DEF 14A 1 a2238122zdef14a.htm DEF 14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
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ALLERGAN PLC

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Notice of 2019 Annual General Meeting of Shareholders
May 1, 2019
8:30 a.m. local time
The Conrad Hotel, Earlsfort Terrace, Dublin 2, Ireland

You are hereby notified that the 2019 Annual General Meeting of Shareholders (the "Annual Meeting") of Allergan plc (the "Company") will be held at The Conrad Hotel, Earlsfort Terrace, Dublin 2, Ireland, at 8:30 a.m. local time on May 1, 2019, to receive the Company's Irish statutory financial statements for the fiscal year ended December 31, 2018 and the reports of the directors and auditors thereon, to review the affairs of the Company and to consider and vote on the following proposals:

1.
Proposal No. 1: To elect by separate resolutions Nesli Basgoz, M.D., Joseph H. Boccuzi, Christopher W. Bodine, Adriane M. Brown, Christopher J. Coughlin, Carol Anthony (John) Davidson, Thomas C. Freyman, Michael E. Greenberg, PhD, Robert J. Hugin, Peter J. McDonnell, M.D. and Brenton L. Saunders as members of the Board of Directors to hold office until the 2020 Annual General Meeting of Shareholders or until each of their respective successors is duly elected and qualified;
2.
Proposal No. 2: To approve, in a non-binding vote, Named Executive Officer compensation;
3.
Proposal No. 3: To ratify, in a non-binding vote, the appointment of PricewaterhouseCoopers LLP as the Company's auditor for the fiscal year ending December 31, 2019 and to authorize, in a binding vote, the Board of Directors, acting through its Audit and Compliance Committee, to determine PricewaterhouseCoopers LLP's remuneration;
4.
Proposal No. 4: To renew the authority of the directors of the Company (the "Directors") to issue shares;
5.
Proposal No. 5A: To renew the authority of the Directors to issue shares for cash without first offering shares to existing shareholders;
6.
Proposal No. 5B: To authorize the Directors to allot new shares up to an additional 5% for cash in connection with an acquisition or other capital investment;
7.
To consider a shareholder proposal (Proposal No. 6) to require an independent Board Chairman with immediate effect, as detailed in the Proxy Statement, if properly presented at the meeting;

and to transact such other business as may properly come before the Annual Meeting or any adjournment, postponement or continuation thereof.

The Board of Directors has fixed 4:00 p.m. Eastern Standard Time on March 5, 2019 as the record date for the determination of shareholders entitled to receive notice of and to attend, speak and vote at the Annual Meeting. Only shareholders of record at 4:00 p.m. Eastern Standard Time on March 5, 2019 will be entitled to receive notice of and to attend, speak and vote at the Annual Meeting or any adjournment, postponement or continuation thereof. Your attention is directed to the Proxy Statement for more complete information regarding the matters to be acted upon at the Annual Meeting.

The Board of Directors recommends that you vote "FOR" each director nominee included in Proposal No. 1 and "FOR" Proposals No. 2, 3, 4, 5A and 5B. The Board of Directors recommends that you vote "AGAINST" Proposal No. 6. The full text of these proposals is set forth in the accompanying Proxy Statement.

The Proxy Statement and 2018 Annual Report to Shareholders are available at www.proxyvote.com. Our Irish statutory financial statements will be available at www.proxyvote.com on or before April 5, 2019.

You are encouraged to attend the Annual Meeting, where you will have the option to vote your shares in person.

Whether or not you plan to attend the Annual Meeting, we encourage you to vote your shares: (i) by 3:59 p.m. Eastern Daylight Time on April 30, 2019 by accessing the Internet site described in the Notice Regarding the Availability of Proxy Materials previously provided to you, (ii) by 3:59 p.m. Eastern Daylight Time on April 30, 2019 by calling the toll-free telephone number listed on www.proxyvote.com or on the voter instruction form, proxy card or Notice Regarding the Availability of Proxy Materials previously provided to you, or (iii) by marking, dating and signing any proxy card or voter instruction form provided to you and returning it in the accompanying postage paid envelope, which we must receive by 10:00 a.m. Eastern Daylight Time on April 29, 2019. All proxies will be forwarded to the Company's registered address electronically.

A shareholder entitled to attend and vote at the Annual Meeting is entitled, using the form provided (or the form in section 184 of the Irish Companies Act 2014), to appoint one or more proxies to attend, speak and vote instead of him or her at the Annual Meeting. A proxy need not be a shareholder of record.

    By Order of the Board of Directors

March 22, 2019
Dublin, Ireland

 

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    A. Robert D. Bailey
EVP and Chief Legal Officer and Corporate Secretary

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Letter from Chairman and CEO Brenton L. Saunders:

Dear Fellow Shareholders:

2018 was an important year for Allergan, underpinned by significant progress across our strategic priorities which strengthened our Company's foundation and prospects for durable value creation. We delivered solid operating performance, beating our annual guidance while managing the impact from the loss of exclusivity in certain products and other short-term headwinds inherent to our industry. Importantly, we advanced our R&D pipeline and executed our disciplined capital allocation strategy focused on reinvestments in future growth drivers, strengthening our balance sheet and returning capital to Allergan shareholders. Our 2018 results demonstrate the strength of our underlying business with leading franchises as well as our relentless focus on execution of our strategy.

While our strong progress and long-term outlook was not reflected in our stock price in 2018, we believe that our focus on execution and the accomplishments of 2018 have set us up for success in 2019 and beyond. The Allergan team is hard at work continuing to drive the growth of our Core Business (which is defined in Annex A of this Proxy Statement) and advance our pipeline, with important milestones ahead throughout 2019, as we pursue our mission to transform patient lives and create long-term value for shareholders.

Strong Execution Delivering Results In 2018, we made significant progress on each of our strategic priorities to drive global leadership across our four key therapeutic areas (TAs) and delivered on—and in some cases exceeded—our financial and strategic targets that we set at the start of the year. Our Core Business delivered 8.3 percent revenue growth, excluding the impact of foreign exchange, driven by solid double-digit growth for key flagship products such as Botox® (both Therapeutic and Cosmetic), Juvéderm®, Vraylar®, Coolsculpting®, Alloderm® and Lo Loesterin®. As of year-end 2018, our Core Business accounted for 87 percent of our total revenue, while brands facing loss of exclusivity and divested products accounted for 13 percent of our total revenues. We also reported continued solid growth in our international business with a 6 percent revenue increase over last year.

During the year, we prudently prepared for the impact of the loss of exclusivity on certain products with the implementation of a comprehensive restructuring program which lowered our cost base by approximately $400 million compared to 2017. While we planned for an earlier impact from a loss of exclusivity for Restasis®, we retained exclusivity for Restasis® through the end of 2018 and reinvested a portion of those profits back into business growth drivers.

Driving Leadership in Core Therapeutic Areas Earlier in the year, we sharpened our strategy following a comprehensive strategic review, led by our Board of Directors. The Board determined that the best pathway to increase shareholder value was to sharpen our focus on our Company's greatest strengths with a clear roadmap and execution priorities. This strategy focuses the Company on creating a global branded biopharmaceutical leader centered on Medical Aesthetics (MA), Central Nervous System (CNS), Eye Care (EYE), and Gastroenterology (GI).

Across these four areas, we have durable franchises with strong market leading positions, as well as depth and breadth in marketed product lines and the R&D pipeline. We have many potentially transformative products in mid-to-late stage clinical development, as well as scientific, regulatory and commercial expertise at a global scale to drive the growth of these four businesses. This portfolio focus not only capitalizes on our competitive advantages, but also provides operational synergies and diversified revenue streams to enable the sustainability of Allergan's profitable growth over the long-term

Advancing Our Highly-Promising Pipeline Allergan is focused on advancing our promising pipeline, and over the course of 2018, we achieved major milestones on several of our R&D programs in late-stage development:

In CNS, we successfully completed Ubrogepant clinical trials in acute migraine. We also reported positive Phase 2b/3 results for Atogepant for episodic migraine and we advanced the approval process of Vraylar® for bipolar depression with the submission of a registration program in the third quarter.

In Eye Care, we announced two positive Phase 3 studies for Abicipar for the treatment of wet age-related macular degeneration (AMD) and announced two positive Phase 3 studies for Bimatoprost SR for the treatment of glaucoma. Additionally, we delivered a positive Phase 2 study for Brimonidine DDS for geographic atrophy.

In Gastroenterology, our R&D team advanced Brazikumab into registrational studies for Crohn's Disease and into a Phase 2 study for ulcerative colitis.

In Medical Aesthetics, we acquired Elastagen to develop new dermal fillers and Bonti to develop a fast-acting, short duration neurotoxin.

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Each of these products could be a game-changing treatment that addresses critical patient needs.

We also experienced certain disappointments, like the Complete Response Letter we received from the U.S. FDA for our investigational drug ESMYA following reports of serious adverse events in Europe that were not observed in clinical studies in 2018, and the Phase 3 results for Rapastinel in 2019. While these disappointments do not reflect the outcomes that we had wanted for the Company and for our stakeholders, we are very excited about the opportunities our promising pipeline presents to have a life-changing impact on a growing number of patients while creating value for our company and all our stakeholders.

Disciplined Capital Allocation We reinforced our commitment to disciplined capital allocation this year with a focus on driving growth, maintaining a strong balance sheet and investment grade rating, and returning excess cash to our shareholders in the form of dividends and share buybacks. Following our strategic review, we prioritized our internal and external resources to align with our focus TAs and continued to invest in compelling growth opportunities to further enhance our pipeline. We were excited to expand our R&D programs in Medical Aesthetics with the acquisitions of two clinical stage companies, Bonti (a clinical stage company focused on developing a novel, fast-acting neurotoxin designed for aesthetic and therapeutic applications) and Elastagen (a clinical stage technology platform with potential applications in aesthetics, scar remodeling and surgical wound repair). We have a good track record of investing in and growing commercial stage assets, such as our acquisitions of Allergan, LifeCell and CoolSculpting, but unfortunately not all of our acquisitions will be successful. For example, KYBELLA, a product acquired in 2015, continued to underperform in 2018, resulting in an impairment charge on that product. In addition to the acquisitions that we made in 2018, we also completed the sale of our Medical Dermatology assets and redirected the proceeds towards debt reduction and share repurchases.

We have made significant progress in reducing our net debt position with a $6.15 billion paydown in 2018, bringing the total debt reduction to $9.0 billion since the beginning of 2017. Coupled with our robust dividend, we returned a total of $3.8 billion of capital to shareholders in 2018. In addition to the $800 million remaining under our 2018 program, our Board authorized another $2.0 billion of share repurchases this January, demonstrating our confidence in Allergan's prospects for value creation. Combined, we have total capital availability of $2.8 billion for share buybacks in 2019.

Social Commitments Allergan remains intensely focused on corporate citizenship, leveraging our science innovation to make a positive impact in patients' lives. We continue to operate under our Social Contract with Patients, which was a first of a kind commitment to ensuring patients have access to our medicines. Throughout the year, we continued to enhance our sustainability programs in the areas of energy use, environmental protection, and employee health and safety. Three years into our "20/20 Challenge," which sets ambitious five-year sustainability goals, we remain on track to achieve our objectives, including reduction of greenhouse gas emissions and water consumption of our operations in water-scarce regions by 20%, and eliminating waste to landfill from manufacturing operations, by 2020.

Looking Ahead Looking into 2019 and beyond, our business momentum reinforces our confidence that Allergan is well positioned to deliver a strong 2019 and achieve its long-term goals. We have several promising mid-to-late-stage potential breakthrough treatments to address the needs of underserved patients and drive sustainable long-term growth. Despite recent pressures on our stock price, we remain fully confident that we are on the right path to create value for our shareholders, and Allergan's upside potential will be realized through continued execution of our robust strategy, completion of upcoming pipeline milestones and disciplined capital allocation.

Over the past five years, Allergan has driven a remarkable transformation from a generics company to a global, more focused, branded biopharmaceutical company, with a culture of innovation, diversity and opportunity, well positioned to drive sustainable long-term value for shareholders.

As always, thank you for your investment in Allergan and the trust that you place in us to be stewards of your capital. We look forward to welcoming you at our 2019 Annual Meeting and encourage you to review this Proxy Statement and to vote your shares.


Sincerely,

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Brenton L. Saunders
Chairman, President and
Chief Executive Officer

March 22, 2019


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Letter from Lead Independent Director Christopher J. Coughlin:

Dear Fellow Shareholders:

As Allergan's Lead Independent Director, I have the privilege of working with a group of highly-qualified and committed Board members and engaging with you, our valued shareholders. 2018 was a very active year for the Allergan Board as we completed a comprehensive strategic review, continued to refresh our Board with three highly-experienced new members, and worked to remain directly accountable to our shareholders through active engagement and strong, independent oversight of our Company.

Strategic Oversight. Our Board is highly knowledgeable, experienced and committed to rigorous oversight of the Company's management. The balanced mix of business leadership, industry knowledge, scientific expertise and financial acumen among our Directors drives vigorous debate in the boardroom and ensures pressure-testing of the Company's strategy. While we review our Company's strategic direction and operational and financial performance on a regular basis, this year we decided to conduct a holistic review of our strategy to ensure that the Company is on the right path to maximize shareholder value. I, along with my fellow Board members, were integrally involved in the strategic review which refined Allergan's long-term strategy to transform into a world class global biopharmaceutical leader. This was an extremely comprehensive process that included multiple leading financial and legal advisors and rigorous internal and external analysis. We believe that our strategy will create sustained value for shareholders.

Shareholder Engagement. Upholding an active and open dialogue with our shareholders remains a top priority for Allergan. Over the past year, our Board of Directors and our management team had the pleasure of speaking with a robust cross-section of our shareholder base. We believe that a Board should have direct engagement with shareholders so in addition to the consistent shareholder outreach made by our management team and Investor Relations department, the Board continued our own comprehensive shareholder engagement program, led by myself, our Nominating and Corporate Governance Committee Chair, our Compensation Committee Chair, and some of our newer directors. Topics of discussion included our business and financial performance, our independent Board leadership and risk oversight, compensation, diversity and inclusion, and our corporate responsibility and sustainability initiatives. Feedback received during these meetings was shared with our fellow Directors and is discussed in more detail in this Proxy Statement. Our direct conversations with shareholders are highly valuable, and we look forward to continuing our dialogue in the coming year.

Board Structure. Our Board believes in the importance of independent leadership in the boardroom, and that a strong and highly independent board is a critical foundation for Allergan and its shareholders. The Board firmly believes that at the present time a combined Chairman/CEO role coupled with a robust Lead Independent Director role is the best structure to position the Company for success as it executes its strategy to create a more focused, world-class biopharmaceutical business and develop its promising product pipeline. We heard during our engagement with our shareholders that many are supportive of the current combined Chairman and CEO position with strong independent directors and robust board governance policies. The Board also heard from many of our shareholders during our engagement that they would value a policy requiring an independent Chairman that the Board could phase in with the next CEO transition. Accordingly, the Board has adopted a policy providing that the Chairman of the Board shall be an independent director, phased in with the next Chief Executive Officer transition.


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Active Board Refreshment. As Allergan's strategy has evolved, the refreshment of our Board to ensure experience that aligns to our strategy has been a key priority. Over the last two years, we have refreshed half of our Board by adding six new highly qualified directors, including the addition of four directors since the beginning of 2018: Robert J. Hugin who joined our Board in February 2019, and Michael E. Greenberg, PhD, Thomas C. Freyman and Carol Anthony (John) Davidson, who joined our Board in 2018.

Each of these new members adds exceptional skill, experience, and fresh perspective to the Allergan Board:

Mr. Hugin, the former Chief Executive Officer and Executive Chairman of Celgene Corporation, brings deep operational, financial and commercial experience that is highly relevant to Allergan's business and strategy, and has a strong track record of building and advancing innovative therapies through both internal research and development and external partnerships while delivering strong business results and shareholder value, which will bring valuable perspective to the Board as it continues to guide the Company's strategy.

Dr. Greenberg's 35-year track record of scientific leadership and groundbreaking research and discovery in neurobiology, is highly complementary to our Company's focus on world-class R&D and delivering innovative treatments for underserved patients in the CNS therapeutic area.

Mr. Freyman brings nearly 40 years of finance and healthcare industry experience, having served in various senior leadership roles and on public company boards, where he built a strong track record of leading significant corporate transformations, optimizing capital allocation strategies and creating shareholder value.

Mr. Davidson has deep leadership experience in finance, accounting, audit and compliance, having served in various senior executive roles at complex global organizations, as well as on the board of FINRA and of public companies across industries.

As a result of these efforts, we believe the Board composition today strikes the right balance between new and longer tenured directors and has the diversity of experiences which we firmly believe provides a crucial benefit to shareholders.

Finally, our long-standing board member, Catherine M. Klema, is not standing for re-election to the Board this year. We thank Ms. Klema for her service and guidance on the Board and wish her the very best in her future endeavors. As a result, after the Annual Meeting, our Board size will be decreased by one to 11 directors. Consistent with the Board's robust refreshment process, we will consider which skills, experience, and attributes would complement the composition of our current Board and determine whether to add additional members to our Board accordingly. Our Board has always been a proponent of diversity, and in that regard, our search pool will include highly qualified, experienced, diverse candidates.

Allergan remains dedicated to best-in-class governance and strong independent oversight of management that is needed to drive our company's long-term success and create value for shareholders, customers, patients, and communities.

On behalf of the Board, I am grateful for your investment in Allergan. We hope that you review this Proxy Statement and we look forward to continuing our dialogue with you in the year to come.

Sincerely,

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Christopher J. Coughlin
Lead Independent Director

March 22, 2019


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PRESENTATION OF IRISH STATUTORY FINANCIAL STATEMENTS   1

PROXY STATEMENT EXECUTIVE SUMMARY

 

2

PROPOSAL NO. 1

 

12
Election of Directors    

BOARD AND COMMITTEE GOVERNANCE

 

27

PROPOSAL NO. 2

 

45
Non-Binding Vote on the Compensation of Our Named Executive Officers ("Say-on-Pay-Vote")    

COMPENSATION DISCUSSION AND ANALYSIS

 

 
Executive Summary   47
Impact of 2018 Say on Pay Vote & Shareholder Engagement   52
Determination of Compensation   54
Other Compensation Practices   66
2018 Compensation Tables   71

EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2018

 

82

PROPOSAL NO. 3

 

83
Non-Binding Ratification of the Appointment of PricewaterhouseCoopers LLP as Independent Auditor and Binding Authorization of the Board of Directors to Determine its Remuneration    

AUDIT FEES

 

85

REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE

 

86

PROPOSAL NO. 4

 

87
Renewal of the Authority of the Directors of the Company (the "Directors") to Issue Shares    

PROPOSALS NO. 5A AND 5B   89
Renewal of the Authority of the Directors to Issue Shares for Cash Without First Offering Shares to Existing Shareholders    

Authority of the Directors to Allot New Shares up to an Additional 5% for Cash in Connection with an Acquisition or Other Capital Investment

 

 

PROPOSAL NO. 6

 

92
Shareholder Proposal to Require an Independent Board Chairman (Immediate Change)    

BOARD OF DIRECTORS' RESPONSE TO SHAREHOLDER PROPOSAL NO. 6

 

94

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

96

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

97

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

98

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

 

99

SHAREHOLDER PROPOSALS FOR THE 2020 ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

100

PROXY STATEMENT

 

101

OTHER BUSINESS

 

106

ANNEX A—Core Business

 

A-1

ANNEX B—Non-GAAP Reconciliations

 

B-1
Allergan plc Performance Net Income
Reconciliation Table
   
Allergan plc Adjusted EBITDA and Adjusted Operating Income Reconciliation Table    

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Presentation of Irish Statutory Financial Statements

The Irish statutory financial statements of Allergan plc (referred to in this Proxy Statement as "Allergan," the "Company," "we," "us" or "our") for the fiscal year ended December 31, 2018, including the reports of the directors and auditors thereon, will be presented at our 2019 Annual General Meeting of Shareholders (the "Annual Meeting"). There is no requirement under Irish law that such statutory financial statements be approved by shareholders, and no such approval will be sought at the Annual Meeting. The Company's 2018 Irish statutory financial statements will be available with the Proxy Statement and the 2018 Annual Report to Shareholders at www.proxyvote.com on or before April 5, 2019.

    

 

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2019 ANNUAL PROXY STATEMENT

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Proxy Statement Executive Summary

We provide below highlights of certain information contained in this Proxy Statement. This summary does not contain all the information that you should consider in advance of the Annual Meeting, and we encourage you to read the entire Proxy Statement before voting.

2019 Annual General Meeting of Shareholders
Date and Time:   May 1, 2019, 8:30 a.m. local time
Place:   The Conrad Hotel, Earlsfort Terrace, Dublin 2, Ireland
Record Date:   March 5, 2019

How to Cast Your Vote

Your vote is very important. We encourage you to vote your shares and to submit your proxy regardless of whether or not you plan to attend the Annual Meeting. If you properly give your proxy and submit it to us by the voting deadlines described in this section of the Proxy Statement, one of the individuals named as your proxy will vote your shares as you have directed.

Shareholders of Record

If you are a shareholder of record, you may vote in one of the following ways:

GRAPHIC   By Telephone or over the Internet.
You may submit your proxy by calling the toll-free telephone number noted on your proxy card or Internet Notice. Telephone proxy submission is available 24 hours a day and will be accessible until 3:59 p.m. Eastern Daylight Time on April 30, 2019. Easy-to-follow voice prompts allow you to submit your proxy and confirm that your instructions have been properly recorded.

 

 

You also may choose to vote over the Internet. The website for Internet voting is noted on your proxy card or Internet Notice. Internet voting is also available 24 hours a day and will be accessible until 3:59 p.m. Eastern Daylight Time on April 30, 2019. As with telephone proxy submission, you may confirm that your instructions have been properly recorded.

 

 

Shareholders who vote through the Internet or submit their proxy by telephone should be aware that they may incur costs to access the Internet or use the telephone, such as usage charges from telephone companies or Internet service providers, and that these costs must be borne by the shareholder.

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By Mail.
If you received a paper copy of the proxy card by mail and choose to vote by mail, please mark your proxy card, date and sign it, and promptly return it in the postage-paid envelope provided. We must receive your signed proxy card by 10:00 a.m. Eastern Daylight Time on April 29, 2019 in order to ensure that your vote is counted.

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In Person at the Annual Meeting.
You may vote in person by attending the Annual Meeting and submitting a ballot. In order to be admitted into the Annual Meeting, you must present your proof of ownership of Allergan ordinary shares, government-issued photo identification and, if you are not the actual holder of record of Allergan ordinary shares, proof that you are duly authorized to vote such shares on behalf of the record holder.

 

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PROXY STATEMENT EXECUTIVE SUMMARY

Beneficial Owners

If your shares are held in a brokerage account or by another nominee, you are considered to be the beneficial owner of shares held in "street name," and these proxy materials, together with a voting instruction card, are being forwarded to you by your broker, bank or other nominee. As the beneficial owner of the shares, you have the right to direct your broker, bank or other nominee how to vote. You are also invited to attend the Annual Meeting, but because you are not the shareholder of record, you may not vote your shares in person at the Annual Meeting unless you obtain a legal proxy giving you the right to vote your shares at the Annual Meeting from the broker, bank or other nominee holding your shares in street name, and you will need to present the legal proxy and a government-issued photo identification in order to be admitted into the Annual Meeting.

If your shares are held in street name, your broker, bank or other nominee has enclosed or provided voting instructions for you to use in directing the broker, bank or other nominee how to vote your shares.

Voting Matters and Board Recommendations

Voting Matter
  Shareholder
Approval
Threshold

  Board of Directors'
Recommendation

  Page
Reference

 
Proposal No. 1:
To individually elect each of the 11 director nominees as members of the Board of Directors to hold office until the 2020 Annual General Meeting of Shareholders or until each of their respective successors is duly elected and qualified.
  Majority of Votes Cast for Each Nominee   FOR
EACH NOMINEE
    12  
Proposal No. 2:
To approve, in a non-binding vote, Named Executive Officer compensation.
  Majority of Votes Cast   FOR     45  
Proposal No. 3:
To ratify, in a non-binding vote, the appointment of PricewaterhouseCoopers LLP as the Company's auditor for the fiscal year ending December 31, 2019 and to authorize, in a binding vote, the Board of Directors, acting through its Audit and Compliance Committee, to determine PricewaterhouseCoopers LLP's remuneration.
  Majority of Votes Cast   FOR     83  
Proposal No. 4:
To renew the authority of the directors of the Company (the "Directors") to issue shares.
  Majority of Votes Cast   FOR     87  
Proposal No. 5A:
To renew the Directors' authority to issue shares for cash without first offering shares to existing shareholders.
  75% of Votes Cast   FOR     89  
Proposal No. 5B:
To authorize the Directors to allot new shares up to an additional 5% for cash in connection with an acquisition or other capital investment.
  75% of Votes Cast   FOR     89  
Proposal No. 6:
Shareholder proposal to require an independent Board Chairman with immediate effect.
  Majority of Votes Cast    AGAINST     92  

 

    

 

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2019 ANNUAL PROXY STATEMENT


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Director Nominees

The nominees for our Board of Directors comprise candidates with a diverse set of backgrounds, experiences and skills.

Name
  Age
  Director
Since

  Independent
  Committees*
Nesli Basgoz, M.D.   61   2014     Quality and Innovation (C)
Joseph H. Boccuzi   72   2017     Compensation
Nominating and Corporate Governance
Christopher W. Bodine   63   2009     Compensation
Nominating and Corporate Governance
(C)
Adriane M. Brown   60   2017     Audit and Compliance
Quality and Innovation
Christopher J. Coughlin
Lead Independent Director
  66   2014     Audit and Compliance
Compensation
Mergers and Acquisitions
Nominating and Corporate Governance
Carol Anthony (John) Davidson   63   2018     Audit and Compliance (C)
Nominating and Corporate Governance
Thomas C. Freyman   64   2018     Audit and Compliance
Compensation
(C)
Mergers and Acquisitions
Michael E. Greenberg, PhD   64   2018     Mergers and Acquisitions
Quality and Innovation
Robert J. Hugin   64   2019     Mergers and Acquisitions (C)
Peter J. McDonnell, M.D.   60   2015     Compensation
Quality and Innovation
Brenton L. Saunders
Chairman
  49   2014      
*
"(C)" denotes Committee Chair
Catherine M. Klema, the current Chair of the Compensation Committee, is not standing for re-election to the Board of Directors. Thomas C. Freyman will succeed Ms. Klema as Chair of the Compensation Committee upon his re-election to the Board of Directors.

 

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PROXY STATEMENT EXECUTIVE SUMMARY

Board Composition and Refreshment

As part of Allergan's commitment to best-in-class governance, the Board is focused on active board refreshment. Since the beginning of 2017, the Board has added six new independent, highly experienced directors who collectively bring significant financial, scientific, technology and talent experience to the Board, and who have brought the average tenure of the Board to less than four years.

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The Board is committed to an ongoing refreshment process and continually evaluates the composition of the Board to ensure that it has the right balance of skills, experience, perspective, and rigorous oversight through independent judgment. With the retirement of Catherine M. Klema, who is not standing for re-election to the Board, the Board will consider what additional skills, experience and perspective could complement the current composition of the Board and will factor that consideration into its thinking on future board refreshment.

 

    

 

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Corporate Governance

Our corporate governance requirements and practices, which are informed by shareholder feedback and our shareholder outreach program, include the following highlights:

Robust Lead Independent Director role

Highly independent Board—10 out of 11 director nominees are independent

Regular executive sessions of the independent directors

Shareholder right to call special meeting with a 10% threshold

Board oversight of company-wide risks, including identification and monitoring of risk parameters

Annual election of directors

Policy regarding an independent Chairman to be phased in as of the next CEO transition

 

Majority voting for the election of directors in an uncontested election, and plurality voting in a contested election

Thoughtful Board succession planning and refreshment process (four new independent directors appointed in 2018 and 2019)

Demonstrated commitment to board diversity

Rigorous annual board evaluation process, led by an independent third-party governance expert

Active shareholder engagement program

No poison pill in place

Shareholder Outreach and Engagement

During 2018, our Board of Directors continued to solicit the views of our shareholders on governance, executive compensation, environmental, social and other matters in order to inform our Board's discussions and decision-making. Our Board believes that regular engagement with our shareholders is a critical part of this, and is committed to understanding our shareholders' views and considering their input as the Board and management make important decisions.

In 2018, as part of our third straight year of engagement, we reached out to a robust cross section of our shareholder base representing approximately 50% of the Company's outstanding ordinary shares. Many of the shareholders to whom we reached out indicated that that they did not see a need to meet with us in light of our engagement with them in 2016 and/or 2017, and accordingly, we actually engaged either in person or telephonically with shareholders representing approximately 23% of outstanding ordinary shares.

Many of these engagements included a discussion between our investors and our independent directors, without management present.

The independent directors and senior management who engaged with shareholders shared feedback from these engagements with our full Board and its Committees, used this feedback to inform their decisions and priorities, including the Board's decision to adopt a policy regarding an independent Chairman, its decision to form a Mergers and Acquisitions Committee of the Board and its decision to further enhance the Lead Independent Director role, as further described in this Proxy Statement. We appreciate the feedback of our shareholders and we are committed to continuing to engage in this constructive dialogue.

 

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PROXY STATEMENT EXECUTIVE SUMMARY

Board Leadership Structure

Our Board reviews its leadership structure regularly. The Board believes that strong, independent leadership in the boardroom is critical for Allergan, and that Allergan and its shareholders are best served with a strong and highly independent Board as a foundation.

The Board firmly believes that phasing in an independent Chairman with the next CEO transition is consistent with the feedback that we received from our shareholders and is the best way to change the current leadership structure of the Board. Implementing an independent Chairman policy to take effect immediately would not enhance the Board's effectiveness or the Company's operational, financial or stock performance or ability to create shareholder value, and to the contrary could impede the Board's effectiveness by creating a crisis of confidence in Mr. Saunders at a time when leadership stability and effectiveness is critical to the Company's success as it executes its strategy to create a more focused, world-class biopharmaceutical business and develop its promising product pipeline. Currently, the Board is led by Brent Saunders in the combined Chairman and CEO role, and by a strong Lead Independent Director, Chris Coughlin.

The well-defined role of the Lead Independent Director enables him to provide strong independent leadership, and the parameters of this role were enhanced recently based on specific shareholder input. These enhancements to the role, which are discussed in more detail on pages 31-32, include the following responsibilities:

Advising the Chairman and CEO of the Board's information needs, and approving information sent to the Board

Assisting the Nominating and Corporate Governance Committee in overseeing conflicts of interest of all directors, including the Chairman and CEO

Ensuring that the Board develops and periodically reviews the Company's long-term strategy

Ensuring that the Board oversees management's execution of the Company's long-term strategy

Assisting in aligning governance structures with the Company's long-term strategy

Providing guidance to the Chairman and CEO on executing the Company's long-term strategy

Ensuring effective functioning of key Board committees and providing input on functions of the committee, when required

Advising Board committees on activities, if required, and receiving feedback from the chairs of Board committees

The Board has also heard from many shareholders that they are supportive of the current combined Chairman and CEO position with the Board's highly independent directors, strong Lead Independent Director role and robust board governance policies. The Board has also heard from many of our shareholders that they would value a policy requiring an independent Chair that the Board could phase in with the next CEO transition. Accordingly, the Board has adopted changes to its corporate governance guidelines and the Nominating and Corporate Governance Committee charter so that, phased in within a reasonable period of time in connection with the next CEO transition following the March 2019 adoption of the Corporate Governance Guidelines, the Chair of the Board shall be, whenever possible, an independent director.

 

    

 

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Company Performance

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   *    Excluding the impact of foreign exchange.

Compensation Objectives

Creating unambiguous long-term shareholder alignment by linking a substantial portion of executives' pay to share price performance

Delivering sustainable top- and bottom-line growth

Creating a unified management team aligned to a shared set of objectives

Attracting and retaining key executive talent

Providing flexibility and allowing for Compensation Committee discretion in order to reflect individual circumstances as well as changing business conditions and priorities

Reinforcing our BOLD, entrepreneurial culture

 

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PROXY STATEMENT EXECUTIVE SUMMARY

Incentive Compensation Program Components

The structure of our executive compensation program for 2018 was unchanged from 2017 and continues to support our compensation philosophy. The Compensation Committee made no changes to our compensation peer group or to the base salaries or incentive targets of our named executive officers ("NEOs"), and no equity awards were made to recipients of the biennial long-term incentive awards made in 2017.

Principal Components of 2018 Executive Compensation

 
 
Relevant Elements of Compensation
Our Philosophy
How We Apply It
Long-Term
Incentives in
the Form of
Performance
Share Units
and Restricted
Stock Units

Annual Incentive
Opportunity
Based on 2018
Non-GAAP Net
Revenue and
Non-GAAP
Performance Net
Income Per
Share

Competitive
Base Salary

Employee
Benefits
Focused on
Well-Being
and Safety

Allergan
Transaction
Performance-
Based Award

Create unambiguous long-term shareholder alignment Link a substantial portion of executives' pay to share price performance      
Drive sustainable top- and bottom-line growth Tie performance metrics to revenue and adjusted PNI        
Create a unified management team aligned to a shared set of objectives Provide a uniform award program for senior executives    
Attract and retain key executive talent Provide competitive short-term cash-flow with longer-term wealth accumulation opportunities
Reinforce our BOLD, entrepreneurial culture Provide exceptional rewards for exceptional performance    
Encourage a long-term perspective and discourage short-term risk taking Balance pay opportunities with sound compensation practices    


The following chart illustrates the key direct compensation components for our Chief Executive Officer as a percentage of his 2018 total target direct compensation opportunity:

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  Our Board of Directors makes it a priority to put in place compensation practices designed to maximize alignment with long-term shareholder value creation.

At-risk compensation and pay for performance.

Appropriate and relevant peer groups.

No supplemental retirement plans.

Caps on incentive awards.

Independent Compensation Committee consultant.

No single-trigger change in control benefits.

Robust share ownership requirements.

Anti-hedging and anti-pledging policies.

Clawback provisions.

No change-in-control excise tax gross-ups.

 

    

 

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PROXY STATEMENT EXECUTIVE SUMMARY

Alignment of Pay and Performance

Our short- and long-term incentive ("LTI") compensation programs are designed to closely align payouts with our financial and/or share price performance, as well as the individual performance of our NEOs. Our program goals are directly tied to our strategic objectives of (1) driving top- and bottom- line growth, (2) advancing our R&D pipeline and (3) share price performance—both absolute and relative.

However, our stock price continued in 2018 to be disconnected from our strong strategic performance and, as a result, recent payouts under our long-term incentive plans have been significantly below target and some awards have resulted in no payout at all, demonstrating unambiguous alignment with our shareholders in our compensation program. See "Our Guiding Principle: Pay for Performance" on page 50 for more details.

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While our strong strategic progress and attractive long-term outlook was not reflected in our stock price in 2018, we believe that our focus on execution during the year has set us up to increase shareholder value in 2019 and beyond.

Annual Incentive:    For the 2018 performance year, the financial metrics used to determine the corporate financial performance factor under our annual incentive plan (the "Annual Incentive Plan" or "AIP") were equally split between Non-GAAP Net Revenue ("Net Revenue") and Non-GAAP Performance Net Income Per Share ("PNI"), in order to drive top- and bottom-line growth. 2018 was anticipated to be a year in which we faced significant challenges as a result of the expected loss of exclusivity ("LOE") across several products, which were expected to impact revenues by approximately $2.3 billion, including Restasis®, a significant contributor to our annual revenue with over $1.4 billion in U.S. sales in 2017. In light of these significant revenue declines and the desire to set challenging yet appropriate incentive targets that reflected the Company's current operating environment, the Compensation Committee set the AIP targets somewhat below 2017 actual results.

In 2018, we delivered robust growth of our Core Business and key brands, despite experiencing $1.2 billion in revenue decline from losses of exclusivity, expected losses of exclusivity and asset sales:

8.3% growth of our Core Business, with over $1 billion in new revenue, while eliminating $400 million in annual costs through cost savings initiatives.

Double-digit growth of key brands, including Botox®, Vraylar®, Juvéderm® and Alloderm.

Despite the LOEs we faced, management remained focused on driving growth of our remaining Core Business in four key therapeutic areas and delivered these results despite other significant unanticipated headwinds that negatively impacted revenue, primarily as a result of supply shortages and product recalls.

 

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While the Company and our shareholders continued to benefit from the exclusivity of Restasis® throughout 2018, which was more favorable to our Company than was anticipated in our operating budget, in order to minimize the impact of Restasis® revenue on AIP funding, the Compensation Committee determined to exercise its negative discretion and exclude any above-budget U.S. revenue from Restasis® earned after June 30, 2018 ("Excess Restasis Revenue") from Net Revenue results and exclude any unreinvested Excess Restasis Revenue from PNI results in determining AIP funding. Financial performance under the AIP resulted in 142% achievement on the AIP corporate financial metrics, after taking into account the impact of the Compensation Committee's exercise of negative discretion.

 

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In addition, despite strong performance of our CEO across our corporate financial goals and his pre-set strategic objectives, given the performance of our stock and the Compensation Committee's desire to ensure our overall executive compensation program maintains unambiguous shareholder alignment, the Compensation Committee applied negative discretion and accordingly reduced his incentive award by over 50% from $6,177,000 down to $3,000,000. See pages 57-63 for additional details on the 2018 Annual Incentive Plan.

Long-term Incentives:    Share price performance—both absolute and relative—has been the primary performance measure of our long-term awards because it incentivizes actions that drive sustainable growth in our share-price through long performance measurement and vesting periods. Additionally, share price performance has provided a durable performance measure through our period of transformation from a generic to a branded biopharmaceutical company. Beginning in 2017, with the new PSU program (the "2018-2019 PSUs") the Compensation Committee, considering shareholder feedback, added an R&D metric to its performance share unit program to incentivize management to deliver on key R&D milestones that are necessary to advancing our pipeline and driving future performance of the company and eliminated absolute share price performance as a measure. See pages 64-65 for more detail on the 2018-2019 PSUs.

CEO's Realized and Realizable Compensation:    As a result of the decline in our share price, approximately 40% of our CEO's target total direct compensation opportunity (base salary, target annual incentive and target long-term incentives) for 2016 through 2018 was realizable as of December 31, 2018. In addition, our CEO has realized approximately 20% of his target long-term incentive opportunity for awards granted since 2014 that were based on our stock price (cash-based awards that vest based on total shareholder return and equity-based awards) and for which the performance period was completed as of December 31, 2018. This further demonstrates the alignment of our executive compensation program with long-term shareholder returns.

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*
Calculated as the value of long-term incentive awards that were based on our stock price and that were completed as of December 31, 2018 compared to target. Excludes PSUs with performance periods in progress and unvested RSUs.
**
Calculated as the annualized value of our CEO's 2016-2018 target total direct compensation (base salary, target annual incentive and target long-term incentives, including transaction-related awards) compared to the base salary and AIP awards earned from 2016-2018 and the value of long-term incentive awards for this period as of December 31, 2018, based on our closing price on December 31, 2018 and assuming that the performance period ended on December 31, 2018 for in-cycle awards.

 

    

 

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Proposal No. 1 Election of Directors

Background

Under the Company's current Articles of Association, the Board of Directors must consist of between five and fourteen directors. Our Board's overarching goal is to have a Board large enough to include all critical skills and perspectives but small enough to work efficiently. Generally, in determining the optimal size, structure and membership, the Board will take into account the Company's then-current circumstances, the Company's near- and longer-term strategic goals and aspirations, the current state of the pharmaceutical industry, legislative and regulatory developments, governance trends, and the views of shareholders and other key stakeholders. Our Board of Directors currently has 12 members; however, because Catherine M. Klema is not standing for re-election to the Board of Directors, 11 directors are proposed to be elected to serve until the 2020 Annual General Meeting of Shareholders or until their respective successors are duly elected and qualified and the size of the Board shall be 11 members effective as of the conclusion of the Annual Meeting.

Based upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Nesli Basgoz, M.D., Joseph H. Boccuzi, Christopher W. Bodine, Adriane M. Brown, Christopher J. Coughlin, Carol Anthony (John) Davidson, Thomas C. Freyman, Michael E. Greenberg, PhD, Robert J. Hugin, Peter J. McDonnell, M.D. and Brenton L. Saunders for reelection as directors to serve until the 2020 Annual General Meeting of Shareholders or until their respective successors are duly elected and qualified.

None of the director nominees were selected pursuant to an arrangement or understanding between such nominee and any other person.

Information about each director nominee is set forth in the following paragraphs and is based on information provided to us as of March 15, 2019. The Board of Directors knows of no reason why any of the nominees will be unavailable to serve, but in the event of any such unavailability, the proxies received will be voted for such substitute nominees as the Board of Directors may recommend, unless the number of directors constituting a full Board of Directors is reduced.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR the election of each of Nesli Basgoz, M.D., Joseph H. Boccuzi, Christopher W. Bodine, Adriane M. Brown, Christopher J. Coughlin, Carol Anthony (John) Davidson, Thomas C. Freyman, Michael E. Greenberg, PhD, Robert J. Hugin, Peter J. McDonnell, M.D. and Brenton L. Saunders.

Required Vote

Persons nominated to serve on our Board of Directors in an uncontested election must each individually receive a greater number of votes cast "FOR" than votes cast "AGAINST" in order to be elected, or re-elected, to the Board of Directors. Accordingly, abstentions will not affect the outcome of the election of directors.

Please note that if your broker holds your ordinary shares in "street name," your broker will not vote your shares on the election of directors and broker non-votes will result, unless you provide your voting instructions to your broker. Broker non-votes will not affect the outcome of the election of directors.

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Overview of Directors

Our Board of Directors collectively has a skillset well suited to our industry and our short- and long-term strategic objectives, and possesses the requisite leadership, financial, risk management and operating skills. Our Board also has extensive experience across a broad spectrum of the healthcare industry. Our Board is well-balanced in terms of the tenure of its members, which is a testament to our ongoing evaluation of the effectiveness of our Board and search for a highly qualified slate of candidates who can contribute to our Company.

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Industry
Experience






Global
Business






Clinical
Medical






Risk
Oversight






Finance &
Audit






Corporate
Governanace






Operational
& Strategic






HR &
Compensation




  Basgoz           ü           ü          
  Boccuzi   ü   ü                   ü   ü  
  Bodine   ü   ü       ü   ü   ü   ü   ü  
  Brown       ü               ü   ü   ü  
  Coughlin   ü   ü       ü   ü   ü   ü   ü  
  Davidson       ü       ü   ü   ü   ü      
  Freyman   ü   ü       ü   ü   ü   ü   ü  
  Greenberg           ü                      
  Hugin   ü   ü       ü   ü   ü   ü   ü  
  McDonnell           ü           ü       ü  
  Saunders   ü   ü       ü       ü   ü   ü  
  Totals   6   8   3   6   5   9   8   8  

    

 

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Table of Contents

    

Process

Nomination

Our goal is to have a highly qualified, balanced, engaged and diverse Board whose members possess the skills and background necessary to maximize shareholder value in a manner consistent with all legal requirements and the highest ethical standards.

Specifically, our Board, through our Nominating and Corporate Governance Committee, seeks candidates who:

Bring to our Board not only critical skills and experience in areas identified by the Board as directly important to the success of the Company's strategy and business, but also a diversity of experiences and backgrounds, both professionally and personally.

Have high integrity, sound moral character and good judgment.

For outside directors, satisfy the independence requirements of the New York Stock Exchange ("NYSE"), our Corporate Governance Guidelines and applicable law.

Our Corporate Governance Guidelines specify that the value of diversity, including with respect to race, age and gender, on the Board of Directors shall be considered by the Nominating and Corporate Governance Committee in the director identification and nomination process. Accordingly, when conducting searches for new directors, the Nominating and Corporate Governance Committee will take reasonable steps to include diverse candidates in the pool of nominees and any search firm engaged by the Nominating and Corporate Governance Committee will affirmatively be instructed to seek to include diverse candidates. Although the Nominating and Corporate Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees, the Committee and the Board both have a strong commitment to creating and maintaining diversity on our Board.

The Nominating and Corporate Governance Committee follows a rigorous process when evaluating candidates for nomination to the Board of Directors. The Nominating and Corporate Governance Committee considers candidates for our Board of Directors from diverse sources, including suggestions from our shareholders and, from time to time, a third party that the Committee engages for a fee to assist in identifying potential director candidates. The Committee makes a final recommendation to the Board of Directors, which then nominates a candidate for election by the shareholders or, as applicable, appoints a candidate to fill a vacancy or new position. The Nominating and Corporate Governance Committee employs the same process for evaluating all candidates, including those properly recommended by shareholders, and considers shareholder recommendations of candidates on the same basis as it considers all other candidates.

Shareholders wishing to recommend a director candidate for consideration by the Nominating and Corporate Governance Committee may do so by sending the candidate's name, biographical information and qualifications, together with a consent in writing signed by the recommended nominee indicating that he or she is willing to be considered as a nominee and, if nominated and elected, will serve as a director, to the Chair of the Nominating and Corporate Governance Committee in care of the Corporate Secretary, Allergan plc, Clonshaugh Business and Technology Park, Coolock, Dublin, D17 E400, Ireland. The submission of a recommendation by a shareholder in compliance with these procedures does not guarantee the selection of the shareholder's candidate or the inclusion of the candidate in our Proxy Statement. However, the Nominating and Corporate Governance Committee will consider any such candidate in accordance with the procedures and guidelines as described above and as set forth in our Corporate Governance Guidelines and the charter of our Nominating and Corporate Governance Committee.

Refreshment

In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee considers that director under the same criteria as all other director nominees and with a view toward the anticipated future needs of the Company. Our Board has no term limits or retirement age for service as a Director. At the same time, our Board believes there is value in Board refreshment and turnover so that the mix of directors yields a Board that is as strong as possible from year to year. Accordingly, the Nominating and Corporate

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PROPOSAL NO. 1 ELECTION OF DIRECTORS

Governance Committee annually re-examines whether to re-nominate each sitting director using the same criteria it would an outside candidate, considering criteria such as whether:

His or her experience in a key area has become stale or is no longer relevant given the anticipated future work of the Board.

The number of other boards on which he or she serves, or his or her age or health, impacts the energy and time needed for active participation on the Board.

The length and nature of his or her work on the Board has diminished his or her independence.

Both our Corporate Governance Guidelines and the charter of our Nominating and Corporate Governance Committee set forth in further detail the criteria that guide our Board and our Nominating and Corporate Governance Committee in assessing potential candidates for election and re-election to our Board of Directors, and can be found on our website at www.allergan.com under the "Investors" section.

As an outcome of the Board's focus on refreshment, since the beginning of 2017, the Board has added six new independent, highly-experienced directors, bringing the average tenure of the Board to less than four years. Moreover, since 2014, the Board has added 11 new Board members, replacing 12 directors departing the Board. The Board is committed to an ongoing refreshment process to ensure that the Board has the right balance of skills, experience, perspective, and rigorous oversight through independent judgment.

    

 

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Director Nominees for Election at the Annual Meeting

 
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NESLI BASGOZ, M.D.

Director Since: 2014

Age: 61

Committees:

Quality and Innovation Committee (Chair)

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Dr. Basgoz joined the Board of Directors in July 2014 following the Company's acquisition of Forest Laboratories, Inc. Dr. Basgoz is currently the Associate Chief and Clinical Director, Division of Infectious Diseases at Massachusetts General Hospital (MGH), a role she has held since 2001. In addition, Dr. Basgoz is an Associate Professor of Medicine at Harvard Medical School. Dr. Basgoz earned her MD degree and completed her residency in internal medicine at Northwestern University Medical School. She also completed a fellowship in the Infectious Diseases Division at the University of California at San Francisco. She is board certified in both infectious diseases and internal medicine.

The Board of Directors concluded that Dr. Basgoz should serve on the Board of Directors because of her extensive experience in clinical medicine.

Skills:

Clinical Medical Background

Corporate Governance Experience

Other Public Company Directorships:

None

Previous, Recently-Held Public Company Directorships:

Forest Laboratories, Inc.

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PROPOSAL NO. 1 ELECTION OF DIRECTORS
 
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JOSEPH H. BOCCUZI

Director Since: 2017

Age: 72

Committees:

Compensation Committee

Nominating and Corporate Governance Committee

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Mr. Boccuzi joined the Board of Directors in 2017. He retired from Spencer Stuart in December 2016 after 24 years of service, where he played a central role in establishing and building the firm's Life Sciences Practice. He served in positions of increasing responsibility within Spencer Stuart, most recently as a Partner in the firm's Global Life Sciences, Board and Chief Executive Officer Practices, a role he had held since 1996. Prior to joining Spencer Stuart, Mr. Boccuzi worked in executive search, venture capital and corporate management roles. He served as a consultant with Paul R. Ray & Company, an executive search firm. Prior to that, he worked as a Financial Advisor for Merrill Lynch. Mr. Boccuzi also held several leadership positions at National Patent Development Corporation, a venture capital firm specializing in medical technology and investment throughout the U.S. and worldwide. While there, he managed four medical startup operations serving as chief operating officer, board member and adviser to the board of directors. Prior to that, Mr. Boccuzi worked in sales for Xerox Corporation.

The Board of Directors concluded that Mr. Boccuzi should serve on the Board of Directors because of his deep understanding of leadership, talent and compensation issues in the pharmaceutical industry.

Skills:

Extensive Industry Experience

Global Business Experience

Operational & Strategic Experience

Human Resources & Compensation Experience

Other Public Company Directorships:

None

Previous, Recently-Held Public Company Directorships:

None

    

 

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Table of Contents

    
 
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CHRISTOPHER W. BODINE

Director Since: 2009

Age: 63

Committees:

Nominating and Corporate Governance Committee (Chair)

Compensation Committee

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Mr. Bodine joined the Board of Directors in 2009. Mr. Bodine retired from CVS Caremark in January 2009 after 24 years with CVS. Prior to his retirement, Mr. Bodine served as President, Healthcare Services of CVS Caremark Corporation, where he was responsible for strategy, business development, trade relations, sales and account management, pharmacy merchandising, marketing, information technology and Minute Clinic. Prior to the merger of CVS Corporation and Caremark Rx, Inc. in March 2007, Mr. Bodine served for several years as Executive Vice President—Merchandising and Marketing of CVS Corporation. Mr. Bodine is active in the pharmaceutical industry, having served on a number of boards and committees, including the Healthcare Leadership Council, RI Quality Institute, National Retail Federation, National Association of Chain Drug Stores (NACDS), and the NACDS Pharmacy Affairs and Leadership Committees.

The Board of Directors concluded that Mr. Bodine should serve on the Board of Directors because of his extensive industry experience and knowledge of the needs and operations of our major customers.

Skills:

Extensive Industry Experience

Global Business Experience

Risk Oversight Experience

Finance & Audit Experience

Corporate Governance Experience

Financial, Operational & Strategic Expertise

Human Resources & Compensation Experience

Other Public Company Directorships:

None

Previous, Recently-Held Public Company Directorships:

Fred's Inc.

Nash Finch

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PROPOSAL NO. 1 ELECTION OF DIRECTORS
 
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ADRIANE M. BROWN

Director Since: 2017

Age: 60

Committees:

Audit and Compliance Committee

Quality and Innovation Committee

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Ms. Brown joined the Board of Directors in 2017. She currently serves as Senior Advisor to Intellectual Ventures LLC (Intellectual Ventures), having served as President and Chief Operating Officer of Intellectual Ventures until 2017. Prior to joining Intellectual Ventures, Ms. Brown served in a number of leadership positions at Honeywell International, Inc. (Honeywell) from 1999-2010, most recently as Senior Vice President, Energy Strategy, and prior to that, as President and CEO of Honeywell's Transportation Systems global operating group. Prior to joining Honeywell, Ms. Brown had a nearly 20 year career at Corning, Inc. Ms. Brown currently serves as the Chairwoman of the Board of Directors of the Pacific Science Center and also sits on the boards of Jobs for America's Graduates, the Washington Research Foundation, and Intellectual Ventures, LLC. Ms. Brown received her Bachelor of Science in environmental health from Old Dominion University and a Master's of Science in management (Sloan Fellow) from Massachusetts Institute of Technology. She also received a Doctorate of Humane Letters from Old Dominion University.

The Board of Directors concluded that Ms. Brown should serve on the Board of Directors because of her global business experience as a senior executive in technology-rich companies and her experience identifying, protecting and licensing intellectual property.

Skills:

Global Business Experience

Corporate Governance Experience

Operational & Strategic Expertise

Human Resources & Compensation Experience

Other Public Company Directorships:

eBay, Inc.

Raytheon Company

Previous, Recently-Held Public Company Directorships:

Harman International Industries, Inc.

    

 

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Table of Contents

    
 
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CHRISTOPHER J. COUGHLIN
Lead Independent Director

Director Since: 2014

Age: 66

Committees:

Audit and Compliance Committee

Compensation Committee

Mergers and Acquisitions Committee

Nominating and Corporate Governance Committee

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Mr. Coughlin joined the Board of Directors in July 2014 following the Company's acquisition of Forest Laboratories, Inc. Mr. Coughlin began serving as our Lead Independent Director in October 2016. Mr. Coughlin served as Senior Advisor to the CEO and Board of Directors of Tyco until September 2012. Prior to that, he was Executive Vice President and Chief Financial Officer of Tyco International from 2005 to 2010. During his tenure, he played a central role in the separation of Tyco into five independent, public companies. Prior to joining Tyco, he worked as the Chief Operating Officer of the Interpublic Group of Companies from June 2003 to December 2004 and as Chief Financial Officer from August 2003 to June 2004. Previously, Mr. Coughlin was Executive Vice President and Chief Financial Officer of Pharmacia Corporation from 1998 until its acquisition by Pfizer in 2003. Prior to that, he was Executive Vice President of Nabisco Holdings and President of Nabisco International. From 1981 to 1996 he held various positions, including Chief Financial Officer, at Sterling Winthrop. In addition to the directorships listed below, Mr. Coughlin also previously served on the Board of Directors of Interpublic Group of Companies, Monsanto Company and Perrigo Company.

The Board of Directors concluded that Mr. Coughlin should serve on the Board of Directors, and as our Lead Independent Director, because his depth of experience in executive leadership roles within complex corporate organizations and his service on public company boards, including in the roles of Chairman and Lead Independent Director, contribute critical risk oversight and management insight to our Board of Directors.

Skills:

Extensive Industry Experience

Global Business Experience

Risk Oversight Experience

Finance & Audit Experience

Corporate Governance Experience

Operational & Strategic Expertise

Human Resources & Compensation Experience

Other Public Company Directorships:

Alexion Pharmaceuticals, Inc.

Previous, Recently-Held Public Company Directorships:

The Dun & Bradstreet Corp. (Former Chairman of the Board)

Hologic, Inc.

Covidien

Dipexium

Forest Laboratories, Inc.

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PROPOSAL NO. 1 ELECTION OF DIRECTORS
 
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CAROL ANTHONY (JOHN) DAVIDSON

Director Since: 2018

Age: 63

Committees:

Audit and Compliance Committee (Chair)

Nominating and Corporate Governance Committee

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Mr. Davidson joined the Board of Directors in 2018. He retired from Tyco International in September 2012, having served as senior vice president, controller and chief accounting officer since January 2004, where he was responsible for overseeing financial reporting, internal controls, and accounting policies and processes. In this role, Mr. Davidson worked as part of Tyco's new senior leadership team in establishing financial integrity, operational excellence and strong ethical practices across Tyco global operations. Prior to joining Tyco in January 2004, Mr. Davidson served as vice president, audit, risk and compliance for Dell Inc. During his six-year career at Dell he also served in other senior capacities, including chief compliance officer and vice president and corporate controller. In addition, Mr. Davidson spent 16 years with Eastman Kodak Company where he led the company's internal audit function and previously served in a variety of accounting and financial leadership roles. He began his career with Arthur Andersen & Co. From 2011 to 2015 he served as a member of the board of trustees of the Financial Accounting Foundation which oversees the FASB and GASB in accounting standards setting. From 2012 to 2018, Mr. Davidson served on the board of governors of the Financial Industry Regulatory Authority (FINRA) which regulates and oversees the US financial industry in the interest of investor protection and market integrity. Mr. Davidson serves as a trustee of both the University of Rochester and Garth Fagan Dance. He earned his BS in Accounting from St. John Fisher College and his MBA in Finance from the University of Rochester. Mr. Davidson was inducted into the Financial Executives International (FEI) Hall of Fame.

The Board of Directors concluded that Mr. Davidson should serve on the Board of Directors because of his expertise in complex accounting and financial issues, his experience serving on the boards of self-regulatory organizations, including FINRA, his experience serving on the Audit Committees of public company boards, and his extensive leadership experience across multiple industries, which includes experience implementing governance and control processes.

Skills:

Global Business Experience

Risk Oversight Experience

Finance & Audit Experience

Corporate Governance Experience

Operational & Strategic Expertise

Other Public Company Directorships:

TE Connectivity Ltd.

Legg Mason, Inc.

Previous, Recently-Held Public Company Directorships:

DaVita, Inc.

Pentair Plc

    

 

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THOMAS C. FREYMAN

Director Since: 2018

Age: 64

Committees:

Audit and Compliance Committee

Compensation Committee (Chair)*

Mergers and Acquisitions Committee

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Mr. Freyman joined the Board of Directors in 2018. Mr. Freyman retired from Abbott Laboratories in 2017, having held various leadership positions during a period where the company executed a significant transformation and refocused its business portfolio. He brings broad-based healthcare experience in two of Allergan's core therapeutic areas through his tenure at Abbott and his involvement in its proprietary pharmaceuticals and medical optics businesses. Most recently, he served as Executive Vice President, Finance and Administration for Abbott since June 2015. Prior to that, he served as Chief Financial Officer (CFO) and Executive Vice President, Finance for Abbott. He was first appointed CFO and Senior Vice President, Finance at Abbott in 2001. Previously, he served as Vice President and Controller of Abbott's Hospital Products Division and held a number of financial planning and analysis positions. Prior to joining Abbott, Mr. Freyman was a certified public accountant at Ernst & Whinney. Mr. Freyman holds a bachelor's degree in accounting from the University of Illinois and a master's degree in management from Northwestern University. He also serves on the Board of Directors of Tenneco Inc. and Hanger, Inc., serving on the audit committee of each of those boards.

The Board of Directors concluded that Mr. Freyman should serve on the Board of Directors because of his extensive experience as a senior executive in our industry, his expertise in complex accounting and financial issues and his experience serving on the Audit Committees of public company boards.

Skills:

Extensive Industry Experience

Global Business Experience

Risk Oversight Experience

Finance & Audit Experience

Corporate Governance Experience

Operational & Strategic Expertise

Human Resources & Compensation Experience

Other Public Company Directorships:

Tenneco Inc.

Hanger, Inc.

Previous, Recently-Held Public Company Directorships:

None

*  Catherine M. Klema, the current Chair of the Compensation Committee, is not standing for re-election to the Board of Directors. Mr. Freyman will succeed her as Chair of the Compensation Committee upon his re-election to the Board of Directors.

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PROPOSAL NO. 1 ELECTION OF DIRECTORS
 
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MICHAEL E. GREENBERG, PHD

Director Since: 2018

Age: 64

Committees:

Mergers and Acquisitions Committee

Quality and Innovation Committee

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Dr. Greenberg joined the Board of Directors in 2018. Dr. Greenberg has been Harvard University's Nathan Marsh Pusey Professor of Neurobiology since 2008. He has been a Co-Leader of Harvard Medical School's Allen Discovery Center for Human Brain Evolution since 2017 and Chair of the Department of Neurobiology since 2008. He was also Founding Director of the F.M. Kirby Neurobiology Center, Children's Hospital Boston, where he continues to serve as director. Prior to that he was a Professor in the Department of Microbiology & Molecular Genetics at Harvard Medical School, where he began in 1986. Dr. Greenberg serves on the Scientific Advisory Board of Decibel Therapeutics. Dr. Greenberg earned his Doctor of Philosophy from Rockefeller University and a Bachelor of Arts degree from Wesleyan University. He completed his post-doctoral fellowship at New York University Medical Center.

The Board of Directors concluded that Dr. Greenberg should serve on the Board of Directors because of his extensive experience in academic medicine and 35-year track record of groundbreaking scientific discoveries in neurobiology, particularly with respect to the central nervous system, one of our therapeutic areas of focus.

Skills:

Clinical Medical Background

Other Public Company Directorships:

None

Previous, Recently-Held Public Company Directorships:

None

    

 

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ROBERT J. HUGIN

Director Since: 2019

Age: 64

Committees:

Mergers and Acquisitions Committee (Chair)

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Mr. Hugin joined the Board of Directors in 2019. He previously served as Chief Executive Officer of Celgene Corporation from June 2010 until March 2016 and as Executive Chairman of the Board of Directors from June 2011 to January 2018. Mr. Hugin joined Celgene in 1999 as Chief Financial Officer. Prior to joining Celgene, Mr. Hugin served as a Managing Director at J.P. Morgan & Co. Inc., which he joined in 1985. Mr. Hugin holds a Bachelor of Arts degree from Princeton University and an MBA from the Darden School of Business at the University of Virginia. In addition to the directorships listed below, Mr. Hugin currently serves on the Board of Trustees of Princeton University and previously, served on the boards of Coley Pharmaceutical Group and Atlantic Health System, and served as Chairman of the Board of The Pharmaceutical Research and Manufacturers of America.

The Board of Directors concluded that Mr. Hugin should serve on the Board of Directors because of his extensive experience as a senior executive in our industry, his expertise in complex financial, operational and strategic issues and his extensive corporate governance experience.

Skills:

Extensive Industry Experience

Global Business Experience

Risk Oversight Experience

Finance & Audit Experience

Corporate Governance Experience

Operational & Strategic Expertise

Human Resources & Compensation Experience

Other Public Company Directorships:

None

Previous, Recently-Held Public Company Directorships:

Celgene Corporation (Former Chairman of the Board)

Danaher Corporation

The Medicines Company

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PROPOSAL NO. 1 ELECTION OF DIRECTORS
 
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PETER J. MCDONNELL, M.D.

Director Since: 2015

Age: 60

Committees:

Compensation Committee

Quality and Innovation Committee

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Dr. McDonnell joined the Board of Directors in March 2015 following the Company's acquisition of Allergan, Inc. Dr. McDonnell has been the Director and William Holland Wilmer Professor of the Wilmer Eye Institute of the Johns Hopkins University School of Medicine since 2003. Dr. McDonnell has also served as the Chief Medical Editor of Ophthalmology Times since 2004, and has served on the editorial boards of numerous ophthalmology journals. Dr. McDonnell also served as the Assistant Chief of Service at the Wilmer Institute from 1987 to 1988. Dr. McDonnell also serves as the President and a director of the National Alliance for Eye and Vision Research and the Alliance for Eye and Vision Research, a director and Vice President-elect of the PanAmerican Ophthalmological Foundation, and as the Chief Medical Editor of the Ophthalmology Times. He served as a consultant to the United States Department of Health and Human Services in 1996. Dr. McDonnell served as a full-time faculty at the University of Southern California from 1988 until 1999, where he advanced to the rank of professor in 1994. Dr. McDonnell has been inducted into the Achievement Rewards for College Scientists (ARCS) Foundation Alumni Hall of Fame.

The Board of Directors has concluded that Dr. McDonnell should serve on the Board of Directors because he provides our Board of Directors with wide-ranging expertise in ophthalmology, one of our therapeutic areas of focus. He is widely recognized as an international leader in corneal transplantation, laser refractive surgery and the treatment of dry eye.

Skills:

Clinical Medical Experience

Corporate Governance Experience

Human Resources & Compensation Experience

Other Public Company Directorships:

None

Previous, Recently-Held Public Company Directorships:

Allergan, Inc.

    

 

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BRENTON L. SAUNDERS
Chairman

Director Since: 2014

Age: 49

Committees:

None

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Mr. Saunders joined the Board of Directors in July 2014 and began serving as our Chairman of the Board in October 2016. Mr. Saunders is Chairman, President and Chief Executive Officer of Allergan plc. He previously served as Chief Executive Officer and President of Forest Laboratories, Inc. and had served as a Director of Forest beginning in 2011. Prior to that, he served as Chief Executive Officer of Bausch + Lomb Incorporated, a leading global eye health company, serving in this capacity from March 2010 until August 2013. Mr. Saunders also held a number of leadership positions at Schering-Plough, including the position of President of Global Consumer Health Care and was named head of integration for the company's merger with Merck & Co. and for Schering-Plough's acquisition of Organon BioSciences. Before joining Schering-Plough, Mr. Saunders was a Partner and Head of Compliance Business Advisory at PricewaterhouseCoopers LLP. Prior to that, he was Chief Risk Officer at Coventry Health Care and Senior Vice President, Compliance, Legal and Regulatory at Home Care Corporation of America. Mr. Saunders began his career as Chief Compliance Officer for the Thomas Jefferson University Health System. Mr. Saunders serves on the Board of Directors of Cisco Systems and RWJBarnabas Health. Mr. Saunders is a member of the Business Council, the Business Roundtable, and PhRMA.

The Board of Directors concluded that Mr. Saunders, as Allergan's CEO, should serve on our Board of Directors, and believe that Mr. Saunders brings to the Board his leadership experience and deep knowledge of the Company as Chief Executive Officer of two global healthcare companies and deep pharmaceutical experience, deep management and operational experience, and invaluable senior compliance experience and broad regulatory expertise.

Skills:

Extensive Industry Experience

Global Business Experience

Risk Oversight Experience

Corporate Governance Experience

Operational & Strategic Expertise

Human Resources & Compensation Experience

Other Public Company Directorships:

Cisco Systems, Inc.

Previous, Recently-Held Public Company Directorships:

Forest Laboratories, Inc.









The Board of Directors knows of no reason why any of the foregoing nominees will be unavailable to serve, but in the event of any such unavailability, the proxies received will be voted for such substitute nominees as the Board of Directors may recommend.

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Board and Committee Governance

Corporate Governance Guidelines and Code of Conduct

Our Board of Directors has adopted Corporate Governance Guidelines. These guidelines address the make-up, responsibility and functioning of the Board of Directors and its Committees, and include guidelines relating to:

The Board's determination of its leadership structure, composition and director independence

Criteria for Board membership and refreshment

The self-evaluation process of the Board and its Committees

Shareholder engagement

Review of management performance

The Board's authority to retain independent advisors

Our Board of Directors, through our Audit and Compliance Committee, has also adopted a Code of Conduct, which applies to all of our Board members and all of our officers and employees. The Code of Conduct sets forth and summarizes certain of our policies related to legal compliance and honest and ethical business practices. The Code of Conduct is intended to comply with the standards set forth in Section 303A.10 of the NYSE Listed Company Manual and applicable rules and regulations of the United States Securities and Exchange Commission ("SEC"). Any amendments to, or waivers from, provisions of the Code of Conduct that apply to our directors or executive officers, including our Chief Executive Officer and Chief Financial Officer and persons performing similar functions, will be promptly posted on our website at www.allergan.com under the "Investors—Corporate Governance" section.

You can find links to our Corporate Governance Guidelines and our Code of Conduct on our website at www.allergan.com under the "Investors—Corporate Governance" section. Copies of these materials are also available to shareholders without charge by contacting our Investor Relations department by mail with your request at Allergan plc, Investor Relations, 5 Giralda Farms, Madison, NJ 07940.

Governance Materials Available On Our Website

In addition to our Corporate Governance Guidelines and Code of Conduct, the following Board policies and other corporate governance materials are published on our website at www.allergan.com under the "Investors—Corporate Governance" section:

The members of our Board of Directors, including a biography for each director

The composition and charter of each of our Board Committees

Our Memorandum of Association and our Articles of Association

Our Board of Directors' statement in support of our Social Contract with Patients

Our Code of Conduct

Our Corporate Governance Guidelines (which include a description of the responsibilities of our Lead Independent Director)

Information relating to Allergan's corporate compliance program

Copies of these materials are also available to shareholders without charge by contacting our Investor Relations department by mail with your request at Allergan plc, Investor Relations, 5 Giralda Farms, Madison, NJ 07940.

Director Independence

On an annual basis, our Board of Directors reviews the independence of each person standing for election to the Board of Directors and affirmatively makes a determination as to his or her independence. For a person to be considered an independent director, the Board of Directors must determine that the person does not have any

    

 

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direct or indirect material relationship with Allergan (other than as serving as a director of Allergan). The Board of Directors considers any and all additional relevant facts and circumstances in making an independence determination.

Our Board of Directors has determined that all but one of the people standing for election to our Board, which is at least a majority, have no direct or indirect material relationship with us (other than as our director, as applicable) and are independent within the meaning of the independence standards promulgated by the SEC and the NYSE. The Board of Directors has determined that Nesli Basgoz, M.D., Joseph H. Boccuzi, Christopher W. Bodine, Adriane M. Brown, Carol Anthony (John) Davidson, Christopher J. Coughlin, Thomas C. Freyman, Michael E. Greenberg, PhD, Robert J. Hugin and Peter J. McDonnell, M.D. have no material relationship with the Company and constitute independent directors. Mr. Saunders has been determined to be not independent because he is our Chief Executive Officer.

In making its independence determinations, the Board of Directors reviewed transactions and relationships between, on the one hand, each director or any member of his or her immediate family, and, on the other hand, the Company or one of its subsidiaries or affiliates, in each case based on information provided by the director, our records and publicly available information. Each of the reviewed transactions and arrangements were entered into in the ordinary course of business and none of the reviewed business transactions, donations or grants involved a director serving as an employee or general partner of the entity party to the transaction or any member of his or her immediate family or spouse serving as an executive officer or general partner of such entity. None of our non-employee directors directly or indirectly provides any professional or consulting services to us and none of our directors currently has or has had any direct or indirect material interest in any transactions or arrangements that exceeded the greater of $1 million or 2% of either company's consolidated gross revenues.

Additionally, in making its independence determinations, the Board of Directors considered the fact that many of our independent directors currently serve or have previously served within the last three years as a professor, trustee, director, or member of a board, council or committee for one or more charitable organizations (including research or scientific institutions), hospitals, for profit corporations or any other entity with which Allergan has business transactions or to which Allergan may make grants. These business transactions or grants may include, among other things, purchases of services and supplies, licensing transactions, healthcare sponsorships and programs, research and development and clinical trials, activities, and limited consulting services.

The Board of Directors has determined that the transactions and activities described above were made in the ordinary course and did not affect the independence of the directors involved.

Risk Oversight

Risk oversight continues to be top-of-mind for our Board of Directors. How well we manage risk will ultimately determine our success.

Our Company faces a number of risks, including economic, financial, cyber, legal, regulatory, competition, compliance and reputational risks. Primary day-to-day responsibility for the identification, assessment, and prioritization of risks, as well as for the application of resources to minimize, control, and mitigate these risks, lies with senior management. Our Board of Directors' responsibility with respect to risk is in the area of risk oversight: the Board plays an active role in understanding and overseeing the management of risks that our Company faces and ensures that senior management has the framework and processes in place to effectively and adequately monitor and manage these risks.

Broad risk matters, such as setting the Company's risk appetite and ensuring its fit with strategy, are matters for the full Board. However, certain risk management oversight responsibilities are delegated to Board Committees. The Board Committees meet regularly and report back to the full Board. With respect to cybersecurity, the Audit & Compliance Committee regularly reviews and discusses with the Company's information security department the Company's risk exposure in this area as well as the steps management has taken to monitor and control such exposure. The Audit and Compliance Committee and the full Board each review the Company's cyber risks, threats, and protections at least once a year. All Board Committees foster open communication with the Board, which enables the Board to coordinate its oversight of risk and identify risk interrelationships between Committees.

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The Company allocates responsibility for managing risk as follows:

Overview of Risk Management Responsibilities
Board of Directors   Performs Company-wide risk oversight and identifies and monitors appropriate risk parameters
Board Committees   Assist the full Board in carrying out its risk oversight function by considering risk in enumerated areas of responsibility.
Senior Management   Performs day-to-day risk management:
         
   

  Identification, assessment, and prioritization of risks
         
   

  Application of resources to minimize, control, and mitigate risks

The following Committees have the following risk oversight responsibilities:

Board Committee
  Risk Oversight Responsibilities*
Audit and Compliance Committee  

  Oversees major areas of financial and compliance risk exposure
         
   

  Reviews the Company's risk assessment and risk management policies, including the Allergan Code of Conduct
         
   

  Reviews the Company's effective corporate compliance program, including updates on the core components of the program
         
   

  Reviews the Company's continuous efforts and progress with respect to managing risk
         
   

  Reviews the Company's cybersecurity risk exposure and risk management processes
Compensation Committee  

  Oversees risks relating to the Company's compensation programs to ensure that these programs do not lead to excessive risk-taking by employees and that employee interests are aligned with the interests of the Company's stockholders, as discussed in more detail in the "Risk Assessment" section of this Proxy Statement on pages 67-68
Mergers and Acquisitions Committee  

  Reviews risks relating to mergers, acquisitions, dispositions, investments and similar transactions
Quality and Innovation Committee  

  Oversees risks relating to the Company's compliance with quality systems and other legal and regulatory requirements related to product safety and quality and environmental, health and safety matters
         
   

  Oversees risks relating to the Company's strategy, activities, results and investment in product research and development and innovation initiatives
*
A detailed overview of each Committee's responsibilities can be found in the respective Committee charters on our website at www.allergan.com under the "Investors—Corporate Governance" section.

    

 

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Shareholder Engagement

Our Board of Directors believes that regular, open communication with our shareholders is critical to our Company's long-term success. We recognize the importance of listening to and taking into account the views of our shareholders on performance, governance, environmental, social, executive compensation and other matters, and our Board is committed to understanding the views of the Company's shareholders and considering their input as the Board and management make important decisions.

Accordingly, Allergan includes as part of its governance program a comprehensive shareholder engagement program that allows the Company to maintain an active and open dialogue with its shareholders.

This program is led by Allergan's Lead Independent Director, Nominating and Corporate Governance Committee Chair, and Compensation Committee Chair, as well as certain newer members of the Board. These directors meet with shareholders, both with and without senior management present. Our Board-led engagement is conducted in accordance with the following process:

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Following extensive engagement efforts in the fall of 2016 and the fall of 2017, during which we met with shareholders representing approximately 37% and 25% of the Company's outstanding ordinary shares, respectively, certain of our independent directors and members of our management team engaged with our shareholders in 2018 to discuss their feedback on a variety of topics.

As part of such engagement, in 2018, we reached out to a robust cross section of our shareholder base representing approximately 50% of the Company's outstanding ordinary shares. Many of the shareholders to whom we reached out indicated that that they did not see a need to meet with us in light of our engagement with them in 2016 and/or 2017, and accordingly, we actually engaged either in person or telephonically with shareholders representing approximately 23% of outstanding ordinary shares.

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Many of these engagements included a discussion between our investors and our independent directors, without management present.

Topics discussed as part of our comprehensive shareholder engagement program included our business and financial performance, the independence of our Board leadership, Board refreshment, executive compensation, and our corporate social responsibility initiatives.

The directors and senior management who engaged with shareholders shared feedback from these engagements with our full Board and its Committees, which used this feedback to inform their decisions and priorities.

What We Heard
  What We Did
Many of our shareholders expressed that they would value a policy requiring an independent Chairman that the Board could phase in with the next CEO transition.   The Board has adopted a policy providing that phased in within a reasonable period of time in connection with the next Chief Executive Officer transition following the March 2019 adoption of the Corporate Governance Guidelines, the Chairman shall be, whenever possible, an Independent Director (as defined below). See page 33 for more information about this policy.
Certain shareholders suggested additions to the responsibilities of the Lead Independent Director to further enhance our strong Lead Independent Director role.   The Board has added additional responsibilities to the role of the Lead Independent Director. See pages 31-32 for more information about the responsibilities of the Lead Independent Director.
Certain shareholders suggested that they would appreciate enhanced Board oversight over the Company's acquisitions and divestitures.   The Board has formed a Mergers and Acquisitions Committee to review and approve potential mergers, acquisitions, dispositions, investment, joint ventures, collaborations, partnerships, licensing arrangements and similar transactions within a specified range. See page 37 for more information about this new committee.

We appreciate the feedback of our shareholders and we are committed to continuing to engage in this constructive dialogue.

Leadership Structure

Our Board believes that independent leadership in the boardroom is critical for Allergan, and that a strong and highly independent Board is a critical foundation for Allergan and its shareholders.

Current Structure

The Company's Board of Directors annually reviews its leadership structure. During the Board's review of its leadership structure in 2018, the Board determined that Mr. Brenton L. Saunders continues to be the right person to serve as its Chairman at this time because of his leadership in our ongoing strategic transformation into a global biopharmaceutical leader, deep knowledge of the Company and its management and operations, extensive experience with complex pharmaceutical enterprises, and he brings that expertise to the role of director and Board Chairman. The Board also determined that Mr. Christopher J. Coughlin continues to be the right person to serve as Lead Independent Director, given his depth of experience in biopharmaceuticals; his extensive financial and industry leadership experience; his demonstrated skill in managing companies before, during, and after significant corporate transformations; and his extensive service on public company boards, for which he was recognized as Director of the Year by the National Association of Corporate Directors in 2015.

Mr. Coughlin's duties as Lead Independent Director include:

Coordinating the activities of the other Independent Directors, including the calling of meetings of the Independent Directors and/or other non-management directors (and the establishment of the agendas and schedules for such meetings), with or without the presence of management

    

 

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Presiding at all meetings of the Board at which the Chairman and CEO is not present, including executive sessions

Serving as liaison between the Chairman and CEO and the Independent Directors

Serving as liaison between management and the Independent Directors, including with respect to requests for management to provide information to the Board

Serving as the Board's liaison for consultation and communication with major shareholders, as appropriate

Advising the Chairman and CEO of the Board's information needs, and approving information sent to the Board, including the agenda for Board meetings, Board pre-read materials, meeting calendars and schedules

Recommending and authorizing the retention of advisers and consultants who report directly to the Board

Facilitating director discussions of the Chairman and CEO's leadership of the Board and the Company, and participating in evaluations of the Chairman and CEO's annual performance against Company objectives which are led by the Compensation Committee

Leading the Chairman and CEO succession planning process

Assisting the Nominating and Corporate Governance Committee in overseeing conflicts of interest of all directors, including the Chairman and CEO

Overseeing the application of the Code of Conduct applicable to the Board, including the Chairman and CEO

Ensuring that the Board develops and periodically reviews the Company's long-term strategy

Ensuring that the Board oversees management's execution of the Company's long-term strategy

Assisting in aligning governance structures with the Company's long-term strategy

Providing guidance to the Chairman and CEO on executing the Company's long-term strategy

Ensuring effective functioning of key Board committees and providing input on functions of the committees, when required

Advising Board committees on activities, if required, and receiving feedback from the chairs of Board committees

Providing guidance to the Nominating and Corporate Governance Committee on director succession and development

Facilitating cross-committee feedback and providing input on committee meeting agendas, if required

Leading or participating in ad-hoc committees established to deal with extraordinary matters (such as investigations or potential mergers and acquisitions)

Following up on meeting outcomes

Engaging with key regulators to discuss Board process and oversight of management and Company, when necessary

Representing Independent Directors with other stakeholders, when necessary

Communicating regularly with each director to be certain that each director's views, competencies and priorities are understood

Performing such other duties as the Board may determine from time to time

Additionally, the Lead Independent Director shall also take other active roles in governance of the Company as appropriate, including leading the work of the Board when the management directors are excluded from the Board's work, such as when the management directors have a conflict of interest; acting as a sounding board and advisor to the CEO; leading the Board in times of crisis; assisting the Nominating and Corporate Governance Committee in promoting corporate governance best practices; and (helping to ensure efficient and effective Board performance and functioning.

The Board firmly believes that changing at the present time from a combined Chairman/CEO role coupled with a robust Lead Independent Director role, strong independent directors and robust board governance policies could

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impede the Company's success. As part of our dialogue with our shareholders as part of our shareholder engagement, the Board has heard from our shareholders that many are supportive of the current combined Chairman and CEO position given the Board's strong independence and focus on governance.

Independent Chair Policy

Additionally, the Board heard from our shareholders that many would value a policy requiring an independent Chairman that the Board could phase in with the next CEO transition. The Board considered this feedback and accordingly has adopted a policy that provides that, phased in within a reasonable period of time in connection with the next Chief Executive Officer transition, the Chairman of the Board, shall be, whenever possible, an independent director.

In selecting the independent director to serve as Chairman, the Board shall take into account the recommendation of the Nominating and Corporate Governance Committee the duties of the Chairman and the qualifications and experiences of the Chairman candidate(s), and the Company's shall disclose the rationale for the selection of the Chairman in the Company's proxy statement. The policy also provides an exemption in the event no independent director is available and willing to serve as Chairman. In the event that the Board determines that a Chairman who was an independent director when selected no longer constitutes an independent director, the Board shall select a new Chairman who is an independent director based on the recommendation of the Nominating and Governance Committee, within a reasonable amount of time.

The Board believes that phasing in an independent Chairman with the next CEO transition is consistent with the feedback that we received from our shareholders and is the best way to change the current leadership structure of the Board. Implementing an independent Chairman policy to take effect immediately would not enhance the Board's effectiveness or the Company's operational, financial or stock performance or ability to create shareholder value, and to the contrary could impede the Board's effectiveness by creating a crisis of confidence in Mr. Saunders at a time when leadership stability and effectiveness is critical, given this juncture of the Company's transformation.

Board Evaluations

Our Board is committed to continuous improvement and recognizes the fundamental role a robust Board and Committee evaluation process plays in ensuring that our Board maintains an optimal composition and is functioning effectively. Accordingly, each year, the Board, as directed by the Nominating and Corporate Governance Committee consistent with its charter (available on our website at www.allergan.com under the "Investors—Corporate Governance" section), conducts a three-part evaluation process involving a review of the Board, each of the Board's Committees and each individual director. The Nominating and Corporate Governance Committee believes that a third-party evaluator is best placed to solicit the most independent and impartial feedback, and accordingly each year the evaluation is conducted by an independent third-party facilitator with deep experience in corporate governance matters and assessments of board effectiveness.

    

 

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The evaluation process is as follows:

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Succession Planning

Our Board of Directors recognizes that one of its most critical responsibilities is to guarantee excellence and stability in our Company's senior leadership. As a result, our Board is actively engaged in talent management. Our Board oversees the development of executive talent and plans for the succession of the Chairman of our Board, our directors, our Chief Executive Officer and other senior members of executive management.

Board Succession Planning

The Nominating and Corporate Governance Committee considers the critical needs of the Company regularly, taking into account the results of the annual Board of Directors and Committee evaluations and other relevant data to assess Board skills and the leadership capabilities of existing directors to ensure that there are sitting directors who are ready to fill the roles of Chairman, Lead Independent Directors and Chair of each of our Committees should one of those directors vacate his or her position unexpectedly.

Chief Executive Officer Succession Planning

Our Board of Directors is responsible for the selection of our Chief Executive Officer. In connection with its preparation of short- and long-term succession plans for the Chief Executive Officer, including in the event of unanticipated vacancy, our Board of Directors regularly reviews leadership development initiatives, surveys the market for potential candidates in the event of unanticipated vacancy and identifies and periodically updates the skills, experience and attributes that they believe are required to be an effective Chief Executive Officer in light of the Company's business strategy, prospects and challenges.

Board Meetings

During the fiscal year ended December 31, 2018, the Board of Directors of Allergan plc met six times in person and telephonically. In addition, from time to time, the Board is provided with updates telephonically or in writing regarding matters for which it has oversight. Each incumbent director attended at least 75 percent of the combined total of (i) all Board of Directors meetings and (ii) all meetings of Committees of which such director was a member. We do not have a policy with regard to Board members' attendance at our Annual General Meeting of Shareholders. All of the members of the Board of Directors nominated for election at the 2018 Annual General Meeting Shareholders attended that meeting.

Executive Sessions

We schedule regular executive sessions in which all of the directors meet without management participation and regular executive sessions in which only independent directors meet, including as part of each regularly scheduled in-person Board meeting. Mr. Coughlin chairs executive sessions of the independent directors of the Board.

In 2018, the independent directors began to include executive sessions of the independent directors as an agenda item in the middle of each Board meeting rather than as a concluding agenda item. This has facilitated the use of information and feedback received from the independent directors while the full Board remains convened. The Lead Independent Director and the Chairman maintain an ongoing and active dialogue, and the Board has further encouraged this dialogue by timing the occurrence of executive sessions of the independent directors so that their feedback can be delivered to the Chairman in person during Board meetings.

Committees

The Board of Directors has five standing Committees: the Audit and Compliance Committee, the Compensation Committee, the Mergers and Acquisitions Committee, the Nominating and Corporate Governance Committee and the Quality and Innovation Committee.

    

 

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Audit and Compliance Committee
Meetings held in 2018: 14

Members
  Independence*
  Key Skills / Qualifications
Carol Anthony (John) Davidson (Chair)    

Audit / Tax / Accounting

Adriane M. Brown    

Oversight of financial statements

Christopher J. Coughlin    

Compliance

Thomas C. Freyman    

Executive leadership

       

Risk oversight

*
All of the members of the Audit and Compliance Committee have been determined to be "independent" and to meet the financial literacy and audit committee independence requirements of the NYSE listing standards and SEC Rule 10A-3.

Key Responsibilities

The primary function of the Audit and Compliance Committee is to assist the Board of Directors in fulfilling its oversight of:

The integrity of Allergan's financial statements.

Allergan's compliance with legal and regulatory requirements and Allergan's processes, controls, resources and plans to manage risk.

The qualifications and independence of Allergan's independent auditor.

The performance of Allergan's internal audit function and of its independent auditor.

Additionally, the Audit and Compliance Committee serves as an independent and objective party that:

Monitors Allergan's financial reporting process and internal control systems.

Evaluates the effectiveness of Allergan's corporate compliance program.

Retains, oversees and monitors the qualifications, independence, compensation and performance of Allergan's independent auditor.

Provides an open avenue of communication among the independent auditor, financial and senior management, the internal audit department, the Global Chief Compliance Officer and the Board of Directors.

Financial Expertise

The Board of Directors determined that each member of the Audit and Compliance Committee is financially literate as required under the NYSE listing standards and that each of Messrs. Davidson, Coughlin and Freyman is an "audit committee financial expert" within the meaning of the SEC rules.

The functions of the Audit and Compliance Committee and its activities during the fiscal year ending December 31, 2018 are described in further detail on page 86 under the heading "Report of the Audit and Compliance Committee."

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Compensation Committee
Meetings held in 2018: 6

Members
  Independence*
  Key Skills / Qualifications
Catherine M. Klema (Chair)**    

Executive leadership

Joseph H. Boccuzi    

Financial experience

Christopher W. Bodine    

Talent development

Christopher J. Coughlin    

Human capital management

Thomas C. Freyman**      
Peter J. McDonnell, M.D.      
*
All of the members of the Compensation Committee have been determined to be "independent" and to meet the independence requirements of the NYSE listing standards. In addition, all current Compensation Committee members have been determined to qualify as "non-employee directors" within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and as "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code.
**
Catherine M. Klema is not standing for re-election to the Board of Directors. Thomas C. Freyman will succeed her as Chair of the Compensation Committee upon his re-election to the Board of Directors.

Key Responsibilities

The key functions of the Compensation Committee are to:

Evaluate the performance and determine the compensation of our Chief Executive Officer.

Review and determine the compensation payable to our other Named Executive Officers.

Oversee and administer our equity compensation and other incentive compensation plans.

Oversee the use of senior executive employment agreements and severance plans.

Review compensation programs and policies for features that may encourage excessive risk taking, and determine the extent to which there may be a connection between compensation and risk.

Review and approve the Compensation Discussion and Analysis to be included in the Proxy Statement for our Annual General Meetings of Shareholders.

Mergers and Acquisitions Committee
Meetings held in 2018: N/A

Members
  Independence
  Key Skills / Qualifications
Robert J. Hugin (Chair)    

Executive leadership

Christopher J. Coughlin    

Risk oversight

Thomas C. Freyman    

Clinical medical background

Michael E. Greenberg, PhD    

M&A experience

Key Responsibilities

The key functions of the Mergers and Acquisitions Committee, which was formed in 2019, are to:

Review potential mergers, acquisitions, dispositions, investments, joint ventures, collaborations, partnerships, licensing arrangements or similar transactions or arrangements, whether by transfer of equity, assets, or otherwise that are proposed by the Company's management.

In connection with its review of potential transactions that are proposed by the Company's management, approve any such transactions within a specified price range.

    

 

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Nominating and Corporate Governance Committee
Meetings held in 2018: 4

Members
  Independence*
  Key Skills / Qualifications
Christopher W. Bodine (Chair)    

Senior leadership

Joseph H. Boccuzi    

Corporate governance

Christopher J. Coughlin    

Succession planning

Carol Anthony (John) Davidson    

Talent development

Catherine M. Klema**    

Public company board service

       

Global business experience

*
All of the members of the Nominating and Corporate Governance Committee have been determined to be "independent" and to meet the independence requirements of the NYSE listing standards.
**
Catherine M. Klema is not standing for re-election to the Board of Directors.

Key Responsibilities

The key functions of the Nominating and Corporate Governance Committee are to:

Identify and present qualified candidates to the Board of Directors for election or re-election as directors of the Company.

Ensure that the size and composition of the Board of Directors and its Committees best serve our practices and objectives.

Develop and recommend to the Board of Directors a set of corporate governance guidelines and principles and periodically review and recommend changes to such guidelines and principles as deemed appropriate.

Oversee the evaluation of the Board of Directors and senior management.

Make recommendations to the Board of Directors regarding the compensation payable to members of the Board of Directors.

Make recommendations to the Board of Directors regarding governance matters, including our Memorandum of Association and Articles of Association.

Quality and Innovation Committee
Meetings held in 2018: 10

Members
  Independence
  Key Skills / Qualifications
Nesli Basgoz, M.D. (Chair)    

R&D

Adriane M. Brown    

Innovation

Michael E. Greenberg, PhD    

Strategy

Peter J. McDonnell, M.D.    

Product safety and quality knowledge

       

Environmental and health safety knowledge

       

Compliance knowledge

Key Responsibilities

The key functions of the Quality and Innovation Committee are to assist the Board with its oversight responsibilities regarding:

The Company's compliance with quality systems and other legal and regulatory requirements related to product safety and quality and environmental, health and safety matters.

The Company's strategy, activities, results and investment in product research and development and innovation initiatives.

The Company's commitments to patients, quality and safety, education and product accessibility as reflected in its Social Contract with Patients.

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Each Committee:

Operates in accordance with a written charter adopted by the Board (published on our website at www.allergan.com under the "Investors—Corporate Governance—Committee Charters" section).

Reviews its charter on an annual basis.

Evaluates its performance on an annual basis.

Schedules regular executive sessions in which all of the Committee members meet without management participation, including as part of each regularly scheduled in-person Committee meeting.

In addition to Board refreshment, the Board of Directors also values Committee refreshment when making Committee assignment decisions. Our Board believes that there are benefits to Committee refreshment and turnover so that the mix of committee members yield Committees that are as strong as possible from year to year. Because of the active Board refreshment process, there has also been significant Committee refreshment. Continuity but also ensuring that Committees have new perspectives are key considerations when determining Committee composition. Committee leadership refreshment is also part of the Board of Director's ongoing review.

Director Compensation

Our director compensation program is overseen by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee reviews the amount and form of director compensation annually, and in reviewing the compensation program considers a number of factors, including benchmarking studies prepared by an outside consultant and the amount and frequency of travel required of the directors in connection with their service on the Board and Committees.

Under our current director compensation program, all members of the Board of Directors who are not full-time employees of the Company receive a yearly cash retainer equal to $150,000, payable at the time of the directors' election at our Annual General Meeting of Shareholders. Our Lead Independent Director also receives an additional yearly fee of $50,000. As compensation for serving as Committee Chair, the Chair of the Audit and Compliance Committee receives an additional yearly fee of $30,000 and the Chair of each of our other Committees receives an additional yearly fee of $24,000. In addition, all directors receive a yearly grant of restricted stock units valued at approximately $300,000 (using the closing stock price of the date of the Annual General Meeting of Shareholders commencing such Board Year). The restricted stock unit awards granted at the time of the 2018 Annual General Meeting of Shareholders will vest at the earlier of (1) one day before the date of our 2019 Annual General Meeting of Shareholders or (2) May 2, 2019. For the purposes of director compensation, the term "yearly" refers to a "Board Year" in which a director serves and which begins on the date of the Annual General Meeting of Shareholders for such year.

Mr. Saunders, who was employed by us during 2018, did not receive additional compensation for his service as a director during 2018.

    

 

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The following table shows the compensation earned and equity awards granted in 2018 to each person who served as a director during 2018 (other than Mr. Saunders):

Name1
Fees Earned
or Paid in
Cash2
($)

Restricted
Stock Unit
Awards3
($)

Total
Nesli Basgoz, M.D. 174,000 299,874 473,874
Paul M. Bisaro 150,000 299,874 449,874
Joseph H. Boccuzi 150,000 299,874 449,874
Christopher W. Bodine 174,000 299,874 473,874
Adriane M. Brown 150,000 299,874 449,874
Christopher J. Coughlin 200,000 299,874 499,874
Carol Anthony (John) Davidson 150,000 299,874 449,874
Thomas C. Freyman 132,692 265,218 397,910
Michael E. Greenberg, PhD 110,440 220,747 331,187
Catherine M. Klema 174,000 299,874 473,874
Peter J. McDonnell, M.D. 150,000 299,874 449,874
Patrick J. O'Sullivan 150,000 299,874 449,874
Fred G. Weiss 180,000 299,874 479,874
(1)
Robert J. Hugin is not included as he joined the Board of Directors in February 2019 and therefore did not receive any compensation in 2018.
(2)
Includes yearly cash retainer fees and, if applicable, Lead Independent Director or Committee Chair fees.
(3)
Consists of the annual grant of restricted stock units to non-employee directors, equal to 1,985 units with a per share fair value of $151.07 granted on May 1, 2018. As of December 31, 2018, each of our current non-employee directors other than Mr. Freyman and Dr. Greenberg held 1,985 outstanding unvested restricted stock units. As of December 31, 2018, Mr. Freyman held 1,558 outstanding unvested restricted stock units and Dr. Greenberg held 1,194 outstanding unvested restricted stock units.

In order to better align the interests of our Board with those of our shareholders in a fair and reasonable manner, as well as to align with what we believe is a corporate governance "best practice," we maintain share ownership guidelines for our directors. Our ownership guidelines require our directors to hold shares in the Company in an amount at least equal in value to five times their annual cash retainer, and provide that a director has five years from the date of his or her appointment to achieve compliance with this holding requirement. Under our guidelines, restricted stock units held by a director are treated as shares for this purpose. As of December 31, 2018, each of our directors, other than our recently appointed or elected directors (Joseph H. Boccuzi, Adriane M. Brown, Carol Anthony (John) Davidson, Thomas C. Freyman, Michael E. Greenberg, and Robert J. Hugin) held shares in the Company in an amount at least equal in value to five times their annual cash retainer. Given the dates of their respective appointments, Mr. Boccuzi, Ms. Brown, Mr. Davidson, Mr. Freyman, Dr. Greenberg and Mr. Hugin each have additional time to achieve compliance with this holding requirement under our share ownership guidelines.

Corporate Political Contributions

Public Policy Engagement & Disclosure of Political Activities

Our Board of Directors believes that informed public policy plays a critical role in our ability to achieve our goal of pursuing medical advances to help patients live life to its fullest potential. Therefore, two of our U.S. subsidiaries, Allergan, Inc. and Allergan USA, Inc. engage in various efforts to advance public policies that support healthcare innovation and improve patient access to needed medical treatments while also advocating for a fair, free market system that will provide the best environment for continued innovation.

These efforts include direct and indirect engagement with and advocacy before federal, state and local government officials, sponsoring a federal political action committee, contributing to state and local candidates and committees where permitted, and supporting and participating in industry and trade organizations. We believe that such public policy engagement is an important and appropriate role for companies in open societies when conducted in a legal and transparent manner.

Our public policy priorities and positions are determined in consultation with the Company's business operations and are approved by our senior management.

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Lobbying

In the U.S. in 2018, the top issues that the Company lobbied at the federal level included:

Allergan's Social Contract with Patients.

Intellectual property reform.

Incentives for anti-microbial research.

Patient safety concerns related to drug compounding, diversion and counterfeit medicines.

In each state where we engage in lobbying, we comply with that state's specific lobbying registration, disclosure and other compliance requirements. For 2018, our state lobbying efforts were focused predominately on nine states: Arizona, California, Florida, Illinois, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, and Texas.

In the U.S. in 2018, the top issues that the Company lobbied at the state level included:

Allergan's Social Contract with Patients.

Patient access to prescription medicines.

Patient safety concerns related to drug compounding and counterfeit medicines.

Price transparency disclosure requirements.

In the U.S., a range of lobbying registration and disclosure laws exist with which we comply. At the federal level, we comply with the Lobbying Disclosure Act, which requires us to file quarterly reports with the U.S. Congress to disclose the issues we are lobbying and the amount we spend doing so. These reports call for the disclosure of the expenses associated with lobbying the federal government, including those incurred by our Government Affairs team and non-lobbyist employees, amounts paid to outside lobbying firms and consultants and the portion of our trade association dues attributable to those associations' federal lobbying. For calendar year 2018, we reported total U.S. federal lobbying expenditures of $3,090,000 and state lobbying expenditures of $1,540,000.

Industry & Trade Association Memberships

Additionally, Allergan is a member of industry and trade groups that represent both the pharmaceutical industry and the business community at large so that we may participate in bringing about consensus on broad policy issues that can impact our business objectives and ability to serve patients. Allergan's membership in these industry and trade groups comes with the understanding that, although we may not always agree with the positions of the larger organizations and/or other members, we are committed to participating in the discussions and voicing our concerns as appropriate through our colleagues who serve on the boards and committees of these groups. We may even recuse ourselves from related association or industry group activities if our participation would not advance Allergan's interests.

A list of the major industry and trade groups that we support (over $25,000 for lobbying annually) is available on our website at www.allergan.com under the "Responsibility—Social Responsibility—Public Policy" section.

Political Contributions

While U.S. federal law prohibits corporations from making political contributions to federal candidates, companies can establish political action committees that are funded solely through voluntary employee contributions. The Allergan, Inc. Political Action Committee (the "Allergan, Inc. PAC ") provides eligible employees a direct means to voluntarily participate in the political process that can affect public policy issues of importance to our business interests.

The Allergan, Inc. PAC operates in accordance with all relevant federal and state laws and contributes to candidates from both parties. When selecting candidates to support, priority is given to candidates who understand business issues of importance to Allergan, as well as to candidates who represent states or districts where the company has facilities or employees. Contributions are always made in the best interest of the company and are never made in recognition of the private political preferences of company executives. Input from Allergan employees who participate in the Allergan, Inc. PAC is considered when selecting candidates to support, but all contribution recommendations must be approved by the Allergan, Inc. PAC Treasurer. All Allergan, Inc. PAC contributions are publicly disclosed via reports which are available on the Federal Election Commission's Web site at www.fec.gov.

    

 

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In certain jurisdictions where doing so is permitted, Allergan makes corporate contributions to support election campaigns, political action committees, party committees and ballot measure committees. Allergan supports state candidates from both parties and applies the same criteria as with the Allergan, Inc. PAC in selecting which recipients to support. On a semi-annual basis, we make available a list of all corporate state and local political contributions made to support candidates, committees, political parties and ballot measure committees available on our website at www.allergan.com under the "Responsibility—Social Responsibility—Public Policy" section.

Compliance

We believe that our efforts to influence public policy and its participation in the political process are critical to advancing the company's interests. We are also firmly committed to doing so only in a legal and transparent manner. In addition to management oversight of these policies and activities, our contributions and our policies and practices in this area are reviewed and overseen by the Audit and Compliance Committee.

All of our employees must abide by our global Code of Conduct, which defines the way we conduct our affairs with each other, with our stakeholders and with external parties. The Code of Conduct applies to our interactions with government officials, including our advocacy activities on public policy issues, and is intended to ensure that all information that we provide to government officials and entities is complete and accurate to the best of an employee's knowledge and belief.

Our global Code of Conduct also prohibits our employees from using corporate funds or other resources for political purposes without prior approval by the Company. Our corporate policy on ethical business practices includes guidelines conforming to the U.S. anti-kickback laws and Foreign Corrupt Practices Act, making clear that no illegal payments of any kind (monetary or otherwise) are to be offered or made to individuals or entities—including local, state or federal government or political party officials or candidates in the U.S.; government or political party officials or candidates of any other nation; or officials of public international organizations—at any time or under any circumstances.

To ensure compliance with these policies and federal and state law, outside legal experts provide periodic guidance to our Company on required disclosure of its political activities. We also perform periodic audits to assess and enforce compliance with our policy governing our corporate and PAC contributions.

Corporate Social Responsibility

Corporate Responsibility at Allergan

We are mindful of our impact on the world around us. Allergan has a deep commitment to the health, safety, and well-being of the people who put their trust in our products and the global communities where we operate. We are committed to ensuring our contribution to science reflects our commitment to safe, healthful workplaces, strong communities and responsible, ethical business practices in everything we do—research and development, manufacturing and distribution.

Allergan remains focused on sustainable business practices including:

Offering needed products that have environmental health and safety design considerations.

Managing our environmental impact by improving energy, waste, and water efficiency.

Providing a safe and healthy workplace for our employees.

Working with (and auditing) our supply chains to improve corporate responsibility performance.

Executing on the principles of our Social Contract with Patients.

Supporting our business by delivering leading compliance and risk management guidance, resources and assurance.

As a company, we've set an ambitious goal to further reduce our environmental impact by 20% by 2020 (compared to 2015), including by reducing our greenhouse gas emissions, energy consumption, and waste

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generation. We believe that these measures are the most relevant and impactful sustainability metrics for our transformed Company.

Results of our sustainability efforts include:

Recognition for broad sustainability programs by inclusion in the Dow Jones Sustainability Index and FTSE 4 Good Index.

Recognition by the United States Environmental Protection Agency with receipt of 2018 Partner of the Year—Sustained Excellence Award. Additionally, the Waco, Texas plant and four buildings on the Irvine, California campus received ENERGY STAR certification in 2018 for superior energy efficiency and environmental performance

Recognition from Center for Climate and Energy Solution in the Organization Leadership category.

"B" score in the CDP (Carbon Disclosure Project) Investor Survey, which indicates a more advanced environmental stewardship and signals that the Company is measuring and managing its impact, developing a policy and strategic framework within which to take action and reduce negative climate change impacts.

Top quartile employee safety performance, driven by a robust employee observations process and strong management engagement.

Implementation of projects at manufacturing operations to reduce waste, and water consumption.

Use of 100% renewable energy at seven key manufacturing / R&D operations.

More information on our Corporate Social Responsibility and Sustainability practices can be found at www.allergan.com under the "Responsibility—Social Responsibility" section.

Workforce Sustainability and Talent Management

Allergan is also committed to workforce sustainability by engaging, developing, rewarding, attracting and retaining top talent globally at all levels. As part of our focus on workforce sustainability, we have completed a global all-colleague survey in 2018 to measure engagement, culture and overall satisfaction. Results showed generally positive levels of engagement and influenced our talent focus areas for immediate action planning.

Additionally, aligned with our engagement results, we have put in place a talent management plan that provides opportunities for our leaders to focus on their growth through a blend of performance management, individual development plans, and a variety of learning options that are focused on building leadership and professional skills for our future, including:

The implementation of a development plan that enables colleagues to own their career with their manager's support.

A strong commitment to building our talent pipeline through robust succession planning, identification of development opportunities, and a Leadership Skills framework for all colleagues.

Learning and development programs offered in a variety of formats, including eLearning courses, instructor-led classes, and experiential development, all of which are aligned with our Leadership Skills framework.

We believe that attracting and retaining the very best talent is essential to sustainable and profitable growth for Allergan for years to come.

Our Social Contract

In 2016, our Chief Executive Officer made unprecedented commitments to uphold our Social Contract with Patients (our "Social Contract"). Our Board of Directors has affirmed its commitment to the Social Contract, and the Quality and Innovation Committee of our Board oversees the Company's compliance with the Social Contract.

Our Board of Directors recognizes the strong connection between our Social Contract and the role it plays in the corporate governance of the Company, and believes that adhering to the four principles of the Social Contract is

    

 

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key to our Company's success, as it enables our Company to fulfill our responsibilities to patients which, in turn, fuels our ability to generate return for our shareholders. The four principles of the Social Contract are:

Principle 1: Invest & Innovate  

We commit to investing, at risk, billions of dollars to develop life-enhancing innovations.

We will do so in the U.S. and around the world, and use our Open Science model to access promising inventions that exist outside of Allergan.

We do so because we believe that this is our responsibility as part of our social contract with people who are hoping for a better, healthier life.

Principle 2: Access & Price  

We commit to making these branded therapeutic treatments accessible and affordable to patients.

We commit to working with decision makers and intermediaries to make our products accessible to all people who need them.

We commit to pricing our products in a way that is commensurate with, or lower than, the value they create.

We will not engage in price gouging actions or predatory pricing and will limit price increases; where we increase price on our branded therapeutic medicines, we will take price increases no more than once per year and, when we do, they will be limited to single-digit percentage increases.

Principle 3: Quality & Safety  

We commit to intensely monitoring the safety of our medicines, before they are approved by regulators and after they enter the market.

We commit to promptly reporting and acting on new safety data.

We commit to maintaining high standards of quality for each of our products and to maintaining a continuous supply of our medicines.

Principle 4: Education  

We commit to appropriately educating physicians about our medicines so that they can be used in the right patients for the right conditions.

We take pride in doing this well because outcomes matter to everyone.

Our Board's structure and composition encourages thoughtful consideration of the four principles and oversight (through The Quality and Innovation Committee) of management's implementation of the Social Contract, as our Board members bring the perspective of all stakeholders to this discussion, including practicing physicians, retail pharmacy, pharmacy benefit managers, pharmaceutical companies and non-profit patient groups.

More information on our Social Contract can be found at www.allergan.com under the "Responsibility—Social Contract" section.

Communications with the Board of Directors

Any interested party, including any shareholder, wishing to contact the Board of Directors, the Lead Independent Director, or any other individual director may do so in writing by sending a letter to:

Chair, Nominating and Corporate Governance Committee
c/o Corporate Secretary
Allergan plc
Clonshaugh Business and Technology Park, Coolock,
Dublin, D17 E400, Ireland

Our Corporate Secretary reviews all such written correspondence and regularly forwards to the Board of Directors a summary of all correspondence and copies of correspondence that, in the opinion of the Corporate Secretary, deal with the functions of the Board of Directors or its Committees, or that the Corporate Secretary otherwise determines requires the attention of the Board.

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Proposal No. 2 Non-Binding Vote on the Compensation of Our Named Executive Officers ("Say-on-Pay-Vote")

Background

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are providing our shareholders the opportunity to vote to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. The Company has determined to hold such say-on-pay advisory vote every year and following the 2019 Annual General Meeting of Shareholders expects to hold its next non-binding say-on-pay vote at the 2020 Annual General Meeting of Shareholders.

Summary

In accordance with Section 14A of the U.S. Securities and Exchange Act of 1934 (the "Exchange Act"), we are asking our shareholders to provide advisory (non-binding) approval of the compensation of our Named Executive Officers (which consist of our Chief Executive Officer, Chief Financial Officer and our next three highest paid executives), as such compensation is described in the "Compensation Discussion and Analysis" section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in this Proxy Statement, beginning on page 47. Our executive compensation programs are designed to enable us to attract, motivate and retain executive talent who are critical to our success. These programs link compensation to the achievement of pre-established corporate financial performance objectives and other key objectives within each executive's area of responsibility and provide long-term incentive compensation that focuses our executives' efforts on building shareholder value by aligning their interests with those of our shareholders. The following is a summary of some of the key points of our executive compensation program. We urge our shareholders to review the "Compensation Discussion and Analysis" section of this Proxy Statement and executive-related compensation tables for more information.

Performance-Based Compensation. Our executive compensation program includes (i) annual incentive awards that focus on annual financial and strategic goals that support long-term value creation; and (ii) performance-based long-term incentives that are directly linked to the creation of long-term, sustainable shareholder value.

Long-Term Compensation. Grants of performance share units are intended to align the interests of executives with our shareholders and focus executives' attention on long-term growth. In addition, even after performance awards are earned, they continue to be subject to service vesting requirements to promote executive retention and a longer-term perspective.

Independent Compensation Consultant. The Compensation Committee has engaged an independent global executive compensation consulting firm, Steven Hall & Partners, to advise the Committee on matters related to executive compensation.

Resolution

RESOLVED, that the compensation of Allergan's Named Executive Officers, as described in the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in this Proxy Statement, be and is hereby approved.

Board Recommendation

The Board of Directors unanimously recommends that shareholders vote FOR adoption of the resolution approving, on an advisory (non-binding) basis, the compensation of the Company's Named Executive Officers, as described in the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in this Proxy Statement.

Our Board of Directors believes that the information provided above and within the "Compensation Discussion and Analysis" section of this Proxy Statement demonstrates that our executive compensation program was designed appropriately and is working to ensure that management's interests are aligned with our shareholders' interests to support long-term value creation.

    

 

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Required Vote

A simple majority of votes cast at the Annual Meeting is required to approve, on a non-binding basis, the compensation of our Named Executive Officers.

Abstentions and broker non-votes will not have any effect on the outcome of this proposal because neither an abstention nor a broker non-vote represents a vote cast.

The say-on-pay vote is advisory, and therefore not binding on the Company, the Board of Directors or the Compensation Committee. However, the Board of Directors and the Compensation Committee will consider the outcome of the vote in deciding whether to take any action as a result of the vote and when making future compensation decisions for Named Executive Officers.

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Compensation Discussion and Analysis

In this section, we discuss and analyze the material elements of compensation paid to each of our Named Executive Officers (or "NEOs") in 2018.

2018 Named Executive Officers
 Brenton L. Saunders Chairman, President and Chief Executive Officer
  Matthew M. Walsh Executive Vice President and Chief Financial Officer
  William Meury Executive Vice President and Chief Commercial Officer
  C. David Nicholson, PhD Executive Vice President and Chief R&D Officer
  A. Robert D. Bailey Executive Vice President and Chief Legal Officer and Corporate Secretary
  Maria Teresa Hilado Former Executive Vice President and Chief Financial Officer

The Executive Summary that follows provides an overview of our performance and its relationship with our compensation decisions and practices. Following the Executive Summary, we will review each element of compensation. This Compensation Discussion and Analysis should be read together with the information in the Summary Compensation Table and other executive compensation tables below.

TABLE OF CONTENTS
47   Executive Summary
52   Impact of 2018 Say on Pay Vote & Shareholder Engagement
54   Determination of Compensation
66   Other Compensation Practices
71   2018 Compensation Tables

Executive Summary

2018 Business Highlights and Share Price Performance

2018 was a year of steady strategic progress for Allergan, and we furthered our transformation into a global biopharmaceutical leader focused on four key therapeutics areas—medical aesthetics, eye care, central nervous system and gastroenterology. Through focused execution of our strategic priorities, we delivered on all operational and financial commitments we set in the beginning of the year and entered 2019 with positive momentum.

    

 

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2019 ANNUAL PROXY STATEMENT


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Our financial results in 2018 reflected the strength of our Core Business and operational discipline, enabling us to deliver solid top and bottom line performance while offsetting the impact of short-term headwinds.


$15.8B
Total Net
Revenue
···
that exceeded the
top-end of our 2018
updated guidance

 

+8.3%
Core Business
Growth

···
from promoted
brands and others
with ongoing exclusivity

 

$5.64B
Operating
Cash Flow

···
was strong through
the year and
exceeded 2018 guidance

 

$400M
Cost
Savings

···
from previously
announced
restructuring program

 

$16.69
Non-GAAP
Performance Net
Income Per Share

···
that exceeded our
target for full year
2018 under our Annual
Incentive Plan
We delivered solid Core Business growth, with particular strength in our leading brands—Botox® Therapeutic (+13%) and Cosmetic (+14%), Vraylar® (+69%) and Juvéderm® (+12%). The continued growth in our Core Business, which represented 87% of our total revenues in 2018, helped offset the unfavorable impact of divestitures and the LOE on certain brands. All growth figures exclude the impact of foreign exchange.

We delivered strong non-GAAP operating margins while continuing to invest in key growth drivers across our four key therapeutic areas.

We completed a significant cost savings initiative in 2018 that reduced the company's cost base by $400 million and headcount by 1,500, in each case versus 2017, to better position our company for durable long-term growth and profitability in anticipation of the LOE for a leading product.

We continued to generate robust cash flows and prudently deployed our capital, with a focus on strategic reinvestments in growth, continued debt reduction and capital returns to shareholders. Specifically, we:


 

 

1. Paid down $6.15 billion in debt in 2018, which reduced our gross leverage ratio to 3.0x from 3.7x in year-end 2017.

 

 

 

 

2. Completed $2.74 billion in share buybacks, representing approximately 5% of our total shares outstanding at the end of 2017.

 

 

 

 

3. Paid an annual dividend of $2.88 per ordinary share to our shareholders.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Over the course of 2018, Allergan's highly-promising R&D pipeline advanced with positive results in six late-stage programs across our four key therapeutic areas.

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The positive momentum in our pipeline reinforces our confidence in our long-term outlook, and we expect to deliver one to two new product launches every year over the next several years to address highly unmet needs of patients and create significant value for shareholders.

However, our stock price continued in 2018 to be disconnected from our strong strategic performance and, as a result, recent payouts under our long-term incentive plans have been significantly below target and some awards resulted in no payout at all, demonstrating unambiguous shareholder alignment in our compensation program. See "Our Guiding Principle: Pay for Performance" on page 50 for more details.

While our strong strategic progress and attractive long-term outlook was not reflected in our stock price in 2018, we believe that our focus on execution during the year has set us up to increase shareholder value in 2019 and beyond.

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Our Guiding Principle: Pay for Performance

As we continue our transformation from a generics company into a global biopharmaceutical leader, we remain committed to a pay-for-performance culture and implementation of the best practices in corporate governance. This is evidenced by the fact that 93% of our CEO's total target direct compensation opportunity is variable or "at-risk", a greater proportion than any of our peer companies.

COMPONENTS OF CEO PAY   COMPONENTS OF OTHER NEO PAY (AVERAGE)

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Within this pay-for-performance framework, our compensation program is designed to promote six key objectives:

Create unambiguous long-term shareholder alignment

Drive sustainable top- and bottom-line growth

Create a unified management team aligned to a shared set of objectives

Attract and retain key executive talent

Reinforce our BOLD, entrepreneurial culture

Encourage a long-term perspective and discourage short-term risk taking

Application of Best Practices in Compensation and Corporate Governance

Our pay-for-performance culture is supported through sound compensation and corporate governance policies and programs that reflect best practices.

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COMPENSATION DISCUSSION AND ANALYSIS
What We Do and What We Don't Do

Retain an independent compensation consultant that performs no services for the Company other than for the Board and Compensation Committee

Pay the vast majority of executive compensation in the form of incentive awards

Determine incentive payouts based on a variety of challenging, pre-determined performance goals

Cap the maximum payout under our annual incentive awards and maximum vesting percentage of our PSUs

Include a clawback provision in our Annual Incentive Plan and in our CEO's employment agreement

Take into consideration the compensation levels of an appropriate and relevant peer group of companies when setting compensation

Subject executives to a robust stock ownership policy

Include double-trigger vesting provisions in our equity award agreements

Conduct a periodic risk assessment of our compensation program

Regularly engage with shareholders on compensation and governance matters

 

Don't allow executives to participate in the determination of their own compensation

Don't pay guaranteed bonuses

Don't use the same performance metrics for short-term and long-term compensation

Don't backdate options or re-price underwater options

Don't provide excessive perquisites

Don't pay compensation that is significantly misaligned with peer companies

Don't allow our officers or directors to hedge or pledge our stock

Don't provide tax gross-ups

Don't encourage excessive risk taking

Key Compensation Decisions for 2018

No Increases in Compensation Opportunities

In 2018, no adjustments were made to base salaries or target annual incentive opportunities for the NEOs (other than for Mr. Walsh, who was hired in 2018). In addition, no new equity incentive awards were granted to our executives (other than to Mr. Walsh) given that the previous equity grant was biennial in nature and reflected 2018 and 2019 target equity values. We will not grant additional equity incentive awards to these recipients prior to 2020.

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Incentive Award Payouts Reflect Performance

Our incentive compensation programs are designed to closely align payouts with our financial and/or share price performance as well as the individual performance of our NEOs. Our program goals are directly tied to our strategic goals of (1) driving top- and bottom-line growth, (2) advancing our R&D pipeline and (3) enhancing share price performance—both absolute and relative.

Long-term Incentives:    Share price performance—both absolute and relative—has been the primary performance measure of our long-term awards because it incentivizes actions that drive sustainable growth in our share price through long performance measurement and vesting periods. Additionally, share price performance

    

 

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2019 ANNUAL PROXY STATEMENT

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has provided a durable performance measure through our period of transformation from a generic to a branded biopharmaceutical company. Beginning in 2017, with the new PSU program, the Compensation Committee, considering shareholder feedback, added an R&D metric to the PSU program (the "2018-2019 PSUs") to incentivize management to deliver on key R&D milestones that are necessary to advancing our pipeline and driving future performance of the company and eliminated absolute share price performance as a measure. See pages 64-65 for more detail on the 2018-2019 PSUs.

Annual Incentive:    For the 2018 performance year, the financial metrics used to determine the corporate financial performance factor were 50% Non-GAAP Net Revenue ("Net Revenue") and 50% Non-GAAP Performance Net Income Per Share ("PNI"). These were chosen to align to our objective of driving top- and bottom-line growth. Financial performance under our AIP resulted in 142% achievement of the corporate financial metrics. Actual incentive amounts for our NEOs, other than our CEO, ranged from 163% to 210% of target, reflecting strong performance across the strategic financial and individual goals for each of the NEOs during 2018.

For our CEO, despite strong performance across our corporate financial goals and his pre-set strategic objectives, given the performance of our stock and the Compensation Committee's desire to ensure our overall executive compensation program maintains unambiguous shareholder alignment, the Compensation Committee applied negative discretion and reduced his AIP award by over 50% (from $6,177,000 down to $3,000,000). See pages 57-63 for additional details on the 2018 Annual Incentive Plan.

CEO's Realized and Realizable Compensation

As a result of the decline in our share price, approximately 40% of our CEO's target total direct compensation opportunity (base salary, target annual incentive and target long-term incentives) for the most recently completed three-year period (2016-2018) was realizable as of December 31, 2018. In addition, our CEO has realized only approximately 20% of his target long-term incentive opportunity for awards granted since 2014 that were based on our stock price (cash-based awards that vest based on total shareholder return and equity-based awards) and where the performance period was completed as of December 31, 2018. This further demonstrates the alignment of our executive compensation program with long-term shareholder returns.

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*
Calculated as value of long-term incentive awards that were based on our stock price and that were completed as of December 31, 2018 compared to target. Excludes PSUs with performance periods in progress and unvested RSUs.
**
Calculated as the annualized value of our CEO's 2016-2018 target total direct compensation (base salary, target annual incentive and target long-term incentives, including transaction-related awards) compared to the actual base salary and AIP awards earned from 2016-2018 and the value of long-term incentive awards for this period as of December 31, 2018, based on our closing price on December 31, 2018 and assuming that the performance period ended on December 31, 2018 for in-cycle awards.

Impact of 2018 Say on Pay Vote & Shareholder Engagement

Consistent with the preference of a substantial majority of our shareholders, the Company has determined to hold a say-on-pay advisory vote on executive compensation annually. Accordingly, at our 2018 Annual General Meeting of Shareholders, we provided shareholders with the opportunity to cast a non-binding vote on a proposal regarding the compensation of our executives in the year ended December 31, 2017. Of the votes cast on this 2018 "say-on-pay" vote, 91% were in favor of the proposal. We were pleased with these results and believe it reflects our continuous efforts to engage with shareholders and solicit their feedback on our compensation program.

As described in this Proxy Statement, over the past several years, certain independent members of our Board and senior management have engaged with our shareholders to discuss and obtain additional feedback on a variety of topics. Since the 2018 Annual General Meeting of Shareholders, we requested calls and meetings with shareholders who collectively owned over 50% of the Company's outstanding ordinary shares and met in person or telephonically with shareholders representing approximately 23% of outstanding ordinary shares. Topics discussed as part of this engagement included corporate governance matters such as the Board's leadership structure and the composition and refreshment of our Board; succession planning; our executive compensation program; business strategy and capital allocation; and corporate social responsibility. Shareholder feedback from these engagements was shared with the Board and its committees so that they could discuss and consider the significant comments or concerns that are identified.

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COMPENSATION DISCUSSION AND ANALYSIS

A summary of the compensation-related feedback we received during our recent shareholder engagement efforts including feedback received during and after the 2018 Annual General Meeting of Shareholders is set forth below.

Topic
  What We Heard and What We Did
Shareholder alignment   Several shareholders commented positively on the alignment achieved between our incentive programs and our stock price performance, including the 44% payout under the performance share units for 2015-2017. Investors shared their views that it is critical to continue to maintain a pay for performance philosophy and retain relative total shareholder return as a component of our incentive programs. We also received positive reaction to the level of share ownership by our CEO and other executives and the inherent alignment achieved by such ownership levels. We intend to continue to focus on shareholder alignment when designing our future incentive programs and continue to reinforce our share ownership and entrepreneurial culture.
R&D milestones   After the 2017 Annual General Meeting of Shareholders, shareholders expressed their desire for us to include an operating goal focused on R&D in our incentive programs, given the criticality of our pipeline to our future success. As a result, we incorporated measurable R&D milestones, including approvals and submissions, from our key R&D programs. Shareholders commented positively on the inclusion of R&D focused metrics in our incentive program and inquired as to the process for selecting the metrics and ensuring they are tied to the programs expected to most likely drive long-term shareholder value. These milestones are established annually through a rigorous process led by the Quality and Innovation Committee, which consists entirely of independent directors, to ensure that the targets are challenging, and the achievements are aligned with expected outperformance if the Company hits such milestones, and subsequently advances the applicable products through the pipeline and brings them to market.
Biennial grant   Certain shareholders expressed their view that the biennial grant structure was atypical and inquired about whether the Company intends to maintain this type of structure going forward. See "Long-Term Incentive Program" on pages 64-65 for more details. In our 2018 Proxy Statement, we provided disclosure regarding the Compensation Committee's rationale for the biennial grant and its alignment with our strategy for that performance period. The Compensation Committee will review whether a more typical annual grant approach is appropriate when reviewing the design of our 2020 long-term incentive program. Shareholders also responded positively to the Company's supplemental disclosure clarifying that given the biennial nature of these awards, the Compensation Committee did not intend to grant additional equity incentive awards to these recipients until 2020.
Executive compensation enhancements made have been responsive to shareholder feedback   Following the 2016 Annual General Meeting of Shareholders, we received feedback from our shareholders requesting enhancements to our disclosure to more clearly articulate how our program design is aligned to our strategy, how we make annual incentive decisions and the performance metrics for outstanding incentive awards. As a result, we enhanced our disclosure in our recent proxy statements regarding how each element of our pay is designed to align to our philosophy and strategy, provided a clearer description of our financial performance and individual performance of our CEO and other NEOs, and included a summary of performance metrics for our outstanding programs. Shareholders have continued to indicate that these enhancements are positive and helpful to investors' understanding of our executive compensation program. We strive to continually enhance our disclosures to provide the appropriate level of detail regarding our compensation philosophy, pay elements and the way they work to advance our business strategy.

Our relationship with our shareholders is an important part of our success and we are committed to continuing to engage with our shareholders in constructive and meaningful dialogue throughout the year.

    

 

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An Independent and Deliberate Process for Determining Compensation

Authority of the Independent Compensation Committee

The Compensation Committee, which consists entirely of independent directors, meets regularly during the year (six times in 2018), and makes all compensation decisions regarding senior management, which includes our NEOs and certain other senior officers of the Company. Meeting agendas are determined by the Chair of the Compensation Committee with the assistance of our Chief Human Resources Officer. At the invitation of the Committee, members of management, including the Chief Human Resources Officer, also may attend Committee meetings, as well as representatives from the Committee's independent compensation consultant, Steven Hall & Partners, and external legal counsel, if needed. The Compensation Committee periodically reviews our overall executive compensation program to ensure that it remains aligned with current business objectives and evolving best practices.

Role of the Independent Compensation Consultant

In 2018, the Compensation Committee continued its engagement of Steven Hall & Partners, an independent compensation consulting firm, to advise the Compensation Committee on executive compensation matters. Steven Hall & Partners reports directly to the Compensation Committee and the Compensation Committee retains the sole right to terminate or replace Steven Hall & Partners at any time. Steven Hall & Partners does not provide any other services to the Company or management.

Each year the Compensation Committee reviews the independence of its compensation consultant and other advisors. In performing its analysis, the Compensation Committee considers the factors set forth in SEC rules and NYSE listing standards. After review and consultation with Steven Hall & Partners, the Compensation Committee has determined that Steven Hall & Partners is independent and there are no conflicts of interest raised by the work of Steven Hall & Partners during the year ended December 31, 2018.

Role of Management

At the Compensation Committee's request, the CEO provides input regarding the performance and appropriate compensation of the other executive officers. The Compensation Committee considers the CEO's perspective because of his direct knowledge of each executive officer's performance and contributions. The CEO is not present during voting or deliberations by the Compensation Committee regarding his own compensation.

Importance of Shareholder Feedback

As discussed further on pages 30-31, we value feedback from shareholders and, accordingly, throughout the year, certain independent members of our Board and senior management engage in dialogue with a significant portion of our shareholders regarding a number of matters important to both the Company and its investors, including our executive compensation program. When structuring the compensation program, the Compensation Committee considers feedback received through direct discussions with investors as well as the results of "Say on Pay" proposals and other shareholder proposals related to executive compensation.

Compensation Peer Group


In setting the compensation for our NEOs and other senior executives, the Compensation Committee reviews the elements of our compensation program, including executive officer compensation levels and opportunities as compared to those provided to similarly situated executives among a peer group of companies with which we compete for talent. In setting this compensation, the Compensation Committee considers compensation survey data from independent third-party sources as well as publicly available information. While we generally aim to set each NEO's target total direct compensation (base salary, target annual incentive compensation and target long-term incentive compensation) within the levels paid to similarly situated executives in our peer group, such data is intended to serve as only one of several reference points to assist the Compensation Committee in its discussions and deliberations.

 

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COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Committee reserves flexibility to vary pay levels for our executives based on a variety of factors, including the desired mix of variable and fixed pay elements, the NEO's overall performance and changes in roles or responsibilities.

The Company's peer group, which is unchanged from 2017, includes the pharmaceutical companies below.

Peer Group*
AbbVie Inc.   Eli Lilly
Amgen Inc.   Gilead Sciences Inc.
AstraZeneca plc   GlaxoSmithKline plc
Biogen Inc.   Merck & Co. Inc.
Bristol-Myers Squibb Company   Novo Nordisk A/S.
Celgene Corporation   Sanofi
*
The Compensation Committee may, from time to time, also use Pfizer, Inc., as a reference company when reviewing pay levels and programs/practices.

Principal Components of 2018 Executive Compensation

The structure of our executive compensation program for 2018 was unchanged from 2017 and continues to support our compensation objectives.

        Relevant Elements of Compensation
Our Philosophy   How We Apply It   Long-Term
Incentives
in the Form of
Performance
Share Units
and
Restricted
Stock Units
  Annual
Incentive
Opportunity
Based on 2018
Non-GAAP Net
Revenue
and Non-GAAP
Performance
Net Income
Per Share
  Competitive
Base Salary
  Employee
Benefits
Focused
on
Well-Being
and Safety
  Allergan
Transaction
Performance-
Based
Award
Create unambiguous long-term shareholder alignment   Link a substantial portion of executives' pay to share price performance   GRAPHIC               GRAPHIC
Drive sustainable top- and bottom-line growth   Tie performance metrics to revenue and adjusted PNI       GRAPHIC