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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.           )

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Soliciting Material under §240.14a-12

 

Bristol-Myers Squibb Company

(Name of Registrant as Specified In Its Charter)

 

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PROXY STATEMENT



TABLE OF CONTENTS

 
  Page

PROXY STATEMENT SUMMARY

  3

ELECTION OF DIRECTORS

  9

Majority Vote Standard and Mandatory Resignation Policy

  9

Criteria for Board Membership

  9

Director Independence

  9

Director Succession Planning and Identification of Board Candidates

  10

2019 Director Nominees

  12

CORPORATE GOVERNANCE AND BOARD MATTERS

  18

Active Board Oversight of Our Governance

  18

Board Leadership Structure

  18

Board's Role in Strategic Planning and Risk Oversight

  19

Risk Assessment of Compensation Policies and Practices

  21

Annual Evaluation Process

  21

Responsiveness to Shareholder Feedback

  22

Meetings of our Board

  22

Annual Meeting of Shareholders

  22

Committees of our Board

  23

Codes of Conduct

  25

Related Party Transactions

  26

Disclosure Regarding Political Activities

  27

Global Corporate Citizenship & Sustainability

  27

Responsible Drug Pricing Strategy & Transparency

  28

Communications with our Board of Directors

  29

Compensation of Directors

  30

EXECUTIVE COMPENSATION

   

Compensation Discussion and Analysis

  33

Compensation and Management Development Committee Report

  54

Summary Compensation Table

  55

Grants of Plan-Based Awards

  56

Outstanding Equity Awards at Fiscal Year-End

  57

Option Exercises and Stock Vesting

  58

Present Value of Accumulated Pension Benefits

  60

Non-Qualified Deferred Compensation Plan

  60

Post-Termination Benefits

  61

Termination of Employment Obligations (Excluding Vested Benefits)

  65

Pay Ratio

  66

ITEMS TO BE VOTED UPON

   

Item 1—Election of Directors

  9

Item 2—Advisory Vote to Approve the Compensation of our Named Executive Officers

  67

Equity Compensation Plan Information

  67

Item 3—Ratification of the Appointment of Independent Registered Public Accounting Firm

  68

Audit and Non-Audit Fees

  68

Pre-Approval Policy for Services Provided by our Independent Registered Public Accounting Firm

  69

Audit Committee Report

  69

Item 4—Shareholder Proposal on Shareholder Right to Act by Written Consent

  71

VOTING SECURITIES AND PRINCIPAL HOLDERS

  73

Common Stock Ownership by Directors and Executive Officers

  73

Principal Holders of Voting Securities

  74

Section 16(a) Beneficial Ownership Reporting Compliance

  74

Policy on Hedging and Pledging

  74

OTHER MATTERS

  75

Advance Notice Procedures

  75

2020 Shareholder Proposals

  75

Compensation Committee Interlocks and Insider Participation

  75

Availability of Corporate Governance Documents

  75

FREQUENTLY ASKED QUESTIONS

  76

EXHIBIT A—Categorical Standards of Independence

  A-1

EXHIBIT B—Directions to our Lawrence Township Office

  B-1

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430 E. 29th Street, 14th Floor
New York, New York 10016




NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS



              Notice is hereby given that the 2019 Annual Meeting of Shareholders will be held at Bristol-Myers Squibb Company, 3401 Princeton Pike, Lawrence Township, New Jersey, on May 29, 2019, at 10:30 a.m. for the following purposes as set forth in the accompanying Proxy Statement:

    to elect to the Board of Directors the 11 persons nominated by the Board, each for a term of one year;

    to conduct an advisory vote to approve the compensation of our Named Executive Officers;

    to ratify the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2019;

    to consider one shareholder proposal, if presented at the meeting; and

    to transact such other business as may properly come before the meeting or any adjournments thereof.

              Holders of record of our common and preferred stock at the close of business on April 30, 2019 will be entitled to vote at the meeting.

  By Order of the Board of Directors
GRAPHIC

Katherine R. Kelly
Vice President, Associate General Counsel
and Corporate Secretary

Dated: April 30, 2019


YOUR VOTE IS IMPORTANT

Regardless of the number of shares you own, your vote is important. If you do not attend the Annual Meeting to vote in person, your vote will not be counted unless a proxy representing your shares is presented at the meeting. To ensure that your shares will be voted at the meeting, please vote in one of these ways:

    (1)
    GO TO WWW.PROXYVOTE.COM and vote via the Internet;

    (2)
    CALL THE TOLL-FREE TELEPHONE NUMBER (800) 690-6903 (this call is toll-free in the United States); or

    (3)
    MARK, SIGN, DATE AND PROMPTLY RETURN the enclosed proxy card in the postage-paid envelope.

If you do attend the Annual Meeting, you may revoke your proxy and vote by ballot.


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Dear fellow shareholders:

You are cordially invited to attend the Annual Meeting of Shareholders of Bristol-Myers Squibb Company on Wednesday, May 29, 2019, at 10:30 a.m. at our offices located in Lawrence Township, New Jersey. I hope that you will be able to attend.

During the meeting, we will cover a number of business items, including the election of directors, advisory vote to approve the compensation of our Named Executive Officers, ratification of the appointment of an independent registered public accounting firm, and consideration of one shareholder proposal.

We will also use the meeting as an opportunity to look back on the past year, highlighting everything from our strong commercial and operational execution to our clinical advances to our progress against our Sustainability 2020 Goals and the important work of the BMS Foundation. We will also look ahead to the next steps in our announced acquisition of Celgene Corporation—creating a leading focused specialty biopharma company well positioned to address the needs of patients facing serious diseases.

Last year, over 86% of the outstanding shares were represented at the Annual Meeting and earlier this year, over 75% of outstanding shares were represented at our Special Meeting on April 12, 2019. Whether or not you attend in person, I hope that your shares will be represented at the meeting. Your vote is very important.

I look forward to welcoming many of you to our 2019 Annual Meeting.


GRAPHIC

Giovanni Caforio, M.D.
Chairman of the Board and Chief Executive Officer

 

 

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To my fellow shareholders:

              Bristol-Myers Squibb's Mission is "to discover, develop and deliver innovative medicines that help patients prevail over serious diseases." My fellow Directors and I believe in this Mission, and we strive to ensure from the boardroom that the company is successful in this important undertaking. In 2018, with the Board's independent oversight and effective guidance, our management team's focused execution of our strategy resulted in increased revenues and an increase in both our GAAP and non-GAAP earnings per share. These results were primarily driven by superior commercial execution for our prioritized brands, including Opdivo and Eliquis (two of the 10 largest selling drugs in the pharmaceutical industry in 2018).

              Your Board and management team understand the importance of maintaining a robust pipeline for future growth as well as capitalizing on opportunities to create sustainable long-term growth for our shareholders. To that end, following a comprehensive strategic review and extensive due diligence, we decided to acquire Celgene Corporation ("Celgene"). Together with Celgene, our combined company will be a global biopharma leader, with the #1 oncology franchise, a top 5 immunology and inflammation franchise, best-in-class cardiovascular franchise, significant near-term launch opportunities, and a deep and broad pipeline. We are very pleased that this transaction has been approved by both companies' shareholders and we look forward to closing the transaction later this year following regulatory approval.

              Each year, your Board evaluates and re-asserts its commitment to sound corporate governance. Over the last year, we have focused in particular on the following key areas:

Setting the company strategy for sustainable long-term value creation. My fellow Directors and I firmly believe in the importance of a strong partnership between management and the Board to set the company strategy—our long-term success as a company is inextricably linked to the Board's proactive, independent, and constructive engagement with management. This partnership proved critical in 2018 as we embarked on a robust strategic review process of numerous business development opportunities, with thorough Board oversight that ultimately led to the decision to acquire Celgene in early 2019. Our Board met eight times between June 2018 and January 2019 to discuss the risks and merits of the Celgene opportunity and oversaw all aspects of the process. Our Board will continue to provide critical oversight of our management team as they execute our strategy to create long-term shareholder value and support the pursuit of our Mission.

Constructive dialogue with shareholders. Shareholder engagement remains a top priority and we are committed to this because of the valuable insights we gain. In 2018, management and members of the Board, including me, met with some of our shareholders and had productive discussions on a number of topics, including board composition, company strategy and execution, sustainability and risk oversight, as well as executive compensation. More recently, our Board and members of management engaged with shareholders extensively about the Celgene transaction. We believe the support of over 75% of shareholders for the transaction is an important endorsement of the value it brings to the company. We recognize, however, that some shareholders have expressed concerns about the deal. We are committed to continuing an open and constructive dialogue with all our shareholders as we focus on executing a successful integration and delivering the value of the combined company.

Focus on Board effectiveness and composition. We are at an important inflection point for the company. As we look ahead to the unique opportunities and challenges presented by the integration of Celgene and continued execution of our strategy and Mission, we recognize the importance of having an effective Board with the right skill sets for this time. We are focused on Board composition to ensure that your Board has highly qualified members with diverse backgrounds and the best mix of skill sets, including leadership and vision, industry and company-specific knowledge, and experience integrating large-scale acquisitions, among others, to provide important insights, guidance and oversight as we move into the next chapter for Bristol-Myers Squibb as a company.

              As we look ahead, I can report that the Board will continue to advance its commitment to excellence in serving you, our shareholders. On behalf of the Board of Directors, I thank you for your continued support.

GRAPHIC    
Vicki L. Sato, Ph.D.
Lead Independent Director
Chair, Committee on Directors and Corporate Governance
   

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PROXY STATEMENT SUMMARY

 
   
   
   
    2019 Annual Meeting of Shareholders    
    Date:   May 29, 2019    
    Time:   10:30 a.m.    
    Place:   3401 Princeton Pike, Lawrence Township, New Jersey    
             
             
        For additional information about the Annual Meeting, see "Frequently Asked Questions" beginning on page 76.    

 

 
   
   
   
   
   
   
    Voting Matters                
   
Item
 
Proposal
  Board Vote
Recommendation
 
Required Vote
  Page
Number
   
    1   Election of Directors   FOR ALL   Majority of votes cast   9  
    2   Advisory vote to approve the compensation of our Named Executive Officers   FOR   Majority of shares voted   67    
    3   Ratification of the appointment of an independent registered public accounting firm   FOR   Majority of shares voted   68  
    4   Shareholder proposal on shareholder right to act by written Consent   AGAINST   Majority of shares voted   71    

2018 Performance Highlights

              In 2018, we exceeded our financial goals in key areas, including continued growth across our core prioritized brands, and had important scientific advancement of clinical assets, including some high value targets, that continue to diversify our pipeline. Management's continued execution of our strategic priorities in 2018 resulted in increased revenues of 9%. Our strong operating performance resulted in an increase of our GAAP earnings per share by 393% and our non-GAAP earnings per share by 32%. Our 2018 operating results were primarily driven by outstanding commercial execution, which yielded strong performance for our prioritized brands, particularly Opdivo and Eliquis, important scientific advances that continue to diversify our R&D pipeline, a disciplined approach to expense management, and a strong balance sheet.

 
 
 
 
 
 

 

 
Full Year
 

 

$ amounts in millions, except per share amounts

     

 

 
2018
2017
Change
 

 

Total Revenues

$22,561 $20,776 9%

 

GAAP Diluted EPS (1)

3.03 0.61 393%  

 

Non-GAAP Diluted EPS (2)

3.98 3.01 32%

(1)
The increase in GAAP EPS in 2018 was primarily due to 2017 tax charges attributed to tax reform. After excluding the impact of tax reform and other specified items due to their significant and/or unusual nature, the increase in non-GAAP EPS in 2018 was primarily due to higher revenues. The exclusion of such specified items for 2018 is consistent with the company's current policies and procedures, as well as our past practices.
(2)
Our non-GAAP financial measures, including non-GAAP earnings and related EPS information, are adjusted to exclude specified items, which represent certain costs, expenses, gains and losses and other items impacting the comparability of financial results. For a detailed listing of all specified items and further information, including reconciliations of non-GAAP financial measures, please refer to "—Non-GAAP Financial Measures" in our Annual Report on Form 10-K for the year ended December 31, 2018.

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              Our overall philosophy to create sustainable shareholder value is primarily focused on strong year-to-year financial and operational performance and on the development and advancement of our pipeline over the long-term. Our strong performance in 2018 continued to deliver on our strategy and positions us well for potential growth opportunities that will create sustainable long-term shareholder value. Our acquisition of Celgene will position us to create a leading biopharma company, with best-in-class franchises, significant near-term launch opportunities and a deep and broad pipeline, creating an even stronger foundation for long-term sustainable growth.

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Director Nominees

              Our Committee on Directors and Corporate Governance maintains an active and engaged Board, whose diverse skill sets benefit from both the industry and company-specific knowledge of our longer-tenured directors, as well as the fresh perspectives brought by our newer directors. We continually review our Board's composition with a focus on refreshing necessary skill sets as our business strategy and industry dynamics evolve.

 
   
   
   
   
   
   
   
        Name   Occupation   Independent   Committee
Memberships*
  Other
Public
Company
Boards
   
    GRAPHIC   Giovanni Caforio, M.D.
Chairman of the Board
Age: 54
Director Since: 2014



 
Chairman of the Board and Chief Executive Officer   No     0  
    GRAPHIC   Vicki L. Sato, Ph.D.
Lead Independent Director
Age: 70
Director Since: 2006
  Independent Chairman of the Board, Denali Therapeutics, Inc.; Former Professor of Management Practice and Molecular and Cell Biology at Harvard University   Yes   CDCG (c);
S&T
  3    
    GRAPHIC   Peter J. Arduini
Age: 54
Director Since: 2016


 
President and Chief Executive Officer of Integra LifeSciences Holdings Corporation   Yes   Audit;
CMDC

 
1  
    GRAPHIC   Robert Bertolini
Age: 57
Director Since: 2017
  Former President and Chief Financial Officer, Bausch & Lomb Incorporated; Former Chief Financial Officer, Schering Plough Corporation   Yes   Audit (c);
CDCG
  2    
    GRAPHIC   Matthew W. Emmens
Age: 67
Director Since: 2017


 
Former Chairman and Chief Executive Officer, Shire PLC; Former Chairman, President and Chief Executive Officer, Vertex Pharmaceuticals Incorporated; Former Chief Executive Officer, Astra Merck   Yes   CMDC;
S&T

 
0  
    GRAPHIC   Michael Grobstein
Age: 76
Director Since: 2007
  Former Vice Chairman, Ernst & Young LLP   Yes   Audit;
CMDC (c)
  0    
    GRAPHIC   Alan J. Lacy
Age: 65
Director Since: 2008


 
Trustee, Fidelity Funds; Former Non-Executive Chairman, Dave & Buster's Entertainment, Inc.   Yes   Audit;
CDCG

 
0  
    GRAPHIC   Dinesh C. Paliwal
Age: 61
Director Since: 2013
  President and Chief Executive Officer, Harman International, a wholly-owned subsidiary of Samsung Electronics Co., Ltd   Yes   CDCG;
CMDC
  2    
    GRAPHIC   Theodore R. Samuels
Age: 64
Director Since: 2017


 
Former President, Capital Guardian Trust Company   Yes   Audit;
CDCG

 
2  
    GRAPHIC   Gerald L. Storch
Age: 62
Director Since: 2012
  Chief Executive Officer, Storch Advisors; Former Vice Chairman, Target; Former Chairman and Chief Executive Officer; Toys "R" Us; Former Principal, McKinsey & Company   Yes   Audit;
CMDC
  0    
    GRAPHIC   Karen H. Vousden, Ph.D.
Age: 61
Director Since: 2018


 
Chief Scientist, Cancer Research UK; Former Chief Executive Officer, Beatson Institute for Cancer Research   Yes   CMDC;
S&T (c)

 
0  
    *   Committee memberships listed as of the date of the 2019   Audit:   Audit Committee    
        Annual Meeting   CDCG:   Committee on Directors and Corporate Governance    
            CMDC:   Compensation and Management Development Committee    
            S&T:   Science and Technology Committee    
            (c):   Committee Chair    

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Board's Role in Strategic Planning

              The Board and Board Committees regularly meet to discuss the strategic direction and the issues and opportunities facing our company. Our Board frequently provides guidance to management on strategy and has been instrumental in determining our next steps as a company. As part of its ongoing review and focus on strategy, the Board annually holds an in-depth meeting with senior management dedicated to discussing and reviewing our long-term operating plans and overall corporate strategy, which also includes a discussion of key risks and opportunities as well as risk mitigation plans and activities. In 2018, this in-depth strategy meeting was the start of a comprehensive strategic review process of numerous business development opportunities, which ultimately led to the decision to acquire Celgene. During this process, the Board was consistently involved, meeting 8 times between June 2018 and January 2019 to discuss the merits and risks of the Celgene opportunity. For a further discussion on the Board's role in strategic planning, please see "Board's Role in Strategic Planning and Risk Oversight" on page 19.

Board Refreshment and Leadership Transition

              The Board continually reviews its composition with a focus on refreshing necessary skill sets as our business strategy and industry dynamics evolve. Five new independent directors have been added to the Board over the past 3 years, including Dr. Karen Vousden, our newest director who joined the Board in January 2018. These new independent directors bring fresh perspectives and important skills and experience that further strengthen and complement the Board.

              In connection with our acquisition of Celgene, we have announced that two current Celgene directors will join our Board upon closing of the transaction.

              Following the 2017 Annual Meeting, Dr. Giovanni Caforio became Chairman of the Board. The Board determined that Dr. Caforio's deep institutional knowledge and industry experience uniquely position him to serve as Chairman. The Board recognizes the importance of a Lead Independent Director, and Dr. Sato was elected to serve in this position. The Lead Independent Director responsibilities can be found on page 19.

Corporate Governance Highlights

              We are committed to strong governance practices that protect the long-term interests of our shareholders and establish strong Board and management accountability. The "Corporate Governance and Board Matters" section beginning on page 18 describes our governance framework, which includes the following key governance best practices that we have adopted:

 
   

ü

  Annual election of Directors  

ü

  Proxy access shareholder right  
   

ü

  Majority voting standard for election of Directors  

ü

  Limit on number of public company directorships Board members may hold (4)    
   

ü

  Shareholder right to call a special meeting (25%)  

ü

  Emphasis on board refreshment and effectiveness  
   

ü

  No supermajority voting provisions for common shareholders  

ü

  Clawback and recoupment policies    
   

ü

  Proactive shareholder engagement  

ü

  Share ownership and retention policy  
   

ü

  Robust related party transaction policies and procedures  

ü

  Prohibition of speculative and hedging transactions by all employees and directors    
   

ü

  Semi-annual disclosure of political contributions  

ü

  No shareholder rights plan  
         

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Shareholder Engagement and Responsiveness

              We continued to place a high priority on engagement with our shareholders in 2018, reaching out to over 50 of our top shareholders, representing nearly 50% of our shares outstanding. In 2018, management and members of the Board, including our Lead Independent Director, met with many of our shareholders and had a productive dialogue on a number of topics, including board composition, company strategy and execution, sustainability and risk oversight, as well as executive compensation. The feedback received was generally positive and was shared with the entire Board and members of senior management. In addition, we continued to engage with shareholders, seeking active feedback and offering additional insights on shareholder proposals included in our most recent proxy statements, including those related to drug pricing and executive compensation and the threshold to call special shareholder meetings. For a discussion of the company's response to shareholder proposals, please see "Responsiveness to Shareholder Feedback" on page 22.

              More recently, we engaged extensively with our shareholders ahead of our Special Meeting on April 12, 2019 to approve the issuance of shares in connection with the Celgene acquisition.

              We encourage our registered shareholders to use the space provided on the proxy card to let us know your thoughts about BMS or to bring a particular matter to our attention. If you hold your shares through an intermediary or received the proxy materials electronically, please feel free to write directly to us.

2018 Compensation Plan Structure

              Our compensation program design reflects our compensation philosophy and aligns well with our strategy, market practice and our shareholders' interests.

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Executive Compensation

                   The Compensation and Management Development Committee firmly believes in pay-for-performance and has structured the executive compensation program to align our executives' interests with those of our shareholders.

                In line with our commitment to a highly performance-based compensation structure, approximately 90% of Dr. Caforio's target total compensation (and approximately 82% of the target total compensation for our other Named Executive Officers) is variable and at risk, based on the financial, operational, strategic and share price performance of the company.

              Additional detail on our executive compensation program is provided in the "Compensation Discussion and Analysis" beginning on page 33.

  2018 Target Total CEO Compensation

        GRAPHIC

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ITEM 1—ELECTION OF DIRECTORS

              Our Board of Directors has nominated 11 current directors, Peter J. Arduini, Robert Bertolini, Giovanni Caforio, M.D., Matthew W. Emmens, Michael Grobstein, Alan J. Lacy, Dinesh C. Paliwal, Theodore R. Samuels, Vicki L. Sato, Ph.D., Gerald L. Storch and Karen H. Vousden, Ph.D., to serve as directors of Bristol-Myers Squibb. The directors will hold office from election until the 2020 Annual Meeting.

Majority Vote Standard and Mandatory Resignation Policy

              A majority of the votes cast is required to elect directors. Any current director who does not receive a majority of votes cast must tender his or her resignation as a director within 10 business days after the certification of the shareholder vote. The Committee on Directors and Corporate Governance, without participation by any director tendering his or her resignation, will consider the resignation offer and recommend to the Board whether to accept it. The Board, without participation by any director tendering his or her resignation, will act on the Committee's recommendation at its next regularly scheduled meeting to be held within 60 days after the certification of the shareholder vote. We will promptly disclose the Board's decision and the reasons for that decision in a broadly disseminated press release that will also be furnished to the U.S. Securities and Exchange Commission (SEC) on Form 8-K. If any nominee is unable to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees, unless our Board of Directors provides for a lesser number of directors.

Criteria for Board Membership

              As specified in our Corporate Governance Guidelines, members of our Board should be persons with broad experience in areas important to the operation and long-term success of our company. These include areas such as business, science, medicine, finance/accounting, law, business strategy, crisis management, corporate governance, education or government. Board members should possess qualities reflecting integrity, independence, leadership, good business judgment, wisdom, an inquiring mind, vision, a proven record of accomplishment and an ability to work well with others. The Corporate Governance Guidelines also express the Board's belief that its membership should continue to reflect a diversity of gender, race, ethnicity, age, sexual orientation and gender identity.

All Director Nominees Possess:

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Director Orientation and Continuing Education

              Director education is an ongoing, year-round process, which begins when a director joins our Board. Upon joining our Board, new directors are provided with a comprehensive orientation to our company, including our business, strategy and governance. New directors participate in an orientation program with senior business and functional leaders from all areas of the company, during which there is discussion on strategic priorities and key risks and opportunities, and participate in site visits to one or more of our locations. On an ongoing basis, directors receive presentations on a variety of topics related to their work on the Board and within the biopharmaceutical industry, both from senior management and from experts outside of the company. We also encourage directors to enroll in continuing education programs sponsored by third parties at our expense.

Director Independence

10 of our 11 director nominees are currently independent

              Our Corporate Governance Guidelines provide that a substantial majority of Board members be independent from management, and the Board has adopted independence standards that meet the listing standards of the New York Stock Exchange. Our Board has determined that, except for Giovanni Caforio, M.D. who is our Chief Executive Officer, each of our directors and each director nominee for election at this Annual Meeting is independent of Bristol-Myers Squibb and its management.

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Process for Determining Independence

              In accordance with our Corporate Governance Guidelines, our Board undertakes an annual review of director independence. In February 2019, the Board considered all commercial and charitable relationships of our independent directors and director nominees, including the following relationships, which were deemed immaterial under our categorical standards (see Exhibit A):

    Messrs. Arduini, Bertolini, Lacy and Samuels are directors of companies that received payment from the company for property or services in an aggregate amount that did not exceed the greater of $1 million or 2% of such other company's consolidated gross revenues. For each transaction, the Board determined that the director did not initiate or negotiate the transaction and that the transaction was entered into in the ordinary course of business.

    Drs. Sato and Vousden, Messrs. Arduini, Grobstein, Lacy and Storch, or one of their immediate family members, are employed by, or serve as directors of, businesses or educational or medical institutions with which we engage in ordinary course business transactions. The directors did not initiate or negotiate any transaction with such institutions and the payments made did not exceed the greater of $1 million or 2% of such institutions' respective consolidated gross revenues.

    Dr. Sato, Messrs. Grobstein and Samuels are directors of charitable or nonprofit organizations to which the Bristol-Myers Squibb Foundation made charitable contributions, which, in the aggregate, did not exceed the greater of $1 million or 2% of such organizations' respective consolidated gross revenues.

              The Board determined that none of these relationships impair the independence of these directors under the New York Stock Exchange's independence standards or otherwise.

Director Succession Planning and Identification of Board Candidates

Regular Assessment of our Board Composition

              The Committee on Directors and Corporate Governance regularly assesses the appropriate size and composition of our Board. This assessment incorporates the results of the Board's annual evaluation process, which was recently enhanced in 2017 as described more fully under "Annual Evaluation Process" beginning on page 21. The Committee also considers succession planning for its directors.

Identification and Selection of Director Nominees   Director Tenure

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              In connection with the Board's ongoing director identification process, the Committee on Directors and Corporate Governance, in consultation with the Chairman, conducts an initial evaluation of prospective nominees against the established Board membership criteria discussed above. The Committee also reviews the skills of the current directors and compares them to the particular skills of potential candidates, keeping in mind the Board's commitment to maintain members of diverse experience and background. In particular, the Board is committed to identifying and evaluating highly qualified women and under-represented ethnic group candidates as well as candidates with other diverse backgrounds, industry experience and other unique characteristics. Candidates may come to the attention of the Committee on Directors and Corporate Governance through current Board members, third party search firms, management, shareholders or others. Search firms together with management and directors develop a candidate profile that includes the relevant skills and experiences being sought at that time and incorporates the Board membership criteria. Prospective candidates are identified based on the profile. Additional information relevant to the qualifications of prospective nominees may be requested from third party search firms, other directors, management or other sources. After this initial evaluation, prospective nominees may be interviewed by telephone or in person by the members of the Committee on Directors and Corporate Governance, the Chairman, the Lead Independent Director and other directors, as applicable. After completing this evaluation and interview process, the Committee on Directors and Corporate Governance makes a recommendation to the full Board as to the persons who should be nominated by our Board, and the full Board determines the nominees after considering the recommendation and any additional information it may deem appropriate.

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Shareholder Nominations for Director

              The Committee on Directors and Corporate Governance considers and evaluates shareholder recommendations of nominees for election to our Board of Directors in the same manner as other director nominees. Shareholder recommendations must be accompanied by disclosure, including written information about the recommended nominee's business experience and background with consent in writing signed by the recommended nominee that he or she is willing to be considered as a nominee and, if nominated and elected, he or she will serve as a director. Shareholders should send their written recommendations of nominees accompanied by the required documents to: Bristol-Myers Squibb Company, 430 East 29th Street—14th Floor, New York, New York 10016, Attention: Corporate Secretary.

Proxy Access Shareholder Right

              Following extensive engagement with our shareholders, our Board determined to adopt proxy access in 2016, permitting a shareholder or group of up to 20 shareholders holding 3% of our outstanding shares of common stock for at least three years to nominate a number of directors constituting the greater of two directors or 20% of the number of directors on our Board, as set forth in detail in our Bylaws. If you wish to propose any action pursuant to our proxy access bylaw provision, you must deliver a notice to BMS containing certain information set forth in our Bylaws, not less than 120 but not more than 150 days before the anniversary of the prior year's filing of the proxy materials. For our 2020 Annual Meeting, we must receive this notice between December 2, 2019 and January 1, 2020. Shareholders should send their notices to: Bristol-Myers Squibb Company, 430 East 29th Street—14th Floor, New York, New York 10016, Attention: Corporate Secretary.

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2019 Director Nominees

              The following biographies of our director nominees reflect their Board Committee membership and Chair positions as of the date of this year's Annual Meeting.

  Giovanni Caforio, M.D.
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Chairman and
Chief Executive Officer of the Company

DIRECTOR SINCE: 2014

AGE: 54

OTHER CURRENT PUBLIC BOARDS: None

Chairman of the Board since May 2017 and Chief Executive Officer of Bristol-Myers Squibb since May 2015. He was Chief Operating Officer from June 2014 until May 2015 and was Executive Vice President and Chief Commercial Officer from November 2013 until June 2014. From October 2011 until November 2013, he served as President, U.S. He held the position of Senior Vice President, Global Commercialization and Immunology from May 2010 until October 2011. Previously, he served as Senior Vice President, Oncology, U.S. and Global Commercialization from March 2009 until May 2010. From January 2007 until March 2009 he served as Senior Vice President, U.S. Oncology, and from May 2004 until January 2007, he served as Senior Vice President, European Marketing and Brand Commercialization.

He is a member of the Board of Trustees of Hun School of Princeton, and a member of Business Roundtable, CEO Roundtable on Cancer, the Pharmaceutical Research and Manufacturers of America and The Prium.

​KEY SKILLS & EXPERIENCE: Dr. Caforio brings over 30 years of pharmaceutical industry experience, including more than 18 years at the company. He has overseen the creation of a fully integrated worldwide commercial organization as part of our evolution into a diversified specialty biopharmaceutical company. A physician by training, Dr. Caforio has worked across many businesses within the company, in Europe and in the U.S., and has a proven record of developing talented leaders with the diverse experiences and competencies needed for the continued success of the company.


  Vicki L. Sato, PH.D.
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Lead Independent Director

DIRECTOR SINCE: 2006

AGE: 70

BOARD COMMITTEES:

Committee on Directors and Corporate Governance (Chair)

Science & Technology Committee

OTHER CURRENT PUBLIC BOARDS:

Denali Therapeutics, Inc.

BorgWarner, Inc.

Syros Pharmaceuticals

Dr. Sato serves as the independent Chairman of the Board of Denali Therapeutics, Inc. Retired in 2005 as President of Vertex Pharmaceuticals Incorporated, a global biotechnology company, where she was responsible for research and development, business and corporate development, commercial operations, legal and finance. She also served as Chief Scientific Officer, Senior Vice President of Research and Development and Chair of the Scientific Advisory Board at Vertex before being named President in 2000. She previously served as a professor of management practice at the Harvard Business School from July 2005 until June 2017. From July 2005 until October 2014 she served as professor of the practice of molecular and cell biology at Harvard University. She serves as Chairman of VIR Biotechnology, Inc. She serves as Co-Chair on the Task Force on Science and Engineering at Harvard University and Co-Chair on the Advisory Council of LifeSci NYC. During the last five years, Dr. Sato was a Director of PerkinElmer Corporation. ​KEY SKILLS & EXPERIENCE: Dr. Sato has more than 30 years of extensive and distinctive experience in business, academia and science. She brings to the Board a valuable perspective on the biotech industry. Dr. Sato has a strong background in research and development, positioning her well to serve as a member of our Science & Technology Committee. Her experience serving on the Board of other healthcare companies and her knowledge and keen understanding of the issues facing public companies, in particular healthcare companies, position her well to serve as our Lead Independent Director.

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  Peter J. Arduini
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DIRECTOR SINCE: 2016

AGE: 54

BOARD COMMITTEES:

Audit Committee

Compensation and Management Development Committee

OTHER CURRENT PUBLIC BOARDS:

Integra LifeSciences Holding Corporation

President and Chief Executive Officer at Integra LifeSciences Holdings Corporation, a global medical technology company since January 2012 and currently serves as a member of Integra's Board of Directors. He served as President and Chief Operating Officer of Integra from November 2010 to January 2012. Before joining Integra, Mr. Arduini was Corporate Vice President and President of Medication Delivery, Baxter Healthcare from 2005 until 2010. Prior to joining Baxter, he worked for General Electric Healthcare, where he spent much of his 15 years in a variety of management roles for domestic and global businesses, culminating in leading the global functional imaging business. Mr. Arduini also serves on the Board of Directors of ADVAMED (the Advanced Medical Technology Association), the Board of Directors of MDIC (the Medical Device Innovation Consortium), and the Board of Directors of the National Italian American Foundation. He also serves on the Board of Trustees of Susquehanna University. ​KEY SKILLS & EXPERIENCE: With over 25 years in the healthcare industry, Mr. Arduini brings to the Board extensive leadership, business and operational experience, particularly with respect to manufacturing and sales of medical technology and devices. In addition, his experience serving as a public company chief executive officer and former chief operational officer positions him well to serve as a member of our Audit Committee and our Compensation and Management Development Committee.


  Robert Bertolini
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DIRECTOR SINCE: 2017

AGE: 57

BOARD COMMITTEES:

Audit Committee (Chair)

Committee on Directors and Corporate Governance

OTHER CURRENT PUBLIC BOARDS:

Charles River Laboratories International, Inc.

Idorsia Ltd.

Served as President and Chief Financial Officer of Bausch & Lomb Incorporated from February 2013 until August 2013 (until its acquisition by Valeant Pharmaceuticals). Previously, he served as Executive Vice President and Chief Financial Officer at Schering-Plough Corp. from November 2003 until November 2009 (through its merger with Merck & Co.) with responsibility for tax, accounting and financial asset management. Prior to joining Schering-Plough, Mr. Bertolini spent 20 years at PricewaterhouseCoopers LLP, ultimately leading its global pharmaceutical industry practice. ​KEY SKILLS & EXPERIENCE: Mr. Bertolini brings to the Board extensive expertise in our industry, particularly in building world-class finance and information technology functions and in leading business development and strategy. In addition, as a former chief financial officer who also has over 20 years experience at a major auditing firm, he has extensive knowledge and background related to accounting and financial reporting rules and regulations as well as the evaluation of financial results, internal controls and business processes and this positions him well to serve as Chair of our Audit Committee and a member of our Committee on Directors and Corporate Governance.

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  Matthew W. Emmens
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DIRECTOR SINCE: 2017

AGE: 67

BOARD COMMITTEES:

Compensation and Management Development Committee

Science & Technology Committee

OTHER CURRENT PUBLIC BOARDS: None

Served as Chief Executive Officer of Shire PLC from 2003 until 2008 and Chairman of the Board from 2008 until 2014. He also served as a Director of Vertex Pharmaceuticals Incorporated from 2004 until 2009, Chairman, President and Chief Executive Officer from 2009 until 2012 and Director from 2012 until 2013. Mr. Emmens served as President, Worldwide Pharmaceuticals of Merck KGaA from 1999 until 2003, as Chief Executive Officer, Commercial Operations of Astra Merck Inc. from 1992 until 1999 and in Sales, Marketing and Administration positions for Merck & Co., Inc. from 1974 until 1991. ​KEY SKILLS & EXPERIENCE: With over 40 years in the biopharmaceutical industry, Mr. Emmens brings to the Board significant expertise in management, business development, business and operations, particularly with respect to strategy and team effectiveness. Mr. Emmens' strong leadership qualities and industry knowledge position him well to provide valuable insights to both management and his fellow Board members on issues facing our company and to serve as a member of our Compensation and Management Development Committee and a member of our Science and Technology Committee.


  Michael Grobstein
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DIRECTOR SINCE: 2007

AGE: 76*

BOARD COMMITTEES:

Compensation and Management Development Committee (Chair)

Audit Committee

OTHER CURRENT PUBLIC BOARDS: None

Retired as Vice Chairman of Ernst & Young LLP, an independent registered public accounting firm. He worked with Ernst & Young from 1964 until 1998, and was admitted as a partner in 1975. Mr. Grobstein served as a Vice Chairman—International Operations from 1993 until 1998, as Vice Chairman—Planning, Marketing and Industry Services from 1987 until 1993, and as Vice Chairman—Accounting and Auditing Services from 1984 until 1987. He serves on the Board of Trustees and Executive Committee and is the Treasurer of the Central Park Conservancy. He also serves on the Board of Directors of the Peer Health Exchange, Inc. During the last five years, Mr. Grobstein was a Director of Mead Johnson Nutrition Company and Given Imaging Ltd. ​KEY SKILLS & EXPERIENCE: With over 30 years of experience at a major auditing firm, and 20 years as a director of public companies with global operations, Mr. Grobstein has extensive knowledge and background relating to accounting and financial reporting rules and regulations as well as the evaluation of financial results, internal controls and business processes. Mr. Grobstein's depth and breadth of financial expertise and his experience handling complex financial issues position him well to serve as Chair of our Compensation and Management Development Committee and a member of our Audit Committee.

*
As disclosed in the 2018 Proxy Statement, after extensive consideration and discussion of specific facts and special circumstances, following input from several of our top shareholders, and upon the recommendation of our Committee on Directors and Corporate Governance, our Board determined that it is in the best interest of the company and its shareholders to waive the mandatory retirement age for Mr. Michael Grobstein for up to two years to maintain Board continuity during a period of transition. In reaching this determination, the Board also carefully considered the recent addition of five new independent directors to the Board in the last three years, Mr. Grobstein's extensive knowledge of the company and industry; his leadership as Compensation and Management Development Committee Chairman; his key role as a member and former Chair of our Audit Committee; his desire and ability to continue to guide and serve the company in executing its mission and strategy; the low average tenure of the Board (5.8 years compared to 9 for the S&P 500) and the robust Board evaluation process, among other things. The waiver will expire at the 2020 Annual Meeting.

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  Alan J. Lacy
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DIRECTOR SINCE: 2008

AGE: 65

BOARD COMMITTEES:

Committee on Directors and Corporate Governance

Audit Committee

OTHER CURRENT PUBLIC BOARDS: None

Served as the Non-Executive Chairman of Dave & Buster's Entertainment Inc. from 2014 until 2017. He served as the Vice Chairman and Chief Executive Officer of Sears, Roebuck and Co. and the Vice Chairman and Chief Executive Officer of its successor, Sears Holdings Corporation, from 2000 until 2005. Mr. Lacy also served as Vice Chairman of Sears Holdings Corporation from 2005 until 2006. Mr. Lacy served as Senior Advisor to Oak Hill Capital Partners, L.P., a private equity investment firm, from 2007 until 2014. He is a Trustee of Fidelity Funds and the California Chapter of The Nature Conservancy. Mr. Lacy is a Director of the Center for Advanced Study in the Behavioral Sciences at Stanford University. During the last five years, Mr. Lacy was a Director of The Hillman Companies. ​KEY SKILLS & EXPERIENCE: Mr. Lacy is a highly respected business leader with a proven record of accomplishment. He brings to the Board extensive business understanding and demonstrated management expertise having served in key leadership positions at Sears Holdings Corporation, including Chief Executive Officer. In addition, his experience as a senior financial officer of three large public companies provides him with a comprehensive understanding of the complex financial, legal and corporate governance issues facing large companies and positions him well to serve as a member of our Audit Committee and our Committee on Directors and Corporate Governance.


  Dinesh C. Paliwal
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DIRECTOR SINCE: 2013

AGE: 61

BOARD COMMITTEES:

Committee on Directors and Corporate Governance

Compensation and Management Development Committee

OTHER CURRENT PUBLIC BOARDS:

Nestlé S.A.

Raytheon Company

Served as President and Chief Executive Officer at Harman International, the connected technologies company for automotive, consumer and enterprise markets since 2007. Mr. Paliwal also served as Chairman of the Harman Board of Directors from July 2008 until March 2017 until its acquisition by Samsung Electronics Co., Ltd. Today, Harman operates as a wholly-owned subsidiary of Samsung. Prior to joining Harman, Mr. Paliwal served as a member of the Group Executive Committee of ABB Ltd., a provider of industrial automation, power transmission systems and services from January 2001 until June 2007. He also served as President of Global Markets and Technology of ABB Ltd. from January 2006 until June 2007, as Chairman and Chief Executive Officer of ABB North America from January 2004 until June 2007, and as President and Chief Executive Officer of ABB Automation Technologies Division from October 2002 until December 2005. Mr. Paliwal is a member of the CEO Business Roundtable and the advisory board of the Woodrow Wilson Center.

He also serves on the Boards of Directors of the Business Advisory Council of Farmer School of Business, Miami University of Ohio and the U.S. Indian Business Council. During the last five years, Mr. Paliwal was a Director of ADT Corporation.

​KEY SKILLS & EXPERIENCE: Mr. Paliwal brings to the Board extensive leadership, business and governance experience having served as a public company chief executive officer and a senior executive officer of various divisions of a multi-national corporation. His engineering and financial background, together with his worldwide experience, particularly in emerging markets, provide him with a heightened understanding of the complex issues which arise in the global marketplace. In addition, Mr. Paliwal's experience and his prior service on Boards of other public companies position him well to serve as a member of our Committee on Directors and Corporate Governance and our Compensation and Management Development Committee.

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  Theodore R. Samuels
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DIRECTOR SINCE: 2017

AGE: 64

BOARD COMMITTEES:

Committee on Directors and Corporate Governance

Audit Committee

OTHER CURRENT PUBLIC BOARDS:

Perrigo Company, PLC

Stamps.com

Served with Capital Group Companies from 1981 until 2016. He was President of the Capital Guardian Trust Company from 2010 until 2016 and was the Capital Group representative for Focusing Capital on the Long Term from 2014 until 2015. He was a portfolio manager from 1990 until 2016, and while at Capital Group, he served on numerous management and investment committees. He also served as a board member of Capital Group Foundation and as Chair of Capital Group Foundation Investment Committee and the Capital International (North America) Proxy Committee. Mr. Samuels served on the Capital Group Finance Committee from 2013 until 2016 and previously served on the Capital Group Board and the Capital Group Audit Committee. He also serves as Co-chair of Tuft's President's Council and the Harvard West Coast Council. Mr. Samuels is a Director of Children's Hospital Los Angeles, where he served as Co-chair of the Board of Trustees from 2012 until 2015, the Edward Mallinckrodt, Jr. Foundation and The Fund for Partnership for Success!, where he also serves as an advisor. He is also a trustee of the John Burroughs School. ​KEY SKILLS & EXPERIENCE: With over 35 years in the financial industry, Mr. Samuels brings to the Board extensive business and operational experience, particularly with respect to economics and investment decision making. His experience and the investor perspective he brings to the Board position him well to serve as a member of our Audit Committee and our Committee on Directors and Corporate Governance.


  Gerald L. Storch
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DIRECTOR SINCE: 2012

AGE: 62

BOARD COMMITTEES:

Compensation and Management Development Committee

Audit Committee

OTHER CURRENT PUBLIC BOARDS: None

Has served as Chief Executive Officer of Storch Advisors since November 2017, a position he had also held from November 2013 until January 2015. He served as Chief Executive Officer of Hudson's Bay Company from January 2015 until November 2017, a leading owner and operator of department stores, including Saks Fifth Avenue, Lord & Taylor, Hudson's Bay Department Stores, Home Outfitters, Sakes OFF 5th, Kaufhof, Inno and the e-commerce business Gilt. He also served as Chairman of Toys "R" Us, Inc. from February 2006 until November 2013 and Chief Executive Officer of Toys "R" Us from February 2006 until May 2013. Prior to joining Toys "R" Us, Mr. Storch served as Vice Chairman of Target Corporation. He joined Target in 1993 as Senior Vice President of Strategy and served in roles of increasing seniority over the next 12 years. Prior to joining Target, Mr. Storch was a partner at McKinsey & Company. He is a director of Fanatics, Inc. During the last five years, Mr. Storch was a Director of Supervalu, Inc. ​KEY SKILLS & EXPERIENCE: A retail veteran with more than 20 years of experience, Mr. Storch provides the Board with valuable business, leadership and management insight, including expertise leading an organization with global operations, giving him a keen understanding of the issues facing a multi-national business. These qualities make him a valued member of our Audit Committee. Additionally, his prior service on the compensation committee of another public company positions him well to serve as a member of our Compensation and Management Development Committee.

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  Karen H. Vousden, Ph.D.
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DIRECTOR SINCE: 2018

AGE: 61

BOARD COMMITTEES:

Science & Technology Committee (Chair)

Compensation and Management Development Committee

OTHER CURRENT PUBLIC BOARDS: None

Dr. Vousden has been a Senior Group Leader at the Francis Crick Institute in London since February 2017 and Chief Scientist of Cancer Research UK since July 2016. From 2002 until 2016 she served as the Director of the Cancer Research—UK (CRUK) Beatson Institute in Glasgow, prior to which she held leadership roles at the National Cancer Institute in Maryland from 1995 until 2002. She serves as a member of the Science Advisory Board of Oncode Institute, the Gurdon Institute, The Netherlands Cancer Institute, University Cancer Center Frankfurt, Grail, Inc., Ludwig Institute for Cancer Research, PMV Pharma, Raze Therapeutics and Swiss Institute for Experimental Cancer Research. Dr. Vousden is a Council member of the European Molecular Biology Organization and President of the British Association of Cancer Research. She is also a Fellow of the Royal Society and a Foreign Associate of the National Academy of Sciences. ​KEY SKILLS & EXPERIENCE: With over 30 years of experience leading ground-breaking cancer research, Dr. Vousden brings to the Board important perspective and knowledge on a variety of healthcare related issues, including the inherent challenges facing our R&D organization in discovering and developing new medicines. Her strong background in research and development, expertise in oncology, experience with international healthcare systems and extensive experience in the medical field position her well to serve as Chair of our Science and Technology Committee.

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CORPORATE GOVERNANCE AND BOARD MATTERS

Active Board Oversight of Our Governance

              Our business is managed under the direction of our Board of Directors pursuant to the Delaware General Corporation Law and our Bylaws. The Board has responsibility for establishing broad corporate policies and for the overall performance of our company. The Board keeps itself informed of company business through regular written reports and analyses and discussions with the Chief Executive Officer and other officers of Bristol-Myers Squibb; by reviewing materials provided to Board members by management and by outside advisors; and by participating in Board and Board Committee meetings.

              The Committee on Directors and Corporate Governance continually reviews corporate governance issues and is responsible for identifying and recommending the adoption of corporate governance initiatives. In addition, our Compensation and Management Development Committee regularly reviews compensation issues and recommends adoption of policies and procedures that strengthen our compensation practices. The "Compensation Discussion and Analysis" beginning on page 33 discusses many of these policies and procedures.

              The Board of Directors has adopted Corporate Governance Guidelines that govern its operation and that of its Committees. Our Board annually reviews the Corporate Governance Guidelines and, from time to time, our Board revises them in response to changing regulatory requirements, evolving best practices and the concerns of our shareholders and other constituents. Our Corporate Governance Guidelines may be viewed on our website at www.bms.com/ourcompany/governance.

Board Leadership Structure

              The company's governance documents provide the Board with flexibility to select the appropriate leadership structure for the company. They establish well-defined responsibilities with respect to the Chairman and Lead Independent Director roles, including the requirement that the Board have a Lead Independent Director if the Chairman is not an independent director. This information is set forth in more detail on our website at www.bms.com/ourcompany/governance.

              Our Board has dedicated significant consideration to our leadership structure, particularly in connection with the election of Dr. Caforio as the Chairman of the Board at the 2017 Annual Meeting. The Board's analysis of our leadership structure took into account many factors, including the specific needs of the Board and the company, the strong role of our Lead Independent Director, our Corporate Governance Guidelines (including our governance practices that provide for independent oversight of management), the acquisition of Celgene and integration of Celgene businesses into our company, the challenges specific to our company, and the best interests of our shareholders. After thoughtful and rigorous consideration, the Board determined that combining the Chairman and Chief Executive Officer positions and electing Dr. Caforio as the Chairman of the Board continues to be in the best interest of the company and our shareholders and is the best leadership for the company and its shareholders at this time. Specifically, our Board believes that to have Dr. Caforio serve in the combined role of Chairman and Chief Executive Officer confers distinct advantages at this time, including:

    having a Chairman who can draw on detailed institutional knowledge of the company and industry experience from serving as Chief Executive Officer, providing the Board with focused leadership, particularly in discussions about the company's strategy;

    a combined role ensures that the company presents its message and strategy to all stakeholders, including shareholders, employees and patients, with a unified voice; and

    the structure allows for efficient decision making and focused accountability.

              The Board recognizes the importance of appointing a strong Lead Independent Director to maintain a counterbalancing structure to ensure that the Board functions in an appropriately independent manner. The Lead Independent Director is selected annually by the independent directors. The independent directors have elected Dr. Vicki Sato to serve in that position.

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              The Lead Independent Director's responsibilities include, among others:

   

ü

  Serving as liaison between the independent directors and the Chairman and Chief Executive Officer  

ü

  Approving the quality, quantity and timeliness of information sent to the Board  
   

ü

  Reviewing and approving meeting agendas and sufficiency of time  

ü

  Serving a key role in Board and Chief Executive Officer evaluations    
   

ü

  Calling meetings of the independent directors  

ü

  Responding directly to shareholder and stakeholder questions, as appropriate  
   

ü

  Presiding at all meetings of the independent directors and any Board meeting when the Chairman and Chief Executive Officer is not present, including executive sessions of the independent directors  

ü

  Providing feedback from executive sessions of the independent directors to the Chairman and Chief Executive Officer and other senior management    
   

ü

  Engaging with major shareholders, as appropriate  

ü

  Recommending advisors and consultants  
         

              The Board believes this structure provides an effective, high-functioning Board, as well as appropriate safeguards and oversight. Our Board will continue to evaluate its leadership structure in light of changing circumstances and will evaluate the Board's leadership structure on at least an annual basis and make changes at such times as it deems appropriate.

Board's Role in Strategic Planning and Risk Oversight

              Our Board meets regularly to discuss the strategic direction and the issues and opportunities facing our company in light of trends and developments in the biopharmaceutical industry and general business environment. Our Board has been instrumental in determining our next steps as a company.

              The Board plays a critical role in the determination of the types and appropriate levels of risk undertaken by the company.

Annual strategy deep-dive:  Each year, typically during the second quarter, the Board holds an extensive meeting with senior management dedicated to discussing and reviewing our long-term operating plans and overall corporate strategy. A discussion of key risks to the plans and strategy as well as risk mitigation plans and activities is led by our Chief Executive Officer as part of the meeting.

Constant focus on strategy:  Throughout the year, our Board provides guidance to management on strategy and helps to refine operating plans to implement the strategy. This was especially true in 2018. The Board was consistently involved and met 8 times between June 2018 and January 2019 to discuss the merits and risk of the opportunity to acquire Celgene.

Dedicated to oversight of risk management:  Our Board is responsible for risk oversight as part of its fiduciary duty of care to monitor business operations effectively.

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              Our Board administers its strategic planning and risk oversight function as a whole and through its Board Committees. The following are examples of how our Board Committees are involved in this process:

    Audit Committee   Regularly reviews and discusses with management our process to assess and manage enterprise risks, including those related to market/environmental, strategic, financial, operational, legal, compliance, cyber security and reputation.    
 
    Compensation and
Management
Development
Committee
  Annually evaluates our incentive compensation programs to determine whether incentive pay encourages excessive or inappropriate risk-taking. In particular, the Committee evaluates the components of our executive compensation program that work to minimize excessive or inappropriate risk-taking, including, the use of different forms of long-term equity incentives, linking payout to each executive's demonstration of our BMS Behaviors, placing caps on our incentive award payout opportunities, following equity grant practices that limit potential for timing awards and having stock ownership and retention requirements.    
 
    Committee on Directors
and Corporate
Governance
  Regularly considers and makes recommendations to the Board concerning the appropriate size, function and needs of the Board, determines the criteria for Board membership, provides oversight of our corporate governance affairs and reviews corporate governance practices and policies. Oversees the company's political activities and routinely considers matters relating to the company's responsibilities as a global corporate citizen pertaining to corporate social responsibility and corporate public policy and the impact on the company's employees and shareholders.    
 
    Science and
Technology Committee
  Regularly reviews our pipeline and potential business development opportunities to evaluate our progress in achieving our near-term and long-term strategic research and development goals and objectives and assures that we make well-informed choices in the investment of our research and development resources, among other things.    
 

              In addition, the Board has formed two ad hoc committees in 2019 in connection with the Celgene acquisition for additional oversight over the financing transactions and related matters (by the Board Finance Committee) and the integration (by the Celgene Integration Committee). A summary of each Committee's general responsibilities as well as the Committee members is noted below:

    Special Board Finance
Committee
  Oversee and approve additional acquisition finance-related matters, including, final terms of the notes issuance and debt exchange transactions contemplated by the Celgene transaction as well as future debt exchanges or other related financing transactions, among other things.    

 

 


 

The Committee includes the following Board members: Peter J. Arduini, Giovanni Caforio, M.D., Alan J. Lacy, Theodore R. Samuels and Gerald L. Storch.

 

 
 
    Special Celgene
Integration Committee
  Oversee all aspects of the Celgene integration and provide advice and assistance to the management with respect to the integration.    
      Provide updates on the progress of the Celgene integration to the full Board at each regularly scheduled board meeting, and more frequently as the Committee deems appropriate.    

 

 


 

The Committee will include the following Board members: Peter J. Arduini, Giovanni Caforio, M.D., Matthew W. Emmens, Dinesh C. Paliwal, Karen H. Vousden, Ph.D., and one current director of Celgene who will join the company's Board of Directors upon closing of the transaction.

 

 
 

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Risk Assessment of Compensation Policies and Practices

              The Compensation and Management Development Committee annually conducts a worldwide review of our material compensation policies and practices. Based on this review, we have concluded that our material compensation policies and practices are not reasonably likely to have a material adverse effect on the company. On a global basis, our compensation programs contain many design features that mitigate the likelihood of inducing excessive or inappropriate risk-taking behavior. These features include:

   

ü

  Balance of fixed and variable compensation, with variable compensation tied both to short-term objectives and the long-term value of our stock price  

ü

  Clawback and recoupment provisions and policies pertaining to annual incentive payouts and long-term incentive awards  
   

ü

  Multiple metrics in our incentive programs that balance top-line, bottom-line and pipeline performance  

ü

  Share ownership and retention guidelines applicable to our senior executives    
   

ü

  Caps in our incentive program payout formulas  

ü

  Equity award policies that limit risk by having fixed annual grant dates  
   

ü

  Reasonable goals and objectives in our incentive programs  

ü

  Prohibition of speculative and hedging transactions by all employees and directors    
   

ü

  Payouts modified based upon individual performance, inclusive of assessments against our BMS Behaviors  

ü

  All non-sales managers and executives worldwide participate in the same annual incentive program that pertains to our Named Executive Officers and that has been approved by the Compensation and Management Development Committee  
   

ü

  The Compensation and Management Development Committee's ability to exercise downward discretion in determining incentive program payouts  

ü

  Mandatory training on our Principles of Integrity: BMS Standards of Business Conduct and Ethics (the Principles of Integrity) and other policies that educate our employees on appropriate behaviors and the consequences of taking inappropriate actions    

Annual Evaluation Process

              Our Board recognizes the critical role Board and Committee evaluations play in ensuring the effective functioning of our Board. It also believes in the importance of continuously improving the functioning of our Board and committees. Under the leadership and guidance of our Lead Independent Director, the Committee on Directors and Corporate Governance continuously assesses the Board evaluation process. In 2017, following discussions with and input from the full Board of Directors, the Committee enhanced the Board assessment process to include a written questionnaire. The formal 2018 Board and Committee evaluation processes were as follows:

    Board:  Directors completed a written questionnaire on an unattributed basis responding to questions about the Board and Committee structure and responsibilities, Board culture and dynamics, adequacy of information to the Board, Board skills and effectiveness, and Committee effectiveness. The robust feedback and comments from the directors were anonymously compiled and then were presented by the Chairman and the Lead Independent Director to the full Board for discussion and action. The 2018 Board evaluation was completed in February 2019.

    Committees:  Committee chairs selected a list of topics for their respective committees to evaluate and discuss, covering both substantive and process-oriented aspects of committee performance. The list of discussion topics for each committee was distributed to committee members in advance for consideration. Committee chairs led discussions in executive session of their respective committees. Committee chairs then reported to the full Board the results of their respective committee's evaluation and any follow-up actions. The 2018 Committee evaluations were completed in the beginning of 2019 and reported to the Board in February 2019.

              The formal annual Board and Committee evaluations are supplemented by regular informal one-on-one discussions between the Chairman and Chief Executive Officer and each director throughout the year. The Lead Independent Director actively conveys directors' feedback on an ongoing basis to our Chairman and Chief Executive Officer and has regular one-on-one discussions with the other members of the Board.

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Responsiveness to Shareholder Feedback

              Through our outreach efforts, we actively solicited feedback from shareholders and offered additional insights on shareholder proposals that were included in our most recent proxy statements, including those related to drug pricing and executive compensation and the threshold to call special shareholder meetings. The results of these discussions are noted below:

    Proposal
Proponent
Shareholder Outreach Feedback
Company Response
 
    Lower threshold to
call a special
meeting of
shareholders from
25% to 15%
  James McRitchie   Most shareholders deferred to Board's determination of an appropriate threshold   The Board believes the current 25% threshold is reasonable, appropriate and aligned with our shareholder's interests    
        Some shareholders inquired whether board would consider lowering threshold if proposal received substantial support   The current threshold is designed to strike a balance between assuring that shareholders have the ability to call a special meeting and protecting against the risk that a small minority of shareholders could trigger the expense and distraction of a special meeting to pursue maters that do not need immediate attention  
                Board continues to evaluate the appropriateness of the current threshold, taking into account: (i) shareholder's interest, (ii) shareholder support for the proposal, and (iii) continued feedback from our shareholders    
    How risks related to
public concern over
drug pricing
strategies are
integrated into the
Company's incentive
compensation
policies, plans and
programs for senior
executives









 
UAW Retiree Medical Benefits Trust, Trinity Health and multiple other co-filers   Robust engagement with proponents and other shareholders; proponents requested additional disclosure, including related to (i) key drivers for pricing and (ii) governance around price increases and Board's oversight of pricing   Company collaborated with the proponents to include additional disclosure that was responsive to the proponents' feedback and consistent with our shared desired outcome, which is included in this proxy statement beginning on page 28  
         

Meetings of our Board

              Our Board meets on a regularly scheduled basis during the year to review significant developments affecting Bristol-Myers Squibb and to act on matters requiring Board approval. It also holds special meetings when important matters require Board action between scheduled meetings. Members of senior management regularly attend Board meetings to report on and discuss their areas of responsibility. In 2018, the Board met 10 times. The average aggregate attendance of directors at Board and committee meetings was over 98%. No director attended fewer than 75% of the aggregate number of Board and committee meetings during the period he or she served, except for Dr. Baselga who resigned from the Board in September 2018. In addition, our independent directors met 9 times during 2018 to discuss such topics as our independent directors determined, including the evaluation of the performance of our current Chief Executive Officer.

Annual Meeting of Shareholders

              Directors are strongly encouraged, but not required, to attend the Annual Meeting of Shareholders. All of the 2018 nominees for director attended our 2018 Annual Meeting of Shareholders.

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Committees of our Board

              Our Bylaws specifically provide for an Audit Committee, Compensation and Management Development Committee, and Committee on Directors and Corporate Governance, which are composed entirely of independent directors. Our Bylaws also authorize the establishment of additional committees of the Board and, under this authorization, our Board of Directors established the Science and Technology Committee. Our Board has appointed individuals from among its members to serve on these four standing committees and each committee operates under a written charter adopted by the Board, as amended from time to time. These charters are published on our website at http://bms.com/ourcompany/governance/Pages/board_committees_charters.aspx. Each of these Board Committees has the necessary resources and authority to discharge its responsibilities, including the authority to retain consultants or experts to advise the committee.

              The table below indicates the current members of our standing Board Committees and the number of meetings held in 2018:

 

 

Director
  Audit(1)    Committee on
Directors
and Corporate
Governance
 
  Compensation
and
Management
Development
 
  Science
and
Technology(2)
 
   

 

 

Peter J. Arduini

  X     X    

 

 

Robert Bertolini

  C   X            

 

 

Giovanni Caforio, M.D.

         

 

 

Matthew W. Emmens

          X   X    

 

 

Michael Grobstein

  X     C    

 

 

Alan J. Lacy

  X   X            

 

 

Dinesh Paliwal

    X   X    

 

 

Theodore R. Samuels

  X   X            

 

 

Vicki L. Sato, Ph.D.

    C     X  

 

 

Gerald L. Storch

  X       X        

 

 

Karen H. Vousden, Ph.D.(3)

        C  

 

 

Number of 2018 Meetings

  7   3   7   7    

"C"
indicates Chair of the committee.
(1)
Our Board of Directors has determined, in its judgment, that all members of the Audit Committee are financially literate and that all members of the Audit Committee meet additional, heightened independence criteria applicable to directors serving on audit committees under the New York Stock Exchange listing standards. In addition, our Board has determined that Messrs. Arduini, Bertolini, Grobstein, Lacy, Samuels and Storch each qualify as an "audit committee financial expert" under the applicable SEC rules.
(2)
Dr. Thomas J. Lynch Jr., our Executive Vice President and Chief Scientific Officer, is a member of the Science and Technology Committee but he is not a member of our Board.
(3)
Dr. Karen H. Vousden will become a member of the Compensation and Management Development Committee effective May 29, 2019.

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              The following descriptions reflect each standing Board Committee's membership and Chair effective as of May 29, 2019.

 
   
   
   
    Audit Committee
    Committee Chair:

Robert Bertolini

GRAPHIC

Additional Members:

Peter J. Arduini

Michael Grobstein

Alan J. Lacy

Theodore R. Samuels

Gerald L. Storch

  Key Responsibilities

Overseeing and monitoring the quality of our accounting and auditing practices, including, among others, reviewing and approving the internal audit charter, audit plan, audit budget and decisions regarding appointment and replacement of Chief Audit Officer

Appointing, compensating and providing oversight of the performance of our independent registered public accounting firm for the purpose of preparing or issuing audit reports and related work regarding our financial statements and the effectiveness of our internal control over financial reporting

Assisting the Board in fulfilling its responsibilities for general oversight of (i) compliance with legal and regulatory requirements, (ii) the performance of our internal audit function and (iii) enterprise risk assessment and risk management policies and guidelines

Reviewing our disclosure controls and procedures, periodic filings with the SEC, earnings releases and earnings guidance

Producing the required Audit Committee Report for inclusion in our Proxy Statement

Overseeing the implementation and effectiveness of our compliance and ethics program

Reviewing our information security and data protection program

 

 

 
   
   
   
    Committee on Directors and Corporate Governance
    Committee Chair:

Vicki L. Sato, Ph.D.

GRAPHIC

Additional Members:

Robert Bertolini

Alan J. Lacy

Dinesh C. Paliwal

Theodore R. Samuels

  Key Responsibilities

Providing oversight of our corporate governance affairs and reviewing corporate governance practices and policies, including annually reviewing the Corporate Governance Guidelines and recommending any changes to the Board

Identifying individuals qualified to become Board members and recommending that our Board select the director nominees for the next annual meeting of shareholders

Reviewing and recommending annually to our Board the compensation of non-employee directors

Considering questions of potential conflicts of interest involving directors and senior management and establishing, maintaining and overseeing related party transaction policies and procedures

Evaluating and making recommendations to the Board concerning director independence and defining specific categorical standards for director independence

Providing oversight of the company's political activities

Considering matters relating to the company's responsibilities as a global corporate citizen pertaining to corporate social responsibility and corporate public policy and the impact on the company's employees and shareholders

Overseeing the annual evaluation process of the Board and its Committees

 

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    Compensation and Management Development Committee
    Committee Chair:

Michael Grobstein

GRAPHIC

Additional Members:

Peter J. Arduini

Mathew W. Emmens

Dinesh C. Paliwal

Gerald L. Storch

Karen H. Vousden

  Key Responsibilities

Reviewing, approving and reporting to our Board on our major compensation and benefits plans, policies and programs

Reviewing corporate goals and objectives relevant to CEO compensation, evaluating the CEO's performance in light of those goals and objectives and recommending for approval by at least three-fourths of the independent directors of our Board the CEO's compensation based on this evaluation

Reviewing and evaluating the performance of senior management; approving the compensation of executive officers and certain senior management

Overseeing our management development programs, performance assessment of our most senior executives and succession planning

Reviewing and discussing with management the Compensation Discussion and Analysis and related disclosures required for inclusion in our Proxy Statement, recommending to the Board whether the Compensation Discussion and Analysis should be included in our Proxy Statement, and producing the Compensation and Management Development Committee Report required for inclusion in our Proxy Statement

Establishing and overseeing our compensation recoupment policies

Reviewing incentive compensation programs to determine whether incentive pay encourages inappropriate risk-taking throughout our business

 

 

 
   
   
   
    Science and Technology Committee
    Committee Chair:

Karen H. Vousden, Ph.D.

GRAPHIC

Additional Members:

Matthew W. Emmens

Thomas J. Lynch, Jr., M.D.

Vicki L. Sato, Ph.D.

  Key Responsibilities

Reviewing and advising our Board on the strategic direction of our research and development (R&D) programs and our progress in achieving near-term and long-term R&D objectives

Reviewing and advising our Board on our internal and external investments in science and technology

Identifying and discussing significant emerging trends and issues in science and technology and considering their potential impact on our company

Providing assistance to the Compensation and Management Development Committee in setting any pipeline performance metric under the company's incentive compensation programs and reviewing the performance results

 

Codes of Conduct

              The Principles of Integrity adopted by our Board of Directors set forth important company policies and procedures in conducting our business in a legal, ethical and responsible manner. These standards are applicable to all of our employees, including the Chief Executive Officer, the Chief Financial Officer and the Controller.

              In addition, the Audit Committee has adopted the Code of Ethics for Senior Financial Officers that supplements the Principles of Integrity by providing more specific requirements and guidance on certain topics. The Code of Ethics for Senior Financial Officers applies to the Chief Executive Officer, the Chief Financial Officer, the Controller, the Treasurer and the heads of major operating units.

              Our Board has also adopted the Code of Business Conduct and Ethics for Directors that applies to all directors and sets forth guidance with respect to recognizing and handling areas of ethical issues.

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              The Principles of Integrity, the Code of Ethics for Senior Financial Officers and the Code of Business Conduct and Ethics for Directors are available on our website at www.bms.com/ourcompany/governance. We will post any substantive amendments to, or waivers from, applicable provisions of our Principles, our Code of Ethics for Senior Financial Officers, and our Code of Business Conduct and Ethics for Directors on our website at www.bms.com/ourcompany/governance within two days following the date of such amendment or waiver.

              Employees are required to report any conduct they believe in good faith to be an actual or apparent violation of our Codes of Conduct. In addition, as required under the Sarbanes-Oxley Act of 2002, the Audit Committee has established procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by company employees of concerns regarding questionable accounting or auditing matters.

Related Party Transactions

              The Board has adopted a written policy and procedures for the review and approval of transactions involving the company and related parties, such as directors, executive officers and their immediate family members. The policy covers any transaction or series of transactions (an "interested transaction") in which the amount involved exceeds $120,000, the company is a participant, and a related party has a direct or indirect material interest (other than solely as a result of being a director or less than 10% beneficial owner of another entity). All interested transactions are subject to approval or ratification in accordance with the following procedures:

    Management will be responsible for determining whether a transaction is an interested transaction requiring review under this policy, in which case the transaction will be disclosed to the Committee on Directors and Corporate Governance (the "Governance Committee").

    The Governance Committee will review the relevant facts and circumstances, including, among other things, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or ordinary circumstances and the related party's interest in the transaction.

    If it is impractical or undesirable to wait until a Governance Committee meeting to complete an interested transaction, the Chair of the Governance Committee, in consultation with the General Counsel, may review and approve the transaction, which approval must be ratified by the Governance Committee at its next meeting.

    In the event the company becomes aware of an interested transaction that has not been approved, the Governance Committee will evaluate all options available to the company, including ratification, revision or termination of such transaction and take such course of action as the Governance Committee deems appropriate under the circumstances.

    No director will participate in any discussion or approval of the interested transaction for which he or she is a related party, except that the director will provide all material information concerning the interested transaction to the Governance Committee.

    If an interested transaction is ongoing, the Governance Committee may establish guidelines for management to follow in its ongoing dealings with the related party and will review and assess such ongoing relationships on at least an annual basis.

    Certain types of interested transactions are deemed to be pre-approved or ratified by the Governance Committee, as applicable, even if the amount involved will exceed $120,000, including the employment of executive officers, director compensation, certain transactions with other companies or charitable contributions, transactions where all shareholders receive proportional benefits, transactions involving competitive bids, regulated transactions and certain banking-related services.

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              BlackRock, Inc. (BlackRock), Wellington Management Group, LLP (Wellington) and The Vanguard Group (Vanguard) are each considered a "Related Party" under our related party transaction policy because they each beneficially own more than 5% of our outstanding common stock. The Governance Committee ratified and approved the following related party transactions in accordance with our policy and Bylaws:

    Certain of our retirement plans use BlackRock and its affiliates to provide investment management services. In connection with these services, we paid BlackRock approximately $1.1 million in fees during 2018.

    Certain of our retirement plans use Wellington and its affiliates to provide investment management services. In connection with these services, we paid Wellington approximately $1.2 million in fees during 2018.

    Vanguard acts as an investment manager with respect to certain investment options under our savings and thrift plans. Participants in the plans pay Vanguard's investment management fees if they invest in investment options managed by Vanguard; neither the plans themselves nor the company pays fees directly to Vanguard. In connection with these services, Vanguard received approximately $488,012 in fees during 2018.

              The Governance Committee ratified the above relationships on the basis that these entities' ownership of our stock plays no role in the business relationship between us and them, and that the engagement of each entity was on terms no more favorable to them than terms that would be available to unaffiliated third parties under the same or similar circumstances.

              Dr. José Baselga resigned from the Board in September 2018. Before this, he served as Physician-in-Chief of Memorial Sloan-Kettering Cancer Center (MSKCC) from January 2013 until September 2018. The company has made both business and charitable payments to MSKCC for many years, including for research studies and grants led by principal investigators affiliated with the hospital. The company paid MSKCC approximately $8.2 million in 2018, which accounted for less than 2% of MSKCC's revenues for the 2018 fiscal year.

Disclosure Regarding Political Activities

              We provide semi-annual disclosure on our website of all political contributions to political committees, parties or candidates on both state and federal levels that are made by our employee political action committee, as well as annual disclosure of the portion of our dues or other payments made to trade associations to which we give $50,000 or more that can be attributed to lobbying expenditures.

Global Corporate Citizenship & Sustainability

              Patients are at the center of everything we do, and our work is focused on the development of innovative medicines that deliver value to patients and the broader society. To do so in a sustainable manner requires continued investment in research and development (R&D) that seeks to uncover transformative approaches to treating serious diseases. At the same time, we aim to broaden access to medicines by collaborating with various facets of healthcare systems globally to build capacity to care for patients, including creative approaches to address affordability. Over the past 20 years, Bristol-Myers Squibb has embraced its responsibility to grow in a manner that respects the environment, encourages social progress and contributes to long-term economic viability that supports our employees and communities. Our Sustainability 2020 Goals are:

    Accelerate innovation to develop transformative medicines—By 2020, enable Speed to Patients by optimizing development timelines such as R&D processes, regulatory review and data packaging. The goal also focuses on improving clinical trial patient diversity and satisfaction.

    Enhance patient access to medicines—Use existing approaches such as tiered pricing, voluntary licensing, reimbursement support, patient assistance programs and our Bristol-Myers Squibb Foundation partnerships to provide greater access to our medicines in global markets. For example, all marketed products will have access plans.

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    Be the employer of choice and the champion of safety—Empower and engage our people by improving safe behaviors and building a more globally diverse and inclusive workforce; being a recognized employer of choice. For example, by 2020, establish a new safety culture survey and improve results.

    Drive supply chain leadership on quality and integrity—Ensure reliable supply, engaging with our critical suppliers and assessing those in high-risk countries for conformance with labor and integrity standards. As an example, all critical manufacturing suppliers will be assessed for risk and risk mitigation performance, with results incorporated in sourcing decisions.

    Innovate to support a green, healthy planet—Continue to improve our environmental footprint with greenhouse gas and water reduction goals and integrate green design and reduce waste throughout our product portfolio. Among Bristol-Myers Squibb's Sustainability 2020 Goal targets is to reduce water use and greenhouse gas emissions by 5 percent (absolute) or more from the 2015 baseline.

              We remain actively engaged with our shareholders and other key stakeholders on our environmental, social and governance performance relative to our financial results. Our Board remains actively engaged on these issues with direct oversight by our Committee on Directors and Corporate Governance. For more information and to provide feedback, please see the company's website at https://www.bms.com/about-us/sustainability.html under "Sustainability."

Responsible Drug Pricing Strategy & Transparency

              Our Commitment

              We firmly believe that prescription medicines are such a vital part of human healthcare that everyone who needs them should have access to them. We have been, and remain, committed to facilitating access to our medicines, and to furthering our Mission to help patients prevail over serious diseases. We price our medicines based on a number of factors, including, among others, the value of scientific innovation for patients and society in the context of overall healthcare spend; economic factors impacting the healthcare systems' capacity to provide appropriate, rapid and sustainable access to patients; and the necessity to sustain our research and development (R&D) investment in innovative platforms to continue to address serious unmet medical needs.

              At Bristol-Myers Squibb, we believe in the value our medicines bring to patients and society and our role in transforming care to help patients live longer, healthier and more productive lives. We focus on medicines that meaningfully change patient outcomes and improve quality of life, and over the last 30 years, we have made significant contributions in areas such as HIV, hepatitis, cardiovascular disease and, most recently, immuno-oncology. Many of our medicines are breakthroughs in innovation, truly differentiated medicines that have changed the standard of care and help patients live longer and healthier lives. For example, in melanoma, prior to the availability of immuno-oncology treatment options, 25% of patients diagnosed with metastatic melanoma survived 1 year. This increased to 74% with immuno-oncology therapies. We are making real progress towards the goal of shifting cancer from a death sentence to a chronic disease that can be managed and controlled. Collectively, we have delivered eight (8) new products in the past eight (8) years, including 14 major market approvals in 2018. These breakthrough medicines are possible because of our consistent investment in research and development. Over the last several years, we have emerged as an industry leader in R&D investment, investing approximately $6 billion annually, roughly 30% of our revenue. Therefore, our goal is to ensure access to currently approved medicines while continuing to fuel the development of medicines for the future.

              Governance/Transparency

              We take a thoughtful approach to pricing our products and have internal processes and controls in place to ensure that pricing decisions are thoroughly and appropriately vetted prior to implementation with involvement from the highest levels of management. This process includes routine presentations to the Board on drug pricing strategies. In addition, on balance, over the last few years, our revenue growth has been primarily attributable to increased volume arising from increased demand for our products rather than price increases. We have and continue to disclose in our annual report on Form 10-K and our quarterly reports on Form 10-Q, the average net selling price increase for our products. Our average net selling price increase for 2015, 2016, 2017 and 2018 was approximately, 3%, 5%, 2% and 0%, respectively. We believe we have the appropriate governance mechanisms and internal controls and processes in place to ensure that pricing decisions are made in line with our values and commitment.

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              In addition, the Compensation Management and Development Committee ("Committee") annually completes a thoughtful and rigorous evaluation of our executive compensation program to ensure that the program is aligned with our Mission and delivers shareholder value, while not encouraging excessive or inappropriate risk-taking by our executives. When setting incentive plan targets each year, the Committee is aware of the risks associated with drug pricing, among other things, and ensures our plans do not incentivize risky behavior in order to meet targets.

              Access/Regulatory Reform

              We remain committed to working with policymakers, thought leaders, patient advocates and other stakeholders to shape a comprehensive system that provides accessible and affordable health care with the goal of achieving universal coverage and quality patient care, while continuing to fuel innovation. We support efforts to make medicines more affordable, from access assistance to innovative ways to address costs more directly. Individuals who cannot afford our medicines and have no other means of coverage, public or private, may be eligible to be provided with our medicines, at no charge, through a number of programs, including various independent charitable organizations, including the Bristol-Myers Squibb Patient Assistance Program Foundation, Inc. (an independent 501(c)(3) charitable organization) and other company sponsored patient assistance programs. We estimate that in 2018 alone, we provided more than $1.2 billion worth of medicines to more than 98,000 patients in the United States at no cost to these patients.

              Increasing access to patients is one of our 2020 Sustainability Goals. In addition to our patient assistance programs in the U.S. and outside of the U.S., we have different mechanisms of patient assistance programs, rebates and co-pay assistance programs in each country. For example, we support the use of tiered pricing between distinct groups of countries, in instances of disproportionate disease impact. For instance, for over a decade, Bristol-Myers Squibb has maintained a policy of tiered pricing and voluntary licensing for our HIV and HCV medicines in an attempt to reduce barriers that delay broad and accelerated access to treatment for patients around the world. In addition, as part of our commitment to helping patients prevail over serious diseases, we also drive and support a number of programs designed to build capacity, raise patient awareness, including prevention and diagnosis and access to treatment and care. Several examples are: SECURE THE FUTURE; Delivering Hope; and the U.S. Patient Assistance Program.

              As a company, we have made remarkable improvements in delivering life-saving medicines to patients and also offering creative solutions for access; however, we understand concerns that our healthcare system as a whole is too expensive, and we are interested in finding ways to improve our system. Therefore, we re-assert our commitment to proactively work with governments, payers, health care providers and other stakeholders to develop sustainable solutions that will better assist patients in need.

Communications with our Board of Directors

              Our Board has created a process for anyone to communicate directly with our Board, any committee of the Board, the non-management directors of the Board collectively or any individual director, including our Chairman and Lead Independent Director. Any interested party wishing to contact our Board may do so in writing by sending a letter to Bristol-Myers Squibb Company, 430 East 29th Street—14th Floor, New York, New York 10016, Attention: Corporate Secretary.

              Any matter relating to our financial statements, accounting practices or internal controls should be addressed to the Chair of the Audit Committee. All other matters should be addressed to the Chair of the Governance Committee.

              Our Corporate Secretary or her designee reviews all correspondence and forwards to the addressee all correspondence determined to be appropriate for delivery. Our Corporate Secretary periodically forwards to the Governance Committee a summary of all correspondence received. Directors may at any time review a log of the correspondence we receive that is addressed to members of the Board as well as copies of any such correspondence. Our process for handling communications to our Board has been approved by the independent directors.

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Compensation of Directors

Director Compensation Program

              We aim to provide a competitive compensation program to attract and retain high quality directors. The Committee on Directors and Corporate Governance annually reviews our directors' compensation practices, including a review of the director compensation programs at our executive compensation peer group. Furthermore, for 2018 we again engaged an outside consultant, Frederic W. Cook & Co., Inc. (FWC), to review market data and competitive information on director compensation. FWC recommended that our executive compensation peer group should be the primary source for determining director compensation.

              Based on this analysis, the Committee determined to make no further changes to the director compensation program for service as a director in 2018. The Committee previously determined, in light of the fact that our director compensation program has been unchanged since 2016, and was between the 25th percentile and median of our peer group, among other reasons, to increase the annual equity award for service as a director for 2018 by $15,000. The Committee submitted its recommendations for director compensation to the full Board for approval. Our employee directors do not receive any additional compensation for serving as directors.

              The Committee believes the total compensation package for directors we offered in 2018 was reasonable, and appropriately aligned the interests of directors with our shareholders by ensuring directors have a proprietary stake in our company.

The Components of our Director Compensation Program

              In 2018, non-management directors who served for the entirety of 2018 received:

 
  Component
  Value of Award
   
    Annual Retainer   $100,000  
    Annual Equity Award   Deferred Share Units valued at $185,000    
    Committee Chair Retainer   $25,000  
    Committee Member (not Chair) Retainer – Audit, Compensation and Management Development, and Science and Technology Committees   $15,000    
    Committee Member (not Chair) Retainer – Committee on Directors and Corporate Governance   $7,500  
       

Annual Equity Award

              On February 1, 2018, all non-management directors serving on the Board at that time received an annual award of deferred share units valued at $185,000 under the 1987 Deferred Compensation Plan for Non-Employee Directors. These deferred share units are non-forfeitable at grant and are settleable solely in shares of company common stock. A new member of the Board who is eligible to participate in the Plan receives, on the date the director joins the Board, a pro-rata number of deferred share units based on the number of share units payable to participants as of the prior February 1.

Compensation of our Lead Independent Director

              Our Lead Independent Director receives an additional retainer of $35,000. Our Board has determined to award this retainer in light of the increased duties and responsibilities demanded by this role, which duties and responsibilities are described in further detail on page 19.

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Share Retention Requirements

              We significantly increased the share retention requirements for non-management directors in 2016. All non-management directors are required to acquire a minimum of shares and/or units of company stock valued at not less than five times their annual cash retainer within five years of joining the Board and to maintain this ownership level throughout their service as a director. We require that at least 25% of the annual retainer be deferred and credited to a deferred compensation account, the value of which is determined by the value of our common stock, until a non-management director has attained our share retention requirements.

Deferral Program

              A non-management director may elect to defer payment of all or part of the cash compensation received as a director under our company's 1987 Deferred Compensation Plan for Non-Employee Directors. The election to defer is made in the year preceding the calendar year in which the compensation is earned. Deferred funds for compensation received in connection with service as a Director in 2018 were credited to one or more of the following funds: a United States total bond index, a short term fund, a total market index fund or a fund based on the return on our common stock. Deferred portions are payable in a lump sum or in a maximum of ten annual installments. Payments under the Plan begin when a participant ceases to be a director or at a future date previously specified by the director.

Charitable Contribution Programs

              Each director who joined the Board prior to December 2009 participates in our Directors' Charitable Contribution Program. Upon the death of a director, we will donate up to an aggregate of $500,000 to up to five qualifying charitable organizations designated by the director. Individual directors derive no financial or tax benefit from this program since the tax benefit of all charitable deductions relating to the contributions accrues solely to us. In December 2009, the Board eliminated the Charitable Contributions Program for all new directors.

              In addition, each director was able to participate in our company wide matching gift program in 2018. We matched dollar for dollar a director's contribution to qualified charitable and educational organizations up to $30,000. This benefit was also available to all company employees. In 2018, each of the following non-employee directors participated in our matching gift programs as indicated in the Director Compensation Table below: Drs. Sato and Baselga and Messrs. Arduini, Bertolini, Emmens, Grobstein, Lacy, Samuels and Storch.

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Director Compensation Table

              The following table sets forth information regarding the compensation earned by our non-employee directors in 2018.

 
 
Name
  Fees
Earned or Paid
in Cash(1)
  Stock
Awards(2)
  Option
Awards(3)
  All Other
Compensation(4)
  Total    

 

 

 

                                 

 

 

P. J. Arduini

  $ 130,000   $ 185,000   $ 0   $ 17,750   $ 332,750  

 

 

J. Baselga, M.D., Ph.D.(5)

  $ 62,462   $ 170,808   $ 0   $ 5,000   $ 238,270    

 

 

R. Bertolini

  $ 129,161   $ 185,000   $ 0   $ 10,000   $ 324,161  

 

 

M. W. Emmens

  $ 130,000   $ 185,000   $ 0   $ 30,000   $ 345,000    

 

 

M. Grobstein

  $ 140,000   $ 185,000   $ 0   $ 30,000   $ 355,000  

 

 

A. J. Lacy

  $ 125,812   $ 185,000   $ 0   $ 30,000   $ 340,812    

 

 

D. C. Paliwal

  $ 122,500   $ 185,000   $ 0   $ 0   $ 307,500  

 

 

T. R. Samuels

  $ 122,500   $ 185,000   $ 0   $ 30,000   $ 337,500    

 

 

V. L. Sato, Ph.D.

  $ 178,312   $ 185,000   $ 0   $ 25,000   $ 388,312  

 

 

G. L. Storch

  $ 130,000   $ 185,000   $ 0   $ 10,000   $ 325,000    

 

 

K.H. Vousden, Ph.D.

  $ 121,661   $ 199,438   $ 0   $ 0   $ 321,099    

(1)
Includes the annual retainer, committee chair retainers, committee membership retainers and Lead Independent Director retainer, as applicable. All or a portion of the cash compensation may be deferred until retirement or a date specified by the director, at the election of the director. The directors listed in the below table deferred the following amounts in 2018, which amounts are included in the figures above.
 
 
Name
  Dollar
Amount
Deferred
  Percentage
of Deferred
Amount
Allocated
to U.S. Total
Bond Index
  Percentage
of Deferred
Amount
Allocated
to Short
Term Fund
  Percentage
of Deferred
Amount
Allocated to
Total Market
Index Fund
  Percentage
of Deferred
Amount
Allocated
to Deferred
Share Units
  Number of
Deferred
Share Units
Acquired
   

 

 

P. J. Arduini

  $ 130,000   0 % 0 % 0 % 100 % 2,250  

 

 

J. Baselga, M.D., Ph.D.(5)

  $ 62,462     0 %   0 %   0 %   100 %   1,060    

 

 

R. Bertolini

  $ 129,161   0 % 0 % 0 % 100 % 2,238  

 

 

M. W. Emmens

  $ 130,000     0 %   0 %   0 %   100 %   2,250    

 

 

M. Grobstein

  $ 70,000   0 % 0 % 0 % 100 % 1,211  

 

 

A. J. Lacy

  $ 125,812     0 %   0 %   0 %   100 %   2,174    

 

 

D. C. Paliwal

  $ 122,500   0 % 0 % 0 % 100 % 2,120  

 

 

T. R. Samuels

  $ 122,500     0 %   0 %   0 %   100 %   2,120    

 

 

G. L. Storch

  $ 130,000   0 % 0 % 0 % 100 % 2,250  

 

 

K. H. Vousden, Ph.D.

  $ 30,415     0 %   0 %   0 %   100 %   527    
(2)
Represents aggregate grant date fair value under FASB ASC Topic 718 of deferred share unit and common stock awards granted during 2018. On February 1, 2018, each of the non-management directors then serving as a director received a grant of 2,945.860 deferred share units valued at $185,000 based on the fair market value on the day of grant of $62.80. On January 1, 2018, in connection with her appointment to the Board, Dr. Karen H. Vousden received a pro-rated grant of 235.613 deferred share units valued at $14,438 based on the fair market value on the day of grant of $61.28. On March 1, 2018, in connection with his appointment to the Board, Dr. José Baselga received a pro-rated grant of 2,600.220 deferred share units valued at $170,808 based on the fair market value on the day of grant of $65.69. The aggregate number of deferred share units held by each of these directors as of December 31, 2018 is set forth below. In some cases, these figures include deferred share units acquired through elective deferrals of cash compensation.
 
 
Name
  # of Deferred
Share Units
   

 

 

P. J. Arduini

  14,961  

 

 

J. Baselga, M.D., Ph.D.(5)

    3,731    

 

 

R. Bertolini

  10,100  

 

 

M. W. Emmens

    10,197    

 

 

M. Grobstein

  75,479  

 

 

A. J. Lacy

    65,590    

 

 

D. C. Paliwal

  22,606  

 

 

T. R. Samuels

    9,102    

 

 

V. L. Sato, Ph.D.

  61,108  

 

 

G. L. Storch

    44,743    

 

 

K. H. Vousden, Ph.D.

  3,786  
(3)
There have been no stock options granted to directors since 2006 and no non-employee Director had stock options outstanding as of December 31, 2018.
(4)
Amounts include company matches of charitable contributions under our matching gift program.
(5)
Dr. José Baselga resigned from the company in September 2018.

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COMPENSATION DISCUSSION AND ANALYSIS

               This Compensation Discussion and Analysis (CD&A) is intended to explain how our compensation program is designed and how it operates for our Named Executive Officers (NEOs). The below table includes a list of our 2018 NEOs.

  Name
  Principal Position
 
  Giovanni Caforio, M.D.   Chairman & Chief Executive Officer
  Charles Bancroft   Chief Financial Officer and EVP, Global Business Operations
  Thomas J. Lynch, Jr., M.D.   EVP and Chief Scientific Officer
  Sandra Leung   EVP and General Counsel
  Louis S. Schmukler   SVP and President, Global Product Development and Supply


EXECUTIVE SUMMARY

A.    Introduction

              Overview. Bristol-Myers Squibb Company continues to recognize that aligning pay to the achievement of both our short-term and long-term goals, engagement of our employees, the achievement of our Mission and the delivery of value to our shareholders is a cornerstone of our compensation philosophy and program structure. In 2018, we exceeded our financial goals in key areas, including continued growth across our core prioritized brands, and although we did not meet some of our targeted pipeline goals, we had important scientific advancement of clinical assets that continue to diversify our pipeline.

GRAPHIC   Received strong shareholder support for executive compensation with 95% in favor of our 2018 "Say on Pay" vote

GRAPHIC

 

Key 2018 performance highlights
    §   Total revenues increased by 9%
    §   GAAP and non-GAAP earnings per share increased by 393% and 32%, respectively
    §   Our strong commercial and operational execution as well as continued investment in R&D supports the right framework for delivering value to shareholders over the long-term

GRAPHIC

 

Maintained superior commercial execution across the company in 2018
    §   We sustained significant growth across our prioritized brands, led by our two largest brands, Opdivo, an oncology product, and Eliquis, a cardiovascular product, which had sales growth of 36% and 32%, respectively
    §   Eliquis is the leading oral anticoagulant in the U.S., with a best in class profile
    §   We continued to grow and advance our immuno-oncology portfolio in additional launched indications, including: (i) approval of Opdivo/Yervoy combination in first-line renal cell carcinoma (RCC) in U.S., and approval by the European Medicines Agency (EMA) in January 2019 for first-line RCC in EU; (ii) Opdivo approval for adjuvant treatment in melanoma in EU and Japan (both quickly becoming standards of care within their approved settings); and (iii) Opdivo approval for non-small cell lung cancer in China (the first immuno-oncology product approved in China)
    §   Advanced early pipeline with encouraging phase II data for our TYK-2 inhibitor compound for treatment of moderate-to-severe plaque psoriasis; advanced compound to phase III as part of a robust development plan for TYK-2 across psoriasis, crohn's disease and lupus

GRAPHIC

 

Continued to advance our long-term business strategy
    §   Strong foundation for growth in 2019 and beyond, with a diversified portfolio of innovative medicines
    §   We made the strategic decision to acquire Celgene Corporation ("Celgene"), which was announced on January 3, 2019, following a robust strategic review and extensive due diligence completed in 2018

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    §   We executed other important business development transactions both divesting non-core assets and supplementing our innovative pipeline, including a collaboration with Janssen (JNJ) for our Factor Xla inhibitor program (for treatment of major thrombotic conditions) and advanced assets into phase II trials, the announced sale of the company's UPSA consumer health business to Taisho Pharmaceutical Holdings Co., Ltd., and other research and clinical collaborations with entities such as, Boston Medical, Eisai Co., Ltd., Vedanta Biosciences, and Infinity Pharmaceuticals, Inc.
    §   Although we made significant progress in advancing our innovative medicines pipeline in 2018 and our pending acquisition of Celgene's portfolio strengthens our strategic position, we recognize that there is still more work to be done—our clinical programs remain focused on expanding the benefits of our immuno-oncology, cardiovascular, fibrosis and immunoscience portfolios. The Company's overall pipeline performance and key pipeline milestones are described in more detail on page 43

GRAPHIC

              Our Compensation & Management Development Committee's (the "Committee") ongoing review of our business strategy and our extensive shareholder engagement efforts have allowed our executive compensation program to maintain close alignment with our strategic focus and the perspectives of our shareholders. This executive summary includes an overview of the key components of our executive compensation program and recent changes designed to support our company's strategy as a diversified specialty biopharmaceutical company.

B.    Expanded Shareholder Engagement

              In 2018, we reached out to over 50 of our top shareholders, representing nearly 50% of our shares outstanding. We engaged with our investors on many important aspects of our executive compensation program, including disclosure trends and structural changes to the compensation program that became effective in 2016, as well as other corporate governance topics covering, among other things, board composition, tenure, board assessment, risk oversight, and board and company-wide diversity and other sustainability items.

              The feedback received from shareholders was generally positive and was discussed by the Committee and Board. We are committed to ongoing shareholder engagement and consideration of feedback as we continually evaluate our executive compensation program. For example, after a review of our compensation program practices as well as engagement with our shareholders, the Committee adopted a compensation policy to exclude the impact of share repurchases from both target and achieved financial results. For a discussion of this new compensation policy, please see "Compensation Program Changes for 2019" on page 37.

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C.    2018 Executive Compensation Program at a Glance

              Our compensation program design reflects our compensation philosophy and aligns well with our strategy, market practice and our shareholders' interests.

GRAPHIC

D.    2018 Pay Decisions Align with Company Performance and Ongoing Evolution

Key Considerations

              Each year, when evaluating company and senior management performance and making its compensation decisions, the Committee considers our compensation philosophy and program structure, which underscores competitive compensation and pay for performance, striking the appropriate balance among (i) directly aligning executives' compensation with the fulfillment of our Mission and the delivery of shareholder value, (ii) making a substantial portion of our executives' compensation variable and at risk based on operational, financial, strategic and share price performance and (iii) attracting, retaining and engaging executives who are capable of leading our business in a highly competitive, complex, and dynamic business environment.

              For 2018, after reviewing our financial and operational performance, our share price performance, and the individual performance of our executives, our Committee determined that the compensation of our executives under the program design continues to be appropriate.

The Committee looked at how all the elements of our compensation program design worked together, noting the balance between short-term and long-term compensation and performance; top-line and bottom-line results; absolute and relative factors; and internal and market-based performance metrics. In evaluating 2018 performance, the Committee determined that the compensation of our executives appropriately reflects:

    our financial and operational results,
    the execution and advancement of company's long-term strategy in 2018, and
    the Committee's holistic assessment of the individual performance of our executives.

We believe that the execution of our strategy will continue to create sustainable long-term value for shareholders.

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Other Key Factors Considered

              As noted, our compensation program is guided by our compensation philosophy and principles and this is illustrated through the following elements of our program:

    Balance of incentives emphasizes long-term performance.

    Long-term equity incentive program aligns executive compensation with shareholder value over the relevant period:

      o
      Long-term compensation emphasized in our overall pay mix (i.e., over 60% for our NEOs);

      o
      34% of the 2018 PSU grant is tied to 3-year total shareholder return (TSR) vs. our peer group; and

      o
      MSUs are also highly responsive to changes in our share price.

    Robust share ownership and retention guidelines further the alignment of management and shareholders.

E.    2018 Annual Incentive Program Results & Incentive Plan Target Setting Considerations

Annual Incentive Program Results

              Annual awards are determined based on a Company Performance Factor, which is calculated based on pre-defined financial and pipeline goals, and an Individual Performance Factor, which is calculated based on individual achievements against pre-defined strategic and operational goals. When determining the individual component of our annual incentive awards, the Committee considers each executive's contributions to the company's strategic achievements and financial and operational performance. In addition, the Committee considers how each executive demonstrates our BMS Behaviors, including among others, accountability, and his or her contributions to our company's culture of diversity and inclusion, business integrity, ethics and compliance.

Target Setting Considerations

              At the beginning of each year, the Committee undertakes an incentive goal setting process to establish targets that it believes will motivate our executives appropriately to deliver the performance that drives shareholder value creation in both the short and longer term.

              The Committee set incentive targets in the first quarter of 2018 after considering our budget, operational priorities, long-term strategic plans, historical performance, product pipeline and external factors, among other things. The Committee also set targets in line with guidance provided to the market in early 2018. When it became clear that the Company would exceed the financial targets, we revised our sales and earnings guidance to the market.

              Further detail on annual target setting considerations for each of our NEOs is included beginning on page 42, under "Financial and Pipeline Metric Target Setting Considerations".


Year over Year Comparison of Financial and Pipeline Achievements for Company Performance Factor

        2017         2018    

Performance Measure

      Target       Actual      

% of
Target


    Target       Actual      

% of
Target


 

Non-GAAP Diluted Earnings Per Share(1)

     
$

2.76
     
$

2.94
     

106.5

%
   
$

3.22
     
$

3.87
     

120.2

%

 

                                                               

Total Revenues, Net of Foreign Exchange ($=MM)(1)

     
$

19,991
     
$

20,683
     

103.5

%
   
$

21,447
     
$

22,564
     

105.2

%

 

                                                               

Pipeline Score

     

3
     

3.5
     

116.7

%
   

3
     

2.5
     

83.3

%


(1)
Consistent with the company's past practice, non-GAAP diluted earnings per share and total revenues, net of foreign exchange, were each adjusted $0.11 and $63 million, respectively, due to unanticipated favorable budget variances for Sprycel performance in Europe and the impact of tax reform in the U.S. The Committee determined that it was appropriate to exclude the impact of these unanticipated favorable budget variances because these events favorably impacted performance in an amount that was not determinable when the target was set in the first quarter of 2018.

              The Individual Performance Factors applied to our NEOs for 2018 ranged between 100% and 135%. Disclosure of our NEOs individual performance goals and achievements are detailed below beginning on page 43, under "2018 Individual Performance Assessment". Further detail on annual incentive awards for each of our NEOs is included on page 45, under "2018 Annual Incentive Awards".

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F.    Compensation Program Changes for 2019

Key Integration Metrics Built into Compensation Program

              Our acquisition of Celgene will position us to create a leading biopharma company, with best-in-class franchises, significant near-term launch opportunities and a deep and broad pipeline, creating an even stronger foundation for long-term sustainable growth. To enhance the structural alignment between our incentive program and the successful execution of our integration strategy and value creation, the Committee will adjust performance metrics on outstanding PSUs awarded to our NEOs in 2018 and 2019 to incorporate key integration metrics, subject to the closing of the Celgene transaction. Key integration execution metrics include:

              Our short-term annual incentive program will include assessment of the following key integration execution metrics:

    Near-term pipeline delivery milestones
    Human capital management, and
    Synergy savings

              For our long-term incentive program, outstanding PSU awards will include the following indicators of post-merger progress:

    Multi-year progress against key integration execution metrics
    Combined company revenue goals, and
    Relative TSR

Compensation Policy Regarding Share Repurchases

              Following shareholder engagement, the Committee has decided to adopt a policy to neutralize the impact of share repurchases in financial performance metrics. The Committee will exclude the impact of share repurchases from both target and achieved financial results.

Our Compensation Governance Reflects Market Best Practices

              We maintain a number of compensation governance best practices which support our overarching compensation philosophy and are fully aligned with our compensation principles, as discussed in the following section. Our compensation practices also align with input we have received from shareholders.

    What We Do:       What We Don't Do:    
 
   

ü

  100% performance-based annual and long-term incentives       LOGO   Generally no perquisites to our Named Executive Officers    
 
   

ü

  Caps on the payouts under our annual and long-term incentive award programs       LOGO   Prohibition on speculative and hedging transactions    
 
   

ü

  Robust share ownership and share retention guidelines       LOGO   No employment contracts with our Named Executive Officers    
 
   

ü

  Robust recoupment and clawback policies       LOGO   Prohibition on re-pricing or backdating of equity awards    
 
   

ü

  Proactive shareholder engagement       LOGO   No guaranteed incentives with our Named Executive Officers    
 
   

ü

  "Double-trigger" change-in-control agreements       LOGO   No tax gross-ups    
 

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Executive Compensation Philosophy and Principles

Our executive compensation philosophy focuses on two core elements:

LOGO

              Based on this philosophy, our compensation program is designed with the following principles in mind:

    ü
    to pay our employees equitably based on the work they do, the capabilities and experience they possess, and the performance and behaviors they demonstrate (including passion, innovation, speed and accountability);

    ü
    to promote a non-discriminatory and inclusive work environment that enables us to benefit from and to use as a competitive advantage the diversity of thought that comes with a diverse and inclusive workforce;

    ü
    to motivate our executives and all our employees to deliver high performance with the highest integrity; and

    ü
    to implement best practices in compensation governance, including risk management and promotion of effective corporate policies.

Benchmarking Analysis and Peer Group

Benchmarking Approach

              In general, our executive compensation program seeks to provide total direct compensation at the median of our primary peer group (as defined below) when targeted levels of performance are achieved. In any given year, however, we may target total direct compensation for a particular executive above or below the median of our primary peer group due to multiple factors, including competencies, qualifications, experience, responsibilities, contribution, individual performance, role criticality and/or potential. We may also target total direct compensation above the median of our primary peer group to attract and retain talent within the competitive biopharmaceutical industry marketplace. We define total direct compensation as base salary plus target annual incentive award plus the grant date fair value of annual long-term equity incentive awards.

              Paying at competitive levels when targeted levels of performance are achieved allows us to attract and retain the talent we need to continue driving performance, while enabling us to maintain a competitive cost base with respect to compensation expense.

Benchmarking Process

              The Committee's independent compensation consultant annually conducts a review of the compensation for our Named Executive Officers, including compensation information compiled from publicly filed disclosures of our primary and extended peer groups. Pay levels of our peers are used as a reference point, among other factors, when determining individual pay decisions (i.e., base salary levels, the size of salary adjustments, if any, target annual incentive levels and long-term equity incentive award size).

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2018 Peer Groups

              We regularly monitor the composition of our peer groups and make changes when appropriate. Our peer groups in 2018 remained unchanged and consisted of the following companies:

 
 
  Primary Peer Group
  Extended Peer Group(1)
   
    AbbVie Inc.   Gilead Sciences Inc.       AstraZeneca PLC  
    Amgen Inc.   Johnson & Johnson       GlaxoSmithKline PLC    
    Biogen Inc.   Merck & Co.       Roche Holding AG  
    Celgene Corporation   Pfizer, Inc.       Novartis AG    
    Eli Lilly and Company         Sanofi  
         

(1)     Our extended peer group includes the primary peer group plus these five companies based outside the U.S. Following the closing of the company's acquisition of Celgene, Celgene will be removed from the list of peer companies.

              Primary Peer Group: The Committee believes the companies included in our 2018 primary peer group are appropriate given the unique nature of the biopharmaceutical industry. These companies represent our primary competitors for executive talent and operate in a similarly complex regulatory and research driven environment.

              In determining our primary peer group, we believe emphasis should be placed on whether a company competes directly with us for the specialized talent necessary to further drive our success as a diversified specialty biopharmaceutical company. We also consider company size in determining our peer group. The companies in our primary peer group all had annual revenues of at least $10 billion. In 2018, BMS approximated the 25th percentile in revenue and market capitalization amongst our primary peer group.

              Extended Peer Group: We also review an extended peer group, which is comprised of the nine companies in our primary peer group plus five companies based outside the U.S. This extended peer group serves as an additional reference point for compensation practices, including understanding of the competitive pay environment as it relates to the global nature of both our business and the competition for talent.

2018 Target Compensation Benchmarks

              Target compensation for Dr. Caforio was at approximately the median of Chief Executive Officers within our current proxy peer group. The Committee believes Dr. Caforio's compensation package positions him appropriately among his peers when taking multiple factors into consideration. On average, our other Named Executive Officers were also at approximately the median of our current proxy peer group, with some variation by position.

Components of Our 2018 Compensation Program

  Core components of our 2018 executive compensation program:

          §
          Base Salary

          §
          Annual Incentive Award

          §
          Long-Term Equity Incentives, comprised of:
            Performance Share Units
            Market Share Units

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              The Committee believes this structure aligns with a continued commitment to emphasizing variable, or "at risk," compensation for our Named Executive Officers. The following charts provide an overview of the 2018 executive compensation components for the CEO and other NEOs, and highlights the percentage of target compensation that is variable and at risk.

GRAPHIC

              This target mix supports the core elements of our executive compensation philosophy by emphasizing long-term, stock based incentives while providing competitive annual cash components, thus aligning our executive compensation program with our business strategy.

              The following sections discuss the primary components of our executive compensation program and provide detail on how specific pay decisions were made for each NEO in 2018.

Base Salary

              Base salaries are used to help us attract talent in a highly competitive labor market. The salaries of our executives are primarily established on the basis of the specialized qualifications, experience and criticality of the individual executive and/or his or her role and the pay levels of comparable positions within our primary peer group. Salary increases for our executives are determined based on both the performance of an individual and the size of our annual increase budget in a given year, which is based in part on an assessment of market movement related to salary budgets for our peer companies and broader general industry trends. Therefore, we typically set our annual salary increase budgets based on the median of such forecasts. There may be adjustments to salary from time to time to recognize, among other things, when an executive assumes significant increases in responsibility and/or is promoted, and to reflect competitive pay based on market data for individual executive roles.

              In 2018, in accordance with our company wide merit review process, employees, including the Named Executive Officers, were eligible for a merit increase provided their performance fully met or exceeded expectations on both Results and Behaviors. Employees who are determined to be below the fully-performing level typically receive either a reduced merit increase or no salary increase depending on the extent to which they are below the fully-performing level. Effective April 1, 2018, Dr. Caforio received an increase of 3.1%, and each of Mr. Bancroft, Dr. Lynch, Ms. Leung and Mr. Schmukler received an increase of 3%.

Annual Incentive Program

              Our annual incentive program is designed to reward performance that supports our business strategy as a diversified specialty biopharmaceutical company and our Mission to help patients prevail over serious diseases. The annual plan aligns with our business strategy and Mission by sharpening management's focus on key financial and pipeline goals, as well as by rewarding individual performance (both Results and Behaviors), consistent with our pay-for-performance philosophy.

              Each NEO's target annual incentive is expressed as a percentage of base salary, which is set at a level to ensure competitive total direct compensation. Annual incentive awards for each NEO are determined by evaluating both company performance (as measured by the Company Performance Factor) and individual performance (as measured by the Individual Performance Factor). The maximum incentive opportunity for each NEO is 200% of target.

              The Company Performance Factor can range from 0% to 152%, based on financial achievements and pipeline results, and the Individual Performance Factor can range from 0% to 165%, based on individual performance (both Results and Behaviors), subject to a 200% of target maximum payout. The graphic below illustrates the calculation used to determine annual incentive plan awards.

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Annual Incentive Award Calculation for Named Executive Officers

GRAPHIC

Performance Metrics Underlying the Company Performance Factor

              Our 2018 incentive plan design has the following corporate-wide measures, which apply to all employees eligible to participate in the annual incentive plan, including our Named Executive Officers:

 
 
      2018 Metric and Weighting
  What It Is
  Why It's Important
   
    Earnings Per Share (EPS)
(50%)

 
Non-GAAP Diluted EPS
(Net Income divided by outstanding shares of common stock)

 
A critical measure of annual profitability aligning our employees' interests with those of our shareholders  
    Total Revenues
(25%)
  Total Revenues, net of foreign exchange
(Total revenues minus reserves for returns, discounts, rebates and other adjustments)
  A measure of topline growth that creates a foundation of long-term sustainable growth and competitive superiority    
    Pipeline
(25%)

 
• Near-Term Value
(Submissions and approvals)
• Long-Term Growth Potential


 
Increases BMS-wide focus on delivery of our late-stage pipeline and continued development of a robust pipeline through both internal efforts and business development  
 

              Our pipeline metric highlights the importance of pipeline delivery to the near-term and long-term success of the company. This metric measures the sustainability and output of our R&D pipeline portfolio and is comprised of goals in two categories, Near-Term Value and Long-Term Growth Potential with a Qualitative Overlay on the entire metric:

 
 
  Metric
  What It Is
  Why It's Important
   
    Near-Term Value (50%)   Regulatory submissions and approvals for new medicines and new indications and formulations of key marketed products in the U.S., EU, China and Japan   Recognizes delivery of the late-stage pipeline, which drives near-term value  
    Long-Term Growth Potential (50%)   • Development Candidates
• First in Human
• Registrational Study Starts
  Recognizes the progression and successes of the R&D pipeline at various stages of development, including internally and externally-sourced compounds    
    Qualitative Overlay   Reflects management's, the Science & Technology Committee's (S&T) and the Committee's holistic evaluation of our pipeline performance, including such considerations as the performance of high value assets and the integration of acquired assets, among other factors.  
 

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Financial and Pipeline Metric Target Setting Considerations

              At the beginning of each year, the Committee undertakes an incentive target setting process to establish targets that it believes will motivate our executives appropriately to deliver the high performance that drives shareholder value creation in both the short and longer term.

              Financial and strategic performance targets are:

    Predefined;
    Stretch goals that aligned with earnings guidance;
    Tied to the key financial objectives of the company; and
    Aligned with industry benchmarks on speed of commercial launch and expected market adoption.

              Pipeline performance targets are:

    Set in collaboration with the Science and Technology Committee (the "S&T Committee");
    Aligned with the company's strategic plan and key value drivers;
    Aligned with industry benchmarks on typical clinical study duration and regulatory approval timelines;
    Separated into two performance categories, "Near-Term Value" and "Long-Term Growth Potential" subject to a qualitative overlay; and
    Reflects annual milestones that link short-term outcomes to long-term strategic R&D priorities (milestones for higher value assets are emphasized in goal setting to provide a framework that assesses not only quantity, but also quality and impact of milestones).

              The S&T Committee also identifies those highest value assets and the integration of acquired assets, among other factors, the importance of which will inform the application of a qualitative overlay.

              In establishing targets and goals each year, the Committee considers budget, operational priorities, long-term strategic plans, historical performance, product pipeline and external factors, including external expectations, competitive developments, and the regulatory environment, among other things.

              The Committee set incentive targets in the first quarter of 2018 in consideration of anticipated performance, in line with guidance provided to the market in early 2018 and in line with commercial and pipeline expectations. Later in the year, we met, or exceeded financial and operational goals in certain key areas, including growth of both revenues and non-GAAP earnings, earlier-than-expected regulatory approvals, important business development activities, and disciplined expense management, resulting in a revision of guidance to the market for the year.

2018 Company Performance Factor Achievements

              The table below shows the performance and resulting payout percentage of the performance measures used for our 2018 annual incentive plan:

 
 
  Performance Measure
  Target
  Actual
  % of
Target

  Resulting
Payout
Percentage

   

 

 

Non-GAAP Diluted Earnings Per Share(1)

  $ 3.22   $ 3.87   120.2%   152.1%  

 

 

Total Revenues, Net of Foreign Exchange ($=MM)(1)

  $ 21,447   $ 22,564   105.2%   152.17%    

 

 

Pipeline Score

  3   2.5   83.3%   73.26%  

 

 

Total

          107.2%   132.44%    
 

(1)
Consistent with the company's past practice, non-GAAP diluted earnings per share and total revenues, net of foreign exchange, were each adjusted $0.11 and $63 million, respectively, due to unanticipated favorable budget variances for Sprycel performance in Europe and the impact of tax reform in the U.S. The Committee determined that it was appropriate to exclude the impact of these unanticipated favorable budget variances because these events favorably impacted performance in an amount that was not determinable when the target was set in the first quarter of 2018.

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              For the pipeline metric, the S&T Committee reviews our performance in the categories identified above, including a qualitative assessment of results, and determines a performance score using a scale of one to five, with three being target. We did not meet our target goal range, but we advanced a number of important programs and achieved many high value milestones in 2018. From a qualitative perspective, the S&T Committee considered the specific milestones that were achieved and those that were not achieved and determined that no additional qualitative adjustment was required. For 2018, the S&T Committee recommended, and the Committee approved, a pipeline score of 2.5 based on the following results:

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Individual Performance Factor

              Our executive compensation program is designed to reward executives for financial, operational, strategic, share price and individual performance while demonstrating high integrity and ethical standards. We believe this structure appropriately incentivizes our executives to focus on our long-term business strategy, to achieve our Mission to help patients prevail over serious diseases, and to attain sustained long-term value creation for our shareholders.

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              When determining individual award levels, the Committee considers (i) individual performance against strategic, financial and operational objectives that support our long-term business strategy and shareholder value creation ("Results") and (ii) an executive's demonstration of the behaviors defined in the BMS Behaviors ("Behaviors") identified in the box to the right.

The Role of Risk Assessment in our Incentive Program

              Also embedded in the determination of individual award levels is the ongoing assessment of enterprise risk, including reputational risk stemming from the dynamic external environment. In particular, we evaluate how each of our executives demonstrate our BMS Behaviors in the execution of their day-to-day decisions. This evaluation is one input into the determination of payouts under both the annual incentive and long-term equity incentive programs. Therefore, given the direct link between Behaviors that impact payout and our executive compensation program's emphasis on sustainable long-term value, we minimize and appropriately reduce the possibility that our executive officers will make excessively or inappropriately risky decisions that could maximize short-term results at the expense of sustainable long-term value creation for our shareholders.

2018 Individual Performance Assessment

              When determining the individual component of the annual incentive awards, the Committee considered each executive's contributions to our company's strategic achievements and financial and operational performance as well as his or her demonstration of our BMS Behaviors. The Committee evaluated our NEO's performance against clear and pre-defined objectives established at the beginning of the year and tied to the company's key strategic objectives.

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              For the CEO, the Committee evaluated the following in determining his individual performance modifier:


2018 CEO PERFORMANCE EVALUATION

STRATEGIC OBJECTIVE
  EVALUATION
Drive enterprise performance: Achieve budgeted financial targets established at the beginning of the year, including revenues, non-GAAP EPS and operating margin, and increase competitiveness as a diversified Specialty BioPharma company, including ensuring supply chain reliability, achieving predefined customer service metrics for all products and accelerating strategic plan deliverables. Execute on-time completion of 2018 deliverables against company transformation plan.  

Exceeded target for revenues, operating margin and non-GAAP EPS, as a result of strong commercial execution.

Exceeded all customer service metrics.

Met target for supply chain reliability and manufacturing capacity and achieved 100% of the target enterprise supply chain transformation.

Completed 54 transactions in furtherance of strategic plan, including strategic partnerships with Nektar and Janssen, translational medicines partnerships and an agreement to divest the UPSA business, among others, and positioned the Company to announce an agreement to acquire Celgene on January 3, 2019.

Significant progress on transformation deliverables, exceeding savings goal in 2018; plan remains on track.

Enhance the value of the portfolio and diversify for long-term growth: Maximize portfolio value of brands/assets and advance pipeline portfolio, including through combinations, next-generation agents and innovating delivery solutions. Achieve budgeted revenue targets for core products, key product approvals, regulatory submissions, regulatory study starts, and other key pipeline milestones.  

Exceeded revenue targets for Opdivo, Yervoy and Eliquis and grew net sales of prioritized brands compared to 2017.

Exceeded or met U.S. new patient share objectives, including Opdivo in second-line lung cancer, first- and second-line kidney cancer, and adjuvant melanoma, among other indications.

Additional indications approved for Opdivo, including first-line kidney cancer in the U.S. and Japan and a positive opinion by an advisory board to the European Medicines Agency in the EU; adjuvant melanoma in the EU and Japan; and second-line non-small cell lung cancer in China.

Orencia approved for juvenile idiopathic arthritis in Japan

Overall pipeline performance and key pipeline milestones are described in more detail on page 43.

Evolve our culture and execute our People Strategy: Continue to deepen employee engagement, cultivate great managers and leaders, and build talent, delivering measureable improvements in key areas of focus, including, among others, diversity and inclusion, and continuing to set a firm "tone at the top" on a culture of business integrity and ethics and compliance.  

Continued comprehensive approach to deepen engagement of global leadership team and cultivate great managers.

New performance management approach implemented, with survey results showing significant year over year improvement in employee engagement and articulated development goals.

Continued to reinforce integrity and ethics in all key employee communications, and updated Principles of Integrity.

Progress made on diversity and inclusion with representation of women globally and underrepresented ethnic groups in the U.S.

Successfully managed succession for certain key roles and continued robust management development and succession planning for critical positions.

Individual Performance Modifier Based on CMDC Evaluation:    125%

              In addition, the Committee noted the following with respect to each of our other NEOs:

              For Mr. Bancroft, the Committee considered: (i) his significant leadership in the achievement of strong operational results, including Total Revenues increasing by 9% and GAAP and non-GAAP EPS increasing by 393% and 32% respectively, maintaining a strong balance sheet, and optimized U.S. tax reform impacts, with significant impact on our effective tax rate; (ii) critical support of key business development activities, both divesting non-core assets and supplementing our innovative pipeline, including a collaboration with Janssen (JNJ) for our Factor Xla inhibitor program (for treatment of major thrombotic conditions), the announced sale of the company's UPSA consumer health business to Taisho Pharmaceutical Holdings Co., Ltd., and other research and clinical collaborations with entities such as, Boston Medical, Eisai Co., Ltd., Vedanta Biosciences, and Infinity Pharmaceuticals, Inc.; (iii) his critical advice and guidance in connection with the acquisition of Celgene; and (iv) his continued leadership in driving the evolution of our operating model while ensuring a balanced approach to capital allocation and returning capital to shareholders in dividends.

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              For Dr. Lynch, the Committee considered: (i) Dr. Lynch's leadership of our R&D organization by strengthening capabilities in our Translational Medicine, Medical, Global Clinical Operations and Quality organizations through key leadership appointments; (ii) pipeline performance—namely (a) 23 regulatory submissions and approvals, (b) approval of Opdivo combination with Yervoy for first-line kidney cancer in U.S., (c) approval of Opdivo for adjuvant melanoma in EU and Japan, as well as for lung cancer in China, and (d) 25 pipeline projects meeting transitions milestones, and achieving high value milestones such as the registrational study start for TYK2 inhibitor, first-in-human for LPA1 and NLRP3, among others; (iii) his critical advice and guidance in connection with the acquisition of Celgene; (iv) his leadership in driving the evolution of our operating model within the R&D organization; and (v) his continued partnership with our commercial and global manufacturing organizations, which has resulted in increasingly seamless transitions.

              For Ms. Leung, the Committee considered: (i) her role in providing consistently sound legal advice to senior management and the Board of Directors; (ii) her leadership in enforcing and enhancing our immuno-oncology intellectual property position; (iii) her leadership in obtaining significant royalties from competitors; (iv) her successful management of multiple, significant legal issues across all teams and functions, including among others, successful execution of robust commercial defense, intellectual property and patent strategies; (v) her role in supporting multiple business development transactions, including innovative partnerships and worldwide licensing agreements, as well as providing critical advice and guidance on the evaluation, negotiation and signing of the acquisition of Celgene; (vi) her contributions and performance as a trusted and respected senior leader who provides valuable strategic advice and whose impact spans across all teams and functions; and (vii) her strong advocacy and sponsorship of diversity and inclusion both internally and externally.

              For Mr. Schmukler, the Committee considered: (i) strong operational performance in our Global Product Development and Supply organization, including exceeding important metrics such as gross inventory and CapEx; (ii) strong achievement against customer service metrics at a time of increased commercial growth; (iii) achieving key development pipeline milestones and reducing cycle time; (iv) his critical advice and guidance in connection with the acquisition of Celgene; (v) his focus on the on-going development and succession planning of talent; and (vi) his strong advocacy for diversity and inclusion, including his executive sponsorship of the Veterans Community Network (VCN), our people and business resource group focused on the development and advancement of U.S. veterans.

2018 Annual Incentive Awards

              The actual annual incentive awards paid to our Named Executive Officers are shown in the table below and can also be found in the Summary Compensation Table under the Non-Equity Incentive Plan Compensation column:

 
   
   
   
   
   
 
  Executive
  Target Incentive
Award

  Applying Company
Performance
Factor(1)

  Actual
Payout(2)

   

 

 

Giovanni Caforio, M.D.

  $ 2,456,250   $ 3,253,058   $ 4,066,322  

 

 

Charles Bancroft

  $ 1,232,655   $ 1,632,528   $ 2,203,913    

 

 

Thomas J. Lynch, Jr., M.D.

  $ 1,227,000   $ 1,625,039   $ 1,625,039  

 

 

Sandra Leung

  $ 975,861   $ 1,292,430   $ 1,680,159    

 

 

Louis Schmukler

  $ 643,680   $ 852,490   $ 1,065,613  

(1)
Adjusted to reflect Company Performance Factor (financial and pipeline performance) earned at 132.44%.
(2)
Adjusted to reflect individual performance.

              As set forth in the table above, the Company Performance Factor of 132.44% was applied to each Named Executive Officer's target incentive award. Then, an individual performance payout factor was applied to determine the actual payout. The Committee can approve an Individual Performance Factor up to 165% of the adjusted incentive, subject to 200% of target maximum payout. Based on the performance highlighted the Committee approved Individual Performance Factors ranging between 100% and 135% for our Named Executive Officers.

Long-Term Incentive Program

              Like our annual incentive plan, our long-term equity incentive program is designed to reward performance that supports our strategic objectives and creates value for our shareholders. A significant percentage of our Named Executive Officers' compensation is in the form of equity that vests over several years, which is designed to closely tie the interests of our Named Executives Officers' to the interests of our shareholders. Our long-term equity incentive program also is designed to promote retention through multi-year vesting.

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              In 2018, we continued to offer two long-term award vehicles, each of which served a different purpose:

      Performance Share Unit Awards:  rewards the achievement of key financial goals and the value created for shareholders as measured by relative TSR over a three-year period ending in the first quarter of the applicable year.

      Market Share Unit Awards:   rewards the creation of incremental shareholder value over a long-term period.

              We believe our long-term equity incentive program serves the best interests of our shareholders by focusing the efforts of our executives on key drivers of both short and long-term success and on shareholder value. Key aspects of the long-term equity incentive program include:

      100% of executives' long-term equity incentive awards are performance-based;

      The design of our long-term equity incentive program applies to all our executives, not just our most senior, thus promoting organizational alignment with our recruitment and business strategy; and

      Our long-term equity incentive program serves as a retention lever, through vesting and payout over several years.

2018 Equity Incentive Program Summary

 
   
   
   
   
        Performance Share Units   Market Share Units  
    Proportion of Annual Grant   60%   40%    
 
    Metrics & Weighting   Non-GAAP Operating Margin: 33%
Total Revenues (ex-fx): 33%
3-Year Relative TSR: 34%
  Share Price Performance    
 
    Min / Max Payout
(% of Target Units)
  0% / 200%   0% / 200%*    
 
    Vesting   3-year, cliff vesting   4-year, ratable vesting    

    * The number of shares earned from Market Share Units (MSUs) can increase or decrease, in proportion to the change in our share price over the one-, two-, three and four-year performance periods. The minimum share price achievement required to earn any shares from MSUs is 60% of the grant date stock price. Accordingly, if 60% is not achieved, zero shares will vest.

Our Long-term Incentive Program Design Promotes the Creation of Sustainable Long-term Value for Shareholders

              Our overall philosophy to create sustainable shareholder value is primarily focused on strong year-to-year financial and operational performance and on the development and advancement of our pipeline over the long-term. Additionally, as noted, our long-term equity incentive program is tied directly to our stock price performance to closely align the interest of our executives with the interests of our shareholders. Namely, 100% of our executives' long-term equity incentive awards are performance based, which results in a significant portion of their total compensation being tied to our stock price performance and the creation of value for our shareholders.

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              In addition, the design of our long-term equity incentive program generally magnifies the impact of changes in our stock price and relative TSR performance. When our stock price declines, the value of MSU awards decreases in two ways: (i) the number of shares earned goes down in proportion to the change in stock price and (ii) the value of those shares is less because of the lower stock price. Similarly, the value of PSU awards decreases in two ways: (i) the relative TSR metric reduces the number of shares earned (assuming our stock price declines more than our peers) and (ii) the value of those shares is also less.

    GRAPHIC    
                                                     
   

Target values of performance share units and market share units reflect target number of units granted in 2018 using BMS' stock price of $67.92 on the date of grant.

Realizable value of performance share units reflects number of units expected to vest based on actual relative TSR performance as of 12/31/18 for the 34% of the award that vests based on relative TSR (i.e., 0% of the target number of units). For the remaining 66% of the award, realizable value reflects target number of shares.

Realizable value of market share units reflects number of units expected to vest based on BMS' 10-day average stock price on 12/31/18 (i.e., 75.63% of the target number of units).

Realizable values of both performance share units and market share units reflect BMS' stock price of $51.98 on 12/31/18 a 47% decline from the grant date value versus a 22% decline in TSR over the same period.

2018 Performance Share Unit Awards

              Following extensive engagement with shareholders and an in-depth review of our compensation program in the context of our strategic goals and product portfolio, the Committee made a number of changes to the PSU program that became effective in 2016, with the first three-year performance cycle under the new design scheduled to be paid, if earned, in 2019. The key elements of the re-design are:

Three-year performance period of financial measures; and

Financial performance measures that create alignment with our strategic goals. Specifically, total revenues (ex-fx), cumulative non-GAAP operating margin, and relative TSR expressed as a percentile rank relative to our peer group. TSR performance must be at median for target shares to be earned.

  GRAPHIC

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              For PSUs awarded in 2018, the structure of our 2018 financial metrics and three-year relative TSR modifier in our PSU program are detailed below.

 
 
 
 
 
 
 
 
 

 

2018-2020 PSU Payout Schedule


 

 

2018-2020 Cumulative
Operating Margin (33%)

2018-2020 Cumulative
Total Revenues (ex-fx) (33%)
3-Year
Relative TSR (34%)
 

 

 

Achievement Payout Achievement Payout TSR Percentile Payout  

 

Maximum

115% 200% 110% 200% 80%ile 200%

 

Target

100% 100% 100% 100% 50%ile 100%  

 

Threshold

85% 50% 90% 50% 35%ile 50%

 

Below Threshold

<85% 0% <90% 0% <35%ile 0%  

Market Share Unit Awards

              MSUs comprise 40% of our executives' target long-term equity incentives. Each grant of MSUs vests 25% on each of the first four anniversaries of the grant date and the number of shares received by an executive upon payout is increased or decreased depending on the performance of our stock price during the one-, two-, three- and four-year performance periods.

              Upon vesting, a payout factor is applied to the target number of MSUs vesting on a given date to determine the total number of units paid out. If our stock price increases during the performance period, both the number of units and value of shares that vest increases. If our stock price declines during the performance period, both the number of units and value of shares that are eligible to vest will be reduced. The payout factor is a ratio of the ten-day average closing price on the measurement date divided by the ten-day average closing price on the grant date. Beginning with our 2013 annual MSU award grant, the measurement date is the February 28 immediately preceding the vesting date. The minimum payout performance factor that must be achieved to earn any payout is 60% and the maximum payout factor is 200%. If our stock price performance is below 60%, then the portion of the award scheduled to vest will be forfeited. The following chart shows the performance periods for the MSU awards granted to our executives in March 2018:

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Performance Results

              The following table summarizes the payout factors relating to the tranches that vested in the first half of 2018 for MSU awards outstanding at that time:

 
 
 
 
 
 
  Grant Date Vesting Date # of Years in
Performance
Period
Payout Factor  
  March 10, 2014 March 10, 2018 4 122.71%
  March 10, 2015 March 10, 2018 3 105.83%  
  May 5, 2015* May 5, 2018 3 79.57%
  March 10, 2016 March 10, 2018 2 104.26%  
  March 10, 2017 March 10, 2018 1 117.92%
  April 3, 2017** April 3, 2018 1 115.63%  

*Reflects CEO grant on promotion to CEO.
**Reflects grant to Dr. Lynch on hire as Chief Scientific Officer.

Restricted Stock Units and Stock Options

              Restricted stock units may be granted selectively to executives at other times of the year generally as inducement grants as part of an offer in attracting candidates to BMS, for retaining employees, or for providing special recognition, such as when an employee assumes significant increases in responsibility. During 2018, no special restricted stock unit awards were granted to any of our Named Executive Officers. We have not granted any stock options to our executives since 2009.

Process for Annual Equity Award Grants

              Annual equity awards are typically approved on the date the Committee and full Board meet during the first week of March with a grant effective date of March 10. We believe that consistent timing of equity award grants is good corporate governance and reduces the risk of selecting a grant date with a preferential stock price.

              Since March 2014, the Committee has established annual equity award guidelines for all executives at the company, including our Named Executive Officers other than the CEO, as a percentage of salary. The CEO's long-term equity incentive award level is assessed by the Committee annually.

              Based upon individual performance, an executive other than the CEO may receive a long-term equity incentive award ranging from 0% to 150% of the target award. Once the grant value is established for each executive, 60% of the value is converted into PSUs and 40% into MSUs.

              In determining the size of the individual long-term equity incentive awards granted to our Named Executive Officers in March 2018, the Committee considered the prior year's performance (both Results and Behaviors) of each executive as well as ways to motivate our Named Executive Officers to focus on the company's long-term performance over the next three years and beyond. Each Named Executive Officer, other than the CEO, had a target value for their long-term equity incentive award granted in March 2018. The Committee approved individual awards ranging between 125% and 135% of the target value for these Named Executive Officers. The CEO's long-term equity incentive award is not based on a target value and is determined annually by the Committee based on competitive benchmarks and individual performance and contributions. Dr. Caforio's award took into account his strong performance as CEO during 2017 and a long-term equity incentive opportunity that was commensurate with his role as CEO and the competitive market pay for that position.

Other Elements of 2018 Compensation

              In addition to the components set forth above, our senior executives, including all of our Named Executive Officers, were entitled to participate in the following plans or arrangements in 2018:

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Other Elements of 2018 NEO Compensation

    §
    Post-Employment Benefits
        Change-in-Control- Arrangements
        Severance Plan
        Qualified and Non-Qualified- Pension Plans (Frozen; applicable only to Mr. Bancroft and Ms. Leung. In October of 2018, the Committee approved termination of the qualified Pension Plan, effective February 1, 2019)
        Qualified and Non-Qualified Savings Plans

    §
    Other Compensation

Post-Employment Benefits

              We offer certain plans which provide compensation and benefits to employees who have terminated their employment. These plans are periodically reviewed by the Committee to ensure that they are consistent with competitive practice. The plans offered are common within our primary peer group and enhance our ability to attract and retain key talent.

Change-in-Control Arrangements

              We have entered into change-in-control agreements with certain executives including the CEO and other Named Executive Officers. These agreements enable management to evaluate and support potential transactions that might be beneficial to shareholders even though the result would be a change-in-control of BMS. Additionally, the agreements provide for continuity of management in the event of a change-in-control. Our agreements require a "double-trigger" before any payments are made to an executive. This means that payments are only made in the event of a change-in-control and subsequent involuntary termination or termination for good reason of the employee within either 36 months or 24 months after a change-in-control.

              We do not gross up compensation on excess parachute payments for any of our executives, including all of our Named Executive Officers.

              If a change-in-control occurs during the term of the agreement, the agreement will continue in effect for either 36 months or 24 months beyond the month in which such change-in-control occurred, as applicable. The value of this benefit for our Named Executive Officers is provided in the "Post-Termination Benefits" section beginning on page 61.

Severance Plan

              The Bristol-Myers Squibb Senior Executive Severance Plan provides a competitive level of severance protection for certain senior executives (including the Named Executive Officers) to help us attract and retain key talent necessary to run our company. The value of this benefit for our Named Executive Officers is shown in the "Post-Termination Benefits" section beginning on page 61.

Defined Benefit Pension Plans

              Our frozen defined benefit pension plans provide retirement income for U.S. employees who joined the company and were U.S. employees prior to December 31, 2009 following their retirement. The Retirement Income Plan is a tax-qualified plan, as defined under IRS regulations, and the Benefit Equalization Plan relating to the Retirement Income Plan is a non-qualified plan that provides pension benefits above those allowed under the contribution limits for tax-qualified plans. The Summary Compensation Table reflects the annual increase in the actuarial value of these benefits. Current accrued benefits for each of the participating Named Executive Officers are provided in the Pension Benefit Table. As of December 31, 2009, we discontinued service accruals under our qualified and nonqualified pension plans in the U.S. and Puerto Rico for active plan participants, including all of our Named Executive Officers, and closed the plans to new participants. For active plan participants at year-end 2009, we allowed five additional years of pay growth in our pension plans. Accordingly, 2014 was the last year of pay growth under our pension plans. These actions were taken to align our retirement program with our new biopharmaceutical business strategy and culture, to mitigate volatility risk to the company, to respond to the competitiveness of a changing industry, and meet the mobility and career expectations of an evolving workforce. In December 2018, the Company announced it will terminate the U.S. Retirement Income Plan ("US-RIP") in 2019 and transfer $3.8 billion of U.S.

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pension obligations through a full termination of its U.S. Retirement Income Plan (the "Plan"). The obligations will be distributed through a combination of lump sums to Plan participants who elect such payments, and the purchase of a group annuity contract from Athene Annuity and Life Company, a wholly-owned insurance subsidiary of Athene Holding, Ltd, for all remaining liabilities. For a further discussion on the termination of the US-RIP, please see "Retirement Plan" beginning on page 58.

Savings Plans

              Our savings plans allow U.S. employees to defer a portion of their total eligible cash compensation and to receive matching contributions from BMS to supplement their savings and retirement income. The Savings and Investment Program is a tax-qualified 401(k) plan, as defined under IRS regulations, and the Benefit Equalization Plan for the Savings and Investment Program is a nonqualified deferred compensation plan that allows a select group of management and highly compensated employees to defer a portion of their total eligible cash compensation and to receive matching contributions from BMS in excess of the contributions allowed under the Savings and Investment Program. The savings plans are designed to allow employees to accumulate savings for retirement on a tax-advantaged basis. The company matching contribution under our savings plans equals 100% of the employee's contribution on the first 6% of eligible compensation that an employee elects to contribute. Employees are eligible for an additional automatic company contribution that is based on a point system of an employee's age plus service as follows: below 40 points, the automatic contribution is an additional 3% of total cash; between 40 and 59 points, the contribution is 4.5%; and at 60 points and above, the contribution is 6%. For those employees with 60 or more points who had 10 or more years of service at year-end 2009, we provided an additional automatic contribution of 2% for a five-year period. Accordingly, 2014 was the last year for this additional 2% automatic contribution for this group. As of December 31, 2009, Mr. Bancroft and Ms. Leung had earned over 60 points and had more than ten years of service. All U.S. employees are eligible to participate in the Savings Plan. The Summary Compensation Table reflects company contributions to these plans during 2018 in the "All Other Compensation" column. The Non-Qualified Deferred Compensation Table provides more detail on the Benefit Equalization Plan for the Savings and Investment Program.

Other Compensation

              We generally do not provide perquisites or other personal benefits to our Named Executive Officers that are not otherwise available to all salaried employees. However, in 2018, our Named Executive Officers were provided benefits intended for business purposes that were in addition to the benefits offered to all salaried employees. In certain exigent circumstances, these benefits were used for personal use, which then became part of the Named Executive Officer's total compensation and treated as taxable income under the applicable tax laws. We did not reimburse the Named Executive Officers for any taxes paid on such income. Additionally, all perquisites for each of our Named Executive Officers during 2018 did not exceed $10,000; therefore, "All Other Compensation" for 2018 does not include disclosure of any perquisite amounts as permitted under SEC rules.

Our Compensation Program Design Process

Compensation and Management Development Committee

              The Committee is responsible for providing oversight of our executive compensation program for the Named Executive Officers as well as other members of senior management. The Committee is responsible for setting the compensation of the Chief Executive Officer and approving the compensation of all of the other Named Executive Officers and certain other members of senior management.

              The Committee annually reviews and evaluates the executive compensation program to ensure that the program is aligned with our compensation philosophy and with our performance. See page 25 for a discussion of the duties and responsibilities of the Committee in more detail.

Independent Compensation Consultant

              The Committee has retained Compensation Advisory Partners, LLC (CAP) on an annual basis as its independent compensation consultant to provide executive compensation services to the Committee. CAP reports directly to the Committee, and the Committee directly oversees the fees paid for services provided by CAP. The Committee instructs CAP to give advice to the Committee independent of management and to provide such advice for the benefit of our company and shareholders. CAP does not provide any consulting services to BMS beyond its role as consultant to the Committee.

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              In 2018, CAP provided the following services:

      reviewed and advised on the composition of the peer group used for competitive benchmarking;

      participated in the review of our executive compensation program;

      provided an assessment of BMS senior executive pay levels and practices relative to peers and other competitive market data;

      provided an annual analysis of i