instead basing the value of a PBRSU on the fair market value of the underlying “target” number of shares on the grant date) to simplify the award process and provide more consistent award sizing (based on the number of shares subject to the awards) from year to year.

The following chart shows the values of the PBRSU awards approved by the Compensation Committee in 2020 that were used to determine the number of shares subject to the awards (based on the $72.68 closing price per share of our common stock on the grant date for PBRSUs, calculated at the “target” level of performance and without taking the Monte Carlo simulation pricing model into account), as well as the accounting grant-date fair value of the PBRSUs we are required to use under applicable SEC rules to report in the “Summary Compensation Table” (calculated as noted in the footnotes to the “Summary Compensation Table,” and including the impact of the Monte Carlo simulation pricing model).

 

     2020 PBRSU Awards    

Name

   Value
Based on
May 7, 2020
Stock Price
  

Value Required

to be Included

in Summary

    Compensation    

Table

   

Mr. Mussallem

     $ 1,924,203      $ 2,188,776    

Mr. Ullem

       561,453        638,651    

Mr. Bobo

       441,531        502,240    

Mr. Lemercier

       310,707        353,428    

Mr. Wood

       501,492        570,446          

The grant-date fair value of all the long-term incentive awards granted by the Company to the NEOs in 2020 is included in the “Grants of Plan-Based Awards in Fiscal Year 2020” table below.

Determination as to 2017 PBRSU Awards.    In May 2017, the Compensation Committee granted awards of PBRSUs to certain of our executives. For these awards to vest, Edwards’ TSR had to be at or above -7.5% points from median of the other companies that were listed in the SPSIHE Subset on the grant date and were still publicly traded on April 30, 2020, the last day of the three-year performance period. Edwards’ TSR compared to the threshold, target, and maximum performance levels of the SPSIHE Subset as of April 30, 2020, as well as the 3-year TSRs relative to each level, are as follows:

 

2017 PBRSU

Performance

Levels

   Company’s TSR vs
Median of SPSIHE Subset
  

TSR Over

Three-Year

Period

  

Payout as a

Percentage of
Target Award

Maximum

   +7.5% points from Median        21.39 %        175 %

Target

   Median        13.89 %        100 %

Threshold

   -7.5% points from Median        6.39 %        25 %

Edwards

   +15.27% points from Median        29.16 %        175 %

The Compensation Committee determined that as of April 30, 2020 our relative TSR was at +15.27% points above the median and, accordingly, 175% of the target award for each executive vested. Amounts realized by our NEOs attributable to these awards can be found in the “Option Exercises and Stock Vested in Fiscal Year 2020” table below.

 

 

 
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Stock Ownership Guidelines and Holding Requirement.    Under our guidelines, executives are expected to own shares of Edwards’ stock as follows:

 

CEO

 

Other NEOs

6 times base salary   3 times base salary
All of our NEOs are in compliance with the
ownership guidelines.

Stock ownership guidelines were established to create additional owner commitment and to emphasize stockholder value creation. Expected ownership levels are adjusted as the executives’ annual base salaries change. Executives who have not met the guidelines must hold 50% of the net shares of our common stock acquired in connection with the exercise of stock options and the vesting of restricted stock and RSU awards (after satisfaction of applicable taxes and, in the case of options, payment of the exercise price) until the guidelines are met. In the event an executive achieved the guideline but was unable to maintain the ownership level due to a decline in the price of our common stock, the 50% holding requirement is reinstated.

Prohibition on Pledging and Hedging.    We have adopted a policy prohibiting all members of the Board, all employees with a title of “vice president” equivalent or above, and any other employee designated as a “Designated Insider” from time to time under our insider trading policy, from pledging or hedging the Company’s securities. Pledging includes holding the Company’s securities in a margin account or otherwise pledging the Company’s securities as collateral for a loan. Hedging includes entering into short sales, options, puts, calls and sales against the box, as well as hedging of the Company’s securities or derivative transactions including equity swaps, forwards, futures, collars and exchange funds. To our knowledge, none of our NEOs have engaged in pledging or hedging with respect to our common stock.

Market Timing of Equity Awards.    We do not have any program, plan or practice to time equity grants in coordination with the release of material information. Annual equity awards for the NEOs are generally approved at the Compensation Committee meeting in May of each year and awarded on the date of the Board meeting immediately following that Committee meeting. Any other equity awards to the NEOs, including grants to new hires, are generally made on the date of the next regularly scheduled Board meeting.

Benefits and Perquisites.    The NEOs are eligible to participate in employee benefit programs generally offered to our employees employed in the same jurisdiction as the NEO including, for all NEOs employed in the United States, the Edwards Lifesciences Corporation 401(k) Savings and Investment Plan (“401(k)”), which provides for a Company matching contribution. The Company matches employee 401(k) contributions dollar for dollar up to the first 4% of cash compensation, and 50% on the next 2%. In addition, we provide certain other perquisites to our NEOs described below that are not generally available to our employees.

The Compensation Committee conducts an annual review of the competitiveness of our perquisite program, including its individual components and levels, against the perquisite programs of companies in the Comparator Group. As a result of these reviews, the Compensation Committee may make adjustments from time to time in the benefits and perquisites provided as it determines to be appropriate.

We believe that providing perquisites enhances the competitiveness of the executive’s compensation in a relatively inexpensive way. These perquisites are described below and reported in the “Summary Compensation Table.”

Our perquisite program for the NEOs includes the following:

Car Allowance.    An annual car allowance is paid as follows: $13,200 for the CEO, and $10,800 for the other U.S.-based NEOs. An executive residing outside of the U.S. is entitled to an amount in local currency that provides the executive with similar car benefits as those received by an executive in the U.S. The car allowance is intended to cover expenses related to the lease, purchase, insurance, and maintenance of a vehicle, and mileage for business use. It is provided in recognition of the need to have executives visit hospitals, physicians, business partners, and other stakeholders in order to fulfill their job responsibilities.

 

 

 
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Executive Physical Examination.    The Company paid up to $2,149 for each annual executive physical examination received by a NEO. This benefit encourages the proactive management of the executive’s health, helping best position the executive team to be able to address the ongoing and day-to-day issues we face.

Perquisite Allowance.    NEOs receive a fixed annual allowance for certain expenses. The CEO receives $40,000 (including one club membership that is being used for corporate business purposes, at a cost of $7,103 in 2020), and the other NEOs each receive $20,000. This benefit recognizes the diverse nature of expenses that have a business nexus that may be incurred by our executives. The allowance may also be used to cover certain personal financial, estate and tax planning costs, as we believe that it is appropriate for the executives to have professional assistance in managing their total compensation, permitting them to focus their full attention on growing and managing our business. Mr. Lemercier also receives a monthly housing allowance.

Pension. Mr. Lemercier participates in our pension plan applicable to our salaried employees at our Nyon, Switzerland facility (see the section “Pension Benefits” below). We do not have any pension plans in which any of the other NEOs participate.

Deferred Compensation.    We have adopted a deferred compensation plan for the NEOs and certain other management employees to enable them to save for retirement by deferring their income and the associated tax to a future date or termination of employment. Under the Executive Deferred Compensation Plan (the “EDCP”), return on compensation deferred by participants is based on investment alternatives selected by the participant. We believe that the EDCP is comparable to similar plans offered by companies in the Comparator Group.

The amounts deferred and accrued under the EDCP for the NEOs are reported below in the “Summary Compensation Table” and the “Nonqualified Deferred Compensation Plans” table.

Employment and Post-Termination Agreements.    We have entered into an employment agreement with the CEO, as well as change-in-control severance agreements (the “change-in-control severance agreements”) with the CEO and our other NEOs as discussed below. Messrs. Bobo, Ullem, and Wood are eligible to participate in a general severance plan for eligible U.S. employees to receive severance benefits, and Mr. Lemercier is eligible to receive severance benefits, in each case upon a qualifying termination of employment.

Chief Executive Officer Employment Agreement.    We entered into an amended and restated employment agreement with Mr. Mussallem on March 9, 2009, which was approved by the Compensation Committee and provides for, among other things, his appointment as Chief Executive Officer, an annual base salary, bonus and long-term incentive awards as determined by the Board, and, in certain circumstances, severance payments upon termination of employment. The agreement renews automatically for successive one-year terms.

Mr. Mussallem’s base salary is reviewed and may be adjusted annually based on the Compensation Committee’s review of the Comparator Group data in consultation with the Compensation Consultant, and Mr. Mussallem’s performance. The Compensation Committee followed the same philosophy and programs described above for executives in determining 2020 compensation for Mr. Mussallem. In addition, the Compensation Committee reviewed a tally sheet, which affixed a dollar amount to all components of Mr. Mussallem’s compensation, including current compensation, equity awards and benefits.

The Compensation Committee believes, after reviewing Mr. Mussallem’s target total direct compensation, individual performance, and contribution to our financial results during 2020, that Mr. Mussallem’s total compensation and each component thereof were in line with our compensation philosophy and objectives.

If Mr. Mussallem’s employment is involuntarily terminated by us without “cause,” as defined in the employment agreement, we are required to pay certain severance benefits, provided he is not receiving the severance benefits under his change-in-control severance agreement. The material terms of the severance arrangement are described in the section “Potential Payments upon Termination or Change in Control” below.

Change-in-Control Severance Agreements.    We have entered into agreements with the NEOs pursuant to which such individuals will be provided certain payments and benefits in the event of termination of employment following a change

 

 

 
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in control of the Company. We believe that these agreements enhance the likelihood of retaining the services of the executives in the event we were to become an acquisition target and allow the NEOs to continue to focus their attention on our business operations, stockholder value and the attainment of long-term and short-term objectives without undue concern over their employment or financial situations. The material terms of the agreements are described in the section “Potential Payments upon Termination or Change in Control” below.

We believe that the level of severance payments is fair and reasonable based on the value we would derive from the services provided by the executives with change-in-control severance agreements prior to, and following, a change in control.

Tax Implications – Policy Regarding Section 162(m).    Federal income tax law generally prohibits a publicly-held company from deducting compensation paid to a current or former NEO that exceeds $1 million during the tax year. Certain awards granted by the Company before November 2, 2017 that were based upon attaining pre-established performance measures set by the Compensation Committee, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit. There can be no assurance that any compensation the Compensation Committee intended to be deductible will in fact be deductible. Although the potential deductibility of compensation is one of the factors the Compensation Committee notes when designing the Company’s executive compensation program, the Compensation Committee has the flexibility to take any compensation-related actions it determines are in the best interests of the Company and its stockholders, including awarding compensation that will not be deductible for tax purposes.

The Compensation Committee recognizes the importance of preserving our ability to design compensation programs to attract and retain skilled and qualified individuals in a highly competitive market. The Compensation Committee will continue to design salary, annual incentive bonuses and long-term incentive compensation in a manner that the Compensation Committee believes prudent or necessary to hire and retain our NEOs, and may approve non-deductible compensation arrangements for our executive officers from time to time when it believes that these other considerations outweigh the benefit of the tax deductibility of the compensation.

COMPENSATION AND GOVERNANCE COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” contained in this Proxy Statement with management. Based on its review and discussions, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in this Proxy Statement and incorporated by reference into the Company’s 2020 Annual Report on Form 10-K.

The Compensation and Governance Committee:

William J. Link, Ph.D. (Chair)

Nicholas J. Valeriani

Martha H. Marsh

Paul A. LaViolette

This report shall not be deemed soliciting material or to be filed with the SEC, or incorporated by reference in any document so filed, whether made before or after the date hereof, except to the extent we specifically request that it be treated as soliciting material or it is specifically incorporated by reference therein.

 

 

 
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EXECUTIVE COMPENSATION AND OTHER INFORMATION

 

EXECUTIVE COMPENSATION

The “Summary Compensation Table” quantifies the value of the different forms of compensation earned by or awarded to our NEOs for 2020. The primary elements of each NEO’s total compensation reported in the table are base salary, annual bonus and long-term equity incentives, consisting of stock options, PBRSUs and RSUs. NEOs also received the other benefits listed in the “All Other Compensation” column of the “Summary Compensation Table,” as further described in the footnotes to the table.

The “Summary Compensation Table” should be read in conjunction with the tables and narrative descriptions that follow. A description of the material terms of each NEO’s base salary and annual bonus is provided immediately following the “Summary Compensation Table.” The “Grants of Plan-Based Awards in Fiscal Year 2020” table, and the accompanying description of the material terms of the stock options, PBRSUs, and RSUs granted in 2020, provides information regarding the long-term equity incentives awarded to NEOs in 2020. The “Outstanding Equity Awards at 2020 Fiscal Year-End” and “Option Exercises and Stock Vested in Fiscal Year 2020” tables provide further information on the NEOs’ potential realizable value and actual value realized with respect to their equity awards.

Summary Compensation Table

The following table sets forth a summary, for the years indicated, of the compensation of the principal executive officer, the principal financial officer and our three other most highly compensated executive officers whose total compensation for 2020 was in excess of $100,000 and who were serving as executive officers at the end of 2020. No other executive officers that would have otherwise been includable in the table on the basis of total compensation for 2020 have been excluded by reason of their termination of employment or change in executive status during that year.

 

Name and

Principal Position

  Year   Salary $(1)  

Bonus

$(2)

  Stock
Awards
$(3)
  Option
Awards
$(3)
  Non-Equity
Incentive Plan
Compensation
$(4)
  Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
$(5)
  All Other
Compensation
$(6)
  Total $

Mr. Mussallem

      2020       1,121,299             3,731,409       4,232,880       734,993             230,352       10,050,933

Chairman of the Board and Chief Executive Officer

      2019       1,072,240             3,641,664       4,235,402       2,381,117             190,550       11,520,973
      2018       1,034,769             3,409,941       3,958,800       1,668,227             207,212       10,278,949

Mr. Ullem

      2020       647,079       49,583       1,091,084       1,236,859       262,500             98,860       3,385,965

Corporate Vice President,

Chief Financial Officer

      2019       619,760             1,047,907       1,098,595       756,864             47,945       3,571,071
      2018       593,628             843,514       975,537       559,944             49,207       3,021,830

Mr. Bobo

      2020       640,931             856,555       975,897       252,000             77,881       2,803,264

Corporate Vice President

      2019       615,455       2,000       807,687       935,153       671,600             73,546       3,105,441
      2018       592,999       4,000       772,062       891,964       563,790             78,584       2,903,399

Mr. Lemercier

      2020       625,360             604,174       688,517       254,746       1,925,308       246,810       4,344,915

Corporate Vice President

      2019       576,854             546,270       633,331       555,287       804,765       197,453       3,313,960

Mr. Wood

      2020       639,273             968,369       1,097,961       273,000             101,114       3,079,717

Corporate Vice President

      2019       605,791       4,000       849,708       988,184       756,864             88,736       3,293,283
        2018       574,430       4,000       804,231       936,516       507,683             91,543       2,918,403

 

(1)

The amounts shown for 2020 include amounts that were deferred into the EDCP as follows: Mr. Mussallem – $224,469; Mr. Ullem – $66,544; Mr. Bobo – $458,056; Mr. Lemercier – $0, and Mr. Wood – $66,081. The EDCP is more fully described in the section following the “Nonqualified Deferred Compensation Plans” table below. Mr. Lemercier’s salary is paid in Swiss Francs. For 2020, Mr. Lemercier’s salary is reported in this table by converting Swiss Francs to United States dollars using an exchange ratio of 1.0657 (which is our average monthly intercompany Swiss Franc to United States dollar exchange rate for the year). For 2019, Mr. Lemercier’s salary is reported in this table by converting Swiss Francs to United States dollars using an exchange ratio of 1.006404 (which is our average monthly intercompany Swiss Franc to United States dollar exchange rate for the year).

 

(2)

The amount shown for Mr. Ullem includes an award received through our Discretionary Cash Award Program which recognizes extraordinary contributions to our Company. The amounts shown for Messrs. Bobo and Wood include awards received through our Innovation Rewards Program which compensates active employee inventors for their patent contributions to our Company.

 

 

 
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EXECUTIVE COMPENSATION AND OTHER INFORMATION

 

(3)

The amounts reported in these columns reflect the aggregate grant-date fair value of the stock awards and option awards during the applicable year. These values have been determined under the principles used to calculate the grant-date fair value of equity awards for purposes of our financial statements in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. PBRSUs have been valued for this purpose based on a Monte Carlo simulation pricing model. For a discussion of the assumptions and methodologies used to value the awards reported in these columns, please see the discussion of stock awards and option awards contained in Note 14 of the “Notes to Consolidated Financial Statements” in our 2020 Annual Report.

 

 

Under the terms of our PBRSU awards at grant, between 0% and 175% of the target number of shares subject to the awards can vest based on performance and the other vesting conditions applicable to the awards. For the PBRSUs awarded to our NEOs in 2020, 2019 and 2018, the table below sets forth (i) the grant-date fair value of the awards determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, with these values determined based on a Monte Carlo simulation pricing model (included in the “Probable Outcome” column below), and (ii) the grant-date fair value of these awards assuming that the maximum level of performance was achieved.

 

Name

   Year   

Probable Outcome of

Performance Conditions

Grant-Date Fair Value

($)

  

Maximum Outcome of

Performance Conditions

Grant-Date Fair Value

($)

Mr. Mussallem

       2020        2,188,776        3,830,357
       2019        2,099,509        3,674,140
       2018        1,970,143        3,447,749

Mr. Ullem

       2020        638,651        1,117,640
       2019        547,909        958,840
       2018        486,960        852,180

Mr. Bobo

       2020        502,240        878,921
       2019        465,480        814,590
       2018        446,070        780,623

Mr. Lemercier

       2020        353,428        618,500
       2019        315,169        551,545

Mr. Wood

       2020        570,446        998,280
       2019        489,724        857,017
         2018        464,656        813,148

 

(4)

Amounts shown in this column for 2020 were earned under the Incentive Plan based on achievement of performance criteria for 2020, as described in the “Compensation Discussion and Analysis” above. Amounts shown for Mr. Bobo include $83,160 deferred into the EDCP. Amounts earned but not deferred were paid to the executives for 2020 performance.

 

(5)

Mr. Lemercier participates in our pension plan for salaried employees at our Nyon, Switzerland facility (see section “Pension Benefits” below). The amounts shown include employer contributions and investment earnings, and do not include regular employee contributions of approximately $123,469 in 2020. The amount of Mr. Lemercier’s regular employee contributions to the Nyon pension plan is reflected in the total amount included in the “Base Salary” column of the “Summary Compensation Table.”

 

 

 

 
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(6)

The “All Other Compensation” column includes the following amounts paid to the NEOs for the year ended December 31, 2020. The amounts disclosed are the actual costs to us of providing these benefits.

 

 

Type of

Compensation

 

 

 

    Mr. Mussallem    

 

 

 

    Mr. Ullem    

 

 

 

    Mr. Bobo    

 

 

 

    Mr. Lemercier    

 

 

 

    Mr. Wood    

 

401(k) Company Match

    $ 14,250     $ 11,611     $ 14,250     $     $ 14,250

EDCP Company Contribution

      160,014       55,453       31,917             55,068

Company Contribution – Zurich vita Pension Plan (saving)

                        166,078      

Car Allowance or Company Car Lease Payments

      13,200       10,800       10,800       27,448       10,800

Officer Perquisites (Flexible Allowance, including, among other things, financial planning expenses, airline club dues, club membership dues, home office supplies, personal travel expenses; Annual Physical Examination Expenses and Life Insurance Premiums)

      42,888       20,996       20,914       21,313 *       20,996

Housing Allowance

                        31,971      

Total

    $ 230,352     $ 98,860     $ 77,881     $ 246,810     $ 101,114

 

  *

Converted from 19,999 Swiss Francs to United States dollars, using an exchange ratio of 1.0657 (which is our average monthly intercompany Swiss Franc to United States dollar exchange rate for the year).

 

Employment Agreements.    We entered into an amended and restated employment agreement with Mr. Mussallem on March 9, 2009 as described in the “Compensation Discussion and Analysis” section above. We do not have employment agreements with the other NEOs. Post-termination benefits are discussed in the section “Potential Payments Upon Termination or Change in Control” below.

 

 

 
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Grants of Plan-Based Awards in Fiscal Year 2020

The following table provides certain summary information concerning each grant of an incentive award made to NEOs in 2020 under a compensation plan.

 

           

 

Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards(2)

 

 

Estimated Future Payouts
Under Equity Incentive
Plan Awards(4)

 

All Other
Stock
Awards:
Number of
Shares of
Stock/

Units (#)

  All Other
Option
Awards;
Number of
Securities
Underlying
Options
(#)
  Exercise
or Base
Price of
Option
Awards
($/Share)
  Closing
Price on
Grant
Date
($)
 

Grant-Date  

Fair Value
of Stock
and
Option
Awards
($)(8)

Name

  Grant
Date(1)
  Approval
Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)

Mr. Mussallem

            02/19/2020             1,615,370 (3)        3,230,740                                                
      05/07/2020       05/06/2020                                                 212,100 (6)        72.68       72.68       4,232,880
      05/07/2020       05/06/2020                                           21,225 (5)                          1,542,633
      05/07/2020       05/06/2020                               26,475       46,331                               2,188,776

Mr. Ullem

            02/19/2020             500,000 (3)        1,000,000                                                
      05/07/2020       05/06/2020                                                 56,100 (7)        72.68       72.68       1,236,859
      05/07/2020       05/06/2020                                           6,225 (5)                          452,433
      05/07/2020       05/06/2020                               7,725       13,518                               638,651

Mr. Bobo

            02/19/2020             480,000 (3)        960,000                                                
      05/07/2020       05/06/2020                                                 48,900 (6)        72.68       72.68       975,897
      05/07/2020       05/06/2020                                           4,875 (5)                          354,315
      05/07/2020       05/06/2020                               6,075       10,631                               502,240

Mr. Lemercier

            02/19/2020             421,180 (3)        842,360                                                
      05/07/2020       05/06/2020                                                 34,500 (6)        72.68       72.68       688,517
      05/07/2020       05/06/2020                                           3,450 (5)                          250,746
      05/07/2020       05/06/2020                               4,275       7,481                               353,428

Mr. Wood

            02/19/2020             520,000 (3)        1,040,000                                                
      05/07/2020       05/06/2020                                                 49,800 (7)        72.68       72.68       1,097,961
      05/07/2020       05/06/2020                                           5,475 (5)                          397,923
        05/07/2020       05/06/2020                               6,900       12,075                               570,446

 

(1)

Our practice is to grant equity-based awards on the date of the Board meeting following the Compensation Committee’s approval of the grants.

 

(2)

These are awards payable under the Incentive Plan for 2020. See the discussion on “Annual Cash Incentive Payment” beginning at page 35 for additional information. Amounts for Mr. Lemercier were converted from Swiss Francs to United States dollars using an exchange rate of 1.027267 CHF/USD (reflects the exchange rate as of January 2020).

 

(3)

See the discussions beginning at page 29 on “2020 Annual Incentive Plan” and page 35 on “Annual Cash Incentive Payment” and on “Incentive Pay Objective” for additional information. The amounts set forth above represent the Incentive Pay Objective that were set in the beginning of 2020 prior to the pandemic that would have been paid for performance meeting the pre-established objectives at the “target” and “maximum” performance levels.

 

(4)

These are PBRSUs granted under the Long-Term Stock Program that vest based on a combination of certain length of service and market conditions. The material terms of the PBRSUs are described in the section “Equity Incentive Plan Awards—Performance-Based Restricted Stock Units” below.

 

(5)

RSUs with respect to shares of common stock are granted under the Long-Term Stock Program. RSUs granted since February 2020 become vested in four equal annual installments beginning on the first anniversary of the grant date and are subject to the executive’s continued employment with the Company. The material terms of the RSUs are described in the section “Equity Incentive Plan Awards—Restricted Stock Units” below.

 

(6)

Options to acquire common stock are granted under the Long-Term Stock Program. Consistent with vesting standards established by the Company for its stock option grants to executives who are retirement-eligible, options vest and become exercisable in 36 equal monthly installments beginning one month after the award date, and are subject to the executive’s continued employment with the Company. The material terms of the options are described in the section “Equity Incentive Plan Awards—Stock Options” below.

 

(7)

Options to acquire common stock are granted under the Long-Term Stock Program. The options vest and become exercisable in four equal annual installments beginning on the first anniversary of the grant date. The material terms of the options are described in the section “Equity Incentive Plan Awards—Stock Options” below.

 

(8)

The amounts reported in this column reflect the grant-date fair value of the stock award or option award determined under the principles used to calculate the grant-date fair value of equity awards for purposes of our financial statements. For the assumptions and methodologies used to value the awards, see footnote 3 to the “Summary Compensation Table” above.

Non-Equity Incentive Plan Awards.    The material terms of the non-equity incentive plan awards reported in the table above are described in the “Compensation Discussion and Analysis” section under the heading, “2020 Annual Incentive Plan” and “Elements of Compensation—Annual Cash Incentive Payment.”

Equity Incentive Plan Awards.    Each of the equity incentive awards reported in the table above was granted under, and is subject to, the terms of the Long-Term Stock Program. The Compensation Committee administers the Long-Term Stock

 

 

 
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EXECUTIVE COMPENSATION AND OTHER INFORMATION

 

Program and has authority to interpret the plan provisions and make all required determinations thereunder. Additional terms of the equity incentive awards reported in the table above are described in the “Compensation Discussion and Analysis” section under the heading, “Elements of Compensation—Long-Term Incentive Awards” and in the footnotes accompanying the table above. The terms of the accelerated vesting provisions for equity incentive awards are described in this section and in the section titled “Potential Payments Upon a Termination or Change in Control.”

The table above reports awards of stock options granted to our NEOs in 2020. Each option represents a contractual right to receive one share of our common stock if the option becomes vested and is exercised, subject to payment of the exercise price of the option by the award holder. The terms of each option are summarized in the chart below.

 

STOCK OPTIONS

Maximum Term (expiration date)

 

  Seven years from grant date

Exercise Price Per Share

 

  Fair market value of a share of common stock on the grant date

Vesting Schedule—Regular (all option grants in the chart above awarded to Messrs. Ullem and Wood)

 

  25% annually over four years following the grant date

Vesting Schedule—Retirement-Eligible (Messrs. Mussallem, Bobo and Lemercier)

 

  Monthly over 36 months following the grant date

Effect of Change in Control

 

  No automatic acceleration upon a change in control of the Company

 

  Accelerated vesting upon a change in control with either (1) a specified termination of employment (a “double-trigger”) under the NEO’s change-in-control severance agreement, or (2) termination of the awards in connection with the change in control

Effect of Termination of Employment of Retirement-Eligible NEOs (Messrs. Mussallem, Bobo and Lemercier)

 

  Unvested options held by the NEO will immediately terminate and be forfeited

 

  Vested options held by the NEO will remain exercisable and will terminate on the earlier of five years from termination date or the normal expiration date

Effect of Termination of Employment of Non-Retirement-Eligible NEOs (Messrs. Ullem and Wood)

 

  Unvested options held by the NEO will immediately terminate and be forfeited

 

  Vested options held by the NEO will remain exercisable and will terminate on the earlier of 90 days from termination date or the normal expiration date

Dividend Rights

 

  No dividend rights

 

 

 
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The “Grant of Plan-Based Awards in Fiscal Year 2020” table above reports awards of RSUs granted to our NEOs in 2020. Each RSU represents a contractual right to receive one share of our common stock if the time-based vesting requirements applicable to the award are satisfied, as summarized in the chart below.

 

RESTRICTED STOCK UNITS

Vesting Schedule

  

  25% of the total number of units subject to the award on the first, second, third and fourth anniversaries of the award date

Effect of Change in Control

  

  No automatic acceleration upon a change in control of the Company; accelerated vesting upon a change in control with either (1) a specified termination of employment (a “double-trigger”) under the NEO’s change-in-control severance agreement, or (2) termination of the awards in connection with the change in control

Effect of Termination of Employment of Retirement- Eligible NEOs (including Messrs. Mussallem, Bobo and Lemercier)

  

  RSUs held by the NEO will vest 25% for each full year of employment from the grant date

 

  Any remaining unvested RSUs held by the NEO and not earned as mentioned above will terminate and be forfeited

Effect of Termination of Employment of Non-Retirement-Eligible NEOs (including Messrs. Ullem and Wood)

  

  Unvested RSUs held by the NEO will immediately terminate and be forfeited

Dividend Rights

  

  Dividend equivalent units may be paid or credited, either in cash or in actual or phantom shares of common stock, on outstanding RSUs; however, to date we have never paid a dividend on our common stock

The “Grant of Plan-Based Awards in Fiscal Year 2020” table above reports awards of PBRSUs granted to our NEOs in 2020. Each PBRSU represents a contractual right to receive one share of our common stock if the performance-based and time-based vesting requirements applicable to the award are satisfied, as summarized in the chart below.