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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

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

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

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

AbbVie Inc.

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

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No fee required.

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

 

 

(1)

 

Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
    (4)   Proposed maximum aggregate value of transaction:
        
 
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Fee paid previously with preliminary materials.

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

 

 

(1)

 

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LOGO

MAIN HEAD

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 5, 2017

              The Annual Meeting of the Stockholders of AbbVie Inc. will be held at the Fairmont Chicago, Millennium Park, 200 North Columbus Drive, Chicago, Illinois 60601, on Friday, May 5, 2017, at 9:00 a.m. CT for the following purposes:

    To elect 4 directors to hold office until the next Annual Meeting or until their successors are elected (Item 1),

    To ratify the appointment of Ernst & Young LLP as AbbVie's independent registered public accounting firm for 2017 (Item 2),

    To vote on an advisory vote on the approval of executive compensation (Item 3),

    To vote on a management proposal regarding the annual election of directors (Item 4),

    To transact such other business as may properly come before the meeting, including consideration of two stockholder proposals, if presented at the meeting (Items 5 and 6).

Your Vote Is Important

              Please promptly vote your shares by telephone, using the Internet, or by signing and returning your proxy in the enclosed envelope if you received a printed version of the proxy card.

              The board of directors recommends that you vote FOR Items 1, 2, 3, and 4 on the proxy card.

              The board of directors recommends that you vote AGAINST Items 5 and 6 on the proxy card.

              The close of business on March 8, 2017, has been fixed as the record date for determining the stockholders entitled to receive notice of and to vote at the Annual Meeting.

              AbbVie's 2017 Proxy Statement and 2016 Annual Report on Form 10-K are available at www.abbvieinvestor.com. If you are a registered stockholder, you may access your proxy card by either:

    Going to the following website: www.proxyvote.com, entering the information requested on your computer screen and following the simple instructions, or

    Calling (in the United States, U.S. territories, and Canada) toll free 1-800-690-6903 on a touch-tone telephone and following the simple instructions provided by the recorded message.

              Admission to the meeting will be by admission card only. If you plan to attend, please complete and return the reservation form in the back of these materials and an admission card will be sent to you. Due to space limitations, reservation forms must be received before April 28, 2017. Each admission card, along with photo identification, admits one person. A stockholder may request two admission cards, but a guest must be accompanied by a stockholder.

By order of the board of directors.

Laura J. Schumacher
Secretary

March 20, 2017


Table of Contents

LOGO

MAIN HEAD

Table of Contents

Proxy Statement Summary

  1

Information about the Annual Meeting

  7

Who Can Vote

  7

Notice and Access

  7

Voting by Proxy

  7

Revoking a Proxy

  7

Discretionary Voting Authority

  7

Quorum and Vote Required to Approve Each Item on the Proxy

  8

Effect of Broker Non-Votes and Abstentions

  8

Inspectors of Election

  8

Cost of Soliciting Proxies

  8

AbbVie Savings Plan

  8

Information Concerning Director Nominees (Item 1)

  9

The Board of Directors and its Committees

  13

Communicating with the Board of Directors

  17

Director Compensation

  18

Securities Ownership

  20

Executive Compensation

  22

Compensation Discussion and Analysis

  22

Compensation Committee Report

  39

Compensation Risk Assessment

  40

Summary Compensation Table

  41

2016 Grants of Plan-Based Awards

  44

2016 Outstanding Equity Awards at Fiscal Year End

  46

2016 Option Exercises and Stock Vested

  48

Pension Benefits

  48

Non-qualified Deferred Compensation

  52

Potential Payments upon Termination or Change in Control

  52

Ratification of Ernst & Young LLP as AbbVie's Independent Registered Public Accounting Firm (Item 2)

  56

Audit Information

  57

Audit Fees and Non-Audit Fees

  57

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Registered Public Accounting Firm

  57

Audit Committee Report

  58

Say on Pay—Advisory Vote on the Approval of Executive Compensation (Item 3)

  59

Management Proposal Regarding the Annual Election of Directors (Item 4)

  60

Stockholder Proposals

  61

Stockholder Proposal on Lobbying Report (Item 5)

  61

Stockholder Proposal to Separate Chair and CEO (Item 6)

  64

Additional Information

  67

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LOGO

MAIN HEAD

              The accompanying proxy is solicited on behalf of the board of directors for use at the Annual Meeting of Stockholders. The meeting will be held on May 5, 2017, at the Fairmont Chicago, Millennium Park, 200 North Columbus Drive, Chicago, Illinois 60601. This summary highlights selected information in the Proxy Statement. Please review the entire Proxy Statement and the AbbVie 2016 Annual Report before voting.

2017 Annual Meeting of Stockholders

Date and Time: May 5, 2017 9:00 a.m. CT

Location: Fairmont Chicago, Millennium Park, 200 North Columbus Drive, Chicago, Illinois 60601

Record Date: March 8, 2017

How to Vote: Stockholders as of the record date are entitled to vote via Internet at www.proxyvote.com; by telephone at 1-800-690-6903; by returning a completed proxy card; or in person at the Annual Meeting of Stockholders.

Voting Items and Board Recommendations

 
   
  Board Recommendations
Item 1   Election of Directors   FOR All Nominees
Item 2   Ratification of Independent Auditor   FOR
Item 3   Say on Pay—Advisory Vote on the Approval of Executive Compensation   FOR
Item 4   Management Proposal Regarding the Annual Election of Directors   FOR
Item 5   Stockholder Proposal on Lobbying Report   AGAINST
Item 6   Stockholder Proposal to Separate Chair and CEO   AGAINST

Business Overview and Performance Highlights

Business Overview

              AbbVie was created in 2013 following separation from Abbott Laboratories. AbbVie's mission is to be an innovation-driven, patient-focused specialty biopharmaceutical company capable of achieving top-tier financial performance through outstanding execution and a consistent stream of innovative new medicines. AbbVie intends to continue to advance its mission in a number of ways, including: (i) growing revenues through continued strong performance from its existing portfolio of on-market products, including its flagship brands, HumiraTM and ImbruvicaTM, as well as growth from pipeline products; (ii) continuing to enhance efficiency by expanding operating margins; (iii) continued investment in its pipeline in support of opportunities in immunology, oncology, neuroscience and virology, as well as focused investments in other areas that augment AbbVie's core strengths; (iv) augmentation of its pipeline through concerted focus on strategic licensing, acquisition and partnering activity with a focus on identifying compelling programs that fit AbbVie's strategic criteria; and (v) returning cash to stockholders via dividends and share repurchases.

 

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PROXY STATEMENT SUMMARY

              AbbVie's products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C virus and human immunodeficiency virus; neurological disorders, such as Parkinson's disease and multiple sclerosis; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; as well as other serious health conditions. AbbVie also has a pipeline of promising new medicines across such important medical specialties as immunology, virology, oncology and neuroscience, with additional targeted investments in cystic fibrosis and women's health.

Business Performance Highlights

AbbVie has Delivered Robust Financial Results since Separation

GRAPHIC

                        The measures set forth above were calculated as of December 31, 2016.

    *   Net revenues, diluted earnings per share and operating margin are adjusted to exclude certain specified items and are non-GAAP numbers, which are reconciled in Appendix B.    

              AbbVie has delivered a strong compound annual growth rate (CAGR) since inception on adjusted net revenues and adjusted diluted earnings per share (EPS), placing AbbVie in the top quartile of its Health Care Peer Group. Additionally, AbbVie has been committed to a robust return of capital to stockholders with an increase of 60% in its dividend since 2013 as part of a balanced and disciplined capital allocation program. AbbVie's total stockholder return (TSR) since inception of 111.4% also places AbbVie among the top of its Health Care Peer Group, and more than

 

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PROXY STATEMENT SUMMARY

40 percentage points above the Standard & Poor's 500 Index and more than 65 percentage points above the NYSE Arca Pharmaceutical Index over the same time period.

              AbbVie has significantly grown revenue and EPS since 2013.

GRAPHIC

    *   Net revenues and diluted earnings per share are adjusted for specified items, including the impact of intangible asset amortization, and are non-GAAP numbers, which are reconciled in Appendix B. Adjusted net revenues exclude specified items, as described in Appendix B.    

AbbVie also Delivered Strong Business Performance in 2016

              AbbVie has built a strong foundation for its business and 2016 was an exceptional year, as evidenced by a number of 2016 business highlights:

    Net Revenues:  AbbVie reported 2016 full-year net revenues of $25.6 billion on a GAAP basis and adjusted net revenues of $25.6 billion, an increase of 13.3% over 2015, excluding the impact of foreign exchange. This reflects top-tier growth, third in AbbVie's Health Care Peer Group.

    Operating Margins:  In 2016, AbbVie expanded its operating margin to 36.6% on a GAAP basis or 42.4% of net revenues on an adjusted basis, and reported gross margin of 77.2% on a GAAP basis or 81.2% of net revenues on an adjusted basis. Excluding the incremental R&D investment related to acquisitions in 2016 and an unfavorable impact from foreign exchange, the adjusted operating margin was 45.9% in 2016.

    Earnings Per Share:  AbbVie reported full-year diluted EPS of $3.63 on a GAAP basis and adjusted diluted EPS of $4.82, up 12.4%. This reflects top-tier growth, third in AbbVie's Health Care Peer Group. AbbVie provided 2017 GAAP diluted EPS guidance in the range of $4.55 to $4.65 and adjusted diluted EPS guidance in the range of $5.44 to $5.54, reflecting growth of nearly 14% at the midpoint.

    Humira Sales:  AbbVie delivered global Humira sales of $16.1 billion, an increase of 14.7% on a reported basis over 2015, or 16.1% excluding the impact of foreign exchange. Humira's performance was driven by continued market penetration across therapeutic categories and geographies.

    Imbruvica Net Revenue:  In 2016, global Imbruvica net revenue exceeded $1.8 billion, with performance driven by market share growth following Imbruvica's approval as a first line treatment for patients with chronic lymphocytic leukemia (CLL).

 

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PROXY STATEMENT SUMMARY

    Business Development:  AbbVie acquired Stemcentrx and its lead late-stage asset, rovalpituzumab tesirine (Rova-T), further strengthening AbbVie's oncology portfolio by providing a highly attractive platform in solid tumors. AbbVie also entered into a collaboration with Boehringer Ingelheim to develop and commercialize risankizumab, an anti-IL-23 monoclonal antibody that has the potential to be a transformative therapy in a number of immune-mediated diseases.

    Regulatory Milestones:  AbbVie also achieved a number of regulatory milestones in markets worldwide for several key products, including U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA) approvals for several new products, including VenclextaTM for relapsed/refractory chronic lymphocytic leukemia (CLL) patients with 17p deletion, ZinbrytaTM for relapsing forms of multiple sclerosis and EmplicitiTM for the treatment of multiple myeloma, as well as new indications for Humira and Imbruvica.

    Pipeline Development:  With a record number of programs in mid- and late-stage development, AbbVie made significant pipeline advancements in 2016, such as regulatory application submissions for the company's pan-genotypic next-generation HCV combination and Imbruvica for marginal zone lymphoma.

Corporate Governance Highlights

              Our board of directors is committed to strong corporate governance tailored to meet the needs of AbbVie and its stockholders to enhance stockholder value. In connection with our ongoing, proactive engagement with stockholders (as described in greater detail on page 29), AbbVie's board of directors:

    approved and implemented in 2016 a proxy access by-law provision to permit a stockholder, or a group of up to 20 stockholders, owning at least 3% of the company's outstanding common stock continuously for at least 3 years to nominate and include in the company's proxy materials director nominees constituting up to 25% of the board of directors, as further detailed in the company's By-Laws; and

    approved a declassification management proposal in this proxy statement (Item 4) to seek stockholder approval to amend the company's Amended and Restated Certificate of Incorporation to declassify the board of directors and to allow for the annual election of directors, as described in Item 4.

 

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PROXY STATEMENT SUMMARY

              Highlights of our governance practices include:

Governance Practice
  For more information
Independent lead director with robust responsibilities is selected by the Board   p. 13
Eight of AbbVie's nine directors are independent and regularly meet in executive session   p. 13
All members of the audit, compensation, nominations and governance and public policy committees are independent   p. 15
Adopted a Proxy Access By-Law provision for 3%/3 years   p. 69
Policy prohibiting hedging and pledging   p. 39
Robust stock ownership guidelines   p. 39
Disclosure of our corporate political contributions and our trade association dues and oversight process   http://www.abbvie.com/responsibility/transparency-policies/corporate-political-participation.html
Clawback authority in the event of financial restatement to recover incentive plan awards   p. 39
Related person transaction policy to ensure appropriate oversight   p. 67
We do not have a stockholder rights plan or "poison pill"   Certificate of Incorporation and By-Laws
Our directors are elected by a majority vote of our stockholders for uncontested elections and we have a resignation policy if the director fails to receive a majority of the votes cast   p. 9
We hold an annual say-on-pay advisory vote on executive compensation   p. 59
Our governance guidelines restrict the number of boards our directors may serve on to prevent overboarding   Corporate Governance Guidelines
Annual board and committee self-assessments and annual succession planning   Corporate Governance Guidelines
We are guided by strong ethics programs and supplier guidelines   http://www.abbvie.com/responsibility/home.html
For inclusion on the board, the nominations and governance committee considers diversity of ethnicity, gender, and geography   p. 14

Executive Compensation Highlights

              AbbVie's board of directors believes a well-designed compensation program should align executive interests with the drivers of stockholder returns and profitable growth, support achievement of the company's primary business goals, and attract and retain world-class executives whose talents and contributions sustain the growth in long-term stockholder value. Consequently, the compensation committee of the board has designed and implemented an executive compensation program in which a substantial majority of named executive officer (NEO) compensation at AbbVie is performance-based.

              When determining NEO compensation, the committee first considers the median of the competitive marketplace (as derived primarily from the Health Care Peer Group approved by the committee) as an initial benchmark for assessing compensation. The committee then takes into account the company's overall performance against the financial, operating and strategic objectives that were established at the start of the performance period. Finally, specific pay determinations are made for each NEO based on his or her individual performance against goals and contributions to the short- and long-term performance of the company.

 

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PROXY STATEMENT SUMMARY

              Three primary components make up AbbVie's executive pay program: base salary, short-term incentives and long-term incentives. The structure of each component is tailored to serve a specific function and purpose. The following is a summary of the key components of our compensation program.

GRAPHIC

Element of Pay
  Changes Made for 2016
Long-Term Incentive Program  

ü

Completed redesign of our long-term incentive program:

   

Added multiple performance metrics, including relative ROE, EPS and relative TSR as criteria for vesting.

   

Removed provision that allowed performance awards to vest if thresholds were met in any 3 of 5 years, creating more risk of forfeiture.

   

Added multi-year performance periods.

   

Changed dividend payment schedule so dividends are paid only at vesting and only on earned shares.

   

Increased use of performance-vested awards from 75% to 80% which, in combination with stock options, ties 100% of our LTI program to performance metrics and stock price appreciation.

   

Refined process for referencing the market median for long-term incentive award decisions.

Short-Term Incentive Plan  

ü

Added disclosure of our maximum annual incentive cap of 200% of target.

 

ü

Reduced the CEO's target annual incentive to 150% of base salary.

 

ü

Established a formal payout matrix based on net revenues and operating margin to define and cap NEO annual incentive awards at or below the plan maximum.

Peer Comparisons  

ü

Simplified the peer group used for compensation benchmarking, the AbbVie Health Care Peer Group.

 

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Who Can Vote

              Stockholders of record at the close of business on March 8, 2017 will be entitled to notice of and to vote at the Annual Meeting. As of March 8, 2017, AbbVie had 1,593,576,738 outstanding shares of common stock, which are AbbVie's only outstanding voting securities. Each stockholder has one vote per share. Stockholders do not have the right to vote cumulatively in electing directors.

Notice and Access

              In accordance with the Securities and Exchange Commission (SEC) e-proxy rules, AbbVie mailed a Notice of Internet Availability of Proxy Materials (the "Notice") to stockholders in March 2017. The Notice describes the matters to be considered at the Annual Meeting and how stockholders can access the proxy materials online. It also provides instructions on how stockholders can vote their shares. If you received the Notice, you will not receive a printed version of the proxy materials unless you request one. If you would like to receive a printed version of the proxy materials, free of charge, please follow the instructions on the Notice.

Voting by Proxy

              AbbVie's stockholders may vote their shares by telephone, the Internet, or at the Annual Meeting. If you vote by telephone or the Internet, you do not need to return your proxy card. The instructions for voting can be found on the Notice, on the website listed in the Notice, and, if you received one, on your proxy card. If you requested a printed version of the proxy card, you may also vote by mail.

Revoking a Proxy

              You may revoke your proxy by voting in person at the Annual Meeting or, at any time prior to the meeting:

    by delivering a written notice to the secretary of AbbVie,

    by delivering an authorized proxy with a later date, or

    by voting by telephone or the Internet after you have given your proxy.

Discretionary Voting Authority

              Unless otherwise specified in accordance with the instructions on the proxy, the persons named in the proxy will vote the shares of AbbVie common stock covered by proxies they receive to elect the 4 nominees named in Item 1 on the proxy card. If a nominee becomes unavailable to serve, the shares will be voted for a substitute designated by the board of directors or for fewer than 4 nominees if, in the judgment of the proxy holders, such action is necessary or desirable.

              Where a stockholder has specified a choice for or against the proposals to be presented at the Annual Meeting or if the stockholder has chosen to abstain, the shares of AbbVie common stock represented by the proxy will be voted (or not voted) as specified. Where no choice has been specified, the proxy will be voted FOR the ratification of Ernst & Young LLP as auditors, FOR the approval of executive compensation, FOR the management proposal regarding the annual election of directors, and AGAINST each of the stockholder proposals.

              The board of directors is not aware of any other issue which may properly be brought before the meeting. If other matters are properly brought before the meeting, the accompanying proxy will be voted in accordance with the judgment of the proxy holders.

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INFORMATION ABOUT THE ANNUAL MEETING

Quorum and Vote Required to Approve Each Item on the Proxy

              A majority of the outstanding shares entitled to vote generally in the election of directors, represented in person or by proxy, constitutes a quorum. Directors are elected by stockholders in an uncontested election if a majority of the votes cast are "for" a director's re-election at the Annual Meeting, excluding abstentions and broker non-votes. For other matters, the affirmative vote of a majority of the shares represented, in person or by proxy, at the meeting and entitled to vote on a matter shall be the act of the stockholders with respect to that matter, except for the management proposal regarding the annual election of directors, which requires the affirmative vote of shares representing not less than eighty percent (80%) of the outstanding shares of capital stock of AbbVie entitled to vote generally in the election of directors pursuant to Article XI of AbbVie's Amended and Restated Certificate of Incorporation.

Effect of Broker Non-Votes and Abstentions

              A proxy submitted by an institution such as a broker or bank that holds shares for the account of a beneficial owner may indicate that all or a portion of the shares represented by that proxy are not being voted with respect to a particular matter. This could occur, for example, when the broker or bank is not permitted to vote those shares in the absence of instructions from the beneficial owner of the stock. These "non-voted shares" will be considered shares not present and, therefore, not entitled to vote on those matters, although these shares may be considered present and entitled to vote for other purposes. Brokers and banks have discretionary authority to vote shares in the absence of instructions on matters the New York Stock Exchange considers "routine," such as the ratification of the appointment of the auditors. They do not have discretionary authority to vote shares in absence of instructions on "non-routine" matters. The election of directors, the advisory vote on the approval of executive compensation, the management proposal regarding the annual election of directors, and the stockholder proposals are considered "non-routine" matters. Non-voted shares will not affect the determination of the outcome of the vote on any matter to be decided at the meeting. Shares represented by proxies that are present and entitled to vote on a matter but which have elected to abstain from voting on that matter, other than the election of directors, will have the effect of votes against that matter.

Inspectors of Election

              The inspectors of election and the tabulators of all proxies, ballots, and voting tabulations that identify stockholders are independent and are not AbbVie employees.

Cost of Soliciting Proxies

              AbbVie will bear the cost of making solicitations from its stockholders and will reimburse banks and brokerage firms for out-of-pocket expenses incurred in connection with this solicitation. Proxies may be solicited by mail, telephone, Internet, or in person by directors, officers, or employees of AbbVie and its subsidiaries.

              AbbVie has retained Georgeson Inc. to aid in the solicitation of proxies, at an estimated cost of $19,500 plus reimbursement for reasonable out-of-pocket expenses.

AbbVie Savings Plan

              Participants in the AbbVie Savings Plan will receive voting instructions for their shares of AbbVie common stock held in the AbbVie Savings Plan Trust. The Trust is administered by both a trustee and an investment committee. The trustee is The Northern Trust Company. The members of the investment committee are William H.S. Preece, Tabetha A. Skarbek and Michael J. Thomas, employees of AbbVie. The voting power with respect to the shares is held by and shared between the investment committee and the participants. The investment committee must solicit voting instructions from the participants and follow the voting instructions it receives. The investment committee may use its own discretion with respect to those shares of AbbVie common stock for which no voting instructions are received.

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              The board of directors consists of three classes with each class currently comprised of three directors and four directors standing for election in Class II. Directors of one class are elected each year for a term of three years. The Class II directors are presented for re-election to hold office until the expiration of their term at the 2020 annual meeting of stockholders and until their successors are elected and qualified or until their earlier death or resignation.

              Directors are elected by stockholders if a majority of the votes cast are "for" a director's re-election at the Annual Meeting, excluding abstentions and broker non-votes. For more information on the director majority vote standard, see AbbVie's By-Laws as listed as an exhibit to AbbVie's 2016 Annual Report on Form 10-K. All of the nominees, except Ms. Meyer, are currently serving as directors. Ms. Meyer was recommended for election by the nominations and governance committee.

Class II—Directors Whose Terms Expire in 2017

PHOTO
Committees:
Nominations & Governance
Public Policy

Director since: 2013
Age: 66

   
Robert J. Alpern, M.D.

Ensign Professor of Medicine, Professor of Internal Medicine, and Dean of Yale School of Medicine
Dr. Alpern has served as the Ensign Professor of Medicine, Professor of Internal Medicine, and Dean of Yale School of Medicine since June 2004. From July 1998 to June 2004, Dr. Alpern was the Dean of The University of Texas Southwestern Medical Center. Dr. Alpern also serves as a director of Abbott Laboratories and as a director on the Board of Yale-New Haven Hospital.

Key Contributions to the Board: As the Ensign Professor of Medicine, Professor of Internal Medicine, and Dean of Yale School of Medicine, Dean of The University of Texas Southwestern Medical Center, and as a director on the Board of Yale-New Haven Hospital, Dr. Alpern contributes valuable insights to the board through his medical and scientific expertise and his knowledge of the health care environment and the scientific nature of AbbVie's key research and development initiatives.


PHOTO
Committees:
Compensation
Public Policy

Director since: 2013
Age: 71


 

 
Edward M. Liddy

Retired Chairman & CEO, The Allstate Corporation
Mr. Liddy served as a partner in the private equity investment firm Clayton, Dubilier & Rice, LLC from January 2010 to December 2015. At the request of the Secretary of the U.S. Department of the Treasury, Mr. Liddy served as interim chairman and chief executive officer of American International Group, Inc. (AIG), a global insurance and financial services holding company, from September 2008 to August 2009. From January 1999 to April 2008, Mr. Liddy served as chairman of the board of The Allstate Corporation (insurance). He served as chief executive officer of Allstate from January 1999 to December 2006, president from January 1995 to May 2005, and chief operating officer from August 1994 to January 1999. Mr. Liddy currently serves on the board of directors of Abbott Laboratories, 3M Company, and The Boeing Company.

Key Contributions to the Board: Mr. Liddy's executive leadership at Allstate and AIG and his board service at several Fortune 100 companies enable him to provide our board with valuable insights on corporate strategy, risk management, corporate governance and other issues facing large, global enterprises. Additionally, as a former chief financial officer, audit committee chair at Goldman Sachs and 3M, and a private equity firm partner, Mr. Liddy provides our board with significant knowledge and understanding of corporate finance, capital markets, financial reporting and accounting matters.

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INFORMATION CONCERNING DIRECTOR NOMINEES

PHOTO
Director Nominee
Age: 59

    
Melody B. Meyer

President of Melody Meyer Energy,  LLC
Ms. Meyer is president of Melody Meyer Energy, LLC, a private consulting firm, a position she has held since June 2016. From March 2011 to April 2016, Ms. Meyer served as the president of Chevron Asia Pacific Exploration and Production Company. She previously served as president of Chevron Energy Technology Company from 2008 to 2011, in addition to various other roles over her thirty-seven year career at Chevron.

Key Contributions to the Board: As a result of her tenure at Chevron, Ms. Meyer has acquired operational, management, strategic planning, and financial expertise with extensive global experience and provides an informed perspective on financial and operational matters faced by a complex international company.


PHOTO
Committees:
Audit
Compensation

Director since: 2013
Age: 63


 

  
Frederick H. Waddell

Chairman of the Board and Chief Executive Officer of Northern Trust Corporation and The Northern Trust Company
Mr. Waddell has served as the chief executive officer of Northern Trust Corporation and The Northern Trust Company since January 2008 and as chairman of the board since November 2009. He served as president from February 2006 through September 2011 and from October to December 2016, and as chief operating officer from February 2006 to January 2008. Mr. Waddell served as a board member of Northern Trust from February 2006 to November 2009 prior to becoming the chairman of the board.

Key Contributions to the Board: As chairman and chief executive officer of Northern Trust Corporation and The Northern Trust Company, Mr. Waddell possesses broad financial services experience with a strong record of leadership in a highly regulated industry.

Class III—Directors Whose Terms Expire in 2018

PHOTO
Committees:
Audit
Compensation

Director since: 2013
Age: 56

    
Roxanne S. Austin

President, Austin Investment Advisors
Ms. Austin is president of Austin Investment Advisors, a private investment and consulting firm, a position she has held since 2004. From July 2009 through July 2010, Ms. Austin also served as the president and chief executive officer of Move Networks, Inc., a provider of Internet television services. Ms. Austin previously served as president and chief operating officer of DIRECTV, Inc. Ms. Austin also previously served as executive vice president and chief financial officer of Hughes Electronics Corporation and as a partner of Deloitte & Touche LLP. Ms. Austin is also a director of Abbott Laboratories, Target Corporation, and Teledyne Technologies, Inc. Ms. Austin also served as a director of Telefonaktiebolaget LM Ericsson from 2008 to 2016.

Key Contributions to the Board: Through her extensive management and operating roles, including her financial roles, Ms. Austin contributes significant oversight and leadership experience, including financial expertise and knowledge of financial statements, corporate finance and accounting matters.

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INFORMATION CONCERNING DIRECTOR NOMINEES


PHOTO
Director since: 2013
Age: 63


 

  
Richard A. Gonzalez

Chairman of the Board and Chief Executive Officer, AbbVie Inc.
Mr. Gonzalez is the chairman and chief executive officer of AbbVie. He served as Abbott's executive vice president of the pharmaceutical products group from July 2010 to December 2012, and was responsible for Abbott's worldwide pharmaceutical business, including commercial operations, research and development, and manufacturing. He also served as president, Abbott Ventures Inc., Abbott's medical technology investment arm, from 2009 to 2011. Mr. Gonzalez joined Abbott in 1977 and held various management positions before briefly retiring in 2007, including: Abbott's president and chief operating officer; president, chief operating officer of Abbott's Medical Products Group; senior vice president and president of Abbott's former Hospital Products Division; vice president and president of Abbott's Health Systems Division; and divisional vice president and general manager for Abbott's Diagnostics Operations in the United States and Canada.

Key Contributions to the Board: As a result of his service as Abbott's executive vice president, Pharmaceutical Products Group, his previous service as Abbott's president and chief operating officer and his more than 30-year career at Abbott, Mr. Gonzalez has developed valuable business, management and leadership experience, as well as extensive knowledge of AbbVie and its global operations. Mr. Gonzalez's experience and knowledge enable him to contribute to AbbVie's board key insights into strategic, management, and operational matters.

 

PHOTO
Committees:
Compensation
Nominations & Governance

Lead Independent Director

Director since: 2013
Age: 68

   
Glenn F. Tilton

Retired Chairman and Chief Executive Officer of the UAL Corporation
Mr. Tilton was chairman of the Midwest for JPMorgan Chase & Co. from 2011 until his retirement in 2014. From October 2010 to December 2012, Mr. Tilton also served as the non-executive chairman of the board of United Continental Holdings, Inc. From September 2002 to October 2010, he served as chairman, president and chief executive officer of UAL Corporation, and chairman and chief executive officer of United Air Lines, Inc., its wholly owned subsidiary. Prior to becoming the vice chairman of Chevron Texaco following the merger of Texaco Inc. and Chevron Corp., Mr. Tilton enjoyed a 30-year multi-disciplinary career with Texaco Inc., culminating in his election as chairman and chief executive officer. Mr. Tilton is also a director of Abbott Laboratories and Phillips 66. Mr. Tilton also served on the board of directors of Lincoln National Corporation from 2002 to 2007, of TXU Corporation from 2005 to 2007, of Corning Incorporated from 2010 to 2012, and of United Continental Holdings, Inc. from 2010 to 2012.

Key Contributions to the Board: As chairman of the Midwest for JPMorgan Chase & Co. and having previously served as non-executive chairman of the board of United Continental Holdings, Inc., and chairman, president, and chief executive officer of UAL Corporation and United Air Lines, vice chairman of Chevron Texaco and as interim chairman of Dynegy, Inc., Mr. Tilton acquired strong management experience overseeing complex multinational businesses operating in highly regulated industries, as well as expertise in finance and capital markets matters. His experience as non-executive chairman of the board of United Continental Holdings, Inc. also enhances his contributions as AbbVie's lead independent director.

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INFORMATION CONCERNING DIRECTOR NOMINEES

Class I—Directors Whose Terms Expire in 2019

PHOTO
Committees:
Audit
Nominations &
Governance

Director since: 2013
Age: 65

   
William H.L. Burnside

Retired Senior Vice President and Director at The Boston Consulting Group
Mr. Burnside is a retired senior vice president and director at The Boston Consulting Group (BCG), where he currently serves as an advisor. Prior to becoming managing partner of BCG's Los Angeles office in 1987, he worked in BCG's London and Chicago offices, servicing clients in telecommunications, media, defense, financial services, and manufacturing. Mr. Burnside is a director at Audubon California.

Key Contributions to the Board: Through his experience with The Boston Consulting Group, Mr. Burnside acquired knowledge and understanding of corporate finance and capital markets matters, as well as global and domestic strategic advisory experience across a broad base of industries.

PHOTO
Committees:
Nominations &
Governance
Public Policy

Director since: 2016
Age: 47

   
Brett J. Hart

Executive Vice President and General Counsel, United Continental Holdings, Inc.
Mr. Hart is the executive vice president and general counsel of United Continental Holdings, Inc. (UAL) and United Airlines, Inc. since February 2012. Mr. Hart also served as acting chief executive officer of UAL and United Airlines, Inc. from October 2015 to March 2016. From December 2010 to February 2012, he served as senior vice president, general counsel and secretary of UAL, United and Continental. From June 2009 to December 2010, Mr. Hart served as executive vice president, general counsel and corporate secretary at Sara Lee Corporation.

Key Contributions to the Board: As an executive vice president and general counsel for two large public companies with international operations and having served as an acting CEO, Mr. Hart contributes operational and strategic acumen with expertise in risk management, legal strategic matters, government and regulatory affairs, customer and external facing matters, corporate governance, and compliance.

 

PHOTO
Committees:
Audit
Public Policy

Director since: 2013
Age: 59

    
Edward J. Rapp

Retired Group President for Resource Industries of Caterpillar Inc.
Mr. Rapp served as the Caterpillar Inc. group president for resource industries from 2014 until his retirement in mid-2016. He previously served at Caterpillar as group president based in Singapore in 2013 and 2014 and as the chief financial officer from 2010 to 2013, and he was named a group president in 2007. Mr. Rapp is presently a board member for FM Global. He is currently a member of the University of Missouri College of Business Strategic Development Board.

Key Contributions to the Board: As a result of his tenure as group president and chief financial officer at Caterpillar Inc., Mr. Rapp has acquired management, operational, and financial expertise with extensive global experience and provides the board with an informed perspective on financial and operational matters faced by a complex international company.

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The Board of Directors

              The board of directors held eleven meetings in 2016. The average attendance of all incumbent directors at board and committee meetings in 2016 was ninety-six percent and each director attended at least seventy-five percent of the total number of board meetings and meetings of the committees on which he or she served. AbbVie encourages its board members to attend the annual stockholder meeting. All of AbbVie's directors attended the 2016 annual stockholder meeting.

              The board has determined that each of the following individuals is independent in accordance with the New York Stock Exchange (NYSE) listing standards: Dr. Alpern, Ms. Austin, Mr. Burnside, Mr. Hart, Mr. Liddy, Ms. Meyer, Mr. Rapp, Mr. Tilton, and Mr. Waddell. To determine independence, the board applied the AbbVie Inc. director independence guidelines. The board also considered whether a director has any other material relationships with AbbVie or its subsidiaries and concluded that none of these directors had a relationship that impaired the director's independence. This included consideration of the fact that some of the directors are officers or serve on boards of companies or entities to which AbbVie sold products or made contributions or from which AbbVie purchased products and services during the year. This also included consideration of the fact that some of the directors serve on the board of Abbott Laboratories (Abbott), AbbVie's former parent. In making its determination, the board relied on both information provided by the directors and information developed internally by AbbVie.

              The board has risk oversight responsibility for AbbVie and administers this responsibility both directly and with assistance from its committees.

              The board has determined that the current leadership structure, in which the offices of chairman of the board and chief executive officer are held by one individual and the chair of the nominations and governance committee is appointed to be the lead director, ensures the appropriate level of oversight, independence, and responsibility is applied to all board decisions, including risk oversight, and is in the best interests of AbbVie and its stockholders. The lead independent director is chosen by and from the independent members of the board of directors.

              The lead independent director responsibilities include:


1.

 

facilitates communication with the board and presides over regularly conducted executive sessions of the independent directors or sessions where the chairman of the board is not present;

2.

 

reviews and approves matters, such as agenda items, schedule sufficiency, and, where appropriate, information provided to other board members;

3.

 

serves as the liaison between the chairman of the board and the independent directors;

4.

 

has the authority to call meetings of the independent directors;

5.

 

if requested by major stockholders, ensures that he or she is available for consultation and direct communication as needed; and

6.

 

performs such other duties as the board may determine from time to time.

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              All directors are encouraged to, and in fact do, consult with the chairman on each of the above topics, as well. The lead director, and each of the other directors, communicates regularly with the chairman of the board and chief executive officer regarding appropriate agenda topics and other board related matters.

              AbbVie directors have backgrounds that when combined provide a portfolio of experience and knowledge that serve AbbVie's governance and strategic needs. Director nominees are considered based on a range of criteria including broad-based business knowledge and relationships, prominence and excellent reputations in their primary fields of endeavor, as well as a global business perspective and commitment to good corporate citizenship, and ability to commit sufficient time and attention to the activities of the board. They must have demonstrated experience and ability that is relevant to the board's oversight role with respect to AbbVie's business and affairs. They must also be able and willing to represent the stockholders' economic interests and satisfy their fiduciary duties to stockholders without conflicts of interest. For more details on director qualifications, please see Exhibit A to AbbVie's Governance Guidelines.

              Each year, the board conducts a self-evaluation to determine whether it and its committees are functioning effectively. The full board discusses the evaluation reports to determine what, if any, action should be undertaken to improve board and committee performance.

              In the process of identifying nominees to serve as a member of the board of directors, the nominations and governance committee considers the board's diversity of ethnicity, gender, and geography and assesses the effectiveness of the process in achieving that diversity.

              Each director's biography includes the particular experience and qualifications that led the board to conclude that the director should serve on the board. The directors' biographies are in the section of this proxy statement captioned "Information Concerning Director Nominees."

              The following table highlights our directors' skills and experience. The skills identified below are considered by nominations and governance committee to be the most relevant to the board's oversight role with respect to AbbVie's business and affairs and to drive our culture of innovation and responsibility. The specific importance of each skill also is noted.

              Such skills include, among others:

    Healthcare Industry—Relevant to an industry understanding and review of our business and strategy for continued innovation.

    Leadership—For a board that can successfully advise and oversee the company's business performance and represent stockholders interests.

    Global Business and Strategy—For oversight of a complex global organization like AbbVie to successfully advise and oversee the strategic development and direction of the company.

    Corporate Governance and Public Company Board—Ensuring directors have background and knowledge to perform oversight and governance roles.

    Finance or Accounting—Enabling our directors to analyze our financial statements, oversee our capital structure, and consider financial transactions.

    Government Relations and Regulatory—For an understanding of the complex regulatory and governmental environment in which our business operates.

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THE BOARD OF DIRECTORS AND ITS COMMITTEES
Director Skills, Knowledge and Experience Matrix
 
  Healthcare
Industry

  Leadership
  Global
Business
and
Strategy

  Corporate
Governance
and Public
Company
Board

  Finance or
Accounting

  Government
Relations and
Regulatory

Dr. Alpern

  ü   ü   ü   ü     ü

Ms. Austin

  ü   ü   ü   ü   ü   ü

Mr. Gonzalez

  ü   ü   ü   ü   ü   ü

Mr. Burnside

      ü   ü   ü   ü   ü

Mr. Hart

    ü   ü   ü     ü

Mr. Liddy

  ü   ü   ü   ü   ü   ü

Ms. Meyer

    ü   ü     ü   ü

Mr. Rapp

      ü   ü       ü   ü

Mr. Tilton

  ü   ü   ü   ü   ü   ü

Mr. Waddell

      ü   ü   ü   ü   ü

Committees of the Board of Directors

              The board of directors has five committees established in AbbVie's By-Laws: the audit committee, compensation committee, nominations and governance committee, public policy committee, and executive committee. Each of the members of the audit committee, compensation committee, nominations and governance committee, and public policy committee is independent. Mr. Tilton serves as AbbVie's lead independent director.

 
   
   
   
   
 
  Audit
Committee

  Compensation
Committee

  Nominations and
Governance
Committee

  Public Policy
Committee

R. Alpern       GRAPHIC   GRAPHIC

R. Austin     GRAPHIC

 

GRAPHIC

 

GRAPHIC

 

 

 

 

W. Burnside

 

GRAPHIC

 


 

GRAPHIC

 


B. Hart

 

 

 

 

 

GRAPHIC

 

GRAPHIC

E. Liddy

 


 

GRAPHIC

 


 

GRAPHIC

E. Rapp

 

GRAPHIC

 

 

 

 

 

GRAPHIC

G. Tilton     GRAPHIC

 


 

GRAPHIC

 

GRAPHIC

 


F. Waddell

 

GRAPHIC

 

GRAPHIC

 

 

 

 

Number of meetings

 

6

 

3

 

4

 

4

 

    GRAPHIC
Lead Director
  GRAPHIC
Chairperson
  GRAPHIC
Member
  GRAPHIC
Financial Expert
   

Audit Committee

              The audit committee is governed by a written charter. This committee assists the board of directors in fulfilling its oversight responsibility with respect to AbbVie's accounting and financial reporting practices and the audit process, the quality and integrity of AbbVie's financial statements, the independent auditors' qualifications, independence, and

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THE BOARD OF DIRECTORS AND ITS COMMITTEES

performance, the performance of AbbVie's internal audit function and internal auditors, certain areas of legal and regulatory compliance, and enterprise risk management. Each of the members of the audit committee is financially literate, as required of audit committee members by the NYSE, and the independence requirements set forth in Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The board of directors has determined that Ms. Austin, the committee's chairperson, is an "audit committee financial expert."

Compensation Committee

              The compensation committee is governed by a written charter. This committee assists the board of directors in carrying out the board's responsibilities relating to the compensation of AbbVie's executive officers and directors. The compensation committee annually reviews the compensation paid to the directors and gives its recommendations to the full board regarding both the amount of director compensation that should be paid and the allocation of that compensation between equity-based awards and cash. In recommending director compensation, the compensation committee takes into account director fees paid by companies in AbbVie's Health Care Peer Group and reviews any arrangement that could be viewed as indirect director compensation. The processes and procedures used for the consideration and determination of executive compensation are described in the "Compensation Discussion and Analysis" section of this proxy statement. The committee also reviews, approves, and administers the incentive compensation plans in which the AbbVie executive officers participate and all of AbbVie's equity-based plans. It may delegate the responsibility to administer and make grants under these plans to management, except to the extent that such delegation would be inconsistent with applicable law or regulations or with the listing rules of the New York Stock Exchange. The compensation committee has the sole authority, under its charter, to select, retain and/or terminate independent advisors who may assist the committee in carrying out its responsibilities. The compensation committee reviews and discusses with management and its independent compensation advisor potential risks associated with AbbVie's compensation policies and practices as discussed in the "Compensation Risk Assessment" section of this proxy statement. Each member of the committee qualifies as a "non-employee director" for purposes of Rule 16b-3 under the Exchange Act and as an "outside director" for purposes of Internal Revenue Code Section 162(m).

              The committee has engaged Compensation Advisory Partners (CAP) as its independent compensation consultant. The independent compensation consultant provides counsel and advice to the committee on executive and non-employee director compensation matters. CAP, and its principal, report directly to the chair of the committee. The principal meets regularly, and as needed, with the committee in executive sessions, and has direct access to the committee chair during and between meetings. The committee determines what variables it will instruct CAP to consider, including: peer groups against which performance and pay should be examined, metrics to be used in incentive plans to assess AbbVie's performance, competitive short- and long-term incentive practices in the marketplace, and compensation levels relative to market benchmarks. The committee negotiates and approves all fees paid to CAP for these services. AbbVie did not engage CAP to perform any other services during 2016.

              Based on an assessment of internally developed information and information provided by CAP, the committee has determined that its independent compensation advisor does not have a conflict of interest. A copy of the compensation committee report is included in the "Compensation Committee Report" section of this proxy statement.

Nominations and Governance Committee

              The nominations and governance committee is governed by a written charter. This committee assists the board of directors in identifying individuals qualified to become board members and recommends to the board the nominees for election as directors at the next annual meeting of stockholders, recommends to the board the persons to be elected as executive officers of AbbVie, recommends to the board the corporate governance guidelines applicable to AbbVie, oversees the evaluation of the board and management, and serves in an advisory capacity to the board and the chairman of the board on matters of organization, management succession plans, major changes in the organizational structure of AbbVie, and the conduct of board activities. The process used by this committee to identify a nominee to serve as a member of the board of directors depends on the qualities being sought, as described on pages 14-15. From time to time, AbbVie engages an executive search firm to assist the committee in identifying individuals qualified to be board members.

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THE BOARD OF DIRECTORS AND ITS COMMITTEES

Public Policy Committee

              The public policy committee is governed by a written charter. This committee assists the board of directors in fulfilling its oversight responsibility with respect to AbbVie's public policy, certain areas of legal and regulatory compliance, and governmental affairs and health care compliance matters that affect AbbVie by discharging the responsibilities set forth in its charter.

Executive Committee

              The executive committee members are Mr. Gonzalez, chair, Ms. Austin, Mr. Liddy, Mr. Rapp, and Mr. Tilton. This committee may exercise all of the authority of the board in the management of AbbVie, except for matters expressly reserved by law for board action.

Communicating with the Board of Directors

              Stockholders and other interested parties may communicate with the board of directors by writing a letter to the chairman of the board, to the lead director, or to the independent directors c/o AbbVie Inc., 1 North Waukegan Road, AP34, North Chicago, Illinois 60064, Attention: corporate secretary. The corporate secretary regularly forwards to the addressee all letters other than mass mailings, advertisements, and other materials not relevant to AbbVie's business. In addition, directors regularly receive a log of all correspondence received by the company that is addressed to a member of the board and may request any correspondence on that log.

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              AbbVie employees are not compensated for serving on the board or board committees. AbbVie's non-employee directors are compensated for their service under the AbbVie Non-Employee Directors' Fee Plan and the AbbVie 2013 Incentive Stock Program. As described in "Committees of the Board of Directors—Compensation Committee," director compensation is reviewed annually by the compensation committee with the independent compensation consultant, including a review of director compensation against AbbVie's Health Care Peer Group, and a recommendation is then provided to the full board.

              The following table sets forth the non-employee directors' 2016 compensation.

Name
  Fees
Earned or
Paid in Cash
($)(1)

  Restricted
Stock Unit
Awards
($)(2)

  Option
Awards
($)(3)

  Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4)

  All Other
Compensation
($)(5)

  Total
($)

 
R. Alpern   $113,750   $184,983   $0   $16,319   $25,000   $340,052  
R. Austin     135,833     184,983     0     0   0     320,816  
W. Burnside   119,750   184,983   0   0   25,000   329,733  
B. Hart     61,250     184,983     0     0   25,000     271,233  
E. Liddy   130,417   184,983   0   0   6,604   322,004  
E. Rapp     131,417     184,983     0     0   25,000     341,400  
R. Roberts   57,500   0   0   0   28,847   86,347  
G. Tilton     145,000     184,983     0     0   25,000     354,983  
F. Waddell   119,750   184,983   0   0   25,000   329,733  

(1)
Under the AbbVie Non-Employee Directors' Fee Plan as in effect until the 2016 annual meeting of stockholders, non-employee directors earned $10,500 for each month of service as a director and $1,000 for each month of service as a chair of a board committee, other than the chair of the audit committee. The chair of the audit committee received $1,500 for each month of service as a chair of that committee and the other members of the audit committee received $500 for each month of service as a committee member. The Non-Employee Directors' Fee Plan was amended in 2016 to adjust certain components of the program based on recommendations of the compensation committee's independent compensation consultant following review of AbbVie's Health Care Peer Group market practices and trends. Under the amended Non-Employee Directors' Fee Plan, effective as of the 2016 annual meeting of stockholders, non-employee directors earn $105,000 per year for service as a director and $20,000 per year for service as a chair of a board committee, other than the chair of the audit committee. The chair of the audit committee receives $25,000 per year for service as chair of that committee and the other members of the audit committee receive $500 for each month of service as a committee member. The non-employee director and committee fees are earned monthly for each calendar month or portion thereof that the director holds the position, excluding the month in which the director is first elected to the position.

    Fees earned under the AbbVie Non-Employee Directors' Fee Plan are, at the director's election, paid in cash, delivered in the form of vested non-qualified stock options (based on an independent appraisal of their fair value),

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DIRECTOR COMPENSATION

    deferred until retirement (as an unfunded AbbVie obligation), or paid currently into an individual grantor trust established by an eligible director. The distribution of deferred fees and amounts held in a director's grantor trust generally commences at the later of when the director reaches age 65 or upon retirement from the board of directors. Fees deposited in a trust may be credited to a stock equivalent account that earns the same return as if the fees were invested in AbbVie stock or to a guaranteed interest account. If necessary, AbbVie contributes funds to a director's trust so that as of year-end the stock equivalent account balance (net of taxes) is not less than seventy-five percent of the market value of the related AbbVie common stock at year end.

(2)
The amounts in this column represent the aggregate grant date fair value of the restricted stock unit awards granted during 2016, determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. AbbVie determines the grant date fair value of the awards by multiplying the number of units granted by the average of the high and low market prices of one share of AbbVie common stock on the award grant date.

    In addition to the fees described in footnote (1), each non-employee director elected to or serving on the board of directors at the 2016 annual stockholder meeting received under the AbbVie 2013 Incentive Stock Program vested restricted stock units with a target grant date value of $185,000. In 2016, this equated to 2,974 restricted stock units (after rounding the award down to the nearest whole unit), with a reportable value of $184,983. The non-employee directors receive cash payments equal to the dividends paid on the shares covered by the units at the same rate as other stockholders, but do not otherwise have access to the restricted stock units during their board service. Upon termination or retirement from the board, death, or a change in control of the company, a non-employee director will receive one common share for each restricted stock unit outstanding under the Incentive Stock Program.

    The following AbbVie restricted stock units were outstanding as of December 31, 2016: R. Alpern, 19,019; R. Austin, 26,682; W. Burnside, 10,460; B. Hart, 2,974; E. Liddy, 14,446; E. Rapp, 10,460; G. Tilton, 22,666; F. Waddell, 10,460. These numbers include, where applicable, AbbVie restricted stock units issued with respect to Abbott Laboratories restricted stock units outstanding when AbbVie separated from Abbott on January 1, 2013.

(3)
No AbbVie stock options were outstanding as of December 31, 2016.

(4)
The totals in this column include reportable interest credited under the AbbVie Non-Employee Directors' Fee Plan during 2016.

(5)
Charitable contributions made by AbbVie's non-employee directors are eligible for a matching contribution (up to $25,000 annually). For 2016 contributions, the AbbVie Foundation made charitable matching contributions on behalf of the following AbbVie directors: R. Alpern, $25,000; W. Burnside, $25,000; B. Hart, $25,000; E. Liddy, $5,000; E. Rapp, $25,000; R. Roberts $25,000; G. Tilton, $25,000; F. Waddell, $25,000. This column also includes reimbursement for certain taxes.

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Securities Ownership of Executive Officers and Directors

              The table below reflects the number of shares of AbbVie common stock beneficially owned as of January 31, 2017, by each director, the chief executive officer, the chief financial officer, and the three other most highly paid executive officers (NEOs), and by all directors and executive officers of AbbVie as a group. It also reflects the number of stock equivalent units and restricted stock units held by non-employee directors under the AbbVie Non-Employee Directors' Fee Plan.

Name
  Shares
Beneficially
Owned(1)(2)(3)

  Stock Options
Exercisable
within 60 days
of January 31, 2017

  Stock
Equivalent
Units

     

R. Gonzalez

  339,631   656,296   0

R. Alpern

  19,019   0   5,194

R. Austin

  33,526   0   0

W. Burnside

  10,460   0   0

B. Hart

  2,974   0   0

E. Liddy

  15,581   0   16,772

M. Meyer

  0   0   0

E. Rapp

  12,960   0   10,331

G. Tilton

  30,411   0   26,342

F. Waddell

  12,460   0   0

W. Chase

  172,871   404,517   0

L. Schumacher

  141,159   414,413   0

H. Gosebruch

  78,104   27,987   0

M. Severino

  143,282   149,856   0

All directors and executive officers as a group(4)

  1,336,412   2,243,498   58,639

(1)
The table includes shares held in the executive officers' accounts in the AbbVie Savings Plan as follows: all executive officers as a group, 2,788. Each executive officer has shared voting power and sole investment power with respect to the shares held in his or her account.

(2)
The table includes restricted stock units held by the non-employee directors. The directors' units are payable in stock as described in footnote (2) to the Director Compensation table.

(3)
The table includes shared voting and/or investment power over shares as follows: R. Gonzalez, 5,050; G. Tilton, 350; W. Chase, 501; and all directors and executive officers as a group, 49,374.

(4)
The directors and executive officers as a group own less than one percent of the outstanding shares of AbbVie.

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SECURITIES OWNERSHIP

Securities Ownership of Principal Stockholders

              The table below reports the number of shares of AbbVie common stock beneficially owned as of December 31, 2016 by Capital Research Global Investors, BlackRock, Inc. and The Vanguard Group (directly or through subsidiaries), respectively, the only persons known to AbbVie to own beneficially more than 5% of AbbVie's outstanding common stock. It is based on information contained in Schedules 13G filed with the Securities and Exchange Commission by Capital Research Global Investors on February 13, 2017, by BlackRock, Inc. on January 19, 2017, and by The Vanguard Group on February 9, 2017. Capital Research Global Investors reported that it had sole voting power with respect to 174,963,752 shares, shared voting power with respect to 0 shares, sole dispositive power with respect to 174,963,752 shares and shared dispositive power with respect to 0 shares. The Vanguard Group reported that it had sole voting power with respect to 2,548,785 shares, shared voting power with respect to 295,907 shares, sole dispositive power with respect to 106,722,611 shares and shared dispositive power with respect to 2,814,152 shares. BlackRock, Inc. reported that it had sole voting power with respect to 78,355,516 shares, shared voting power with respect to 14,485 shares, sole dispositive power with respect to 92,404,082 shares and shared dispositive power with respect to 14,485 shares.

Name and Address of Beneficial Owner
  Shares Beneficially Owned
  Percent of Class

Capital Research Global Investors
333 South Hope Street
Los Angeles, CA 90071



 
174,963,752   10.7%

The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355

  109,536,763   6.74%

BlackRock, Inc.
40 East 52nd Street
New York, NY 10022



 
92,418,567   5.7%

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Compensation Discussion and Analysis

              This Compensation Discussion and Analysis (CD&A) describes the pay philosophy established for AbbVie's named executive officers (NEOs), the design of our compensation programs, the process used to examine performance in the context of executive pay decisions, and the performance goals and results for each NEO:

 
Richard A. Gonzalez   Chairman of the Board and Chief Executive Officer
William J. Chase   Executive Vice President, Chief Financial Officer
Laura J. Schumacher   Executive Vice President, External Affairs, General Counsel and Corporate Secretary
Henry O. Gosebruch   Executive Vice President, Chief Strategy Officer
Michael E. Severino   Executive Vice President, Research & Development and Chief Scientific Officer

              Although we describe our programs in the context of the NEOs, it is important to note that our programs generally have broad eligibility and therefore in most cases apply to employee populations outside the NEO group as well.

CD&A Table of Contents

              The CD&A is organized as follows:

I. Executive Summary   23

Compensation Philosophy

  23

Business Overview

  23

Business Performance Highlights

  24

Components of our Compensation Program

  28

2016 Performance Results

  28

Stockholder Engagement

  29

Executive Compensation Program Updates in 2016

  30

Compensation Program Governance Summary

  31
II. Executive Compensation Process   31

Commitment to Performance-Based Awards

  31

Committee Process for Setting Total Compensation

  31

Compensation Benchmarking

  32

Role of the Compensation Consultant

  32

Compensation Risk Oversight

  32
III. Compensation Plan Elements   33

Base Salary

  33

Short-Term Incentives

  33

Long-Term Incentives

  36

Benefits

  37

Employment Agreements

  38

Excise Tax Gross-Ups

  38

Change in Control Agreements

  38
IV. Other Matters   39

Stock Ownership Guidelines

  39

Clawback Policy

  39

Anti-Hedging and Anti-Pledging Policies

  39

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I.    Executive Summary

Compensation Philosophy

              At AbbVie, the board of directors and management believe a well-designed compensation program should align executive interests with the drivers of stockholder returns and profitable growth, support achievement of the company's primary business goals, and attract and retain world-class executives whose talents and contributions sustain the growth in long-term stockholder value. The board believes it has implemented a compensation program that appropriately balances short- and long-term strategic objectives and directly links compensation to stockholder value with more than three-fourths of the total direct compensation paid to NEOs tied to performance.

Business Overview

              AbbVie was created in 2013 following separation from Abbott Laboratories. AbbVie's products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C virus and human immunodeficiency virus; neurological disorders, such as Parkinson's disease and multiple sclerosis; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; as well as other serious health conditions.

              Our pipeline includes more than 50 compounds or indications in development across important medical specialties such as immunology, virology, oncology and neuroscience, with additional targeted investment in cystic fibrosis and women's health.

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Business Performance Highlights

AbbVie has Delivered Robust Financial Results since Separation

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              The measures set forth above were calculated as of December 31, 2016.

    *   Net revenues, diluted earnings per share and operating margin are adjusted to exclude certain specified items and are non-GAAP numbers, which are reconciled in Appendix B.    

              AbbVie has delivered a strong compound annual growth rate (CAGR) since inception on adjusted net revenues and adjusted diluted earnings per share (EPS), placing AbbVie in the top quartile of its Health Care Peer Group. Additionally, AbbVie has been committed to a robust return of capital to stockholders with an increase of 60% in its dividend since 2013 as part of a balanced and disciplined capital allocation program. AbbVie's total stockholder return (TSR) since inception of 111.4% also places AbbVie among the top of its Health Care Peer Group, and more than 40 percentage points above the Standard & Poor's 500 Index and more than 65 percentage points above the NYSE Arca Pharmaceutical Index over the same time period.

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AbbVie also Delivered Strong Business Performance in 2016

              AbbVie has built a strong foundation for its business and 2016 was an exceptional year, as evidenced by a number of 2016 business highlights:

    Net Revenues:  AbbVie reported 2016 full-year net revenues of $25.6 billion on a GAAP basis and adjusted net revenues of $25.6 billion, an increase of 13.3% over 2015, excluding the impact of foreign exchange. This reflects top-tier growth, third in AbbVie's Health Care Peer Group.

    Operating Margins:  In 2016, AbbVie expanded its operating margin to 36.6% on a GAAP basis or 42.4% of net revenues on an adjusted basis, and reported gross margin of 77.2% on a GAAP basis or 81.2% of net revenues on an adjusted basis. Excluding the incremental R&D investment related to acquisitions in 2016 and an unfavorable impact from foreign exchange, the adjusted operating margin was 45.9% in 2016.

    Earnings Per Share:  AbbVie reported full-year diluted EPS of $3.63 on a GAAP basis and adjusted diluted EPS of $4.82, up 12.4%. This reflects top-tier growth, third in AbbVie's Health Care Peer Group. AbbVie provided 2017 GAAP diluted EPS guidance in the range of $4.55 to $4.65 and adjusted diluted EPS guidance in the range of $5.44 to $5.54, reflecting growth of nearly 14% at the midpoint.

    Humira Sales:  AbbVie delivered global Humira sales of $16.1 billion, an increase of 14.7% on a reported basis over 2015, or 16.1% excluding the impact of foreign exchange. Humira's performance was driven by continued market penetration across therapeutic categories and geographies.

    Imbruvica Net Revenue:  In 2016, global Imbruvica net revenue exceeded $1.8 billion, with performance driven by market share growth following Imbruvica's approval as a first line treatment for patients with chronic lymphocytic leukemia (CLL).

    Business Development:  AbbVie acquired Stemcentrx and its lead late-stage asset, rovalpituzumab tesirine (Rova-T), further strengthening AbbVie's oncology portfolio by providing a highly attractive platform in solid tumors. AbbVie also entered into a collaboration with Boehringer Ingelheim to develop and commercialize risankizumab, an anti-IL-23 monoclonal antibody that has the potential to be a transformative therapy in a number of immune-mediated diseases.

    Regulatory Milestones:  AbbVie also achieved a number of regulatory milestones in markets worldwide for several key products, including U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA) approvals for several new products, including VenclextaTM for relapsed/refractory chronic lymphocytic leukemia (CLL) patients with 17p deletion, ZinbrytaTM for relapsing forms of multiple sclerosis and EmplicitiTM for the treatment of multiple myeloma, as well as new indications for Humira and Imbruvica.

    Pipeline Development:  With a record number of programs in mid- and late-stage development, AbbVie made significant pipeline advancements in 2016, such as regulatory application submissions for the company's pan-genotypic next-generation HCV combination and Imbruvica for marginal zone lymphoma.

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              The graphs below illustrate AbbVie's growth of net revenue and diluted EPS in 2016 versus 2015.

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      * Net revenues and diluted earnings per share are adjusted for specified items, including the impact of intangible asset amortization, and are non-GAAP numbers, which are reconciled in Appendix B. Adjusted net revenues exclude specified items, as described in Appendix B.    

2016 Performance

              AbbVie is in the top tier of its peers on several financial measures. The chart below outlines AbbVie's performance relative to its Health Care Peer Group in 2016:

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Total Stockholder Return (TSR) Performance

              Over the four years since AbbVie's separation from Abbott, we have delivered a total stockholder return of 111.4%, which places us among the top of our Health Care Peers and surpasses the cumulative total returns of the Standard & Poor's 500 Index and the NYSE Arca Pharmaceutical Index, as shown in the graph below. The graph covers the period from January 2, 2013 (the first day AbbVie's common stock began "regular-way" trading on the NYSE) through December 31, 2016. The graph assumes $100 was invested in AbbVie common stock and each index on January 2, 2013 and also assumes the reinvestment of dividends. The stock price performance in the following graph is not necessarily indicative of future stock price performance.


Comparison of Cumulative Total Return since AbbVie's Launch

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AbbVie is Positioned for Future Growth

              AbbVie is well-positioned to deliver strong top- and bottom-line performance through 2020 and beyond. The company has established growth platforms in some of the largest and most attractive market segments, including immunology, oncology, virology and neurology, and has built a compelling pipeline in these areas which will contribute significantly to future performance. AbbVie is committed to top-line growth and operating margin expansion. In October 2015, AbbVie outlined its long-term strategic and financial objectives through 2020, including an expectation to deliver annual double-digit adjusted EPS growth on average, company net revenues of approximately $37 billion in 2020, and an adjusted operating margin profile of greater than 50 percent in 2020.

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Components of our Compensation Program

              The compensation committee of the board oversees our executive compensation program, which includes several compensation elements that have each been tailored to incentivize and reward specific aspects of company performance the board believes are central to delivering long-term stockholder value. Key components of our compensation program are listed below.

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              In response to stockholder feedback, we redesigned our long-term incentive (LTI) program for 2016, emphasizing multiple, relative performance metrics and multi-year performance periods (see page 36 for a detailed description of the 2016 redesign).

              The committee is dedicated to ensuring that a substantial portion of executive compensation is "at-risk" and variable. Generally, more than three-fourths of our NEOs' total direct compensation is variable and directly affected by both the company's and the NEO's performance.

2016 Performance Results

              The performance targets established under our annual and long-term incentive plans are rigorous and calibrated to a range of potential outcomes, with above target payouts for strong performance and below target payouts (including no payout) for below target performance. Targets are based on expected business, market and regulatory conditions, including expectations for our pipeline. The financial goals shown in the following table were carried by all of the NEOs as part of their 2016 performance goals. The specific weightings for each NEO, other than the CEO, are established at the start of each performance year based on the NEO's role and anticipated contributions to the company's annual objectives. Financial goals are set rigorously; achievement of these targets has resulted in top-tier industry performance.

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Financial Goals

Goal and Expected Result(1)
  Result(2)
  Outcome
  Performance Against
Annual Goals

A.   Non-GAAP Net Revenues of $25.7BN   A.   $25.4BN(3)   Achieved   99%
B.   Non-GAAP Income Before Taxes of $9.7BN   B.   $10.0BN   Achieved Above Target   100%
C.   Adjusted Return on Assets of 17.0%   C.   17.2%   Achieved Above Target   100%
D.   Non-GAAP Operating Margin of $10.9BN   D.   $11.0BN   Achieved Above Target   100%
E.   Humira Sales of $15.7BN   E.   $16.0BN(3)   Achieved Above Target   100%

(1)
Expected results reflect the acquisition of assets from Boehringer Ingelheim and the acquisition of Stemcentrx.

(2)
Results achieved reflect certain specified items, which are reconciled in Appendix B.

(3)
Net revenues and Humira sales are evaluated on a constant currency basis.

              In addition to the financial goals set forth above, each of our NEOs also has individual performance goals that the committee reviews and ensures are appropriately rigorous and in line with the long-term success of the company. Each NEO achieved or exceeded his or her 2016 goals, which are listed below:

    Richard A. Gonzalez:  Drive top-tier business performance; execute key strategic initiatives to drive sustainable long-term business performance; deliver value to our stockholders, building investor confidence and credibility; successfully advance mid- and late-stage pipeline assets; continue to drive employee engagement and motivation around AbbVie's mission and future prospects; and advance our transformation to a biopharmaceutical culture.

    William J. Chase:  Achieve proprietary pharmaceutical pipeline enhancement objectives; and provide support on corporate strategic initiatives and build shareholder value through investor activities.

    Laura J. Schumacher:  Successfully continue to develop and implement strategies to effectively resolve key litigation matters; achieve proprietary pharmaceutical pipeline enhancement objectives; execute biologics strategic development initiatives; and support research and development initiatives per company strategy.

    Henry O. Gosebruch:  Achieve proprietary pharmaceutical pipeline enhancement objectives; and support research and development initiatives per company strategy.

    Michael E. Severino:  Achieve key research and development milestones per company strategy; and achieve proprietary pipeline enhancement objectives.

Stockholder Engagement

2016 Say on Pay Results

              At our 2016 Annual Meeting, the say on pay proposal received support from 94% of our stockholders. The board and compensation committee are encouraged by the continued, consistent stockholder support for our executive compensation program.

              AbbVie is committed to regular, ongoing engagement with stockholders to ensure that we continue to understand stockholder feedback about our compensation program and incorporate that feedback into the compensation decision-making process. To that end, in 2016 AbbVie approached and engaged stockholders holding approximately 38% of the company's outstanding shares. In these discussions, the aggregate feedback was generally supportive of the compensation program, consistent with the level of stockholder support for our say on pay proposals in the last two

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years, and was not prescriptive about our compensation plan design. The feedback informs the compensation committee's continuous assessment of the program design and ongoing discussions with stockholders, which contribute to the evolution of the program.

              After considering stockholder feedback and suggestions, AbbVie's compensation committee, in consultation with management and the committee's independent compensation consultant, has proactively reviewed our policies and compensation program design. For annual awards beginning in 2016, our LTI program has been redesigned, as discussed in greater detail in the following section.

Executive Compensation Program Updates in 2016

              The compensation committee of the board has engaged in a continuous process of evaluation and enhancement of the AbbVie executive compensation program. Since the company's launch, AbbVie has made significant enhancements to its legacy compensation programs, the most recent of which are described in the following paragraphs and on page 36.

              The committee has considered the feedback from stockholders as to the design of its compensation program and competitive benchmarking and, in 2016, completed a comprehensive revision of the program. The new long-term incentive program was effective for equity grants made in 2016. The program consists of equity awards that include 40% performance shares, 40% performance-vested restricted stock awards and 20% stock options. Vesting may occur over a 3-year period based on relative return on equity (ROE) for the performance-vested restricted stock awards and earnings per share (EPS) (with a relative 3-year total stockholder return (TSR) modifier) for the performance shares. The 2016 program eliminates vesting in any 3 of 5 years and provides that awards may vest only over 3 years based on the achievement of the defined performance metrics. Additionally, dividends will not be paid unless the performance criteria are met, and then will be paid only on shares that are earned. AbbVie believes the new design further strengthens and aligns the performance orientation of senior executive compensation. Highlights of the changes made for 2016 include:

Element of Pay
  Changes Made for 2016
Long-Term Incentive Program  

ü

Completed redesign of our long-term incentive program:

   

Added multiple performance metrics, including relative ROE, EPS and relative TSR as criteria for vesting.

   

Removed provision that allowed performance awards to vest if thresholds were met in any 3 of 5 years, creating more risk of forfeiture.

   

Added multi-year performance periods.

   

Changed dividend payment schedule so dividends are paid only at vesting and only on earned shares.

   

Increased use of performance-vested awards from 75% to 80% which, in combination with stock options, ties 100% of our LTI program to performance metrics and stock price appreciation.

   

Refined process for referencing the market median for long-term incentive award decisions.

Short-Term Incentive Plan  

ü

Added disclosure of our maximum annual incentive cap of 200% of target.

 

ü

Reduced the CEO's target annual incentive to 150% of base salary.

 

ü

Established a formal payout matrix based on net revenues and operating margin to define and cap NEO annual incentive awards at or below the plan maximum.

Peer Comparisons  

ü

Simplified the peer group used for compensation benchmarking, the AbbVie Health Care Peer Group.

              The new design is discussed in more detail in Section III.

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Compensation Program Governance Summary

              In addition to strong alignment of pay with the performance of the company and our NEOs, we maintain and are committed to good governance practices, including the following:

New

ü

Long-term incentive design emphasizing multiple, relative performance metrics and multi-year performance periods (see page 36 for a detailed description of the 2016 redesign)

Shifts program away from a single, absolute performance metric to a multi-factor model

Incorporates relative total stockholder return

Eliminates extra vesting opportunity that was a part of the prior LTI design

Dividends on outstanding equity awards are paid at vesting and only on earned shares

ü

CEO target annual incentive reset at 150% of base salary

ü

Robust stock ownership guideline of 5x annual fees for non-employee directors

Ongoing

ü

Majority of NEO compensation tied to long-term performance

ü

Short- and long-term incentive programs closely align pay with performance

ü

Annual incentive payout matrix used to define and cap the range for the committee's determinations (at or below the plan maximum of 200% of target)

ü

Robust stock ownership guidelines of 6x salary for CEO and 3x salary for NEOs

ü

NEOs must hold and not sell equity until the minimum stock ownership requirement is satisfied

ü

Double-trigger requirements for equity acceleration and other benefits in the event of a change in control

ü

No tax gross-ups in executive compensation program

ü

No duplication of performance metrics in short-and long-term incentives

ü

No repricing of stock options without express stockholder approval

ü

No employment contracts

ü

No guaranteed short-term incentives or equity awards

ü

Anti-hedging and anti-pledging policies

ü

Independent compensation consultant that performs no other work for the company

ü

Committee has broad discretion to claw back incentive awards in the unlikely event of a restatement of earnings

ü

Proactive stockholder engagement process

II.    Executive Compensation Process

Commitment to Performance-Based Awards

              More than three-fourths of AbbVie's NEO pay is performance-based. Specific goals and targets are the foundation of our pay-for-performance process, and this section describes how they apply to each pay component. Though quantitative metrics such as financial and operational results are a central part of our performance assessment, some goals such as leadership and progress against strategic and long-term objectives are difficult to measure using numeric or formulaic criteria. As such, the compensation committee also conducts a qualitative assessment of individual performance to ensure the overall assessment of performance and pay decisions are aligned with the company's true performance over a period of time. A discussion of the decision-making criteria for each pay component follows.

Committee Process for Setting Total Compensation

              Each February, the committee, with the assistance of its independent compensation consultant and AbbVie's management team, determines target pay levels for NEOs. The process starts with a consideration of compensation levels and the mix of compensation for comparable executives at companies in AbbVie's Health Care Peer Group, which are listed below in the section captioned "Compensation Benchmarking." After this benchmark review, the committee establishes NEO compensation—base salary adjustments, annual incentive awards, and long-term incentive awards—relative to the peer median in each instance. Awards can be differentiated from the peer group median based on each NEO's individual performance, leadership, and contributions to long-term strategic performance.

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Compensation Benchmarking

              To provide the appropriate context for executive pay decisions, the committee, in consultation with its independent compensation consultant, assesses the compensation practices and pay levels of AbbVie's Health Care Peer Group. The committee chooses to focus on the Health Care Peer Group because its constituents share important characteristics with AbbVie, particularly the global emphasis on research-based pharmaceuticals and biopharmaceutical therapies and the regulatory environment within which they operate. Members of the Health Care Peer Group are AbbVie's primary competitors for executive talent and are companies the committee believes chiefly represent our competitive market:

Health Care Peer Group
Amgen, Inc.
Bristol-Myers Squibb Company
Eli Lilly and Company
Gilead Sciences, Inc.
GlaxoSmithKline plc
Johnson & Johnson
Merck & Company, Inc.
Novartis AG
Pfizer Inc.

Role of the Compensation Consultant

              The compensation committee has engaged Compensation Advisory Partners as its independent compensation consultant. The committee's independent consultant reports directly to the chair of the committee. The consultant meets regularly, and as needed, with the committee in executive sessions, has direct access to the chair during and between meetings, and performs no other services for AbbVie or its senior executives. The committee determines what variables it will instruct its consultant to consider, which include: peer groups against which performance and pay should be examined, metrics to be used to assess AbbVie's performance, competitive incentive practices in the marketplace, and compensation levels relative to market benchmarks.

Compensation Risk Oversight

              The company has established, and the compensation committee endorses, several controls to address and mitigate compensation-related risk, such as employing a diverse set of performance metrics, maintaining robust stock ownership guidelines for its executives and non-employee directors, and retaining broad discretion to recover incentive awards in the unlikely event that incentive plan award decisions are based on earnings that are subsequently restated. The committee identified no material risks in AbbVie's compensation programs in 2016.

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III.    Compensation Plan Elements

              Three primary components make up AbbVie's executive pay program: (1) base salary, (2) short-term incentives and (3) long-term incentives. The structure of each component is tailored to serve a specific function and purpose.

CEO Pay Mix   All Other NEO Average Pay Mix

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Base Salary

              The compensation committee sets appropriate levels of base salary to ensure that AbbVie can attract and retain a leadership team that will continue to meet our commitments to customers and patients and sustain long-term profitable growth for our stockholders. Generally, the committee considers the median of the Health Care Peer Group as an initial benchmark, but also references additional information as needed. Specific pay rates are then established for each NEO relative to his or her market benchmark based on the NEO's performance, experience, unique skills, internal equity with others at AbbVie, and the company's operating budget.

Short-Term Incentives

Performance Incentive Plan

              Annual cash incentives are paid to NEOs through AbbVie's Performance Incentive Plan (PIP), which rewards executives for achieving key financial and non-financial goals that are measured at the company and individual levels. The PIP is intended to comply with the requirements of Internal Revenue Code Section 162(m) for performance-based compensation. The compensation committee may define and cap PIP awards below the maximum amounts allowed by IRC Section 162(m), and is guided by the use of a formal annual incentive payout matrix that establishes a potential range of final incentive outcomes based on net revenues and operating margin performance. All NEOs carry a target incentive amount set as a percentage of their base salary. Mr. Gonzalez's target is 150% of base salary and the other NEOs' targets are 110% of base salary. Determining award amounts is a multi-step process. First, financial and individual goals are evaluated and scored, resulting in a preliminary award amount of up to 100% of target only. For 2016, all financial and strategic goals were materially achieved, resulting in performance scores between 99% and 100% of target. Final awards above 100% of target are determined at the February meeting based on company performance (the extent to which performance exceeds targets), the recommendation of the CEO (for NEOs other than himself), and the support

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of the compensation committee. To determine final awards, the CEO and the compensation committee use the payout matrix to define and cap the range in making its final determinations. This process is more fully described below:


Illustration of 2016 Incentive Calculation

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              While the compensation committee relies heavily on objective, quantitative metrics to determine PIP awards, the performance review also includes a qualitative element to ensure the review is comprehensive and inclusive of all individual, strategic, and leadership goals for which assessment is not solely dictated by numeric or formulaic applications. Moreover, while each participant has predetermined goals, the committee also considers relative achievements and/or developments in the company, the marketplace, and the global economy that could not have been foreseen when individual goals were established.

              For 2016, net revenue performance was 99% compared to plan, while operating margin performance was 101% compared to plan. As a result of this performance, the annual incentive payout matrix capped the annual incentives at 150% of target, below the plan maximum of 200% of target and the Code Section 162(m) cap. This resulted in final awards between 134% and 150% of target, consistent with the high level of performance achieved in 2016 and within the outcome range suggested by the payout matrix.

Annual Metrics and Goal Assessment

              AbbVie's PIP structure is intended to align NEOs' interests directly with AbbVie's annual operating strategies, financial goals, and leadership behaviors. In doing so, it provides a direct link between the NEOs' short-term incentives and the company's and the NEOs' annual performance results through measurable financial and operational performance and qualitative assessments of clearly defined strategic progress and leadership behaviors. The compensation committee approves pre-established goals at the beginning of each year. The qualitative assessment reflects NEOs' overall leadership, progress on strategic initiatives, advancement of the pipeline, and enhancement of AbbVie's biopharmaceutical culture.

              The financial and strategic/leadership goals and their respective weightings are summarized in the chart below. The specific goals and weightings for each NEO, other than the CEO, are established at the start of each performance year based on the NEO's role and anticipated contributions to the company's annual objectives. The CEO's goals are similarly established at the start of each performance year; however, to reflect the CEO's overall accountability for

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company financial performance and strategic outcomes, the committee considers all financial and non-financial goals holistically, without specific weightings, when evaluating CEO performance.

Annual Incentive Payout Matrix

  Range

Net Revenues

  0% to 200% of target

Operating Margin

  0% to 200% of target

   

Financial Goals

  % Weighting

Income Before Taxes

  20%

Net Revenues, Operating Margin, Humira Sales, and Return on Assets

  20% to 60%

Total Tied to Financial Goals

  40% to 80%

   

Strategic/Leadership Goals

  % Weighting

R&D/Biosimilars

    0% to 50%

Business Development

    0% to 50%

Other (including strategic initiatives, etc.)

    0% to 30%

Total Tied to Strategic/Leadership Goals

  20% to 60%

              Assessments of performance against financial results consider the effect of specified adjustments and/or unusual or unpredictable events, and the appropriateness of these adjustments is reviewed annually by the committee. In 2016 specified adjustments consisted of intangible asset amortization, milestones and other research and development expenses, acquired in process research and development, acquisition related costs, change in fair value of contingent consideration, Venezuela devaluation loss, revaluation due to tax law change, and other items, as described in Exhibit 99.1 to AbbVie's Form 8-K filed on January 27, 2017.

2016 PIP Awards

 
  Target
Award

  Actual Award
Paid

  Actual Award
as a % of
Target

     

Richard A. Gonzalez

  $ 2,400,000   $3,600,000   150%

William J. Chase

    1,084,358   1,626,000   150%

Laura J. Schumacher

  1,084,358   1,626,000   150%

Henry O. Gosebruch

    990,418   1,327,136   134%

Michael E. Severino

  1,063,986   1,596,000   150%

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Long-Term Incentives

              AbbVie redesigned its LTI program effective with the 2016 annual grant, based in part on feedback from stockholders. The new design increases the alignment of AbbVie's long-term incentive compensation with key operational and financial initiatives, including sustained EPS growth and generation of superior investment returns relative to peers. In 2016, NEOs received LTI awards with the following characteristics as compared to the 2015 LTI awards:


Evolution of Long-Term Incentive Program

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    Performance Shares (40% of total LTI award)—These awards have the potential to vest at 0% to 250% of target after a three-year performance period and are earned based on company performance in earnings per share (EPS) and relative total stockholder return (TSR). TSR performance is measured relative to a group made up of companies that are constituents in either the S&P Pharmaceutical, Biotech, and Life Science Index or the NYSE Arca Pharmaceutical Index. Dividends on performance shares accrue during the performance period and are paid at vesting only to the extent that shares are earned.

    Performance-Vested Restricted Stock (40% of total LTI award)—These awards have the potential to vest at 0% to 150% of target, in one-third increments during a three-year performance term based on AbbVie's return on equity articulated as pre-set goals and measured relative to a group made up of companies that are constituents in either the S&P Pharmaceutical, Biotech, and Life Science Index or the NYSE Arca Pharmaceutical Index. Dividends accrue during the performance period and are paid at vesting only to the extent that shares are earned.

    Non-Qualified Stock Options (20% of total LTI award)—These awards have the potential to vest in one-third increments on each of the first three annual anniversaries of the grant date, subject to continued employment with the company. The option exercise price is set at or above fair market value on the grant date. To the extent that the options vest, the award expires ten years after the grant date.

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Performance Share and Performance-Vested Restricted Stock Performance Targets and Results

              Performance targets and results associated with the 2016 awards of performance shares and performance-vested restricted stock are shown below. Total shareholder return results are in progress; these results and their impact on final payout will be disclosed following the completion of the three-year performance period.

Performance Objective
Target
Result
Impact on Payout

Adjusted Diluted EPS

$4.72 $ 4.82 166.7%

Total Shareholder Return

TSR is measured over a 3-year performance period and used as a modifier

ROE compared to industry peers

75th - 90th > 90th 150%

              AbbVie's policy with respect to its annual equity award for all eligible employees, including the NEOs, is to grant the award and set the grant price at the compensation committee's regularly scheduled February meeting each year. These meeting dates generally are the third Thursday of February and are scheduled two years in advance. The grant price is the average of the highest and lowest trading prices of a common share on the date of the grant (rounded up to the next even penny). The grant price for the 2016 annual grant was $54.86. The high, low and closing prices of an AbbVie common share on the grant date (February 18, 2016) were $55.53, $54.17, and $54.55, respectively. All LTI awards are subject to a minimum vesting period of 12 months.

Benefits

              Benefits are an important part of retention and capital preservation for all employees, helping to protect against the impact of unexpected catastrophic loss of health and/or earnings potential, as well as providing a means to save and accumulate for retirement or other post-employment needs.

              Each of the benefits described below supports the company's objective of providing a market competitive total rewards program. Individual benefits do not directly affect decisions regarding other benefits or pay components, except to the extent that all benefits and pay components must, in aggregate, be competitive, as previously discussed.

Retirement Benefits

              All eligible U.S. employees, including NEOs, participate in the AbbVie Pension Plan, the company's principal qualified defined benefit plan. NEOs and certain other employees also participate in the AbbVie Supplemental Pension Plan. These plans are described in greater detail in the section of this proxy statement captioned "Pension Benefits."

              The Supplemental Pension Plan is a non-qualified defined benefit plan that cannot be secured in a manner similar to a qualified plan, for which assets are held in trust, so eligible NEOs receive an annual cash payment equal to the increase in the present value of their Supplemental Pension Plan benefit. Eligible NEOs have the option of depositing the annual payment into an individually established grantor trust, net of tax withholdings. Deposited amounts may be credited with the difference between the NEO's actual annual trust earnings and the rate used to calculate trust funding (currently 8 percent). Amounts deposited in the individual trusts are not tax-deferred and the NEOs personally pay the taxes on those amounts without gross-ups.

              The manner in which the grantor trust assets are to be distributed to an NEO upon retirement from the company generally follows the distribution method elected by the NEO under the AbbVie Pension Plan. If an NEO (or the NEO's surviving spouse, depending on the pension distribution method elected by the NEO under the AbbVie Pension Plan) lives beyond the actuarial life expectancy age used to determine the Supplemental Pension Plan benefit, and therefore exhausts the trust balance, the Supplemental Pension Plan benefit will be paid to the NEO (or his or her surviving spouse) by AbbVie.

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Savings Plans

              All U.S. employees, including NEOs, are eligible to defer a portion of their annual base salary under the AbbVie Savings Plan, the company's principal qualified defined contribution plan, up to the IRS contribution limits. Eligible NEOs also may defer up to 18 percent of their base salary, less contributions to the AbbVie Savings Plan, to the AbbVie Supplemental Savings Plan, which is a non-qualified defined contribution plan. Eligible NEOs may defer these amounts to unfunded book accounts or choose to have the amounts paid in cash on a current basis and deposited into individually established grantor trusts, net of tax withholdings. These amounts are credited annually with earnings. Amounts deposited in the individual trusts are not tax-deferred and the NEOs personally pay the taxes on those amounts without gross-ups.

              NEOs elect the manner in which the assets held in their grantor trusts will be distributed to them upon retirement or other separation from the company. These arrangements are described in greater detail in this proxy statement beginning with the section captioned "Summary Compensation Table."

Financial Planning

              NEOs are paid an annual stipend of $10,000 for estate planning advice, tax preparation and general financial planning fees. The stipend is income to the NEO, who is responsible for payment of all resulting taxes without gross-ups.

Company-Provided Transportation

              NEOs are eligible for transportation perquisites that are designed to improve the effectiveness and efficiency of their work, including the use of a company-leased vehicle and access to company-provided air travel, as appropriate. In some circumstances, these benefits may be used for personal travel, which would then be considered part of the NEO's total compensation and treated as taxable income to them under applicable tax laws. The NEOs pay the taxes on such income without gross-ups.

Disability Benefits

              In addition to AbbVie's standard disability benefits, NEOs are eligible for a monthly long-term disability benefit, which is described on page 53 of this proxy statement.

Employment Agreements

              AbbVie does not have employment agreements with any of its NEOs.

Excise Tax Gross-ups

              AbbVie does not provide excise tax gross-ups on NEO compensation.

Change in Control Agreements

              AbbVie has entered into change in control agreements with its NEOs to aid in retention and recruitment, encourage continued attention and dedication to assigned duties during periods involving a possible change in control of the company, and to protect the earned benefits of the NEOs against potential adverse changes resulting from a change in control.

              The change in control agreements contain a double-trigger feature, meaning that if the NEO's employment is terminated other than for cause or permanent disability, or if the NEO elects to terminate employment for good reason, within two years following a change in control, he or she is entitled to receive certain pay and benefits as described in the section of this proxy statement captioned "Potential Payments upon Termination or Change in Control."

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IV.    Other Matters

Stock Ownership Guidelines

              AbbVie's stock ownership guidelines are designed to further promote sustained stockholder return and to ensure the company's senior executives remain focused on both short- and long-term objectives. Each senior executive has five years from the date of election or appointment to his or her position to achieve the ownership level associated with his or her position. NEOs are not allowed to sell stock, except for tax withholding at vesting or exercise, if they do not satisfy the minimum stock ownership requirement. The minimum stock ownership guidelines for the CEO and other NEOs are as follows:

Executive
Stock Ownership Requirement
Requirement Met?
Richard A. Gonzalez 6x Base Salary Yes
William J. Chase 3x Base Salary Yes
Laura J. Schumacher 3x Base Salary Yes
Henry O. Gosebruch 3x Base Salary Yes
Michael E. Severino 3x Base Salary Yes

              In addition, AbbVie's non-employee directors are required to own AbbVie stock valued at five times (5x) the annual fee for service as a director under the AbbVie Non-Employee Directors' Fee Plan within five years of joining the Board or as soon as practicable thereafter.

Clawback Policy

              While the committee does not anticipate there would ever be circumstances where a restatement of earnings upon which any incentive plan award decisions were based would occur, the committee, in evaluating such circumstances, has broad discretion to take all actions necessary to protect the interests of stockholders up to and including actions to recover such incentive awards.

Anti-Hedging and Anti-Pledging Policies

              AbbVie has a formal policy that prohibits directors and officers subject to Section 16 of the Exchange Act, including all of the NEOs, from entering into or engaging in the purchase or sale of financial instruments that are designed to hedge or offset any decrease in the market value of AbbVie equity securities they hold. AbbVie also has a formal policy that prohibits directors and officers subject to Section 16 of the Exchange Act, including all of the NEOs, from pledging AbbVie common stock as collateral for a loan.

              In addition, the AbbVie Incentive Stock Program provides that no long-term incentive award may be assigned, alienated, sold or transferred other than by will or by the laws of descent and distribution or as permitted by the compensation committee for estate planning purposes, and no award and no right under any award may be pledged, alienated, attached or otherwise encumbered. All members of senior management, including the company's NEOs and certain other employees, are required to clear any transaction involving company stock with the General Counsel prior to entering into such transaction.

Compensation Committee Report

              The compensation committee of the board of directors is primarily responsible for reviewing, approving and overseeing AbbVie's compensation plans and practices, and works with management and the committee's independent compensation consultant to establish AbbVie's executive compensation philosophy and programs. The committee reviewed and discussed the Compensation Discussion and Analysis with management and recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee

              E. Liddy, Chairman, R. Austin, G. Tilton, and F. Waddell

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Compensation Risk Assessment

              During 2016, in collaboration with the compensation committee's independent compensation consultant, AbbVie conducted an in-depth risk assessment of its compensation policies and practices, including those related to executive compensation programs for NEOs. The risk assessment included a quantitative and qualitative analysis of AbbVie's executive compensation programs and broader employee incentive compensation plans. AbbVie also considered how these programs compare, from a design perspective, to programs maintained by other companies. Based on this assessment, it was determined that AbbVie's executive compensation programs are balanced and appropriately incent employees, and any risks arising from the compensation policies and practices are not reasonably likely to have a material adverse effect on AbbVie. The following factors were among those considered in making this determination:

    AbbVie's compensation structure contributes to a corporate culture that encourages our NEOs to regard AbbVie as a long-term employer. For example, equity awards vest over multi-year periods, which encourages NEOs to consider the long-term impact of their decisions and align their interests with those of AbbVie's stockholders.

    AbbVie's annual incentive program is based on multiple performance measures, balancing earnings achievement with other factors. Since earnings are a key component of stock price performance, this aspect of AbbVie's compensation plan also promotes alignment with stockholder interests.

    AbbVie does not include certain pay design features that may have the potential to encourage excessive risk-taking, such as: over-weighting toward annual incentives, highly leveraged payout curves, unreasonable thresholds or dramatic changes in payout opportunity at certain performance levels that may encourage inappropriate short-term business decisions to meet payout thresholds. In addition, a limit of 200% of target applies to any awards made under the NEO short-term incentive plan.

    AbbVie's long-term incentive program focuses NEOs on longer-term operating performance and aligns NEOs with stockholder interests through the use of multi-year performance periods and multiple performance measures, including relative total stockholder return. In 2016, AbbVie's NEOs received roughly two-thirds of their total direct compensation in the form of long-term incentives (20% of which are stock options that may vest over a three-year period and 80% of which are performance-based awards that may vest over a three-year performance period).

    AbbVie makes equity awards and sets grant prices at the same time each year, at the compensation committee's regularly scheduled meeting in February. In addition, AbbVie does not award discounted stock options or immediately vesting equity awards.

    AbbVie has robust stock ownership guidelines for its senior executives, which promotes alignment with stockholder interests, and other good governance equity practices such as anti-hedging and anti-pledging policies.

    AbbVie's compensation committee has the ability to exercise downward discretion in determining annual incentive plan payouts.

    AbbVie's compensation committee has broad discretion to claw back incentive compensation that was awarded based on financials that were later restated. The committee can reduce or cancel incentive compensation in connection with a violation of company policy or similar misconduct.

    AbbVie requires mandatory training on its code of conduct and policies and procedures to educate its employees on appropriate behaviors and the consequences of taking inappropriate actions.

              The risk assessment results were presented to the compensation committee by its independent compensation consultant.

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Summary Compensation Table

              This section contains compensation information for AbbVie's NEOs for the fiscal year ended December 31, 2016. The following table summarizes compensation awarded to, earned by and/or paid to AbbVie's NEOs in connection with their service to AbbVie during 2016, 2015 and 2014, as applicable. Mr. Gosebruch was not a named executive officer before 2016. The section of this proxy statement captioned "Compensation Plan Elements" describes in greater detail the information reported in this table.

Name and Principal Position
  Year
  Salary
($)(1)

  Bonus
($)

  Stock
Awards
($)(2)

  Option
Awards
($)(3)(4)

  Non-Equity
Incentive
Plan
Compensation
($)(5)

  Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
($)(6)(7)

  All Other
Compensation
($)(8)

  Total
($)

 
Richard A. Gonzalez   2016   $1,600,000   $0   $9,318,854   $2,360,323   $3,600,000   $3,232,531   $859,216   $20,970,924  

Chairman of the Board and

  2015   1,588,461   0   9,747,455   3,259,808   2,976,000   2,447,316   791,063   20,810,103  

Chief Executive Officer

  2014   1,595,961   0   8,379,403   2,762,525   3,500,000   5,044,809   723,573   22,006,271  
William J. Chase     2016     979,369     0     3,483,919     882,450     1,626,000     1,697,232     162,406     8,831,376  

Executive Vice President,

    2015     950,385     0     3,298,795     1,103,269     1,358,300     739,381     163,664     7,613,794  

Chief Financial Officer

    2014     923,711     0     2,764,853     911,634     1,490,000     1,710,772     121,925     7,922,895  
Laura J. Schumacher   2016   979,369   0   2,864,483   725,663   1,626,000   1,627,686   394,498   8,217,699  

Executive Vice President,

  2015   951,538   0   3,073,930   1,028,071   1,358,300   504,413   390,089   7,306,341  

External Affairs, General Counsel and Corporate Secretary

  2014   957,577   0   2,807,018   925,396   1,490,000   2,465,919   402,095   9,048,005  
Henry O. Gosebruch     2016     894,523     1,000,000 (9)   3,066,591     776,630     1,327,136     190,717     143,466     7,399,063  

Executive Vice President,

                                                       

Chief Strategy Officer

                                                       
Michael E. Severino   2016   960,969   0   3,359,376   850,908   1,596,000   375,080   101,530   7,243,863  

Executive Vice President,

  2015   918,077   0   3,111,604   1,040,621   1,238,700   228,599   66,204   6,603,805  

Research & Development and
Chief Scientific Officer


 
2014   503,750   1,000,000 (9) 7,710,065   734,916   1,200,000   188,911   205,104   11,542,746  

(1)
The year-over-year difference in base salary from 2014 to 2015 is a function of the number of pay periods in each year. There were 27 pay periods in 2014 and 26 pay periods in 2015 and 2016.

(2)
In accordance with Securities and Exchange Commission (SEC) rules, the amounts in this column represent the aggregate grant date fair value of the awards determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. AbbVie determines the grant date fair value of stock awards by multiplying the number of shares granted by the average of the high and low market prices of one share of AbbVie common stock on the award grant date.

(3)
In accordance with SEC rules, the amounts in this column represent the aggregate grant date fair value of the awards determined in accordance with FASB ASC Topic 718.

(4)
These amounts were determined as of the option grant date using a Black-Scholes stock option valuation model. These amounts are being reported solely for the purpose of comparative disclosure in accordance with the SEC rules. There is no certainty that the amount determined using a Black-Scholes stock option valuation model would be the value at which employee stock options would be traded for cash. The weighted-average assumptions used to estimate the grant date fair value of options granted in 2016, along with the weighted-average grant date fair value, are shown below:
 
   
Assumption
  All NEOs

Risk-free interest rate

  1.36%

Average life of options (years)

  6.0   

Volatility

  28.46%

Dividend yield

  4.09%

Fair value per stock option

  $9.25   

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(5)
The compensation reported in this column for 2016 was earned as a performance-based incentive award pursuant to the AbbVie Performance Incentive Plan. Additional information regarding the plan can be found in the section of this proxy statement captioned "Compensation Plan Elements."

(6)
The amounts shown below are reported in this column for 2016, 2015, and 2014, respectively, as applicable.


AbbVie Pension Plan


R. Gonzalez: $(70,521) / $45,413 / $142,324; W. Chase: $74,428 / $(20,261) / $148,641; L. Schumacher: $86,510 / $(11,019) / $166,274; H. Gosebruch: $15,980; and M. Severino: $22,663 / $15,872 / $18,610.


AbbVie Supplemental Pension Plan


R. Gonzalez: $3,016,444 / $2,230,380 / $4,794,683; W. Chase: $1,463,791 / $676,623 / $1,500,464; L. Schumacher: $1,093,415 / $218,282 / $2,072,222; H. Gosebruch: $174,737; and M. Severino: $306,868 / $196,191 / $170,007.


The changes in pension value result primarily from the following factors: (i) the effect of changes in the actuarial assumptions AbbVie uses to calculate plan liability for financial reporting purposes; (ii) additional pension benefit accrual under the Pension Plan and the Supplemental Pension Plan; and (iii) the impact of the time value of money on the pension value.


Non-Qualified Defined Contribution Plan Earnings


The totals in this column include reportable interest credited under the AbbVie Performance Incentive Plan and the AbbVie Supplemental Savings Plan.


R. Gonzalez: $286,608 / $171,523 / $107,802; W. Chase: $159,013 / $83,019 / $61,667; L. Schumacher: $447,761 / $297,150 / $227,423; and M. Severino: $45,549 / $16,536 / $294.

(7)
The amounts shown in this column include the change in pension value during the applicable year, which is attributable to changes in actuarial assumptions (primarily discount rate and mortality tables) and other factors based on plan design (primarily pay, service and age).


The present value of a pension benefit is determined, in part, by the discount rate used for accounting purposes. The discount rate is determined by reference to the prevailing market rate of interest. In 2016, interest rates decreased and the discount rates used for the Pension Plan and the Supplemental Pension Plan were decreased to reflect that change. A decrease in the discount rate increases the present value of participants' pension benefits while actual payments to be made to participants are not changed. The discount rate used for 2016 was 4.67% for the Pension Plan and 4.59% for the Supplemental Pension Plan. The discount rate used for 2015 was 4.93% for the Pension Plan and 4.83% for the Supplemental Pension Plan, while the discount rate used for 2014 for both the Pension Plan and the Supplemental Pension Plan was 4.45%. The mortality assumptions that apply for actuarial purposes also affect pension values. During 2014, the Society of Actuaries released new mortality tables reflecting longer life expectancies, which are now in use for Pension Plan and Supplemental Pension Plan accounting. This increase in assumed life expectancy resulted in an increase in the present value of participants' pension benefits in 2014. During 2015, the Society of Actuaries released an improved scale that adjusted the previously released 2014 scale, which AbbVie determined was appropriate to use in determining the funded status as of December 31, 2015.


In addition to the effect of the changes in actuarial assumptions, other factors built into the plans contributed to the change in pension value. The change in pension value numbers reflect the application of the benefit formulas under the Pension Plan and the Supplemental Pension Plan, which are described in the section of this proxy statement captioned "Pension Benefits." As participants' pay changes, the formulas yield revised pension values. Furthermore, as a participant ages and service credit accumulates year over year (before the participant is eligible for unreduced pension benefits), the present value of his or her pension benefits increases, even without changes in pay or actuarial assumptions.

(8)
The amounts shown below are reported in this column for 2016, 2015, and 2014, respectively, as applicable.


Earnings for Non-Qualified Defined Benefit and Non-Qualified Defined Contribution Plans


R. Gonzalez: $149,512 / $120,030 / $94,209; W. Chase: $84,680 / $75,830 / $50,968; L. Schumacher: $310,138 / $280,224 / $302,097; and M. Severino: $20,104 / $437 / $0.


Each of the NEOs' awards under the AbbVie Performance Incentive Plan is paid in cash to the NEO on a current basis and, for eligible NEOs, may be deposited into a grantor trust established by the NEO, net of maximum tax withholdings. Each of the eligible NEOs has also established grantor trusts in connection with the AbbVie

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    Supplemental Pension Plan and the AbbVie Supplemental Savings Plan. These amounts include the earnings (net of the reportable interest included in footnote (6)).


Employer Contributions to Defined Contribution Plans


R. Gonzalez: $80,000 / $79,423 / $79,798; W. Chase: $48,968 / $47,519 / $46,186; L. Schumacher: $48,968 / $47,577 / $47,879; H. Gosebruch: $13,250; and M. Severino: $48,048 / $45,904 / $25,188.


These amounts include AbbVie contributions to the AbbVie Savings Plan and the AbbVie Supplemental Savings Plan, as applicable. The Supplemental Savings Plan permits eligible NEOs to contribute amounts in excess of the annual limit set by the Internal Revenue Code for employee contributions to 401(k) plans up to the excess of (i) 18 percent of their base salary over (ii) the amount contributed to AbbVie's tax-qualified 401(k) plan. AbbVie matches participant contributions at the rate of 250 percent of the first 2 percent of compensation contributed to the plan. The eligible NEOs have these amounts paid to them in cash on a current basis and deposited into a grantor trust established by the NEO, net of maximum tax withholdings.


Other 2016 Compensation


The totals shown in the table include the cost of providing a corporate automobile less the amount reimbursed by the NEO: R. Gonzalez: $19,362; W. Chase: $18,645; L. Schumacher: $20,856; H. Gosebruch: $16,634; and M. Severino: $23,378. AbbVie imputes income to the NEO, if required, and the NEO pays taxes in accordance with tax regulations without gross-ups.


The totals shown in the table include a $10,000 financial planning services allowance for each NEO. AbbVie imputes income to the NEO, if required, and the NEO pays taxes in accordance with tax regulations without gross-ups.


The totals shown in the table include the following costs for non-business-related air travel: R. Gonzalez: $535,834; W. Chase: $112; and L. Schumacher: $4,536. AbbVie determines the incremental cost for flights based on the direct cost to AbbVie, including fuel costs, parking, handling and landing fees, catering, travel fees, and other miscellaneous direct costs. AbbVie imputes income to the NEO, if required, and the NEO pays taxes in accordance with tax regulations without gross-ups.


For Mr. Gonzalez, the total includes $64,508 for costs associated with security, determined based on AbbVie's actual costs for such services. The security was provided on the recommendation of an independent security study. AbbVie imputes income to Mr. Gonzalez, if required, and he pays taxes in accordance with tax regulations without gross-ups.


For Mr. Gosebruch, the total includes $103,581 for relocation costs.


The NEOs also are eligible to participate in an executive disability benefit which is described on page 53 of this proxy statement.

(9)
These amounts were paid to replace prior employer incentive awards.

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EXECUTIVE COMPENSATION

2016 Grants of Plan-Based Awards

              The following table summarizes the equity awards granted under the AbbVie 2013 Incentive Stock Program to the NEOs during 2016.

 
   
  Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards(1)
   
   
   
   
   
 
 
   
  Estimated
Future
Payouts
Under Equity
Incentive
Plan Awards
Target
(#)

  All Other
Option
Awards:
Numbers of
Securities
Underlying
Options
(#)

   
   
   
 
 
   
  Exercise
or Base
Price of
Option
Awards
($/Sh)

   
   
 
 
   
  Closing
Market
Price on
Grant
Date

  Grant Date
Fair Value
of Stock
and Option
Awards

 
Name
  Grant
Date

  Target
($)

  Maximum
($)

 
R. Gonzalez   2/18/2016       85,300 (2)       $4,640,149 (4)
  2/18/2016       85,300 (3)       4,678,705 (4)
  2/18/2016         255,170 (5) $54.86   $54.55   2,360,323 (6)
W. Chase   2/18/2016                 31,890 (2)                     1,734,752 (4)
    2/18/2016                 31,890 (3)                     1,749,167 (4)
    2/18/2016                       95,400 (5)   54.86     54.55     882,450 (6)
L. Schumacher   2/18/2016       26,220 (2)       1,426,316 (4)
  2/18/2016       26,220 (3)       1,438,167 (4)
  2/18/2016         78,450 (5) 54.86   54.55   725,663 (6)
H. Gosebruch   2/18/2016                 28,070 (2)                     1,526,952 (4)
    2/18/2016                 28,070 (3)                     1,539,639 (4)
    2/18/2016                       83,960 (5)   54.86     54.55     776,630 (6)
M. Severino   2/18/2016       30,750 (2)       1,672,738 (4)
  2/18/2016       30,750 (3)       1,686,638 (4)
  2/18/2016         91,990 (5) 54.86   54.55   850,908 (6)

(1)
During 2016, each of the NEOs participated in the AbbVie Performance Incentive Plan. The annual cash incentive award earned by the NEO in 2016 under the plan is shown in the Summary Compensation Table in the column captioned "Non-Equity Incentive Plan Compensation." No future pay-outs will be made with respect to the 2016 awards under the plan. The plan is described in greater detail in the section of this proxy statement captioned "Compensation Discussion and Analysis—Compensation Plan Elements—Short-Term Incentives."

(2)
This is a performance share award that has the potential to vest at 0% to 250% of target during a three-year performance period and is earned based on company performance in earnings per share (EPS) and relative total stockholder return (TSR). TSR performance is measured relative to a group made up of companies that are constituents in either the S&P Pharmaceutical, Biotech, and Life Science Index or the NYSE Arca Pharmaceutical Index. Dividends accrue during the performance period and are paid in cash at vesting only to the extent that shares are earned. In 2016, in connection with the phase-in of the redesigned long-term incentive program, AbbVie's EPS performance resulted in the vesting on February 28, 2017 of two-thirds of the award at 166.7% of target, and the remaining one-third of the award has been banked for vesting to be determined based on the company's relative TSR performance following the three-year performance period that ends December 31, 2018. The performance metrics are described in the section of this proxy statement captioned "Compensation Discussion and Analysis—Compensation Plan Elements—Long-Term Incentives."

(3)
This is a performance-vested restricted stock unit award that has the potential to vest at 0% to 150% of target, in one-third increments, during a three-year performance term based on AbbVie's return on equity (ROE) articulated as pre-set goals and measured relative to a group made up of companies that are constituents in either the S&P Pharmaceutical, Biotech, and Life Science Index or the NYSE Arca Pharmaceutical Index. Dividends accrue during the performance period and are paid in cash at vesting only to the extent that shares are earned. In 2016, AbbVie's relative ROE performance resulted in the vesting on February 28, 2017 of one-third of the award at 150% of target. The performance metrics are described in the section of this proxy statement captioned "Compensation Discussion and Analysis—Compensation Plan Elements—Long-Term Incentives."

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(4)
The grant date fair value of stock awards is determined by multiplying the number of shares or units granted by the average of the high and low market prices of one share of AbbVie common stock on the award grant date. In the event of a grantee's death or disability, these awards will be deemed earned either based on actual performance through the date of death or disability or at target, depending on the timing of the death or disability, as set forth in the award agreement. Upon a change in control, the treatment of these awards is determined as described in the section of this proxy statement captioned "Potential Payments upon Termination or Change in Control—Equity Awards."

(5)
One-third of the shares of common stock covered by these options are exercisable after one year, two-thirds after two years, and all after three years. The options vest in the event of the grantee's death or disability. Upon a change in control, the treatment of these awards is determined as described in the section of this proxy statement captioned "Potential Payments upon Termination or Change in Control—Equity Awards." Under the AbbVie 2013 Incentive Stock Program, these options have an exercise price equal to the average of the high and low market prices (rounded up to the next even penny) of one share of AbbVie common stock on the date of grant. These options do not contain a replacement option feature.

(6)
The grant date fair value of option awards is determined as of the option grant date using a Black-Scholes stock option valuation model. The assumptions used to determine the grant date fair value are described in footnote (4) to the Summary Compensation Table.

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2016 Outstanding Equity Awards at Fiscal Year End

              The following table summarizes the outstanding AbbVie equity awards held by the NEOs at year end.

 
  Option Awards(1)(2)
   
  Stock Awards
 
Name
  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

  Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

  Option
Exercise
Price ($)

  Option
Expiration
Date

   
  Number of
Shares of
Stock That
Have Not
Vested (#)

  Market
Value of
Shares of
Stock That
Have Not
Vested ($)

  Equity
Incentive
Plan Awards:
Number of
Unearned
Shares
or Other
Rights That
Have Not
Vested (#)

  Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares
or Other
Rights That
Have Not
Vested ($)

 
                 
R. Gonzalez   18,366     $24.2082   2/17/2021         54,320 (3) $3,401,518  
  53,650     29.2265   2/16/2022         110,393 (3) 6,912,810  
  187,353   93,677 (3) 51.4200   2/19/2024         170,600 (3) 10,682,972  
  109,097   218,193 (3) 58.8800   2/18/2025            
    255,170 (3) 54.8600   2/17/2026            
W. Chase     25,500           28.8628     2/14/2018                     17,923 (3)   1,122,338  
      12,800           28.1251     2/19/2019                     37,360 (3)   2,339,483  
      13,400           28.3122     2/18/2020                     63,780 (3)   3,993,904  
      19,000           24.2082     2/17/2021                              
      19,600           29.2265     2/16/2022                              
      115,830           35.8800     2/13/2023                              
      61,827     30,913 (3)   51.4200     2/19/2024                              
      36,924     73,846 (3)   58.8800     2/18/2025                              
            95,400 (3)   54.8600     2/17/2026                              
L. Schumacher   79,800     29.2265   2/16/2022         18,197 (3) 1,139,496  
  145,510     35.8800   2/13/2023         34,813 (3) 2,179,990  
  62,760   31,380 (3) 51.4200   2/19/2024         52,440 (3) 3,283,793  
  34,407   68,813 (3) 58.8800   2/18/2025            
    78,450 (3) 54.8600   2/17/2026            
H. Gosebruch           83,960 (3)   54.8600     2/17/2026                     60,699 (3)   3,800,971  
                                              56,140 (3)   3,515,487  
M. Severino   49,539   24,770 (3) 54.4400   6/1/2024         47,209 (3) 2,956,228  
  34,827   69,653 (3) 58.8800   2/18/2025         35,240 (3) 2,206,729  
    91,990 (3) 54.8600   2/17/2026         61,500 (3) 3,851,130  

(1)
Three of AbbVie's NEOs were employed by Abbott Laboratories (Abbott) prior to AbbVie's separation from Abbott on January 1, 2013 (the "Separation"). When AbbVie separated from Abbott, outstanding Abbott equity awards generally converted into adjusted awards based on Abbott common shares and AbbVie common stock (except to the extent prohibited by local law or with respect to certain awards described below). Such awards are subject to substantially the same terms, vesting conditions and other restrictions that applied to the original Abbott awards immediately before the Separation.


Each Abbott stock option was converted into an adjusted Abbott stock option and an AbbVie stock option, with adjustments to the stock option exercise prices that were intended to preserve the value of the original Abbott award as measured immediately before and immediately after the Separation. Each such adjusted Abbott stock option and AbbVie stock option is subject to substantially the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original Abbott stock option immediately before the Separation.

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As a result of the Separation, the NEOs held the following Abbott equity awards as of December 31, 2016:

W. Chase: Vested options to purchase 6,533 Abbott common shares with an exercise price of $27.03 per share.

L. Schumacher: Vested options to purchase 265,906 Abbott common shares with exercise prices ranging from $22.39 to $27.03 per share.

(2)
Except as noted, the stock options are fully vested.

(3)
The vesting dates of AbbVie unexercisable stock options and unvested performance share and restricted stock/unit awards outstanding at December 31, 2016 are as follows:
 
  Option Awards
   
  Stock or Unit Awards
 
Name
  Number of
Unexercised
Shares
Remaining
from
Original
Grant

  Number of
Option
Shares
Vesting—
Date
Vested 2017

  Number of
Option
Shares
Vesting—
Date
Vested 2018

  Number of
Option
Shares
Vesting—
Date
Vested 2019

   
  Number of
Shares of
Restricted
Stock or
Units

  Number of
Shares of
Restricted
Stock or
Units
Vesting—
Date
Vested 2017

  Number of
Shares of
Restricted
Stock or
Units
Vesting—
Date
Vested 2018

  Number of
Shares of
Restricted
Stock or
Units
Vesting—
Date
Vested 2019

 
                 
R. Gonzalez   93,677   93,677—2/20         54,320     (a)    
  218,193   109,096—2/19   109,097—2/19       110,393     (b)    
  255,170   85,057—2/18   85,056—2/18   85,057—2/18     85,300     (c)    
            85,300     (d)    
W. Chase     30,913     30,913—2/20                     17,923       (a)            
      73,846     36,923—2/19     36,923—2/19               37,360       (b)            
      95,400     31,800—2/18     31,800—2/18     31,800—2/18         31,890       (c)            
                                  31,890       (d)            
L. Schumacher   31,380   31,380—2/20         18,197     (a)    
  68,813   34,406—2/19   34,407—2/19       34,813     (b)    
  78,450   26,150—2/18   26,150—2/18   26,150—2/18     26,220     (c)    
            26,220     (d)    
H. Gosebruch     83,960     27,987—2/18     27,986—2/18     27,987—2/18         60,699       (e)            
                                  28,070       (c)            
                                  28,070       (d)            
M. Severino   24,770   24,770—6/02         47,209     (f)    
  69,653   34,826—2/19   34,827—2/19       35,240     (b)    
  91,990   30,664—2/18   30,663—2/18   30,663—2/18     30,750     (c)    
            30,750     (d)    

    (a)
    These are shares of performance-vested restricted stock that remained outstanding and unvested on December 31, 2016, from an award made on February 20, 2014. The award has a 5-year term, with no more than one-third of the original award vesting in any one year upon AbbVie achieving a minimum return on equity target, measured at the end of the relevant year. In 2016, AbbVie reached its minimum return on equity target and the unvested shares vested on February 28, 2017.

    (b)
    These are shares of performance-vested restricted stock that remained outstanding and unvested on December 31, 2016, from an award made on February 19, 2015. The award has a 5-year term, with no more than one-third of the original award vesting in any one year upon AbbVie achieving a minimum return on equity target, measured at the end of the relevant year. In 2016, AbbVie reached its minimum return on equity target and one-half of the unvested shares vested on February 28, 2017.

    (c)
    These are performance shares that remained outstanding and unvested on December 31, 2016 from an award made on February 18, 2016. The award has the potential to vest at 0% to 250% of target during a 3-year performance period and is earned based on company performance in earnings per share (EPS) and relative total stockholder return (TSR). TSR performance is measured relative to a group made up of companies that are constituents in either the S&P Pharmaceutical, Biotech, and Life Science Index or the NYSE Arca Pharmaceutical Index. Dividends accrue during the performance period and are paid at vesting only to the extent that shares are earned. In 2016, in connection with the phase-in of the redesigned long-term incentive

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      program, AbbVie's EPS performance resulted in the vesting on February 28, 2017 of two-thirds of the award at 166.7% of target, and the remainder of the award has been banked for vesting to be determined based on the company's relative TSR performance following the 3-year performance period that ends December 31, 2018.

    (d)
    These are performance-vested restricted stock units that remained outstanding and unvested on December 31, 2016, from an award made on February 18, 2016. The award has the potential to vest at 0% to 150% of target, in one-third increments, during a 3-year performance term based on AbbVie's return on equity (ROE) articulated as pre-set goals and measured relative to a group made up of companies that are constituents in either the S&P Pharmaceutical, Biotech, and Life Science Index or the NYSE Arca Pharmaceutical Index. Dividends accrue during the performance period and are paid at vesting only to the extent that shares are earned. In 2016, AbbVie's relative ROE performance resulted in the vesting on February 28, 2017 of one-third of the award at 150% of target.

    (e)
    These are shares of performance-vested restricted stock that remained outstanding and unvested on December 31, 2016, from an award made on December 9, 2015. The award has a 5-year term, with no more than one-third of the original award vesting in any one year upon AbbVie achieving a minimum return on equity target, measured at the end of the relevant year. In 2016, AbbVie reached its minimum return on equity target and one-half of the unvested shares will vest on December 9, 2017.

    (f)
    These are shares of performance-vested restricted stock that remained outstanding and unvested on December 31, 2016, from an award made on June 2, 2014. The award has a 5-year term, with no more than one-third of the original award vesting in any one year upon AbbVie achieving a minimum return on equity target, measured at the end of the relevant year. In 2016, AbbVie reached its minimum return on equity target and the unvested shares will vest on June 2, 2017.

2016 Option Exercises and Stock Vested

              The following table summarizes for each NEO the number of shares acquired on the exercise of AbbVie stock options and the number of shares acquired on the vesting of AbbVie stock awards in 2016:

 
  Option Awards
   
  Stock Awards
 
Name
  Number of
Shares
Acquired On
Exercise (#)

  Value
Realized On
Exercise ($)

   
  Number of
Shares
Acquired On
Vesting (#)

  Value
Realized On
Vesting ($)

 
         
R. Gonzalez   285,953   $7,989,718     195,424   $10,943,744  
W. Chase     6,600     210,514         99,904     5,594,624  
L. Schumacher   186,106   6,030,202     118,548   6,638,688  
H. Gosebruch     0     0         30,351     1,848,376  
M. Severino   0   0     64,827   3,952,736  

Pension Benefits

              During 2016, the NEOs participated in two AbbVie-sponsored defined benefit pension plans: the AbbVie Pension Plan, a tax-qualified pension plan; and the AbbVie Supplemental Pension Plan, a non-qualified supplemental pension plan. The Supplemental Pension Plan also includes a benefit feature AbbVie uses to attract senior executives who are mid-career hires, which provides an additional benefit to such participants that is less valuable to participants who have spent most of their career at the company. Except as provided in AbbVie's change in control agreements, AbbVie does not have a policy granting extra years of credited service under the plans. The change in control agreements are described in the section of this proxy statement captioned "Potential Payments upon Termination or Change in Control."

              The compensation considered in determining the pensions payable to the NEOs is the compensation shown in the "Salary" and "Non-Equity Incentive Plan Compensation" columns of the Summary Compensation Table.

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Pension Plan

              The Pension Plan is a broad-based plan that covers most AbbVie employees in the United States, age 21 or older, and provides participants with a life annuity benefit at normal retirement equal to A plus the greater of B or C below.

    A.
    1.10% of 5-year final average earnings multiplied by years of benefit service after 2003.

    B.
    1.65% of 5-year final average earnings multiplied by years of benefit service prior to 2004 (up to 20); plus 1.50% of 5-year final average earnings multiplied by years of benefit service prior to 2004 in excess of 20 (but no more than 15 additional years); less 0.50% of the lesser of 3-year final average earnings (but not more than the social security wage base in any year) or the social security covered compensation level multiplied by years of benefit service.

    C.
    1.10% of 5-year final average earnings multiplied by years of benefit service prior to 2004.

              The benefit for service prior to 2004 (B or C above) is reduced for the cost of preretirement surviving spouse benefit protection. The reduction is calculated using formulas based on age and employment status during the period in which coverage was in effect.

              Final average earnings are the average of the employee's 60 highest-paid consecutive calendar months of compensation (salary and non-equity incentive plan compensation). The Pension Plan covers earnings up to the limit imposed by Internal Revenue Code Section 401(a)(17) and provides for a maximum of 35 years of benefit service.

              Participants become fully vested in their pension benefit upon the completion of five years of service. The benefit is payable on an unreduced basis at age 65. Employees hired after 2003 who terminate employment prior to age 55 with at least 10 years of service may choose to commence their benefits on an actuarially reduced basis as early as age 55. Employees hired before 2004 who terminate employment prior to age 50 with at least 10 years of service may choose to commence their benefits on an actuarially reduced basis as early as age 50. Employees hired before 2004 who terminate employment prior to age 50 with fewer than 10 years of service may choose to commence their benefits on an actuarially reduced basis as early as age 55.

              The Pension Plan offers several optional forms of payment, including certain and life annuities, joint and survivor annuities, and level income annuities. The benefit paid under any of these options is actuarially equivalent to the life annuity benefit produced by the formula described above.

              Employees who retire from AbbVie prior to their normal retirement age may receive subsidized early retirement benefits. Employees hired after 2003 are eligible for early retirement at age 55 with 10 years of service. Employees hired before 2004 are eligible for early retirement at age 50 with 10 years of service or age 55 if the employee's age plus years of benefit service total 70 or more. Mr. Gonzalez and Ms. Schumacher are eligible for early retirement benefits under the plan.

              The subsidized early retirement reductions applied to the benefit payable for service after 2003 (A above) depend upon the participant's age at retirement. If the participant retires after reaching age 55, the benefit is reduced 5 percent per year for each year that payments are made before age 62. If the participant retires after reaching age 50 but prior to reaching age 55, the benefit is actuarially reduced from age 65.

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              The early retirement reductions applied to the benefit payable for service prior to 2004 (B and C above) depend upon age and service at retirement:

    In general, the 5-year final average earnings portions of the benefit are reduced 3 percent per year for each year that payments are made before age 62 and the 3-year final average earnings portion of the benefit is reduced 5 percent per year for each year that payments are made before age 62.

    Employees who participated in the plan before age 36 may elect "Special Retirement" on the last day of any month after reaching age 55 with age plus Seniority Service points of at least 94 or "Early Special Retirement" on the last day of any month after reaching age 55, provided their age plus Seniority Service points would reach at least 94 before age 65. Seniority Service includes periods of employment prior to attaining the minimum age required to participate in the plan. If Special Retirement or Early Special Retirement applies, Seniority Service is used in place of benefit service in the formulas. The 5-year final average earnings portions of the benefit in B above are reduced 12/3 percent for each year between ages 59 and 62 plus 21/2 percent for each year between ages 55 and 59. The 3-year final average earnings portion of the benefit is reduced 5 percent per year for each year that payments are made before age 62. Benefit C is payable on an unreduced basis at Special Retirement and is reduced 3 percent per year for each year that payments are made before age 62, if Early Special Retirement applies.

Supplemental Pension Plan

              The provisions of the Supplemental Pension Plan (which covers AbbVie employees in the United States whose compensation exceeds certain limits under the Internal Revenue Code) are substantially the same as those of the Pension Plan, with the following exceptions:

    Participants' 5-year final average earnings are calculated using the average of the 5 highest years of base earnings and the 5 highest years of payments under AbbVie's non-equity incentive plans.

    The Pension Plan does not include amounts deferred or payments received under the AbbVie Deferred Compensation Plan in its calculation of a participant's final average earnings. To preserve the pension benefits of Deferred Compensation Plan participants, the Supplemental Pension Plan includes amounts deferred by a participant under the Deferred Compensation Plan in its calculation of final average earnings.

    In addition to the benefits outlined above for the Pension Plan, the NEOs are eligible for an additional Supplemental Pension Plan benefit equal to 0.6% of 5-year final average earnings for each year of service for each of the first 20 years of service occurring after the participant attains age 35. The benefit is further limited by the maximum percentage allowed under the Pension Plan under that plan's benefit formulas (A, B and C above). The portion of this additional benefit attributable to service before 2004 is reduced 3 percent per year for each year that payments are made before age 60. The portion attributable to service after 2003 is reduced 5 percent per year for each year that payments are made before age 60 if the participant is at least age 55 at early retirement. If the participant is under age 55 at retirement, the portion attributable to service after 2003 is actuarially reduced from age 65.

    The Supplemental Pension Plan provides early retirement benefits similar to those provided under the Pension Plan. The benefits provided to NEOs under the Supplemental Pension Plan are not, however, reduced for the period between age 60 and age 62, unless the benefit is being actuarially reduced from age 65. Mr. Gonzalez and Ms. Schumacher are eligible for early retirement benefits under the plan.

    Vested benefits accrued under the Supplemental Pension Plan may be funded through a grantor trust established by an eligible NEO. Consistent with the distribution requirements of Internal Revenue Code Section 409A and its regulations, those NEOs who became officers prior to 2009 may have the entire amount of their vested plan benefits funded through a grantor trust. Eligible NEOs who became officers after 2008 and before 2015 may have only the vested benefits that accrue following the calendar year in which he or she is first elected as an officer funded through a grantor trust.

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              Benefits payable under the Supplemental Pension Plan are offset by the benefits payable from the Pension Plan, calculated as if benefits under the plans commenced at the same time. The amounts paid to an eligible NEO's Supplemental Pension Plan grantor trust to fund plan benefits are actuarially determined. The plan is designed to result in AbbVie paying the eligible NEO's Supplemental Pension Plan benefits to the extent assets held in his or her trust are insufficient.

Pension Benefits Table

Name
  Plan Name
  Number of
Years
Credited
Service (#)

  Present
Value of
Accumulated
Benefit
($)(1)

  Payments
During Last
Fiscal Year
($)

 
         
R. Gonzalez   AbbVie Pension Plan   35   $431,133   $0  
  AbbVie Supplemental Pension Plan   35   15,682,566   2,088,728 (2)
W. Chase   AbbVie Pension Plan     28     527,008     0  
    AbbVie Supplemental Pension Plan     28     4,934,899     377,517 (2)
L. Schumacher   AbbVie Pension Plan   26   714,514   0  
  AbbVie Supplemental Pension Plan   26   8,684,377   497,947 (2)
H. Gosebruch   AbbVie Pension Plan     1     17,018     0  
    AbbVie Supplemental Pension Plan     1     253,992     0  
M. Severino   AbbVie Pension Plan   3   57,145   0  
  AbbVie Supplemental Pension Plan   3   673,066   0  

(1)
AbbVie calculates these present values using: (i) a discount rate of 4.67% for the Pension Plan and a discount rate of 4.59% for the Supplemental Pension Plan, the same discount rates it uses for Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 715 calculations for financial reporting purposes; and (ii) each plan's unreduced retirement age, which is age 62 under the AbbVie Pension Plan and age 60 under the AbbVie Supplemental Pension Plan for those participants who are eligible for early retirement benefits and which is age 65 under both plans for other participants. The present values shown in the table reflect postretirement mortality, based on the FASB ASC Topic 715 assumption (the RP2006 Healthy Annuitant table projected fully generationally with MP2016 mortality improvement scale), but do not include a factor for preretirement termination, mortality, or disability.

(2)
During 2016, the amounts shown, less applicable tax withholdings, were distributed and deposited into the individual grantor trusts established by the eligible NEOs and included in the NEOs' income, as applicable. Consistent with the distribution requirements of Internal Revenue Code Section 409A and its regulations, vested Supplemental Pension Plan benefits, to the extent not previously funded, are distributed to the eligible participants' individual grantor trusts and included in their income. Amounts held in an eligible NEO's individual trust are expected to offset AbbVie's obligations to him or her under the plan. Grantor trusts are described in greater detail in the section of this proxy statement captioned "Compensation Plan Elements—Benefits—Retirement Benefits."

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Non-qualified Deferred Compensation

              The following table summarizes Mr. Chase's and Ms. Schumacher's non-qualified deferred compensation under the AbbVie Deferred Compensation Plan. No additional contributions have been made to their accounts under the plan since such time as Mr. Chase and Ms. Schumacher, respectively, became officers and ceased to be eligible to contribute to the plan. None of the other NEOs has any non-qualified deferred compensation under the plan.

Name
  Plan Name
  Executive
contributions
in last FY
($)

  Registrant
contributions
in last FY
($)

  Aggregate
earnings
in last FY
($)(3)

  Aggregate
withdrawals/
distributions
($)

  Aggregate
balance at
last FYE
($)(4)

 
           
W. Chase   Deferred Compensation Plan(1)(2)   $0   $0   $5,805   $0   $77,745  
L. Schumacher   Deferred Compensation Plan(1)(2)     0     0     33,967     0     417,810  

(1)
Mr. Chase's and Ms. Schumacher's contributions to the Deferred Compensation Plan ceased in 2007 and 2002, respectively.

(2)
The plan permits participants to defer up to 75% of their base salary and up to 75% of their annual cash incentives and credits a participant's account with an amount equal to the employer matching contributions that otherwise would have been made for the participant under AbbVie's tax-qualified defined contribution plan. Participants may direct the investment of their deferral accounts into one or more of several funds chosen by the administrator, and the deferral account is credited with investment returns based on the performance of the fund(s) selected. During 2016, the weighted average rate of return credited to the accounts was 8.1% for Mr. Chase and 8.8% for Ms. Schumacher.

    The plan provides for cash distributions in either a lump sum or installments after separation from service and permits in-service withdrawals in accordance with specific procedures. Participants make distribution elections each year that apply to the deferrals to be made in the following calendar year, in accordance with the requirements of Internal Revenue Code Section 409A. Participants may request withdrawals due to financial hardship; if a hardship withdrawal is approved, it is limited to the amount needed to address the hardship.

(3)
The amounts reported in this column are not included in the Summary Compensation Table of this proxy statement.

(4)
The amounts reported in this column have not been previously reported as compensation in AbbVie's Summary Compensation Tables because they relate to contributions made before the applicable individual became an NEO.

Potential Payments upon Termination or Change in Control

Potential Payments upon Termination—Generally

              AbbVie does not have employment agreements with its NEOs.

              The following summarizes the payments that the NEOs would have received if their employment had terminated on December 31, 2016. Earnings would have continued to be paid for the NEO's Performance Incentive Plan and Supplemental Savings Plan grantor trusts, as applicable, until the trust assets were fully distributed. The amount of these payments would depend on the period over which the trust assets were distributed and the trust earnings and fees. If the trust assets were distributed over a 10-year period and based on current earnings, the NEOs would receive the following average annual payments over such 10-year period: Mr. Gonzalez, $410,784; Mr. Chase, $249,683; Ms. Schumacher, $594,974; and Dr. Severino, $85,551. In addition, the following one-time deposits would have been made under the AbbVie Supplemental Pension Plan for each of the following NEOs, respectively: Mr. Gonzalez, $1,253,903; Mr. Chase, $713,187; and Ms. Schumacher, $834,337. As of December 31, 2016, Mr. Gonzalez and Ms. Schumacher were eligible to retire, and therefore were eligible to receive the pension benefits previously described.

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              If the termination of employment had been due to disability, then the NEOs also would have received, in addition to AbbVie's standard disability benefits, a monthly long-term disability benefit in the amount of $180,000 for Mr. Gonzalez; $81,300 for Mr. Chase; $81,300 for Ms. Schumacher; $66,357 for Mr. Gosebruch; and $79,800 for Dr. Severino. This long-term disability benefit would continue for up to 24 months following termination of employment. It ends if the NEO retires, recovers, dies or ceases to meet eligibility criteria.

              If the NEO's employment had terminated due to death or disability, his or her unvested stock options and restricted stock or unit awards would have vested on December 31, 2016 with values as set forth below in the subsection of this proxy statement captioned "Equity Awards."

Potential Payments upon Change in Control

              AbbVie has entered into change in control agreements with its NEOs. Each change in control agreement continues in effect until December 31, 2018, and can be renewed for successive two-year terms upon notice prior to the expiration date. If notice of non-renewal is given, the agreement will expire on the later of the scheduled expiration date and the one-year anniversary of the date of such notice. If no notice is given, the agreement will expire on the one-year anniversary of the scheduled expiration date. Each agreement also automatically extends for two years following any change in control (see below) that occurs while the agreement is in effect.

              The agreements provide that if the employee is terminated other than for cause or permanent disability or if the employee elects to terminate employment for good reason (see below) within two years following a change in control, he or she is entitled to receive a lump sum payment equal to three times his or her annual salary and annual incentive ("bonus") award (assuming for this purpose that all target performance goals have been achieved or, if higher, based on the average bonus for the last three years), plus any unpaid bonus owing for any completed performance period and the pro rata bonus for any current bonus period (based on the highest of the bonus assuming achievement of target performance, the average bonus for the past three years or, in the case of the unpaid bonus for any completed performance period, the actual bonus earned). If the employee is terminated other than for cause or permanent disability or if the employee elects to terminate employment for good reason during a potential change in control (see below), he or she is entitled to receive a lump sum payment of the annual salary and bonus payments described above, except that the amount of the bonus to which the employee is entitled will be based on the actual achievement of the applicable performance goals. If the potential change in control becomes a "change in control event" (within the meaning of Internal Revenue Code Section 409A), the employee will be entitled to receive the difference between the bonus amounts the officer received upon termination during the potential change in control and the bonus amounts that would have been received had such amounts instead been based on the higher of the employee's target bonus or the average bonus paid to the employee in the preceding three years.

              Bonus payments include payments made under the Performance Incentive Plan. The employee also will receive up to two years of additional employee benefits (including welfare benefits, outplacement services and tax and financial counseling) and the value of three more years of pension accruals. If change in control-related payments and benefits become subject to the excise tax imposed under Internal Revenue Code Section 4999, payments under the agreement will be reduced to prevent application of the excise tax if such a reduction would leave the employee in a better after-tax position than if the payments were not reduced and the tax applied. The agreements also limit the conduct for which awards under AbbVie's incentive stock programs can be terminated and generally permit options to remain exercisable for the remainder of their term.

              For purposes of the agreements, the term "change in control" includes the following events: any person becoming the beneficial owner of AbbVie securities representing 20 percent or more of the outstanding voting power (not including an acquisition directly from AbbVie and its affiliates); a change in the majority of the members of the board of directors whose appointment was approved by a vote of at least two-thirds of the incumbent directors; and the consummation of certain mergers or similar corporate transactions involving AbbVie. A "potential change in control" under the agreements includes, among other things, AbbVie's entry into an agreement that would result in a change in control. Finally, the term "good reason" includes: a significant adverse change in the employee's position, duties, or authority; the company's failure to pay the employee's compensation or a reduction in the employee's base pay or

2017 Proxy Statement   |   GRAPHIC   53


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