DEF 14A 1 lmdt2018-def14a.htm MEDTRONIC PLC - DEF 14A

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

  Filed by the Registrant  Filed by a Party other than the Registrant
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  Preliminary Proxy Statement
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  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

 MEDTRONIC PLC

 

(Name of Registrant as Specified In Its Charter)

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

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NOTICE OF ANNUAL GENERAL MEETING

Friday, December 7, 2018

8:00 a.m. local time

Shelbourne Hotel, 27 St. Stephen’s Green, Dublin, Ireland

MEETING AGENDA

1.Electing, by separate resolutions, the ten director nominees named in the proxy statement to hold office until the 2019 Annual General Meeting of the Company;
2.Ratifying, in a non-binding vote, the re-appointment of PricewaterhouseCoopers LLP as the Company’s independent auditor for fiscal year 2019 and authorizing, in a binding vote, the Board of Directors, acting through the Audit Committee, to set the auditor’s remuneration;
3.Approving, on an advisory basis, the Company’s executive compensation;
4.Receiving and considering the Company’s Irish Statutory Financial Statements for the fiscal year ended April 27, 2018 and the reports of the directors and auditors thereon, and reviewing the affairs of the Company; and
5.Transacting any other business that may properly come before the meeting.

Proposals 1 to 3 above are ordinary resolutions requiring a simple majority of the votes cast at the meeting to be approved. All proposals are more fully described in this proxy statement. There is no requirement under Irish law that Medtronic’s Irish Statutory Financial Statements for the fiscal year ended April 27, 2018, or the directors’ and auditor’s reports thereon be approved by the shareholders, and no such approval will be sought at the Annual General Meeting.

RECORD DATE

Shareholders of record at the close of business on October 9, 2018, are entitled to vote at the meeting.

ONLINE PROXY DELIVERY AND VOTING

As permitted by the Securities and Exchange Commission, we are making this proxy statement, the Company’s annual report to shareholders, and our Irish statutory financial statements available to our shareholders electronically via the Internet. We believe electronic delivery expedites your receipt of materials, reduces the environmental impact of our Annual General Meeting and reduces costs significantly. The Notice Regarding Internet Availability of Proxy Materials (the “Notice”) contains instructions on how you can access the proxy materials and how to vote online. If you received the Notice by mail, you will not receive a printed copy of the proxy materials unless you request one in accordance with the instructions provided in the Notice. The Notice will be mailed to shareholders on or about October 23, 2018, and will provide instructions on how you may access and review the proxy materials on the Internet and how to vote.

ADMISSION TO THE ANNUAL GENERAL MEETING

If you wish to attend the Annual General Meeting, you must be a shareholder on the record date and either request an admission ticket in advance by visiting www.proxyvote.com and following the instructions provided (you will need the control number included on your proxy card, voter instruction form or Notice), or bring proof of ownership of ordinary shares to the meeting. Tickets will be issued to registered and beneficial owners and to one guest accompanying each registered or beneficial owner.

August 24, 2018

By order of the Board of Directors,

 

Bradley E. Lerman

Senior Vice President, General Counsel and Company Secretary

Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting of Shareholders to be held on December 7, 2018: This proxy statement, the Company’s 2018 Annual Report to Shareholders and our Irish Statutory Financial Statements for the year ended April 27, 2018, are available at www.proxyvote.com.

YOUR VOTE IS IMPORTANT. WE ENCOURAGE YOU TO VOTE.

If possible, please vote your shares over the Internet using the instructions found in the Notice. Alternatively, you may request a printed copy of the proxy materials and vote using the toll-free telephone number on the proxy card or by marking, signing, dating and mailing your proxy form in the postage-paid envelope that will be provided. All proxies will be forwarded to the Company’s registered office electronically. Voting by any of these methods will not limit your right to vote in person at the Annual General Meeting.

Under New York Stock Exchange rules, if you hold your shares in “street” name through a brokerage account, your broker will NOT be able to vote your shares on non-routine matters being considered at the Annual General Meeting unless you have given instructions to your broker prior to the meeting on how to vote your shares. Proposals 1 and 3 are considered non-routine matters under New York Stock Exchange rules. This means that you must give specific voting instructions to your broker on how to vote your shares so that your vote can be counted.

 

 

TABLE OF CONTENTS

PROXY SUMMARY   05
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS   11
PROPOSAL 1 – ELECTION OF DIRECTORS   12
Directors and Nominees   12
CORPORATE GOVERNANCE   18
Our Corporate Governance Principles   18
Lead Independent Director and Chairman; Executive Sessions   18
Board Role in Risk Oversight   19
Compensation Risk Assessment   19
Committees of the Board and Meetings   20
Director Independence   25
Related Party Transactions and Other Matters   25
Complaint Procedure; Communications with Directors   26
Our Codes of Conduct   26
Director Compensation   27
SHARE OWNERSHIP INFORMATION   29
Significant Shareholders   29
Beneficial Ownership of Management   29
Section 16(a) Beneficial Ownership Reporting Compliance   30
COMPENSATION DISCUSSION AND ANALYSIS   31
Executive Summary   31
Participants in Executive Compensation Design and Decision-Making Process   35
Executive Compensation Program Design   36
How We Establish Executive Compensation Levels   37
Fiscal Year 2018 Compensation Decisions   38
Fiscal Year 2018 Annual Medtronic Incentive Plan (“MIP”) Design   39
Fiscal Year 2018 Long-Term Incentive Plan (LTIP) Design   41
Fiscal Year 2019 LTPP Design Change   43
Fiscal Year 2018 Annual and Long-Term Incentive Plan Payouts   43
Other Benefits and Perquisites   45
Executive Compensation Governance Practices and Policies   47
COMPENSATION COMMITTEE REPORT   48
EXECUTIVE COMPENSATION   49
2018 Summary Compensation Table   49
2018 Grants of Plan-Based Awards   52
2018 Outstanding Equity Awards at Fiscal Year End   53
2018 Option Exercises and Stock Vested   55
2018 Pension Benefits   56
2018 Nonqualified Deferred Compensation   57
Potential Payments Upon Termination or Change of Control   59
Equity Compensation Plan Information   61
REPORT OF THE AUDIT COMMITTEE   63
AUDIT AND NON-AUDIT FEES   64
PROPOSAL 2 – NON-BINDING RATIFICATION OF INDEPENDENT AUDITOR AND BINDING AUTHORIZATION OF THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO SET AUDITOR REMUNERATION   65
PROPOSAL 3 – ADVISORY RESOLUTION TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION (“SAY-ON-PAY”)   66
QUESTIONS AND ANSWERS ABOUT THE ANNUAL GENERAL MEETING   67
OTHER INFORMATION   69
Expenses of Solicitation   69
Shareholder Proposals and Director Nominations   69
Delivery of Documents to Shareholders Sharing an Address   69
Notice Regarding Adoption of Financial Reporting Standards (“FRS”) 102   70
Other   70
APPENDIX A – FINANCIAL AND NON-GAAP RECONCILIATIONS   A-1

 

 

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PROXY SUMMARY

This summary highlights information described in more detail elsewhere in this proxy statement. It does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

2018 Annual General Meeting of Shareholders

  Date and Time: Friday, December 7, 2018 at 8:00 a.m. (Local Time)
     
    Place: Shelbourne Hotel
27 St. Stephen’s Green
Dublin, Ireland
     
  Commence Mail Date: October 23, 2018
     
  Record Date: October 9, 2018

Advance Voting Methods and Deadlines

Method Instruction   Deadline

Internet

■     Go to http://www.proxyvote.com and follow the instructions (have your proxy card or internet notice in hand when you access the website)

 

Internet and telephone voting are available 24 hours a day, seven days a week up to these deadlines:

■     Shares held through the Medtronic Savings and Investment Plan and the Medtronic Puerto Rico Employees’ Savings and Investment Plan – 11:59 p.m., Eastern Standard Time, on December 4, 2018

■     Registered Shareholders or Beneficial Owners – 11:59 p.m., Eastern Standard Time, on December 6, 2018


Telephone

■     Dial 1-800-690-6903 and follow the instructions (have your proxy card or internet notice in hand when you call)

 

■     Shares held through the Medtronic Savings and Investment Plan and the Medtronic Puerto Rico Employees’ Savings and Investment Plan – 11:59 p.m., Eastern Standard Time, on December 4, 2018

■     Registered Shareholders or Beneficial Owners – 11:59 p.m., Eastern Standard Time, on December 6, 2018


Mail

■     Mark your selections on the enclosed proxy card

■     Date and sign your name exactly as it appears on proxy card

■     Promptly mail the proxy card in the enclosed postage-paid envelope

 

Return promptly to ensure it is received before the date of the Annual General Meeting

■     Shares held through the Medtronic Savings and Investment Plan and the Medtronic Puerto Rico Employees’ Savings and Investment Plan – 11:59 p.m., Eastern Standard Time, on December 4, 2018

■     Registered Shareholders or Beneficial Owners – 11:59 p.m., Eastern Standard Time, on December 6, 2018

Questions and Answers About Attending our Annual General Meeting and Voting

We encourage you to review the questions and answers about our Annual General Meeting and voting beginning on page 67 to learn more about the rules and procedures surrounding the proxy and Annual General Meeting process, as well as the business to be conducted at our Annual General Meeting. If you plan to attend the Annual General Meeting in person, we direct your attention to the information following “Admission to the Meeting” on page 68.

IF YOU WISH TO ATTEND THE ANNUAL GENERAL MEETING, YOU MUST EITHER REQUEST AN ADMISSION TICKET IN ADVANCE OR BRING PROOF OF OWNERSHIP OF ORDINARY SHARES TO THE MEETING.

YOUR VOTE IS IMPORTANT! PLEASE CAST YOUR VOTE AND PLAY A PART IN THE FUTURE OF MEDTRONIC.

MEDTRONIC PLC    2018 Proxy Statement     5

 

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Voting Matters and Board Recommendations

Proposal Board
Recommendation
For More
Information
Proposal 1 — To elect, by separate resolutions, the ten director nominees named in the proxy statement to hold office until the 2019 Annual General Meeting of the Company FOR” all nominees Page 12
Proposal 2 — To ratify, in a non-binding vote, the re-appointment of PricewaterhouseCoopers LLP as Medtronic’s independent auditor for fiscal year 2019 and to authorize, in a binding vote, the Board of Directors, acting through the Audit Committee, to set the auditor’s remuneration FOR Page 65
Proposal 3 — To approve in a non-binding advisory vote, named executive officer compensation (a “Say-on-Pay” vote) FOR Page 66

Director Nominees

You are being asked to vote, by separate resolutions, on the election of the following ten Directors. Each Director nominee is elected annually by a majority of votes cast. Detailed information about each Director’s background, skill sets and areas of expertise can be found beginning on page 13.

                      Other Current Public Boards(1)
                     
    Director
Since
    Committee Memberships
Name Age(1) Principal Position Indep. AC CC FFRC NCGC QC TVCC
Richard H. Anderson 63 2002 President and Chief Executive Officer of Amtrak Y M M M M    
Craig Arnold 58 2015 Chairman and Chief Executive Officer of Eaton Corporation Y   C M     M 1
Scott C. Donnelly(2) 56 2013 Chairman, President and Chief Executive Officer of Textron, Inc. Y   M   C   M 1
Randall J. Hogan, III 62 2015 Chairman of nVent Electric plc Y C M   M     1
Omar Ishrak 62 2011 Chairman and Chief Executive Officer of Medtronic plc N             1
Michael O. Leavitt 67 2011 Founder and Chairman of Leavitt Partners Y     M   M C 1
James T. Lenehan 69 2007 Financial Consultant and Retired Vice Chairman and President of Johnson & Johnson Y M       M M
Elizabeth Nabel, M.D. 66 2014 President of Brigham Health and Professor of Medicine, Harvard Medical School Y M       C M
Denise M. O’Leary 60 2000 Private Venture Capital Investor Y     C M M   1
Kendall J. Powell 64 2007 Retired Chairman and Chief Executive Officer of General Mills, Inc. Y   M M M    
(1)As of July 1, 2018.
(2)Lead Independent Director.
AC:Audit Committee
CC:Compensation Committee
FFRC:Finance and Financial Risk Committee
NCGC:Nominating and Corporate Governance Committee
QC:Quality Committee
TVCC:Technology and Value Creation Committee
C:Chair
M:Member

Corporate Governance Highlights

Strong Lead Independent Director
See page 18
  Annual Board and Committee Evaluation Processes
See page 18
  Robust Risk Management Program
See page 19
         
Stock Ownership Guidelines for Named Executive Officers and Directors
See pages 28 and 47
  Annual Board of Director Elections and Majority Voting for Directors
See page 12
  Regular Executive Sessions of Independent Directors
See page 18
         
Added ESG Oversight Responsibility to the Nominating and Corporate Governance Committee’s Responsibilities
See page 23
  Sustainability and Citizenship Highlights
See page 10
  Proxy Access
High Ethical Standards Established in Written Policies and Actions (Includes Codes of Conduct, U.S. Patient Privacy Principles, Political Contribution Policy, and Policies Regarding Environmental, Health and Safety and the Use of Animals)
See page 26 and our investor relations website

MEDTRONIC PLC    2018 Proxy Statement     6

 

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2018 Board Composition

2018 Board Skills

Executive Leadership   Financial Expertise   Health Care Expertise   Marketing Expertise
             
ESG Expertise   Experience with Large Complex Organizations   Global Operations Experience   Regulatory/Political/ Health Care Policy Experience
             
Public Company Board Experience   Strategic Planning Expertise   Technology Experience   Institutional Investor Experience

Shareholder Outreach on Governance

We recognize the value of shareholder engagement and take a proactive approach to shareholder outreach on governance matters. We continuously engage with our shareholders, including investment and governance specialists, to seek input on governance, executive compensation, strategic issues and to address their questions and concerns. We bring feedback from our shareholders to our Board; such feedback is instrumental to the Board’s decision-making process.

ENGAGEMENT CYCLE

MEDTRONIC PLC    2018 Proxy Statement     7

 

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Performance Highlights

Medtronic is the global leader in medical technology - alleviating pain, restoring health, and extending life for millions of people around the world. Fiscal year 2018 was a solid year for Medtronic. The company delivered record revenue, made progress in each of its growth strategies, met its Covidien cost synergy commitments, and deployed its capital in line with its stated priorities, balancing the return of cash to our shareholders with disciplined reinvestment in its businesses.

During fiscal year 2018, Medtronic delivered record revenue of $30.0 billion, growing in the mid-single digits(1) for the sixth consecutive year. The company made progress in each of its growth strategies. In Therapy Innovation, the company executed a steady cadence of meaningful product launches, as well as introduced some groundbreaking new technologies. In Globalization, the company expanded access to its therapies in emerging markets around the world, resulting in double-digit revenue growth(1). In Economic Value, the company continued to extend its industry leadership in developing value-based healthcare solutions.

The integration of Covidien progressed as planned, and Medtronic fully delivered on its goal of realizing $850 million of total cost savings by the end of fiscal year 2018. Operating margin improvement, coupled with Medtronic’s solid revenue growth, were key contributors to delivering double-digit non-GAAP diluted earnings per share growth(1). Free cash flow would have been $4.7 billion when excluding the $1.1 billion pre-payment Medtronic elected to make late in the fourth quarter to the U.S. IRS related to in-process litigation on Puerto Rico transfer pricing.

Medtronic strategically deployed its capital, meeting its commitment of returning a minimum of 50 percent of its free cash flow to its shareholders in the form of dividends and net share repurchases. Late in fiscal year 2017, the company announced the sale of a portion of its Patient Monitoring and Recovery division to Cardinal Health for $6.1 billion as part of its disciplined portfolio management strategy. The transaction closed early in Medtronic’s second quarter of fiscal year 2018.

Medtronic continues to create distinct competitive advantages and capitalize on the long-term trends in healthcare: namely, the desire to improve clinical outcomes; the growing demand for expanded access to care; and the optimization of cost and efficiency within healthcare systems. These trends, along with an aging population in most countries, produce secular growth tailwinds that Medtronic believes represent sustainable, long-term opportunities for the company. The company has a number of growth catalysts and is optimistic about its ability to deliver on its commitments and expand patient access to its products and services around the world.

Most importantly, in its fiscal year 2018, Medtronic served 71 million patients - more patients, in more places around the world, than in any year in its history. Two patients are benefitting from Medtronic therapies and services every second. This is a direct result of the dedication and passion of over 86,000 employees, collaborating with the company’s partners in healthcare, to fulfill the Medtronic Mission.

A few of our more notable fiscal year 2018 performance highlights include the following:

Achieved revenue of $30.0 billion, GAAP net income of $3.1 billion, and non-GAAP net income of $6.5 billion.
Returned $4.3 billion to shareholders in the form of dividends and net share repurchases. Increased its cash dividend by 7 percent, the 40th consecutive year of increasing its dividend payment.
Delivered solid, balanced geographic revenue growth, with low-single digit growth(1) in the United States, mid-single digit growth(1) in Non-U.S. Developed Markets, and double-digit growth(1) in Emerging Markets.
The Cardiac & Vascular Group (CVG) grew revenues in the mid-single digits(1), as the group continued to leverage its breadth of products and services, as well as its strong positions in important, rapidly expanding markets to drive sustainable growth. Combined, its products in transcatheter aortic valve replacement, AF ablation, and left-ventricular assist devices annualize at over $2 billion and are growing over 30 percent.(1)
The Minimally Invasive Therapies Group (MITG) grew revenues in the mid-single digits(1) and continued to benefit from five key growth drivers: Advancing Minimally Invasive Surgery, or MIS, Advanced Parameters & Informatics, Gastrointestinal Disease, End Stage Renal Disease, and Specialty Diversification. The group enjoyed momentum from recently launched products in Advanced Energy and Advanced Stapling, including ValleyLab™ FT10, LigaSure™ instruments and Signia™, its single-handed powered surgical stapler that provides surgeons with real-time feedback during surgery.
The Restorative Therapies Group (RTG) grew revenues in the mid-single digits(1), including 6 percent growth(1) in the fourth quarter, the highest quarterly growth in the history of the Group. This performance was driven by continued solid growth in Neurovascular and Neurosurgery, as well as a strong second half performance in Pain behind strong acceptance of new offerings in Spinal Cord Stimulation, including Intellis™ stimulator, EvolveSM workflow algorithm, and Snapshot™ reporting.
The Diabetes Group grew revenues in the high-single digits(1), driven by US patient demand for the MiniMed® 670G hybrid closed loop system. The group is experiencing strong global demand for its new sensor-augmented insulin pump systems.
(1)Growth rates represent comparisons to fiscal year 2017 on a comparable, constant currency basis, which excludes currency and the impact of the July 29, 2017 divestiture of Medtronic’s Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. Diluted earnings per share used in these calculations is considered a non-GAAP financial measure under applicable SEC rules and regulations. Reconciliations from the most directly comparable GAAP financial measures to the non-GAAP financial measures are included in Appendix A of this proxy statement.

MEDTRONIC PLC    2018 Proxy Statement     8

 

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Executive Compensation Philosophy

Our performance-based compensation programs align the interests of our Named Executive Officers (NEOs) with those of our shareholders. We have developed programs that enable us to attract, retain and engage highly talented executives with compensation packages established pursuant to the following principles:

Market Competitive. We offer market-competitive total direct compensation consisting of base salary, an annual cash incentive and long-term cash and equity incentives. Our targets match the median of our peer group.
Pay for Performance. We emphasize pay for performance by fixing at least 75% of target total direct compensation (base salary + target annual incentive + target long-term incentive) on the attainment of annual and long-term Company performance goals.
Market Median Pay. We calibrate each element of total direct compensation to within a market median range that is +/- 15%of median of our comparator group for base salary and annual incentive and +/- 20% of median for long-term incentives and total direct compensation. We use the median because at least 75% of NEO compensation is tied to annual and long-term Company performance; performance that is above or below the median of our Comparison Group will generate compensation that is above or below the median compensation for the same group.
Comprehensive Benefit Programs. We enhance competitive total direct compensation with comprehensive employee benefit programs that support retirement, health and wellness. NEOs have the same health and retirement benefits as all employees.
Shareholder Value Alignment. We align incentive programs with shareholder value creation by using annual and three-year performance measures that drive shareholder value. Incentive goals are aligned with our Board-approved annual operating plan and our Board-approved long-term strategic plan, both of which are shared with investors. The Board made the decision in fiscal year 2018 to add a Relative Total Shareholder return metric to the 3-year long-term performance plan (LTPP) for fiscal year 2019. LTPP is a 3-year cash incentive, making up 1/3 of the long- term incentive opportunity.
Focus on Quality. We emphasize quality; payouts under our annual incentive plan can be reduced if a quality compliance modifier performance threshold is not achieved. The quality modifier, which may reduce but not increase a payout, is designed to align Medtronic employees with the Medtronic Mission, “To strive without reserve for the greatest possible reliability and quality in our products...”. The modifier uses Food and Drug Administration inspection observation to provide a standardized and rigorous assessment of our product and process quality.

Executive Compensation Program Design

MEDTRONIC PLC    2018 Proxy Statement     9

 

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Sustainability and Citizenship Highlights

Medtronic’s approach to environmental, social and governance (“ESG”) is grounded in our Mission which articulates the Company’s purpose and acknowledges our responsibility to contribute to human welfare; deliver the highest-quality products, therapies and services to patients; make a fair profit; recognize the personal worth of employees; and maintain good citizenship as a company.

Recognizing the significant impact that ESG has on our ability to achieve sustainable growth, the Nominating and Governance Committee of the Company’s Board of Directors has responsibility to review the Company’s ESG performance, including the impacts of our operations on society and the environment.

An executive-level Sustainability Steering Committee, chaired by our Chief Financial Officer, oversees the Company’s sustainability strategy, which is focused primarily on performance related to the following priority issues:

SUSTAINABILITY STRATEGY

Access

Product Quality

Ethics in Sales & Marketing

Responsible Supply
Management

Product Stewardship

Working with health systems around the world - sharing technologies, services, resources, and expertise - to remove barriers to affordable treatment of chronic disease

Implementing industry-leading lifecycle processes,

quality culture, and regulatory compliance programs that ensure our products and services clearly comply with the highest standards of safety and reliability

Implementing industry-leading programs and culture initiatives that promote responsible business practices in the marketing, communication, and promotion of our products and services

Leveraging best practices to develop and implement programs that enhance product quality, worker rights, and environmental protection throughout our supply chain

Establishing a programmatic approach to eliminating materials of concern and minimizing the lifecycle footprint of our products and packaging

Our Sustainability Program Office monitors activities related to our material issues, as well as emerging risks, and escalates them to the Sustainability Steering Committee as appropriate. The program office also tracks long-term internal targets related to each priority issue.

In the past two years, Medtronic has launched a Global Human Rights program and a Responsible Supply Management program to embed management of these issues and ensure compliance with emerging regulations and customer expectations. We are also establishing a Product Stewardship program to formalize a company-wide approach to product and packaging sustainability.

Medtronic releases an Integrated Performance Report annually, which follows the Global Reporting Initiative Sustainability Reporting Framework. This report outlines our management approach and performance related to our five priority issues and 8 other issues identified as vital to our success:

corporate governance
device security
financial strength
philanthropy
post-market surveillance
stakeholder engagement
talent, and
trial data

We also report against select Sustainability Accounting Standards Board key performance indicators for our industry.

The statement above provides information on Medtronic’s activities related to the four overarching areas outlined in the Task-force for Climate-related Financial Disclosure (TCFD) framework: Governance, Strategy, Risk Management, and Metrics/Targets

MEDTRONIC PLC    2018 Proxy Statement     10

 

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CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “may,” “estimate,” “intend” and other similar words. Forward-looking statements in this proxy statement include, but are not limited to, statements regarding individual and Company performance objectives and targets, statements relating to the benefits of Medtronic’s acquisitions, product launches and business strategies, and Medtronic’s intent to return capital to shareholders through dividends and share repurchases. These and other forward looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. Factors that may cause actual results to differ materially from those contemplated by the statements in this proxy statement can be found in Medtronic’s periodic reports on file with the U.S. Securities and Exchange Commission. The forward-looking statements speak only as of the date of this proxy statement and undue reliance should not be placed on these statements. We disclaim any intention or obligation to publicly update or revise any forward-looking statements. This cautionary statement is applicable to all forward-looking statements contained in this document.

MEDTRONIC PLC    2018 Proxy Statement     11

 

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PROPOSAL 1 — ELECTION OF DIRECTORS

Directors and Nominees

Our Board of Directors currently has twelve members, all of whom serve for a term of one year. All nominees are currently Medtronic directors who were elected by shareholders at the 2017 Annual General Meeting. In order to be elected as a director, each nominee must be appointed by an ordinary resolution and each must receive the affirmative vote of a majority of the votes cast by the holders of ordinary shares represented at the Annual General Meeting in person or by proxy. If a nominee becomes unable or declines to serve, the individuals named as proxies in the enclosed proxy form will have the authority to vote for any substitute who may be nominated in accordance with Medtronic’s Articles of Association. We have no reason to believe this will occur. Shirley Ann Jackson, Ph.D. and Robert C. Pozen were not re-nominated because each has reached the mandatory retirement age for directors.

The Nominating and Corporate Governance Committee considers candidates for Board membership, including those suggested by shareholders, applying the same criteria to all candidates. Any shareholder who wishes to recommend a prospective nominee for the Board for consideration by the Nominating and Corporate Governance Committee must notify the Company Secretary in writing at Medtronic’s registered office at 20 on Hatch, Lower Hatch Street, Dublin 2, D02 XH02, Ireland. Any such recommendations should provide whatever supporting material the shareholder considers appropriate, but should at a minimum include such background and biographical material as will enable the Nominating and Corporate Governance Committee to make an initial determination as to whether the nominee satisfies the criteria for directors set out in the Governance Principles.

If the Nominating and Corporate Governance Committee identifies a need to replace a current member of the Board, to fill a vacancy on the Board, or to expand the size of the Board, it considers candidates from a variety of sources, including third-party search firms that assist with identifying, evaluating and conducting due diligence on potential director candidates. The process followed to identify and evaluate candidates includes meetings to review biographical information and background material relating to candidates, and interviews of selected candidates by members of the Board. Recommendations of candidates for inclusion in the Board slate of director nominees are based upon the criteria set forth in the Governance Principles. These criteria include business experience and skills, judgment, honesty and integrity, the ability to commit sufficient time and attention to Board activities and the absence of potential conflicts with Medtronic’s interests. While the Nominating and Corporate Governance Committee does not have a formal diversity policy for Board membership, we seek directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions. When evaluating candidates for Board membership, the Nominating and Corporate Governance Committee considers, among other factors, diversity with respect to viewpoint, skills, experience, and community involvement, and input from other members of the Board.

After completing the evaluation process, the Nominating and Corporate Governance Committee makes a recommendation to the full Board as to individuals who should be nominated by the Board. The Board determines the nominees after considering the recommendations and report of the Nominating and Corporate Governance Committee and such other nominees and evaluations as it deems appropriate.

Shareholders who intend to appear at the Annual General Meeting to nominate a candidate for election by the shareholders at the meeting (in cases where the Board does not intend to nominate the candidate or where the Nominating and Corporate Governance Committee was not requested to consider the candidacy) must comply with the procedures in Medtronic’s Articles of Association, which are described under “Other Information — Shareholder Proposals and Director Nominations” on page 69 of this proxy statement.

MEDTRONIC PLC    2018 Proxy Statement     12

 

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Nominees for directors for one-year terms ending in 2019:

 
 (PHOTO)      RICHARD H. ANDERSON  
President and Chief Executive Officer Director since 2002
Amtrak Age 63

Mr. Anderson has been President and Chief Executive Officer of Amtrak, an intercity passenger rail service provider, since July 2017. From 2007 until May 2016, Mr. Anderson served as Chief Executive Officer and a director of Delta Air Lines, Inc., a commercial airline. Upon retiring as Chief Executive Officer of Delta Air Lines, Inc., he became the Executive Chairman of the board of directors of Delta Air Lines, Inc. until October 2016. He was Executive Vice President of UnitedHealth Group Incorporated, a diversified health care company, from 2004 until 2006. Mr. Anderson was Chief Executive Officer of Northwest Airlines Corporation from 2001 to 2004. Mr. Anderson is a former director of Delta Air Lines, Inc.

Committees: Audit, Compensation, Finance and Financial Risk, and Nominating and Corporate Governance

Other Public Company Directorships: None

Director Qualifications: Mr. Anderson’s qualifications to serve on our Board include his more than 25 years of business, operational, financial and executive management experience. He has also served on the board of directors of another public company. Mr. Anderson’s extensive experience, including within the health care industry and for Fortune 500 companies, allows him to contribute valuable strategic management and risk assessment insight to Medtronic. Additionally, Mr. Anderson qualifies as an “audit committee financial expert” as defined by SEC rules.

 

 

 
 (PHOTO)      CRAIG ARNOLD  
Chairman and Chief Executive Officer Director since 2015
Eaton Corporation Age 58

Mr. Arnold has been Chairman and Chief Executive Officer of Eaton Corporation, a power management company, since June 2016. From September 2015 to May 2016, Mr. Arnold served as President and Chief Operating Officer of Eaton Corporation. Prior to that, Mr. Arnold served as the Vice Chairman and Chief Operating Officer, Industrial Sector, of Eaton Corporation. From 2000 to 2008 he served as Senior Vice President of Eaton Corporation and Group Executive of the Fluid Power Group of Eaton. Prior to joining Eaton, Mr. Arnold was employed in a series of progressively more responsible positions at General Electric Company from 1983 to 2000. Mr. Arnold was appointed to the Board of Directors of Eaton Corporation in 2015. Mr. Arnold is a former director of Covidien plc.

Committees: Compensation (Chair), Finance and Financial Risk, and Technology and Value Creation

Other Public Company Directorships: Eaton Corporation

Director Qualifications: With his years of managerial experience, both at Eaton and at General Electric, Mr. Arnold brings to the Board of Directors demonstrated management ability at senior levels. His position as Chief Executive Officer of the Eaton Industrial Sector gives Mr. Arnold critical insights into the operational requirements of a large, multinational company. In addition, in previously serving on the Audit Committee of another public company, Mr. Arnold gained valuable experience dealing with accounting principles and financial reporting rules and regulations, evaluating financial results, and generally overseeing the financial reporting process of a large corporation.

 

 

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 (PHOTO)      SCOTT C. DONNELLY  
Chairman, President and Chief Executive Officer Director since 2013
Textron, Inc. Age 56

Mr. Donnelly is Chairman, President and Chief Executive Officer of Textron, Inc., a producer of aircraft, defense and industrial products. Mr. Donnelly joined Textron in June 2008 as Executive Vice President and Chief Operating Officer and was promoted to President and Chief Operating Officer in January 2009. He was appointed to the Board of Directors in October 2009, and became Chief Executive Officer of Textron in December 2009 and Chairman of the Board in September 2010. Previously, Mr. Donnelly was the President and CEO of General Electric Company’s aviation business unit, GE Aviation, a leading maker of commercial and military jet engines and components as well as integrated digital, electric power and mechanical systems for aircraft. Prior to July 2005, Mr. Donnelly held various other management positions since joining General Electric in 1989.

Committees: Compensation, Nominating and Corporate Governance (Chair), and Technology and Value Creation

Other Public Company Directorships: Textron, Inc.

Director Qualifications: Mr. Donnelly’s qualifications to serve on our Board include more than two decades of business experience in innovation, manufacturing, sales and marketing, and business processes. Mr. Donnelly also serves on the board of directors of another public company. His extensive executive decision-making experience and corporate governance work make Mr. Donnelly a valuable director.

 

 

 
 (PHOTO)      RANDALL J. HOGAN, III  
Chairman Director since 2015
nVent Electric plc Age 62

Mr. Hogan has been the Chairman of nVent Electric plc, a manufacturing company for electrical connection and protection products, since May 2018. From January 2001 until May 2018, Mr. Hogan served as Chief Executive Officer of Pentair plc, an industrial manufacturing company and was appointed Chairman in May 2002. From December 1999 to December 2000, he was President and Chief Operating Officer of Pentair, from March 1998 to December 1999 he was Executive Vice President and President of Pentair’s Electrical and Electronic Enclosures Group. Prior to joining Pentair, he was President of the Carrier Transicold Division of United Technologies Corporation. Before that, he was with the Pratt & Whitney division of United Technologies, General Electric Company and McKinsey & Company. Mr. Hogan is the past Chair of the board of the Federal Reserve Bank of Minneapolis. Mr. Hogan is a former director of Covidien plc. and Pentair plc.

Committees: Audit (Chair), Compensation, and Nominating and Corporate Governance

Other Public Company Directorships: nVent Electric plc

Director Qualifications: Serving as Chairman of nVent Electric plc and having served in the roles of Chairman, Chief Executive Officer, President and Chief Operating Officer of Pentair, Mr. Hogan offers a wealth of management experience and business acumen. Running a public company gave Mr. Hogan front-line exposure to many of the issues facing public companies, particularly on the operational, financial and corporate governance fronts. Mr. Hogan’s service on the Board of Directors and Governance Committee of Unisys as well as on the Board of the Federal Reserve Bank of Minneapolis and service as former Chair of the Audit Committee of Covidien plc further augments his range of knowledge, providing experience on which he can draw while serving as a member of our Board and Audit Committee. Additionally, Mr. Hogan qualifies as an “audit committee financial expert” as defined by SEC rules.

 

 

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 (PHOTO)      OMAR ISHRAK  
Chairman and Chief Executive Officer Director since 2011
Medtronic plc Age 62

Mr. Ishrak has been Chairman and Chief Executive Officer of Medtronic since 2011. Prior to joining Medtronic, Mr. Ishrak served as President and Chief Executive Officer of GE Healthcare Systems, a comprehensive provider of medical imaging and diagnostic technology, from 2009 to 2011. Before that, Mr. Ishrak was President and Chief Executive Officer of GE Healthcare Clinical Systems from 2005 to 2008 and President and Chief Executive Officer of GE Healthcare Ultrasound and BMD from 1995 to 2004.

Other Public Company Directorships: Intel Corporation

Director Qualifications: Mr. Ishrak’s qualifications to serve on our Board include his more than 30 years in the health care industry and more than 35 years of technology development and business management experience. Mr. Ishrak’s strong technical expertise and deep understanding of our customers, as well as his long history of success as a global executive in the medical technology industry, make him a valuable and qualified director with critical technical, leadership and strategic skills.

 

 

 
 (PHOTO)      MICHAEL O. LEAVITT  
Founder and Chairman Director since 2011
Leavitt Partners Age 67

Governor Leavitt has been founder and Chairman of Leavitt Partners, a family of healthcare companies focused on value based healthcare policy, since 2009. Prior to that he was the United States Secretary of Health and Human Services from 2005 to 2009; Administrator of the Environmental Protection Agency from 2003 to 2005; and Governor of Utah from 1993 to 2003. Governor Leavitt is a former director of Health Equity, Inc.

Committees: Finance and Financial Risk, Quality, and Technology and Value Creation (Chair)

Other Public Company Directorships: American Express Company

Director Qualifications: Governor Leavitt’s qualifications to serve on our Board include his extensive management and leadership experience, including serving as the Governor of Utah, a large state with a diverse body of constituents, appointments to positions with the U.S. government, where he oversaw and advised on issues of national concern; and overseeing Leavitt Partners, LLC’s work advising and investing in health care. Governor Leavitt’s decades of leadership experience with valuable knowledge of the governmental regulatory environment and corporate governance makes him a valuable member of our Board.

 

 

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 (PHOTO)      JAMES T. LENEHAN  
Financial Consultant and Retired Vice Director since 2007
Chairman and President of Age 69
Johnson & Johnson  

Mr. Lenehan served as President of Johnson & Johnson, an international pharmaceutical company, from 2002 until 2004, when he retired after 28 years of service to Johnson & Johnson. During those 28 years, Mr. Lenehan also served as Vice Chairman of Johnson & Johnson from 2000 until 2004; Worldwide Chairman of Johnson & Johnson’s Medical Devices and Diagnostics Group from 1999 until he became Vice Chairman of the Board; and Worldwide Chairman, Consumer Pharmaceuticals & Professional Group. Mr. Lenehan has been a financial consultant since 2004, including serving as Senior Advisor of Cerberus Operations and Advisory Company, LLC, a private investment firm. Mr. Lenehan is a former director of Talecris Biotherapeutics Holding Corp.

Committees: Audit, Quality, and Technology and Value Creation

Other Public Company Directorships: None

Director Qualifications: Mr. Lenehan’s qualifications to serve on our Board include over 32 years of business, operational and management experience in medical device, pharmaceutical, biotherapeutics and related industries. He also serves on the board of directors of private companies. His management ability at senior levels and financial experience make his input valuable to Medtronic. Additionally, Mr. Lenehan qualifies as an “audit committee financial expert” as defined by SEC rules.

 

 

 
 (PHOTO)      ELIZABETH G. NABEL, M.D.  
President of Brigham Health Director since 2014
Professor of Medicine, Harvard Medical School Age 66

Dr. Nabel has been President of Brigham Health, hospitals and physician organizations operating inpatient and outpatient facilities, clinics, primary care health centers, and diagnostic and treatment technologies, research laboratories, and postgraduate medical and scientific education and training programs, as well as Harvard Medical School’s second largest teaching affiliate. Dr. Nabel has also been a Professor of Medicine at Harvard Medical School since 2010. Prior to that, Dr. Nabel held a variety of roles, including Director, at the National Heart, Lung and Blood Institute at the National Institutes of Health, a federal agency funding research, training, and education programs to promote the prevention and treatment of heart, lung, and blood diseases, from 1999 to 2009. Dr. Nabel is an elected member of the National Academy of Medicine of the National Academy of Sciences.

Committees: Audit, Quality (Chair), and Technology and Value Creation

Other Public Company Directorships: None

Director Qualifications: Dr. Nabel’s qualifications to serve on the Board include extensive experience in the health care field, including senior positions with a number of research universities and organizations. Dr. Nabel has a deep understanding of medical sciences and innovations, as well as physicians and other health care providers who are central to the use and development of our products. Additionally, Dr. Nabel qualifies as an “audit committee financial expert” as defined by SEC rules.

 

 

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 (PHOTO)      DENISE M. O’LEARY  
Private Venture Capital Investor Director since 2000
  Age 60

Ms. O’Leary has been a private venture capital investor in a variety of early stage companies since 1996. She was a member of the Stanford University Board of Trustees from 1996 through 2006, where she chaired the Committee of the Medical Center. Ms. O’Leary is a former director of US Airways Group, Inc. and Calpine Corporation.

Committees: Finance and Financial Risk (Chair), Nominating and Corporate Governance, and Quality

Other Public Company Directorships: American Airlines Group, Inc.

Director Qualifications: Ms. O’Leary’s qualifications to serve on our Board include her extensive experience with companies at a variety of stages and her success as an investor. She also serves on the boards of directors of other public companies. Her financial expertise, experience in the oversight of risk management, and thorough knowledge and understanding of capital markets provide valuable insight with regard to corporate governance and financial matters.

 

 

 
 (PHOTO)      KENDALL J. POWELL  
Retired Chairman and Chief Executive Officer Director since 2007
General Mills, Inc. Age 64

Mr. Powell was Chairman of General Mills, Inc., an international producer, marketer and distributor of cereals, snacks and processed foods, from 2008 until December 2017 and was Chief Executive Officer of General Mills, Inc. from 2007 until June 2017. He was President and Chief Operating Officer of General Mills, Inc. from 2006 to 2007, and became a director of General Mills, Inc. in 2006. He was Executive Vice President and Chief Operating Officer, U.S. Retail from 2005 to 2006; and Executive Vice President of General Mills, Inc. from 2004 to 2005. From 1999 to 2004, Mr. Powell was Chief Executive Officer of Cereal Partners Worldwide, a joint venture of General Mills, Inc. and the Nestle Corporation. Mr. Powell joined General Mills, Inc. in 1979. Mr. Powell is a former director of General Mills, Inc.

Committees: Compensation, Finance and Financial Risk, and Nominating and Corporate Governance

Other Public Company Directorships: None

Director Qualifications: Mr. Powell’s qualifications to serve on our Board include more than three decades of business, operational and management experience. Mr. Powell also served on the board of directors of another public company. His extensive marketing and executive decision-making experience and corporate governance work make Mr. Powell a valuable director.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTOR NOMINEES.

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CORPORATE GOVERNANCE

Our Corporate Governance Principles

The Board of Directors has adopted Principles of Corporate Governance (the “Governance Principles”), last amended August 2017. The Governance Principles describe Medtronic’s corporate governance practices and policies, and provide a framework for the governance of Medtronic. Among other things, the Governance Principles include the provisions below.

A majority of the members of the Board must be independent directors and no more than two directors may be Medtronic employees. Currently one director, Medtronic’s Chairman and Chief Executive Officer, is not independent.
Medtronic maintains Audit, Compensation, Finance and Financial Risk, Nominating and Corporate Governance, Quality,and Technology and Value Creation Committees, which consist entirely of independent directors.
The Board conducts an annual self-evaluation to assess its performance.

Our Governance Principles, the charters of our Audit, Compensation, Finance and Financial Risk, Nominating and Corporate Governance, Quality, and Technology and Value Creation Committees and our codes of conduct are published on our website at www.medtronic.com/us-en/about/corporate-governance.html. These materials are available in print to any shareholder upon request. From time to time, the Board reviews and updates these documents as it deems necessary and appropriate to keep abreast of governance regulations.

Lead Independent Director and Chairman; Executive Sessions

Mr. Ishrak, our Chief Executive Officer, also serves as Chairman of the Board. The Board believes it is appropriate for Mr. Ishrak to serve as Chairman of the Board due to his extensive knowledge of, and experience in, the global health care industry generally and in the medical device industry specifically. This knowledge and experience is critical in identifying strategic priorities and providing unified leadership in the execution of strategy. We believe that Mr. Ishrak’s experience and knowledge as the CEO and Chairman is an asset to Medtronic and promotes efficient board functioning, with independent board leadership provided by our “Lead Independent Director”.

Under Medtronic’s Principles of Corporate Governance, the independent directors annually elect a Lead Independent Director to ensure periodic refreshment of Board leadership roles. Our current Lead Independent Director is Scott C. Donnelly who replaced Richard H. Anderson on July 1, 2017.

As Lead Independent Director, Mr. Donnelly’s duties include:

presiding as chair of regularly scheduled meetings of the independent directors, and presiding as chair of Board meetings at which Mr. Ishrak is not in attendance;
reviewing and approving the agenda for each meeting of the Board of Directors and each of its committees;
leading Board discussion;
overseeing the directors’ annual evaluation of the Board and each of its committees and advising Mr. Ishrak on the conduct of Board meetings;
facilitating teamwork and communications between the non-management directors and management, serving as a liaison between the two;
overseeing the process for identifying and evaluating Board nominees, as the chair of the Nominating and Corporate Governance Committee;
leading the process for assessing appropriate committee leadership and membership on a periodic basis;
recommending, as appropriate, changes to governance policies and practices;
reviewing all committee materials even for committees on which he does not serve; and
acting as the focal point on the Board for suggestions from non-management directors, especially on sensitive issues.

In keeping with Medtronic’s commitment to corporate governance best practices, Mr. Donnelly also takes the lead in both the Board’s ongoing, thoughtful evaluation of Medtronic’s governance structure and constructive shareholder engagement on emerging governance issues. Medtronic’s accountability to its shareholders is clearly indicated by its openness to their engagement, including through its proxy access policy and strong Lead Independent Director. In this role, Mr. Donnelly ensures that he is available, if appropriately requested by shareholders, for consultation and direct communication.

Four regular meetings of our Board were held in fiscal year 2018. At each Board meeting, our independent directors meet in executive session with no Company management present, as did each of our committees.

 

MEDTRONIC PLC    2018 Proxy Statement     18

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Board Role in Risk Oversight

Our Board of Directors, in exercising its overall responsibility to oversee the management of our business, considers risks when reviewing the Company’s strategic plan, financial results, merger and acquisition-related activities, legal and regulatory matters and its public filings with the Securities and Exchange Commission. The Board is also deeply engaged in the Company’s Enterprise Risk Management (“ERM”) program and has received briefings on the outcomes of the ERM program and the steps the Company is taking to mitigate risks that program has identified. The Board’s oversight of risk management includes full and open communications with management to review the adequacy and functionality of the risk management processes used by management. In addition, the Board of Directors uses its committees to assist in its risk oversight responsibility as follows:

Audit Committee: Assists the Board of Directors in its oversight of the integrity of the financial reporting of the Company and its compliance with applicable legal and regulatory requirements. It also oversees our internal controls and compliance activities. The Audit Committee periodically discusses policies with respect to risk assessment and risk management, including appropriate guidelines and policies to govern the process, as well as the Company’s major financial and business risk exposures and certain contingent liabilities and the steps management has undertaken to monitor and control such exposures. It also meets privately with representatives from the Company’s independent registered public accounting firm.
Finance and Financial Risk Committee: assists the Board of Directors in its oversight of risk relating to the Company’s assessment of its significant financial risks and certain contingent liabilities.
Compensation Committee: assists the Board of Directors in its oversight of risk relating to the Company’s assessment of its compensation policies and practices.
Quality Committee: assists the Board of Directors in its oversight of risk relating to product quality and safety, cybersecurity, and research.
Technology and Value Creation Committee: assists the Board of Directors in its oversight of risk relating to product technology and the Company’s position with regard to technological innovation.

Compensation Risk Assessment

We conducted a risk assessment of our compensation policies and practices and concluded that such policies and practices do not create risks that are reasonably likely to have a material adverse effect on our Company. The framework for the assessment was developed using materials from the Compensation Committee’s independent consultant, Frederic W. Cook & Co., Inc. This framework included an update to a comprehensive internal survey used in fiscal year 2010 that was designed to identify material policies and practices to be assessed, a review of the identified compensation plans and practices against the evaluation framework and identification of mitigating factors with respect to any risks.

In particular, as a result of the assessment, we noted that:

Base salaries at Medtronic are generally competitive in the median range of the executive compensation peer companies, not subject to any performance risk and act as a material component of total compensation for most Medtronic employees.
Incentive plans for senior management and executive officers are appropriately weighted between short-term and long-term performance and between cash and equity compensation. In addition, our practice of establishing long-term incentive performance targets at the beginning of each of our overlapping three-year performance periods reduces the incentive to maximize performance during any one year.

Short-term incentive performance goals are recalibrated annually, based upon Medtronic’s annual operating plan approved by the Board, and are different from the long-term performance measures.
Executives and directors are subject to stock ownership and retention guidelines that require directors to maintain ownership of Medtronic stock equal to five (5) times their annual retainer, Medtronic’s CEO to maintain ownership of Medtronic stock equal to six (6) times his annual salary, and the other NEOs to maintain Medtronic stock equal to three (3) times their annual salary. Until the ownership guideline is met, the CEO and directors must retain 75% of after-tax Medtronic shares received through settlement of equity compensation awards and other NEOs must retain 50% of such shares.
Medtronic has implemented policies designed to recoup payments or gains from incentive and equity compensation improperly paid or granted to executives.

 

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Committees of the Board and Meetings

Our standing Board committees consist solely of independent directors, as defined in the New York Stock Exchange (“NYSE”) Corporate Governance Standards. The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (the “Exchange Act”). Each director attended 75% or more of the total Board and Board committee meetings on which the director served in fiscal year 2018. In addition, it has been the longstanding practice of Medtronic for all directors to attend the Annual General Meeting of Shareholders. All directors attended the last Annual General Meeting.

The following table summarizes (i) the membership of the Board as of the end of fiscal year 2018, (ii) the members of each of the Board’s standing committees as of the end of fiscal year 2018, and (iii) the number of times each standing committee met during fiscal year 2018. 

AS OF APRIL 27, 2018

  Board Audit Compensation Finance and
Financial Risk
Nominating and
Corporate
Governance
Quality Technology and
Value Creation
Richard H. Anderson    
Craig Arnold        
Scott C. Donnelly        
Randall J. Hogan, III        
Omar Ishrak              
Shirley Ann Jackson, Ph.D.      
Michael O. Leavitt        
James T. Lenehan      
Elizabeth Nabel, M.D.        
Denise M. O’Leary      
Kendall J. Powell      
Robert C. Pozen      
Number of fiscal year 2018 meetings 4 11 5 4 4 3(1) 3(1)
Member
Chair
(1)Before the Quality and Technology Committee split into the Quality Committee and the Technology and Value Creation Committee, the Quality and Technology Committee met once in fiscal year 2018.

 

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The principal functions of our six standing committees — the Audit Committee, the Compensation Committee, the Finance and Financial Risk Committee, the Nominating and Corporate Governance Committee, the Quality Committee, and the Technology and Value Creation Committee — are described below.

Audit Committee(1)
Randall J. Hogan III (Chair)
Richard H. Anderson
Shirley Ann Jackson, Ph.D.
James T. Lenehan
Elizabeth Nabel, M.D.
Number of
meetings during
Fiscal Year 2018

11

Responsibilities:

Overseeing the integrity of Medtronic’s financial reporting
Overseeing the independence, qualifications and performance of Medtronic’s external independent registered public accounting firm and the performance of Medtronic’s internal auditors
Overseeing Medtronic’s compliance with applicable legal and regulatory requirements, including overseeing Medtronic’s engagements with, and payments to, physicians and other health care providers
Reviewing with the General Counsel and independent registered public accounting firm: legal matters that may have a material impact on the financial statements; any fraud involving management or other employees who have a significant role in Medtronic’s internal controls; compliance policies; and any material reports or inquiries received that raise material issues regarding Medtronic’s financial statements and accounting or compliance policies
Reviewing annual audited financial statements with management and Medtronic’s independent registered public accounting firm and recommending to the Board whether the financial statements should be included in Medtronic’s Annual Report on Form 10-K
Reviewing and discussing with management and Medtronic’s independent registered public accounting firm quarterly financial statements and earnings releases
Reviewing major issues and changes to Medtronic’s accounting and auditing principles and practices, including analyses of the effects of alternative GAAP methods, regulatory and accounting initiatives and off-balance sheet structures on Medtronic’s financial statements
Discussing policies with respect to risk assessment and risk management, including risks affecting Medtronic’s financial statements, operations, business continuity, and reputation and the reliability and security of our information technology and security systems, and the steps management has undertaken to monitor and control such exposures
Undertaking the appointment, compensation (subject to the requirements of Irish corporate law), retention and oversight of the independent registered public accounting firm, which reports directly to the Audit Committee
Pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm
Reviewing, at least annually, a report by the independent registered public accounting firm describing its internal quality-control procedures and any material issues raised by the most recent internal quality-control review and any recent investigations by regulatory or professional agencies, and any steps taken to deal with any such issues, and all relationships between the independent registered public accounting firm and Medtronic
Reviewing the experience and qualifications of the lead partner of the independent registered public accounting firm each year and considering whether there should be rotation of the lead partner or the independent auditor itself
Establishing clear policies for hiring current and former employees of the independent registered public accounting firm
Preparing the Report of the Audit Committee
Meeting with the independent registered public accounting firm prior to the audit to review the scope and planning of the audit
Reviewing the results of the annual audit examination
Reviewing with the independent registered public accounting firm its evaluation of Medtronic’s identification of, accounting for, and disclosure of related party transactions
Advising the Board with regard to Medtronic’s policies and procedures regarding compliance with laws and regulations
Considering, at least annually, the independence of the independent registered public accounting firm
Reviewing the adequacy and effectiveness of Medtronic’s internal control over financial reporting, including information technology and security systems related to internal controls, and disclosure controls and procedures
Reviewing with the Vice President of Internal Audit the performance of Medtronic’s internal audit function and the results of any significant internal audits
Reviewing candidates for the positions of Chief Financial Officer and Controller of Medtronic
Establishing procedures concerning the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters
Meeting privately in separate executive sessions periodically with management, internal auditors and the independent registered public accounting firm
Meeting privately in executive session with the Chief Ethics and Compliance Officer, and approving any decisions with regard to hiring, terminating, disciplining, or compensating the Chief Ethics and Compliance Officer

(1)The Board has determined that all members of the Audit Committee satisfy the applicable audit committee independence requirements of the New York Stock Exchange (NYSE) and the Securities and Exchange Commission (SEC). The Board also determined that all members have acquired the attributes necessary to qualify them as “audit committee financial experts” as defined by applicable SEC rules.

 

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Audit Committee Pre-Approval Policies

Rules adopted by the SEC require public company audit committees to pre-approve audit and non-audit services provided by a company’s independent registered public accounting firm. Our Audit Committee has adopted detailed pre-approval policies and procedures pursuant to which audit, audit-related, tax and other permissible non-audit services are pre-approved by category of service. The fees are budgeted, and actual fees versus the budget are monitored throughout the year. During the year, circumstances may arise when it becomes necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, we obtain the approval of the Audit Committee before engaging the independent registered public accounting firm. The policies require the Audit Committee to be informed of each service, and do not permit any delegation of the Audit Committee’s responsibilities to management. The Audit Committee may delegate pre-approval authority to one or more of its members, but such member(s) must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Compensation Committee(1),(2)
Craig Arnold (Chair)
Richard H. Anderson
Scott C. Donnelly
Randall J. Hogan, III
Kendall J. Powell
Number of
meetings during
Fiscal Year 2018

5

Responsibilities:

Reviewing compensation philosophy and major compensation programs
Annually reviewing executive compensation programs
Annually reviewing and approving corporate goals and objectives relevant to the compensation of the Chief Executive Officer and, based on its own evaluation of performance in light of those goals and objectives, as well as input from the Nominating and Corporate Governance Committee; determining and approving the total compensation of the Chief Executive Officer
Annually approving the total compensation of all other executive officers, including base salaries
Provide oversight and recommend incentive compensation plans and equity-based compensation plans and approve stock and other long-term incentive awards
Monitoring compliance by the Chief Executive Officer and senior management with the Company’s stock ownership guidelines
Reviewing new compensation arrangements and reviewing and recommending to the Board severance arrangements for senior executive officers
Reviewing and discussing with management the Compensation Discussion and Analysis required by the rules of the SEC and recommending to the Board the inclusion of the Compensation Discussion and Analysis in the Company’s annual proxy statement
Assisting the Board in reviewing results of any shareholder advisory votes, responding to other shareholder communications that relate to the compensation of senior executive officers, and reviewing and recommending to the Board for approval the frequency with which Medtronic will conduct shareholder advisory votes
Preparing the Committee’s report to be included in Medtronic’s annual proxy statement
Assessing the Company’s risk relating to its compensation policies and practices
The Compensation Committee may form and delegate authority to subcommittees as it deems appropriate. The Compensation Committee also may delegate certain of its responsibilities to one or more designated senior executives or committees in accordance with applicable laws, regulations, and plan requirements. Please refer to the Compensation Discussion and Analysis beginning on page 31 for additional discussion of the Compensation Committee’s processes and procedures relating to compensation.

(1)The Board has determined that all members of the Compensation Committee satisfy the applicable compensation committee requirements of the NYSE and the SEC.
(2)No member of the Compensation Committee during fiscal year 2018 was an officer or employee of Medtronic, and no executive officer of Medtronic during fiscal year 2018 served on the Compensation Committee or board of any company that employed any member of Medtronic’s Compensation Committee or Board. During fiscal year 2018, Sarah Powell, a daughter of director Kendall J. Powell, was employed by Medtronic as a Principal Product Specialist as further described in this proxy statement under Corporate Governance - Related Party Transactions and Other Matters beginning on page 25. Mr. Powell had no involvement in the hiring of this role and has had no involvement in Ms. Powell’s performance assessments or compensation decisions.

 

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Finance and Financial Risk Committee
Denise M. O’Leary (Chair)
Richard H. Anderson
Craig Arnold
Michael O. Leavitt
Kendall J. Powell
Robert C. Pozen
Number of
meetings during
Fiscal Year 2018
4

Responsibilities:

Reviewing and approving management’s recommendations to the Board for significant capital expenditures
Reviewing, approving and monitoring significant strategic transactions
Reviewing and overseeing management’s plans and objectives for the capitalization of the Company
Reviewing and approving management’s recommendations to the Board with respect to new offerings of debt and equity securities, stock splits, credit agreements, and Medtronic’s investment policies
Reviewing and approving management’s recommendations to the Board regarding dividends
Reviewing and approving management’s recommendations to the Board regarding authorization for repurchases of Medtronic’s stock
Reviewing and approving management’s recommendations for the Corporate Cash Investment Policy
Reviewing management’s decisions regarding certain financial aspects of the Company’s employee benefit plans
Reviewing and overseeing the Company’s tax strategies
Reviewing with management the Company’s strategies for management of significant financial risks and contingent liabilities
Reviewing with management the financial aspects of the Company’s insurance and self-insurance programs
Reviewing and recommending to the Board for approval authorization limits for the Committee and the Chief Executive Officer to approve expenditures

Nominating and Corporate Governance Committee
Scott C. Donnelly (Chair)
Richard H. Anderson
Randall J. Hogan III
Denise M. O’Leary
Kendall J. Powell
Number of
meetings during
Fiscal Year 2018
4

Responsibilities:

Formulating the Company’s policies and procedures for identifying a diverse pool of qualified director candidates and for evaluating and recommending candidates to the Board for nomination for election as directors
Implementing the Committee’s policies to identify, evaluate and recommend to the Board individuals for the Board to nominate for election as directors
Reviewing and making recommendations to the Board regarding whether members of the Board should stand for re-election
Considering any resignation offered by a director
Developing an annual evaluation process for the Board and its committees
Recommending to the Board directors to serve as members of each committee and recommending any changes to the Board or standing committees that the Committee believes desirable
Monitoring emerging corporate governance trends and overseeing and evaluating the Company’s corporate governance policies and programs to align with market best practices
Reviewing the Company’s Principles of Corporate Governance at least annually and recommending changes to the Board to align with market best practices
Reviewing shareholder proposals and recommending to the Board proposed Company responses to such proposals
Reviewing, in accordance with the Company’s Related Party Transaction Policies and Procedures, transactions and relationships with related parties that are required to be approved or ratified thereunder
Reviewing the Company’s Related Party Transactions Policies and Procedures on a periodic basis and recommending changes to the Board
Reviewing the Company’s Standards for Director Independence, recommending any modifications to the standards deemed necessary for the proper governance of the Company, and providing at least annually to the Board the Committee’s assessment of which directors should be deemed independent directors
Reviewing at least annually the requirements of a “financial expert” under the applicable rules of the SEC and NYSE and determining which directors are “financial experts”
Overseeing and reviewing on a periodic basis the continuing education program for directors and the orientation program for new directors
Providing advice to the Board regarding director compensation and benefits
Reviewing the Company’s stock ownership guidelines for directors, monitoring compliance with such guidelines, and recommending changes to the Board
Reviewing Medtronic’s corporate political contributions
Reviewing the Company’s actions and governance policies in furtherance of its corporate social responsibility, including considering the sustainability and impact of the Company’s business operations on employees, citizens, communities and the environment

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Quality Committee
Elizabeth Nabel, M.D. (Chair)
Shirley Ann Jackson, Ph.D.
Michael O. Leavitt
James T. Lenehan
Denise O’Leary
Robert C. Pozen
Number of
meetings during
Fiscal Year 2018
3(1)

Responsibilities:

Overseeing assessment and making recommendations to the Board regarding the Company’s overall quality strategies and systems to monitor and control product quality and safety, the Company’s response to quality and quality systems assessments conducted by the Company and external regulators, the Company’s response to material quality issues and field actions, and the Company’s technology and cybersecurity strategies, systems, and controls to ensure reliability and prevent unauthorized access.
Overseeing risk management in the area of human and animal studies, including the periodic review of policies and procedures related to the conduct of such studies
Staying informed of major regulatory changes both domestically and internationally to ensure the Company is poised to meet new standards

Technology and Value Creation Committee
Michael O. Leavitt (Chair)
Craig Arnold
Scott C. Donnelly
Shirley Ann Jackson, Ph.D.
James T. Lenehan
Elizabeth Nabel, M.D.
Robert C. Pozen
Number of
meetings during
Fiscal Year 2018
3(1)

Responsibilities:

Overseeing assessment and making recommendations to the Board regarding the Company’s product, service, and technology portfolio and its effect on the Company’s growth and performance, emerging science and technology trends that will affect the Company, the Company’s approach to identifying and developing new markets, and the Company’s intellectual property portfolio
Monitoring the overall direction, effectiveness, and competitiveness of the Company’s research and development programs and pipeline
Evaluating the technological aspects of potential acquisitions as requested by the Board
Reviewing and assessing the Company’s competitive standing from a technological point of view
Providing updates to the Quality Committee, as requested, regarding technological advances in cybersecurity
Evaluating the economic value of new and existing products and services
(1)Before the Quality and Technology Committee split into the Quality Committee and the Technology and Value Creation Committee, the Quality and Technology Committee met once in fiscal year 2018.

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Director Independence

Under the NYSE Corporate Governance Standards, to be considered independent, the Board must affirmatively determine that the director has no material relationship with Medtronic, other than as a director. The Board of Directors has determined that the following directors (all of our non-management directors) are independent under the NYSE Corporate Governance Standards: Messrs. Anderson, Arnold, Donnelly, Hogan, Lenehan, Powell and Pozen, Drs. Jackson and Nabel, Gov. Leavitt and Ms. O’Leary. In making this determination, the Board considered any current or proposed relationships that could interfere with a director’s ability to exercise independent judgment, including those identified by Medtronic’s Standards for Director Independence, which correspond to the NYSE standards on independence. These standards identify certain types of relationships that are categorically immaterial and do not, by themselves, preclude the directors from being independent. The types of relationships and the directors who have had such relationships include:

being a current employee, or having an immediate family member who is an executive officer, of an entity that has made or is expected to make immaterial payments to, or that has received or is expected to receive immaterial payments from, Medtronic for property or services, and each such relationship with Medtronic, through the relevant entity, is transactional in nature and is not a material transactional relationship (Messrs. Anderson, Arnold, Hogan and Pozen, and Drs. Jackson and Nabel);
being an executive officer, director and less than 50% equity owner of an entity that receives immaterial payments from Medtronic for professional services, which relationship, through the relevant entity, relates to limited consulting services and is not a material relationship (Gov. Leavitt); and
being an employee or executive officer of a non-profit organization to which Medtronic or The Medtronic Foundation has made immaterial contributions (Mr. Pozen, and Drs. Jackson and Nabel).

All of the relationships of the types listed above were entered into, and payments were made or received, by Medtronic in the ordinary course of business and on competitive terms, and no director participated in negotiations regarding, nor approved, any such purchases or sales. Aggregate payments to, transactions with, or discretionary charitable contributions to each of the relevant organizations did not exceed the greater of $1,000,000 or 2% of that organization’s consolidated gross revenues for any of that organization’s last three fiscal years. The Board reviewed the transactions with each of these organizations and determined that the directors had no role with respect to the Company’s decision to make any of the purchases or sales or to engage in the relationship, and that the nature and amount of payments involved in the transactions would not influence the relevant director’s objectivity in the boardroom or have a meaningful impact on such director’s ability to satisfy fiduciary obligations on behalf of Medtronic’s shareholders.

In the course of fulfilling its duties, the Board of Directors also considered situations in which the director had a further removed relationship with the relevant third party, such as being a director or trustee (rather than an employee or executive officer) of an organization that engages in a business relationship with Medtronic or receives discretionary charitable contributions from Medtronic or its affiliates. The Board determined that no such further removed relationships impact the independence of its directors.

Related Party Transactions and Other Matters

The Board of Directors of Medtronic has adopted written related party transaction policies and procedures. The policies require that all “interested transactions” (as defined below) between Medtronic or any of its subsidiaries and a “related party” (as defined below) are subject to approval or ratification by the Nominating and Corporate Governance Committee. In determining whether to approve or ratify such transactions, the Nominating and Corporate Governance Committee will consider, among other factors it deems appropriate, whether the interested transaction is on the same terms as are generally available to an unaffiliated third-party under the same or similar circumstances, the extent of the related person’s interest in the transaction, and any other information regarding the interested transaction or the related party that would be material to investors in light of the circumstances. An interested transaction may be approved only if it is determined in good faith that, under all of the circumstances, the interested transaction is in the best interests of Medtronic and its shareholders. In addition, the Nominating and Corporate Governance Committee has reviewed certain categories of interested transactions and deemed them to be pre-approved or ratified. Also, the Board of Directors has delegated to the chair of the Nominating and Corporate Governance Committee (or another member if the chair is interested in the transaction) the authority to pre-approve or ratify any interested transaction in which the aggregate amount is not expected to exceed $1 million. Finally, the policies provide that no director shall participate in any discussion or vote regarding an interested transaction for which he or she is a related party, except that the director shall provide all relevant information concerning the interested transaction to the Nominating and Corporate Governance Committee.

Under the policies, an “interested transaction” is defined as any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or any guarantee of indebtedness) in which:

the aggregate amount involved will or may be expected to exceed $120,000 in any twelve-month period;
Medtronic or a subsidiary is a participant; and
any related party has or will have a direct or indirect interest (other than solely as a result of being a director and/or a less than ten percent beneficial owner of another entity).

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An “interested transaction” includes a material amendment or modification to an existing interested transaction.

A “related party” is defined as any:

person who is or was (since the beginning of the last fiscal year for which Medtronic has filed a Form 10-K and proxy statement) an executive officer, director or nominee for election as a director (even if they do not presently serve in that role);
greater than five percent beneficial owner of Medtronic’s ordinary shares; or
immediate family member of any of the foregoing, as such terms are interpreted under Item 404 of Regulation S-K.

During fiscal year 2018, Sarah Powell, a daughter of director Kendall J. Powell, was employed by Medtronic as a Principal Product Specialist. The aggregate value of the compensation paid to Ms. Powell during fiscal year 2018 was approximately $166,300, which included salary, bonus and incentive payments and restricted stock units. In addition, Ms. Powell received the standard benefits provided to other non-executive Medtronic employees for her services during fiscal year 2018. Ms. Powell is not an executive officer of, and does not have a key strategic role within, Medtronic.

Complaint Procedure; Communications with Directors

The Sarbanes-Oxley Act of 2002 requires companies to maintain procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. We currently have such procedures in place. Our 24-hour, toll-free confidential compliance line is available for the submission of concerns regarding accounting, internal controls or auditing matters.

Our Lead Independent Director may be contacted via e-mail at leaddirector@medtronic.com. Shareholders may also communicate with our independent directors via e-mail at independentdirectors@medtronic.com. Communications received from shareholders may be forwarded directly to Board members as part of the materials sent before the next regularly scheduled Board meeting, although the Board has authorized management, in its discretion, to forward communications on a more expedited basis if circumstances warrant or to exclude a communication if it is illegal, unduly hostile or threatening or otherwise inappropriate. Advertisements, solicitations for periodical or other subscriptions and other similar communications generally will not be forwarded to the directors.

Our Codes of Conduct

All Medtronic employees, including our Chief Executive Officer and other senior executives, are required to comply with our Code of Conduct to help ensure that our business is conducted in accordance with the highest standards of ethical behavior. Our Code of Conduct covers all areas of professional conduct, including customer relationships, conflicts of interest, insider trading, intellectual property and confidential information, as well as requiring strict adherence to all laws and regulations applicable to our business. Employees are required to bring any violations and suspected violations of the Code of Conduct to the attention of Medtronic through management or our legal counsel or by using Medtronic’s confidential compliance line. In addition, our Code of Ethics for Senior Financial Officers provides specific policies applicable to our Chief Executive Officer, Chief Financial Officer, Treasurer and Controller and to other senior financial officers designated from time to time by our Chief Executive Officer.

These policies relate to internal controls, the public disclosures of Medtronic, violations of the securities or other laws, rules or regulations, and conflicts of interest. The members of the Board of Directors are subject to a Code of Business Conduct and Ethics relating to director responsibilities, conflicts of interest, strict adherence to applicable laws and regulations, and promotion of ethical behavior.

Our codes of conduct are published on our website, at www.medtronic.com under the About Medtronic — Corporate Governance section, and are available in print to any shareholder who requests them. We intend to disclose future amendments to, or waivers for directors and executive officers of, our codes of conduct on our website promptly following the date of such amendment or waiver.

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Director Compensation

The Nominating and Corporate Governance Committee conducts a biennial review of our non-employee director compensation program and makes recommendations for adjustments, as appropriate, to the Board. In connection with the review conducted in fiscal year 2018, the Nominating and Corporate Governance Committee’s outside consultant on director compensation, Towers Watson, assessed the compensation paid to our non-employee directors against non-employee director compensation trends and data from our 27-company peer group, which includes both Irish and non-Irish companies. After consultation with Towers Watson, the Nominating and Corporate Governance Committee found the compensation program to be appropriate and no changes were made to the program in the last three fiscal years.

The principal features of the compensation received by our non- employee directors for fiscal year 2018 are described below.

Non-employee Directors are eligible for the following compensation:

Annual Cash Retainer – Non-employee directors are entitled to receive an annual cash retainer for their service on the Board. Committee chairs and the Lead Independent Director are entitled to a supplemental annual cash stipend, and non-chair Audit Committee members are entitled to an additional cash stipend. Directors who are also Medtronic employees receive no fees for their services as directors. Our objective in using annual cash retainers and stipends is to recognize the stewardship role of non-employee directors with respect to our success and the increasing demands and responsibilities of our non-employee directors. The annual cash retainer and stipend fees are paid according to the following schedule:
Director Compensation    
Annual Cash Retainer  $  175,000 
Committee Chair Stipends:     
Audit  $  25,000 
Compensation  $  20,000 
Nominating and Corporate Governance  $  20,000 
Finance and Financial Risk  $  20,000 
Quality  $  20,000 
Technology and Value Creation  $  20,000 
Lead Independent Director Stipend  $  40,000 
Member Audit Committee  $  15,000 
Annual Stock Awards – Each non-employee director receives an annual restricted stock unit award equal in value to $175,000, which vests as described in the Stock Awards section below. We use full-value awards and a fixed dollar value for setting equity levels to compensate our non-employee directors in a manner that is consistent with majority practice and that is competitive with our peers. We believe that the annual equity grant to our non-employee directors, in combination with our stock ownership guidelines (described in the Stock Holdings section below), further aligns the interests of our non-employee directors with the interests of our shareholders.

The Director Compensation table reflects all compensation awarded to, earned by, or paid to the Company’s non-employee directors during fiscal year 2018. No additional compensation was provided to Mr. Ishrak for his service as a director on the Board.

Non-Employee Director 

Fees Earned or Paid in Cash

  

Stock

Awards

   Total 
Richard H. Anderson  $  197,875   $  175,017   $  372,892 
Craig Arnold  $  191,500   $  175,017   $  366,517 
Scott C. Donnelly  $  227,125   $  175,017   $  402,142 
Randall Hogan, III  $  198,250   $  175,017   $  373,267 
Shirley Ann Jackson  $  191,750   $  175,017   $  366,767 
Michael O. Leavitt  $  191,500   $  175,017   $  366,517 
James T. Lenehan  $  190,875   $  175,017   $  365,892 
Elizabeth Nabel  $  203,875   $  175,017   $  378,892 
Denise M. O’Leary  $  191,500   $  175,017   $  366,517 
Kendall J. Powell  $  181,125   $  175,017   $  356,142 
Robert C. Pozen  $  181,125   $  175,017   $  356,142 

Fees Earned or Paid in Cash

The fees earned or paid in the cash column represent the amount of the annual retainer and annual cash stipend for Board and committee service.

The annual cash retainer, annual cash stipend and special committee fees are paid in two installments — in the middle and at the end of a fiscal year. The annual cash retainer and annual cash stipend are reduced by 25% if a non-employee director does not attend at least 75% of the total meetings of the Board and Board committees on which such director served during the relevant year. The table on page 20 of this proxy statement under the section entitled “Committees of the Board and Meetings” shows the committees on which the individual directors serve.

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Stock Awards

Directors are annually granted restricted stock units on the first day of the fiscal year in an amount equal to $175,000 divided by the fair market value of a Medtronic ordinary share on the date of grant. Grants are made on a pro rata basis for participants who are directors for less than the entire preceding fiscal year and are reduced by 25% for any directors who failed to attend at least 75% of the applicable meetings during such fiscal year. The restricted stock units vest on the one-year anniversary of the grant date.

Dividends paid on Medtronic ordinary shares are credited to a director’s stock unit account in the form of additional units.

Prior to the Covidien acquisition in January 2015, directors were granted deferred stock units rather than restricted stock units. The balance in a director’s stock unit account will be distributed to the director in the form of Medtronic ordinary shares upon resignation or retirement from the Board in a single distribution or, at the director’s option, in five equal annual distributions.

Stock Holdings

Non-employee directors held the following restricted stock units, stock options, and deferred stock units as of April 27, 2018:

Non-Employee Director  Restricted
Stock Units
  Stock
Options
  Deferred
Stock Units
Richard H. Anderson  2,138     28,330
Craig Arnold  2,138    
Scott C. Donnelly  2,138     2,125
Randall Hogan, III  2,138    
Shirley Ann Jackson  2,138     29,183
Michael O. Leavitt  2,138     7,523
James T. Lenehan  2,138  4,484  21,878
Elizabeth Nabel  2,138    
Denise M. O’Leary  2,138  4,484  30,521
Kendall J. Powell  2,138     20,970
Robert C. Pozen  2,138  4,484  25,651

To align directors’ interests more closely with those of shareholders, the Nominating and Corporate Governance Committee approved the Medtronic plc Stock Ownership and Retention Guidelines pursuant to which non-employee directors are expected to own stock of Medtronic in an amount equal to five times the annual Board retainer. Until the ownership guideline is met, the directors must retain 75% of after-tax Medtronic shares received through settlement of equity compensation awards. Once the guideline is met, the directors must retain 75% of after-tax shares for one year following grant of equity compensation awards. For stock options, net after-tax profit shares are those shares remaining after payment of the option’s exercise price and income taxes. For share issuances, net gain shares are those remaining after payment of income taxes. Shares retained may be sold on the later of one year after grant or when the ownership guidelines are met. In the case of retirement or termination, shares may be sold after the shorter of the remaining retention period or one year following retirement or termination, as applicable. As of July 6, 2018, all directors were in compliance with the stock ownership and retention policy; however, due to their more recent appointments, Mr. Donnelly and Dr. Nabel are continuing to make progress towards the required ownership guidelines.

Deferrals

Prior to the Covidien acquisition in January 2015, directors were able to defer all or a portion of their cash compensation through participation in the Medtronic Capital Accumulation Plan Deferral Program. This was a nonqualified plan designed to allow participants to defer a portion of their pre-tax compensation, and to earn returns or incur losses on those deferred amounts based upon allocation of their balances to one or more investment alternatives, which were the same investment alternatives that Medtronic offers its employees through its 401(k) Plan. Director contributions in the deferred compensation program were discontinued effective as of the close of the Covidien acquisition in January 2015.

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SHARE OWNERSHIP INFORMATION

Significant Shareholders

The following table shows information as of July 6, 2018, concerning each person who is known by us to beneficially own more than 5% of our ordinary shares.

Name of Beneficial Owner

Amount and Nature of

Beneficial Ownership of

Ordinary Shares

Of Shares Beneficially

Owned, Amount that

May Be Acquired

Within 60 Days

Percent

of Class

The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355(1) 106,925,748 N/A 7.9
BlackRock, Inc., 55 East 52nd Street, New York, NY 10055(2) 94,595,580 N/A 7.0
Wellington Management Group LLP, 280 Congress St, Boston, MA 02210(3) 71,689,287 N/A 5.3
(1)The information for security ownership of this beneficial owner is based on a Schedule 13G filed by The Vanguard Group on February 8, 2018. On such date, Vanguard, together with its affiliates, held indirect voting power over ordinary shares. Based upon shares outstanding as of July 6, 2018, the shareholder beneficially owns approximately 7.9% of our shares outstanding.
(2)The information for security ownership of this beneficial owner is based on a Schedule 13G filed by BlackRock, Inc. on January 30, 2018. On such date, BlackRock, together with its affiliates, held indirect voting power over ordinary shares. Based upon shares outstanding as of July 6, 2018, the shareholder beneficially owns approximately 7.0% of our shares outstanding.
(3)The information for security ownership of this beneficial owner is based on a Schedule 13G filed by Wellington Management Group LLP on February 8, 2018. On such date, Wellington Management Group LLP, together with its affiliates, held indirect voting power over ordinary shares. Based upon shares outstanding as of July 6, 2018, the shareholder beneficially owns approximately 5.3% of our shares outstanding.

Beneficial Ownership of Management

The following table shows information as of July 6, 2018, concerning beneficial ownership of Medtronic’s ordinary shares by Medtronic’s directors, named executive officers identified in the Summary Compensation Table under “Executive Compensation,” and all directors and executive officers as a group.

Name of Beneficial Owner

Amount and Nature of

Beneficial Ownership of

Ordinary Shares

(8)

Of Shares Beneficially

Owned, Amount that May Be

Acquired Within 60 Days

Richard H. Anderson(1) 81,430   30,514
Craig Arnold 29,001   2,184
Michael J. Coyle(2) 550,356   484,341
Scott C. Donnelly(3) 9,505   4,309
Randall Hogan, III 35,813   2,184
Omar Ishrak 1,364,906   1,260,073
Shirley Ann Jackson 38,526   31,367
Michael O. Leavitt 16,090   9,707
James T. Lenehan 53,219   28,546
Bradley E. Lerman 264,866   249,426
Elizabeth Nabel 6,400   2,184
Denise M. O’Leary 63,751   12,773
Karen Parkhill(4) 59,452   37,074
Kendall J. Powell(5) 33,259   23,154
Robert C. Pozen(6) 64,027   32,319
Rob ten Hoedt 172,280   151,733
Directors and executive officers as a group (21 persons)(7) 3,845,075   3,319,068
(1)Mr. Anderson disclaims beneficial ownership of 25 shares that are owned by his adult son. Includes 4,800 shares held by Mr. Anderson’s spouse’s trust.
(2)Includes 4,104 shares held by Mr. Coyle’s spouse and 250 shares held by family trust.
(3)Includes 245 shares held by Mr. Donnelly’s spouse’s trust.

 

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(4)Includes 86 shares held by Ms. Parkhill’s trust.
(5)Includes 3,000 shares held by Mr. Powell’s spouse’s trust.
(6)Includes 24,700 shares owned jointly with Mr. Pozen’s spouse.
(7)As of July 6, 2018, no director or executive officer beneficially owns more than 1% of the shares outstanding. Medtronic’s directors and executive officers as a group beneficially own approximately 0.28% of the shares outstanding.
(8)Amounts include the shares shown in the last column, which are not currently outstanding but are deemed beneficially owned because of the right to acquire shares pursuant to options exercisable or RSUs vesting and payable within 60 days (on or before December 8, 2018) and the right to receive shares for deferred stock units within 60 days (on or before December 8, 2018) upon a director’s resignation.

Section 16(a) Beneficial Ownership Reporting Compliance

Based upon a review of reports and written representations furnished to it, Medtronic believes that during fiscal year 2018, all filings with the SEC by its executive officers and directors complied with requirements for reporting ownership and changes in ownership of Medtronic’s ordinary shares pursuant to Section 16(a) of the Exchange Act.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) describes the compensation programs and decisions made by the Compensation Committee in regard to the compensation of the following named executive officers (“NEOs”) for fiscal year 2018:

Name Title
Omar Ishrak Chairman and Chief Executive Officer
Karen L. Parkhill Executive Vice President and Chief Financial Officer
Michael J. Coyle Executive Vice President and Group President, Cardiac and Vascular Group
Bradley E. Lerman Senior Vice President, General Counsel and Corporate Secretary
Rob ten Hoedt Executive Vice President and Group President, Europe, Middle East, and Africa

Executive Summary

Executive Compensation Philosophy

Our compensation programs align the interests of our NEOs with those of our shareholders. We provide market-competitive programs that enable us to attract, retain and engage highly talented executives with compensation packages established pursuant to the following principles:

Market-Competitive. We offer market-competitive total direct compensation consisting of base salary, an annual cash incentive and long-term cash and equity incentives.
Pay for Performance. We emphasize pay for performance by fixing at least 75% of target total direct compensation (base salary + target annual incentive + target long-term incentive) on the attainment of annual and long-term Company performance goals.
Market Median Pay. We position each element of total direct compensation within a market median range that is +/- 15% of median for base salary and annual incentive and +/- 20% of median for long-term incentives and total direct compensation. Performance that is above or below the median of our 27-company comparison group (“Comparison Group”) will generate compensation that is above or below the median compensation for the same group.
Comprehensive Benefit Programs. We enhance competitive total direct compensation with comprehensive employee benefit programs that support retirement, health and wellness. NEOs have the same health and retirement benefits as all Medtronic employees.
Shareholder Value Alignment. We align incentive programs with shareholder value creation by using annual and three-year performance measures that drive shareholder value. Incentive goals are aligned with our Board-approved annual operating plan and our Board-approved long-term strategic plan, both of which are shared with investors.
Focus on Quality. We emphasize quality: payouts under our annual incentive plan can be reduced if a quality compliance modifier performance threshold is not achieved. The quality modifier, which may reduce but not increase a payout, is designed to align Medtronic employees with the Medtronic Mission, “To strive without reserve for the greatest possible reliability and quality in our products...”. The modifier uses Food and Drug Administration inspection observation to provide a standardized and rigorous assessment of our product and process quality.

Business Context for Fiscal Year 2018

Fiscal Year 2018 Highlights

During fiscal year 2018, we delivered strong results as we continue to execute on our sustainable growth strategy, driving therapy innovation and global market penetration, while delivering enterprise synergies to expand margins. Performance with respect to our differentiated growth platforms was as follows: (i) revenue growth was mid-single digit range on a comparable constant currency basis, (ii) diluted non-GAAP earning per share (“EPS”) growth was in the low-double digit range on a comparable constant currency basis, and (iii) excluding the $1.1 billion pre-payment the company elected to make late in the fourth quarter to the U.S. IRS related to in-process litigation on Puerto Rico transfer pricing, free cash flow would have been $4.7 billion. Nevertheless, our performance fell slightly below the financial goals we set for fiscal year 2018, as illustrated below. As a result, our payout for the annual incentive plan was below target and paid out at 93.02%. Our payout for the long-term performance plan was above target and paid out at 125.4%.

 

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(1)Refer to page 41 for definitions of revenue growth and free cash flow used in calculating results for Medtronic’s Annual Incentive Plan.
(2)These metrics represent non-GAAP financial measures included in Appendix A, adjusted for management’s discretionary adjustments as allowed under the company’s Annual Incentive Plan.
(3)Refer to page 43 for definitions of revenue growth and return on invested capital (“ROIC”) used in calculating result for Medtronic’s Long-Term Performance Plan.

The Company targets 4% plus organic revenue growth annually, and 8% non-GAAP EPS Growth, assuming modest currency volatility, over its long-range planning period. With our diverse growth platforms and leadership in growth markets, we expect to create long-term value growth for our shareholders.

The Compensation Committee made the following compensation decisions for fiscal year 2018 based on individual performance during fiscal year 2017:

Salary merit increases for the NEOs averaged 2.1%.
Base salary for Ms. Parkhill increased an additional 6.0% coincident with individual performance based progression towards the competitive market median following Ms. Parkhill’s hire as CFO by the Company.
Target annual incentive opportunities remained the same year-over-year.
Long-term incentive opportunities remained the same year-over-year except for Ms. Parkhill, whose Long-Term Incentive Plan (“LTIP”) opportunity increased 13.3% coincident with individual performance based progression towards the competitive market median following Ms. Parkhill’s hire.

In addition, award payouts for the annual incentive plan and the three-year long-term performance plan were at 93.02% and 125.4% of target award opportunities, respectively, as summarized below.

ACTUAL PERFORMANCE AS A PERCENT PLAN PERFORMANCE &
ACTUAL AWARD PAYOUT AS A PERCENT TARGET AWARD PAYOUT

 

  

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Compensation of our Chief Executive Officer

The compensation of our CEO is positioned within the median range of our Compensation Comparison Group and is based on the same design elements and performance standards that are applicable to the other NEOs. For fiscal year 2018 the Compensation Committee determined to increase the CEO’s base salary by 3%, maintain his target annual incentive opportunity at 175% of base salary, and maintain his long-term incentive opportunity at $13.5 million, which was equally allocated to stock options, restricted stock units, and long-term performance plan awards.

The following chart presents the increase in target total direct compensation for our CEO for fiscal year 2018 as determined following fiscal year 2017, as well as the total shareholder return for fiscal year 2017 for the Company, our compensation comparison group, and our industry peers.

CHANGE IN FY 2018 CEO TOTAL DIRECT COMPENSATION
RELATIVE TO FY 2017 TSR PERFORMANCE

 

 

Target total direct compensation represents base salary + target annual incentive + target long-term incentive

FY2017 FY2018 Change
Base Salary (000s) $   1,596 $   1,643 3.0%
Target Annual Bonus (000s) $   2,792 $   2,876 3.0%
Long-Term Incentives (000s) $ 13,500 $ 13,500 0.0%
Target Total Direct Compensation (000s) $ 17,888 $ 18,019 0.7%

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NEO Pay Versus Performance

The Compensation Committee annually evaluates how the amount of annual cash compensation aligns with the Company’s performance when ranked against the comparison companies. For purposes of this analysis, annual size and performance is evaluated based on company size, profitability, and growth; annual cash compensation represents the actual base salaries and annual bonuses paid for each fiscal year. As illustrated below, total annual compensation for the NEOs has been directionally aligned with the Company’s size and performance over the last five fiscal years:

MEDTRONIC PERFORMANCE VERSUS TOTAL ANNUAL COMPENSATION

 

Consideration of “Say-on-Pay” Voting Results

For fiscal year 2017, the Medtronic advisory vote on “say-on-pay” garnered shareholder support of 94%. The Compensation Committee reviewed shareholder and other stakeholder feedback along with the results of the shareholder “say-on-pay” vote in making compensation decisions during fiscal year 2018.

At our 2017 annual meeting, shareholders again showed strong support for our executive compensation programs with 94% of the votes cast approving our executive compensation.

Efforts to gather stakeholder feedback included periodic outreach to our largest shareholders. Based on this feedback and the 94% say-on-pay approval by shareholders in 2017, shareholders support our compensation policies and practices. Therefore, the Compensation Committee continued to apply the same principles in determining fiscal year 2018 compensation actions. The Compensation Committee did decide in fiscal year 2018 to add a Relative Total Shareholder Return metric to the LTIP (see page 43 for more detail). This decision was, in part, based on suggestions from shareholders over the past couple of years. The Medtronic advisory “say-on-pay” vote is held on an annual basis.

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Corporate Governance

The Compensation Committee has incorporated the following market-leading governance features into our programs:

 Summary of Key Compensation Practices
What We Do  (GRAPHIC)   Double-trigger change of control vesting of compensation and benefits, including equity
 (GRAPHIC)   Comprehensive clawback policy that applies to annual incentive, long-term incentives and equity compensation
 (GRAPHIC)   Rigorous stock ownership requirements and holding periods on portions of after-tax shares until guidelines are met
 (GRAPHIC)   Targets for performance metrics aligned to financial goals communicated to shareholders
 (GRAPHIC)   Multiple performance metrics under our short- and long-term performance-based plans discourage short-term risk-taking at the expense of long-term results
 (GRAPHIC)   Forfeiture policy providing forfeiture of equity awards when a NEO terminates employment for any reason other than retirement, disability, death, or termination under specific circumstances related to a change of control
 (GRAPHIC)   Responsible use of shares under our long-term incentive program
 (GRAPHIC)   Align pay and shareholder performance
 (GRAPHIC)   Engagement of an independent compensation consultant
 (GRAPHIC)   Limited perquisites
What We Do Not Do  (GRAPHIC)    No defined benefit supplemental executive retirement plans or special healthcare coverage for NEOs
 (GRAPHIC)    No “single-trigger” vesting of equity awards in event of a change of control
 (GRAPHIC)    No dividends or dividend equivalents on unearned equity compensation
 (GRAPHIC)    No hedging and pledging of Company stock permitted for executives
 (GRAPHIC)    No “golden parachute” excise tax gross-ups
 (GRAPHIC)    No backdating or repricing of stock option awards
 (GRAPHIC)    No multi-year compensation guarantees

Participants in Executive Compensation Design and Decision-Making Process

Role of Compensation Committee

The Compensation Committee establishes our compensation philosophy, program design and administration rules, and is the decision-making body on all compensation matters related to our NEOs. The Committee solicits input from an independent outside compensation consultant and relies on the consultant’s advice. For more information on the Compensation Committee, its members and its duties as identified in its charter, please refer to the section entitled “Committees of the Board and Meetings — Compensation Committee” beginning on page 22 of this proxy statement.

Independent Compensation Consultant

The Compensation Committee has engaged FW Cook, an independent outside compensation consulting firm (the “Independent Consultant”), to advise the Compensation Committee on all matters related to executive officer compensation. Specifically, the Independent Consultant conducts an annual competitive market analysis of total compensation for NEOs, provides relevant market data, updates the Compensation Committee on compensation trends and regulatory developments, and counsels the Committee on program designs and specific compensation decisions related to our CEO and other executives. This is the only work completed by the Independent Consultant for Medtronic and the services of that firm are at the discretion and direction of the Compensation Committee.

In June 2013, the Compensation Committee adopted enhanced independence standards for outside consultants that mirror the NYSE listing standards. This policy established an assessment framework to confirm and report on a consultant’s independence. The policy also requires a consultant to confirm its independent status according to the Compensation Committee’s standards. The Compensation Committee reviews and confirms the independence of its outside consultants on an annual basis.

 

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In light of the NYSE listing standards, the Compensation Committee has considered the independence of the Independent Consultant. In connection with this process, the Compensation Committee has reviewed, among other items, a letter from the Independent Consultant addressing its independence and the members of the consulting team serving the Committee, including the following factors: (i) other services provided to us by the Independent Consultant, (ii) fees paid by us as a percentage of the Independent Consultant’s total revenue, (iii) policies or procedures of the Independent Consultant that are designed to prevent conflicts of interest, (iv) any business or personal relationships between the senior advisor of the consulting team and a member of the Compensation Committee, (v) any Company stock owned by the senior advisor or any member of that individual’s immediate family, and (vi) any business or personal relationships between our executive officers and the senior advisor. The Compensation Committee discussed these considerations and concluded that the work performed by the Independent Consultant and its senior advisor involved in the engagement did not raise any conflict of interest.

Role of Chief Executive Officer in Compensation Decisions

In making compensation decisions for executive officers reporting to the CEO, the Compensation Committee solicits the views of our CEO and the Independent Consultant. The CEO is not present during Compensation Committee executive sessions and does not make recommendations to the Compensation Committee about his own compensation.

Executive Compensation Program Design

The design of our executive compensation program is illustrated below:

  Component Performance Period (yrs.) Basic Design Purpose
Fixed Base Salary 1  Calibrated with the Comparison Group market median range

 Compensates for carrying out basic duties of the job

 Recognizes individual experiences, skills, and sustained performance

Benefits 1

 Health, retirement, and other life events

 Market-competitive benefits

 Same benefits available to Medtronic employees
Perquisites 1

 Allowance covering expenses such as financial and tax planning, memberships, etc.

 No tax gross-up

 Provide a modest allowance to be used in lieu of Company-provided perquisites
Variable At Risk Annual Incentive Plan 1

 Actual payout for performance below threshold is zero. Payout for performance between threshold and maximum is 50-200%

 Uses revenue growth, non-GAAP diluted EPS growth, free cash flow, and quality compliance performance measures

 Rewards the accomplishment of annual operating plan based on Company performance and it is driven by performance for our shareholders
Restricted Stock Units 3

 Granted annually

 Vest 100% on the 3rd anniversary of grant date

 Vesting is dependent on achieving a three-year non-GAAP diluted EPS growth threshold

 Promotes long-term stock ownership in Medtronic

 Provides retention

 Includes a long-term performance based threshold that must be achieved for award vesting

Stock Options 4

 Granted annually

 Vest 25% per year starting on the 1st anniversary of grant date

 Aligns pay with performance by linking value to stock price appreciation and shareholder value creation
Long-Term Performance Plan 3

 Granted annually

 Actual pay for performance below threshold is zero; payout for performance between threshold and maximum is 50%-200%

 Uses cumulative revenue growth, and return on invested capital performance measures over a three-year performance period

 Payable in cash if performance criteria satisfied

 Aligns a portion of cash compensation to longer-term strategic financial goals not influenced by variability in the stock market

 Beginning in fiscal year 2019, total shareholder return relative to our comparison group will be added as an equally weighted performance measure equivalent to 33%

 

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The mix of total direct compensation for our NEOs is weighted 83% to 91% at risk with 66% to 75% allocated to long-term incentives, as illustrated below:

How We Establish Executive Compensation Levels

The Compensation Committee considers relevant market pay practices when establishing executive compensation levels and evaluating compensation programs, including base salary and annual and long-term incentives. To facilitate our ability to benchmark competitive compensation levels and practices, the Compensation Committee established a Comparison Group. The Compensation Committee selected the companies that constitute the Comparison Group after discussing various recommendations from the Independent Consultant. The Comparison Group is selected using Compensation Committee-approved criteria designed to identify companies that reflect our size (measured by revenue, market capitalization, and other size measures), our complexity, and our global footprint and to ensure we include companies that represent our Medical Device and Life Sciences industry.

The Compensation Committee uses data from the Comparison Group to establish a competitive market median range within which individual pay can be positioned to reflect each NEO’s experience and performance. Consistent with our pay-for-performance philosophy, we establish an award range for short-term and long-term incentives that generates above-market pay for above-market performance and below-market pay for below-market performance. In addition to the competitive market information, the Compensation Committee also reviews information about performance, potential, expertise, and experience for each NEO.

The following table summarizes the selection criteria used by the Compensation Committee to select the Compensation Comparison Group.

Selection Criteria
Start with Standard & Poor’s 100 largest U.S. companies  
Limit to 5 Global Industry Classification Standard Sectors Consider the following criteria for selecting companies
1. Health Care 1. Overall company size
2. Consumer Staples 2. Health care company
3. Industrials 3. Global operations
4. Information Technology 4. Manufacturer
5. Materials 5. Government contractor
  6. Geographic competitor

 

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During fiscal year 2018, the Independent Consultant recommended two changes to the Comparison Group: (1) the removal of Du Pont from the Comparison Group because they were acquired by The Dow Chemical Company in September 2017 and are no longer a relevant comparison company; and (2) the addition of Danaher because it was reclassified from an industrial conglomerate to a health care company in fiscal year 2018 following the spin-off of Fortive. The Compensation Committee approved these changes. Summarized below is a comparison of the Company to the Comparison Group in various measures of financial and market size at the middle of fiscal year 2018:

COMPARISON GROUP SIZE COMPARISONS

(GRAPHIC) 27-Company Comparison Group
3M IBM
Abbott Laboratories Intel
AbbVie Johnson & Johnson
Amgen Lilly
Biogen Lockheed Martin
Boeing Merck
Boston Scientific Monsanto
Bristol-Myers Squibb Pepsico
Cisco Systems Pfizer
Coca-Cola Procter & Gamble
Danaher Qualcomm
General Electric United Technologies
Gilead Sciences UnitedHealth Group
Honeywell  
  -- All  financial and market data are taken from Standard & Poor’s Capital IQ
     

Fiscal Year 2018 Compensation Decisions

Fiscal Year 2018 Annual Base Salaries for Named Executive Officers

One of the principles of our compensation philosophy as outlined on page 31 is to maintain base salary within a +/- 15% range around the median base salary paid by our Comparison Group. The range allows for pay decisions to take into account individual factors such as performance, potential, expertise, and experience. At the beginning of each fiscal year, the Independent Consultant presents to the Compensation Committee an analysis that identifies the median base salary ranges for the CEO and each NEO based on their respective, or substantially similar, positions in the Compensation Comparison Group. Using this market data for each of the NEOs, the Compensation Committee approves base pay increases taking into account individual factors such as performance for the previous fiscal year (fiscal year 2017), potential, expertise, and experience.

The table below shows the fiscal year 2018 base salary increases for the CEO and each NEO.

Name FY2017 Salary
(000s)
FY2018 Salary
(000s)
Merit %
Increase
Market Equity
% Adjustment
Omar Ishrak $   1,596 $   1,643 3.0% 0.0%
Karen L. Parkhill(1) $   750 $   810 2.0% 6.0%
Michael J. Coyle $   880 $   898 2.0% 0.0%
Bradley E. Lerman $   800 $   816 2.0% 0.0%
Rob ten Hoedt $   760 $   771 1.5 % 0.0%
(1)The base salary increase of 8% for Ms. Parkhill includes a 2% merit increase plus a 6% adjustment is part of individual performance based progression towards the competitive market median following Ms. Parkhill’s hire as CFO of the Company.

 

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Fiscal Year 2018 Annual Incentive Target Pay

Using the same analytical approach described for the annual base salary, the Independent Consultant identifies the median for annual incentive target pay for the CEO and each NEO, which is set as a percentage of annual base salary. No changes were made to fiscal year 2018 annual incentive target pay. The table below shows fiscal year 2018 CEO and NEO annual incentive target pay as a percentage of base salary.

Name FY2017
MIP
Target
FY2018
MIP
Target
%
Increase/
(Decrease)
Omar Ishrak 175% 175% 0%
Karen L. Parkhill 110% 110% 0%
Michael J. Coyle 100% 100% 0%
Bradley E. Lerman 85% 85% 0%
Rob ten Hoedt 100% 100% 0%

Fiscal Year 2018 Long-Term Incentive Plan (LTIP) Target Pay

Using the same analytical approach described for the annual base salary and annual target incentive, the Independent Consultant identifies the median for long-term incentive plan target pay for the CEO and each NEO, which is set as target value. For fiscal year 2018, other than for Ms. Parkhill, no changes were made to the long-term incentive plan target pay for the CEO and NEOs. The table below shows fiscal year 2018 CEO and NEO long-term incentive target.

Name FY2017 LTIP
Target
(000s)
FY2018 LTIP
Target
(000s)
%
Increase
Omar Ishrak $    13,500 $   13,500 0%
Karen L. Parkhill(1) $   3,000 $   3,400 13.3%
Michael J. Coyle $   4,100 $   4,100 0%
Bradley E. Lerman $   3,000 $   3,000 0%
Rob ten Hoedt $   2,300 $   2,300 0%
(1)The LTIP increase of 13.3% for Ms. Parkhill is part of individual performance based progression towards competitive market median following Ms. Parkhill’s hire as CFO of the Company.

Fiscal Year 2018 Annual Medtronic Incentive Plan (“MIP”) Design

Annual incentive compensation supports the Compensation Committee’s pay-for-performance philosophy and aligns individual goals with Company goals as set forth in the Company’s annual operating plan. Under the MIP, executives are eligible for cash awards based on the Company’s attainment of performance measures established by the Compensation Committee and the Board of Directors as part of the annual and strategic planning process. Consistent with past practice, the Compensation Committee structured the 2018 annual incentive plan as follows:

At the beginning of the fiscal year, the Compensation Committee established performance measures and goals based on the Board approved annual operating plan for revenue growth, non-GAAP diluted EPS (“diluted EPS”), and free cash flow.
Also at the beginning of the fiscal year, the Compensation Committee sets individual target awards for each executive, expressed as a percentage of base salary, based on the executive’s level of responsibility and an examination of compensation information from our Comparison Group and market data.
After the close of the fiscal year, the Compensation Committee received a report from management regarding Company performance against the pre-established performance goals. Awards were based on each NEO’s individual target award percentage and the overall Company results relative to the specific performance goals, as certified by the Compensation Committee.

 

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In establishing the annual incentive plan design, the Compensation Committee, in consultation with its Independent Consultant and management, considered shareholder feedback, competitive comparisons and the Company’s strategic imperatives. When reviewing and approving the 2018 plan design, the Compensation Committee considered the 94% support expressed by shareholders for the fiscal year 2017 say-on-pay proposal and continued to use performance measures aligned with the Company’s Board-approved annual operating plan and that represent the best financial measures of annual executive performance expectations. Accordingly, the key design elements of the fiscal year 2018 annual incentive plan, which are substantially the same as our fiscal year 2017 plan, are as follows:

The performance measures were diluted EPS, revenue growth and free cash flow, each weighted equally at 33% (see the table on the following page for details about and definitions of each performance measure). The diluted EPS measure was also designated to be the plan threshold performance measure that had to be achieved in order for any payout to be made under the plan. If the minimum performance goal for the diluted EPS measure was not satisfied, then the plan provided no payout regardless of the results of the other performance measures.
Effective starting fiscal year 2018, the Compensation Committee approved the replacement of the cash-flow indicator performance measure with the free cash flow performance measure in order to more closely align with market prevalence for Medtronic’s industry and Comparison Group of companies and to drive longer term free cash flow growth.
In addition to setting these three performance measures, the Compensation Committee also established minimum, target and maximum performance requirements for each measure. If the minimum performance requirement for a measure was not met, then no award for that particular measure was payable (and no payout was made at all if the diluted EPS minimum performance requirement was not met). If the maximum performance requirement for a measure was exceeded, then any payout associated with that measure was capped at the maximum performance level, which was 200% of target.
Although not a performance measure, the Compensation Committee included a Quality Compliance Modifier as part of the plan design to reinforce the importance of quality. Accordingly, if the Company did not meet the requisite quality score, the payout is reduced by five (5) percentage points. The Quality Compliance Modifier may only reduce a payout and cannot increase a payout.

Fiscal Year 2018 MIP Calculation Methodology

In calculating the annual incentive plan results, if the minimum performance for a measure is met, then a performance multiplier for each performance measure is determined and the overall performance score is calculated. For each performance measure, the performance multiplier would be 0 if performance is below the minimum, 0.5x if performance is at threshold, 1x if performance is at target and 2x if performance is at or above the maximum performance level. The performance multiplier for each performance measure is multiplied by the weighted percentage to obtain a performance score for that measure. The performance scores for each measure are added together for an overall performance score, taking into account the Quality Compliance Modifier. That overall performance score is then multiplied by the applicable NEO’s individual target award and eligible earnings to arrive at the actual payment amount, as illustrated below:

MEDTRONIC INCENTIVE PLAN PERFORMANCE EQUALS:

 (GRAPHIC)

Fiscal Year 2018 Annual MIP Performance Measures

At the beginning of the fiscal year, the Committee approved the target performance goal and performance range for each of the three equally weighted performance measures. The targets are from the Company’s Board-approved annual operating plan and the performance range is derived from the median performance range structure used by our compensation Comparison Group.

 

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The following provides details about the performance measures, targets, and performance range.

Measure Rationale Performance Targets Weight
Revenue Growth
Over Prior Year
Top line growth continues to be a key driver of shareholder value Minimum
(95% of Plan)
Target
(100% of Plan)
Maximum
(105% of Plan)
1/3 of Payout
(Comparable,
Constant Currency)
  (0.2%) 5.4% 10.7%  
Diluted EPS Growth
(Non-GAAP)
Earnings both from operating efficiency and financial management is a key driver of returns to shareholders Minimum
(91% of Plan)
Target
(100% of Plan)
Maximum
(110% of Plan)
1/3 of Payout
  $4.37 $4.82 $5.30  
Free Cash Flow
(Non-GAAP)
Under a free cash flow metric, Medtronic management is held accountable for GAAP net income including items such as litigation, tax payments and benefits not associated with balance sheet transactions – the Free Cash Flow may be adjusted to avoid payment timing based windfalls for large items Minimum
(80% of Plan)
Target
(100% of Plan)
Maximum
(120% of Plan)
1/3 of Payout
  $3,945 $4,931 $5,917  
Quality Compliance
Modifier Performance
Threshold
We focus on quality system compliance measured through FDA inspection results A score of 30 points or less A score of more than 30 points reduces payout by five (5) percentage points

 

For purposes of the annual incentive calculation, “diluted EPS” refers to non-GAAP diluted EPS. A reconciliation of the GAAP to non-GAAP diluted EPS is included in Appendix A to this proxy statement. Revenue Growth represents fiscal year 2018 revenue in comparison to fiscal year 2017 revenue, excluding the impact of currency and the divestiture of Medtronic‘s Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. Free Cash Flow is defined as cash provided by operating activities, less additions to property, plant and equipment as shown on the Statement of Cash Flows, further adjusted for management’s discretionary adjustments as allowed under Medtronic‘s Annual Incentive Plan. The Quality Compliance Modifier Performance Threshold uses a score card based on Food and Drug Administration (“FDA”) inspections, non-material FDA warning letters, and material FDA warning letters.

Fiscal Year 2018 Long-Term Incentive Plan (LTIP) Design

Using the same analytical approach described for annual base salary and short-term incentives, the Independent Consultant identifies a +/- 20% median range for long-term incentive target pay for the CEO and each NEO. Target LTIP is expressed as a fixed dollar value from which the underlying shares subject to the LTIP award are determined based on the market price at the close of business on the grant date.

The target is split equally among three LTIP components: stock options; restricted stock units; and a three-year cash incentive plan called the Long-Term Performance Plan (“LTPP”). For example, the hypothetical target LTIP of $2,400,000 would be granted as $800,000 stock options aggregate grant date Black-Scholes value, $800,000 restricted stock units, and $800,000 under the LTPP.

 

Fiscal Year 2018 Long-Term Incentive Plan Components

Stock Options

Stock options are a performance-based compensation component that tie one-third of the target LTIP value to stock price appreciation and shareholder value creation. Stock options only have value when the market price exceeds the exercise price. All stock option grants have an exercise price that is equal to the market close stock price on the date of grant. Stock options have a ten-year term and vest over four years in equal increments of 25% per year beginning one year after the date of grant. 

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Restricted Stock Units (RSU)

RSUs represent the second one-third of the target LTIP value, and are intended to assist in retaining high performing executives and align executives’ compensation with shareholders through long-term stock ownership. The RSU grants cliff vest (100%) on the third anniversary of the grant date. Unlike the more commonly used time-based RSUs used by our Comparison Group, Medtronic’s RSUs include a three-year minimum performance threshold that must be met before the RSUs vest. For fiscal year 2018 RSU grants, the performance threshold was set as the diluted EPS cumulative compound annual growth rate (cumulative CAGR) of 3%.

Long-Term Performance Plan (LTPP)

Our LTPP is a three-year cash incentive plan that is based on long-term measures of Company performance. Our LTPP design was established following an extensive review completed by the Compensation Committee, Independent Consultant, and management. The review considered shareholder feedback, competitive benchmarking, and the Company’s short-term and long-term strategic imperatives. The LTPP has different measures than our short-term incentive plan as it is tied to longer term financial performance measures that are not influenced by variability in the stock market. The LTPP pays in cash after the end of the three fiscal year performance period, provided a minimum level of diluted EPS is attained. A new LTPP award grant and performance period is established at the beginning of each fiscal year. Because three-year performance periods overlap, performance goals are established at the start of each performance period and, once established, do not change.

Fiscal Year 2018 Long-Term Performance Plan Calculation Methodology

For each performance measure, the performance multiplier would be 0 if performance is below the minimum, 0.5x if performance is at threshold, 1x if performance is at target, and 2x if performance is at or above the maximum performance level. The performance multiplier for each performance measure is multiplied by the weighted percentage to obtain a performance score for that measure. The performance scores for each measure are added together for an overall performance score. That overall performance score is then multiplied by the applicable NEO’s individual target award to arrive at the actual payment amount.

 

Fiscal Year 2018 Long-Term Performance Plan Performance Measures 

At the beginning of the fiscal year, the Committee approved the LTPP performance measures and targets for the fiscal year 2018 - 2020 performance cycle. The targets were established based on Medtronic’s strategic plan and aligned with the goals disclosed to investors. The revenue growth measure, target, and performance range are different from those applicable to the annual incentive plan because the LTPP measures cumulative CAGR over a three-year performance period. Cumulative CAGR requires that each year’s growth is counted. In contrast, standard CAGR measures only the beginning and end points.

The following table provides detailed information about each performance measure.

Measure Rationale Targets Weight
Three-year
Revenue Growth
Uses a cumulative compound annual growth rate (Cumulative CAGR)over three  scal years, which is a more rigorous measure of sustained revenue growth. Minimum
0%
Target
5%
Maximum
10%
50%
Return on
Invested Capital
(“ROIC”)
ROIC measures all components of management’s responsibility to generate sustained, long-term returns on invested capital. Minimum
10%
Target
13%
Maximum
18%
50%

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The average revenue growth used in LTPP results is defined as the three-year cumulative compounded annual revenue growth measured at constant currency, excluding the impact of the divestiture of Medtronic‘s Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses. ROIC is defined as non-GAAP net income after the removal of the after-tax impact of amortization plus interest expense net of tax, divided by Invested Capital, averaged over the 3-year period. Invested Capital is defined as Total Equity Plus Interest-Bearing Liabilities less Cash and Cash Equivalents for each year.

Fiscal Year 2019 LTPP Design Change

In fiscal year 2018, the Compensation Committee, in consultation with the Independent Consultant, introduced a Relative Total Shareholder Return (“Relative TSR”) metric as a third metric in the fiscal year 2019 LTPP program. Beginning with the FY 2019 – FY 2021 LTIP performance period, Relative TSR will be weighted at one-third along with Revenue Growth and ROIC. This change is also in response to suggestions from shareholders about introducing this metric into the Company’s long-term incentive plans.

 

Fiscal Year 2018 Annual and Long-Term Incentive Plan Payouts

Fiscal Year 2018 Annual Incentive Plan Results and Payouts

At the end of the fiscal year, the Committee reviewed performance against the incentive plan targets for fiscal year 2018 and approved the resulting CEO and NEO annual incentive plan payout percentages and payments as shown below.

ANNUAL MIP FINANCIAL RESULTS:

    Non-GAAP
Diluted EPS
(2)  Revenue
Growth
  Free Cash
Flow
(3)  Total Payout
Percent
FY18 Actual   $   4.74      5.0%   $   4,770       
FY18 Target   $   4.82      5.4%   $   4,931       
Payout Level     91.1%   96.1%     91.8%    
Objective Weight     33.33%   33.34%     33.33%    
Award Level     30.37%   32.04%     30.61%   = 93.02   
Quality Compliance Modifier(1)     —      —         —        
Total Payout Percent     —      —         —       93.02%
(1)The Quality Compliance Modifier performance threshold was achieved, resulting in no reduction to the annual incentive plan payout.
(2)Diluted EPS and free cash flow are considered non-GAAP financial measures under applicable SEC rules and regulations. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure is included in Appendix A of this proxy statement.
(3)$ in millions.

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ANNUAL MIP QUALITY COMPLIANCE MODIFIER:

 

      Score
  Multiplier   FY16 FY17 FY18
Material Warning Letters 20  
Non-Material Warning Letter Findings 1   11
Average Findings per Inspection 10   14 7 4
FY Total     14 18 4
Goal – Not to exceed         30.00
FINAL TOTAL          

 

ANNUAL MIP PAYMENTS:

 

Name FY2018
Actual Performance
FY2018
MIP Target
  FY2018
MIP Award
Omar Ishrak 93.02% 175%   $   2,675,248
Karen L. Parkhill 93.02% 110%   $   828,809
Michael J. Coyle 93.02% 100%   $   834,948
Bradley E. Lerman 93.02% 85%   $   645,187
Rob ten Hoedt 93.02% 100%   $   749,842

Fiscal Year 2016 — 2018 Restricted Stock Unit Payout Results

At the end of the fiscal year, the Committee certified the attainment of the 3% cumulative CAGR diluted EPS performance threshold results for the restricted stock unit performance period that began in fiscal year 2016 and was completed at the end of fiscal year 2018.

The following table shows the results for fiscal year 2016-2018 Restricted Stock Unit Performance Threshold:

Fiscal Year EPS(1)
FY2015 (Baseline) $   4.08 (3)
FY2016 $   4.10 (4)
FY2017 $   4.37  
FY2018 $   4.74 (5)
3-year CCAGR(2)   3.86 %

(1)In order to provide year-over-year comparability and to calculate CCAGR above, FY2015 - FY2017 non-GAAP diluted EPS were adjusted for the divestiture of Medtronic’s Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses during the second quarter of fiscal year 2018.
(2)Calculated as a CCAGR.
(3)FY2015 non-GAAP diluted EPS excluded the impact of the Covidien acquisition in Q4 of FY2015 per Medtronic’s standard practice for treatment of large acquisitions on in-flight incentive plans.
(4)FY2016 non-GAAP diluted EPS was adjusted due to the determination of the Compensation Committee and Medtronic management that the special charge recorded in connection with the impairment of a debt investment should not be included in the Non-GAAP earnings adjustment used for the purposes of FY2016 Annual Incentive Plan (MIP) and Restricted Stock Unit performance threshold calculations.
(5)FY2018 non-GAAP diluted EPS was adjusted as contemplated under the MIP for year-over-year comparability. For the reconciliation from GAAP diluted  EPS to non-GAAP diluted EPS for FY2018, refer to Appendix A of this proxy statement.

Fiscal Year 2016 — 2018 Long-Term Performance Plan Payout Results

At the Compensation Committee’s May 2018 meeting, the Committee certified the results for the LTPP performance period that began in fiscal year 2016 and was completed at the end of fiscal year 2018. Payments of awards for this LTPP performance period were made during the first fiscal quarter of fiscal year 2019 and can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 49.

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Fiscal Year 2016 — 2018 Long-Term Performance Plan Results

The following table shows the results for fiscal year 2016 – 2018 LTPP and the resulting total payout percentage:

Year  Revenue
Growth
(1)(2)    ROIC
FY2016  48.7%     9.7%
FY2017  3.2%     9.9%
FY2018  0.7%     10.5%
Total/Average  20.6%     10.1%
2016-2018 LTPP Target  5.0%     13.0%
Payout Level  200.0%     50.8%
Objective Weight  50%     50%
Weighted Payout Percent  100.0%     25.4%
TOTAL PAYOUT PERCENT     125.4%   
(1)Annual revenue growth represents reported revenue, excluding the impact of currency.
(2)Three-year average revenue growth calculated as the cumulative compound annual growth rate, excluding the impact of currency and the divestiture of Medtronic’s Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses.

LONG-TERM PERFORMANCE PLAN PAYMENTS:

Name  FY16-FY18 Actual Performance   FY16-FY18 Targets   FY16-FY18 Awards 
Omar Ishrak   125.4%   $  4,333,334   $  5,434,001 
Karen L. Parkhill(1)            
Michael J. Coyle   125.4%   $  1,216,668   $  1,525,702 
Bradley E. Lerman   125.4%   $  933,334   $  1,170,401 
Rob ten Hoedt   125.4%   $  766,668   $  961,402 
(1)Ms. Parkhill was not eligible to participate in the FY16-FY18 plan.

Other Benefits and Perquisites

Medtronic provides broad-based benefit plans to all of its employees, including the same programs for NEOs. All employees participate in the same health care plans, and we do not provide NEOs with any different or additional benefit plans, except for a business allowance of $24,000 for U.S.-based NEOs and $40,000 for the CEO. Our business allowance policy is described in detail below.

United States Tax-Qualified Retirement Plans

Medtronic sponsors a number of United States tax-qualified retirement plans for its employees, including the NEOs. The Company maintains the Medtronic Retirement Plan (“MRP”), which consists of two types of benefits – the Final Average Pay Pension (“FAPP”) benefit and the Personal Pension Account (“PPA”) benefit. Employees hired before May 1, 2005 could elect to receive the FAPP and either the PPA or the Personal Investment Account (“PIA”) feature in the Medtronic Savings and Investment Plan – our 401(k) plan. Employees hired or rehired on or after May 1, 2005 but prior to January 1, 2016 are not eligible for the FAPP benefit as that particular benefit has been closed to new entrants, but may elect either the PPA benefit under the MRP or the PIA feature under the 401(k) plan. Employees hired or rehired on or after January 1, 2016 are eligible for the Medtronic Core Contribution (“MCC”) feature in the 401(k) plan. Additional details regarding the MRP and 401(k) plan are provided on 56 of this proxy statement.

MEDTRONIC PLC    2018 Proxy Statement     45

 

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Supplemental Retirement Plans

The Company offers a Nonqualified Retirement Plan Supplement (“NRPS”) designed to provide all eligible employees, including the NEOs, with benefits that supplement those provided under certain of our tax-qualified plans. The NRPS is designed to restore benefits lost under the PPA, PIA, FAPP or MCC due to covered compensation limits prescribed by the Internal Revenue Code. The NRPS also restores benefits for otherwise eligible compensation deferred into the Medtronic Capital Accumulation Plan Deferral Program (the “Capital Accumulation Plan”). The NRPS provides employees with no greater benefit than they would have received under the qualified plan in which they participate were it not for the covered compensation limits and deferrals into the Capital Accumulation Plan.

Nonqualified Deferred Compensation Plan

The Company provides all employees at the vice president level or above, including our NEOs, and highly-compensated employees with a market-competitive nonqualified deferred compensation plan through the Capital Accumulation Plan. Our plan allows these employees to make voluntary deferrals from their base pay and incentive payments, which are then credited with gains or losses based on the performance of selected investment alternatives. These alternatives are the same as those offered in our tax- qualified 401(k) Plan for all employees. There are no Company contributions to the plan or Company subsidized returns or Company guaranteed returns.

Business Allowance

Medtronic does not provide any perquisites such as automobiles, club memberships, or financial and tax advisors. Instead, we provide NEOs with a market-competitive business allowance. The NEOs may spend their business allowance at their discretion for expenses such as financial and tax planning, automobiles or club memberships. The business allowance is paid as taxable income, and we do not track how executives use their respective business allowances. The annual business allowances provided to our U.S.-based NEOs in fiscal year 2018 ranged from $24,000 to $40,000. Additionally, it is occasionally appropriate for NEOs to be accompanied during business travel by their spouses. The expenses associated with such travel, while rare, are considered taxable income. The business allowances and travel expenses are included in the “All Other Compensation” column of the Summary Compensation Table.

Corporate Aviation Service

The Medtronic Aviation service provides air transportation for use primarily by the CEO and members of the Board of Directors. Other executives may occasionally use the aviation services for business purposes based on availability and approval by the CEO or General Counsel. The service will help facilitate more effective and efficient travel planning and limited personal use is deemed appropriate in conjunction with scheduled business travel.

Change of Control Policy

Compensation in a change of control situation is designed to protect the compensation already earned by executives and to ensure that they will be treated fairly in the event of a change of control, and to help ensure the retention and dedicated attention of key executives critical to the ongoing operation of the Company. Our change of control policy supports these principles. We believe shareholders will be best served if the interests of our executive officers are aligned with shareholders’ interests, and we believe providing change of control benefits should motivate senior management to objectively evaluate potential mergers or transactions that may be in the best interests of shareholders. Our change of control agreements are discussed in more detail in the “Potential Payments Upon Termination or Change of Control” section of “Executive Compensation.”

Our Change of Control (COC) Policy requires a “double trigger” and only applies if a participant is involuntarily terminated without cause or the participant terminates employment for good reason within three years after a COC event. Our COC policy also does not provide for any “golden parachute” excise tax gross-ups.

MEDTRONIC PLC    2018 Proxy Statement     46

 

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Compensation Risk Assessment

Compensation policies and practices are also designed to discourage inappropriate risk-taking. While you should refer to the section entitled “Governance of Medtronic — Board Role in Risk Oversight” beginning on page 19 of this proxy statement for a discussion of the Company’s general risk assessment of compensation policies and practices, mitigating factors with respect to our NEOs include the following:

The NEOs are subject to stock ownership guidelines that require our CEO to maintain ownership of stock equal to six (6) times annual base salary and the other NEOs to maintain ownership of stock equal to three (3) times annual base salary. As of July 6, 2018, all NEOs are in compliance with the stock ownership and retention guidelines.
Incentive plans are more heavily weighted toward long-term performance to reduce the incentive to impair the prospects for long-term performance in favor of maximizing performance in one year.
Improper payments or gains from incentives and equity compensation are subject to clawback.
Short-term and long-term cash incentive payments are capped at 200% of target payout.
Short-term and long-term cash incentive performance targets are established at the beginning of each performance period and are not subject to change. Short- and long-term incentive programs use different measures of performance. Short-term cash incentives focus on annual operating plan financial measures such as revenue growth, diluted EPS, and cash flow. Long-term cash incentives measure shareholder three-year ROIC and three-year revenue growth relative to our long-term strategic expectations communicated to shareholders.
The Compensation Committee retains discretionary authority to override any incentive plan’s formulaic outcome in the event of unforeseen circumstances.

Executive Compensation Governance Practices and Policies

Stock Ownership and Retention Policy

Medtronic’s executive stock ownership and retention guidelines are meant to align management and shareholder incentives, at the highest levels of Medtronic’s organization. Those guidelines require the CEO to maintain ownership of stock equal to six (6) times annual base salary and other NEOs to maintain stock ownership equal to three (3) times annual base salary. Until the ownership guideline is met, the CEO must retain 75% of after-tax profit shares received through settlement of equity compensation awards and other NEOs must retain 50% of such shares. For purposes of complying with the guidelines, stock is not considered owned if pledged as collateral for a loan. Shares owned outright, legally or beneficially, by an officer or the officer’s immediate family members, after-tax unvested restricted stock units, and shares held in the tax-qualified and nonqualified retirement and deferred compensation plans count toward the guideline. For share issuances (restricted stock unit vesting), net gain shares are those shares remaining after payment of income taxes.

Compliance with our ownership and retention guidelines is measured at the beginning of the first fiscal month of a new fiscal year by the internal team at the Company responsible for handling executive compensation matters and the results of such measurement are reported to the Nominating and Corporate Governance Committee or Compensation Committee, as applicable, after the measurement. On each measurement date, compliance is measured using each executive officer’s base salary then in effect and the average closing price per share of the Company’s ordinary shares on the NYSE for the six (6) calendar months preceding the measurement date. As of July 6, 2018, all NEOs are in compliance with the stock ownership and retention policy.

Hedging and Pledging Policy

Our insider trading policy prohibits our NEOs and directors (along with others) from engaging in short sales of Medtronic securities (including short sales against the box) or engaging in purchases or sales of puts, calls or other derivative securities based on Medtronic securities. The policy also prohibits our NEOs from purchasing Medtronic securities on margin, borrowing against Medtronic securities held in a margin account or pledging Medtronic securities as collateral for a loan (unless the officer can clearly demonstrate the financial capacity to repay the loan without resorting to the pledged securities).

Sale and Transfer of Awards

All stock option, restricted stock, restricted stock unit, and performance-based restricted stock/restricted stock unit awards are granted under plans that specifically prohibit the sale, assignment and transfer of awards with limited exceptions such as the death of the award recipient. In addition, the Compensation Committee may allow an award holder to assign or transfer an award.

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Incentive Compensation Forfeiture (“Clawback”)

The Company has a comprehensive Incentive Compensation Forfeiture Policy, which is designed to recoup improper awards or gains paid to executive officers. If the Board determines that any executive officer has received an improper payment or gain, which is an incentive payment or grant mistakenly paid or awarded to the executive officer as a result of misconduct (as defined below), the executive officer must return the improper payment or gain to the extent it would not have been paid or awarded had the misconduct not occurred, including interest on any cash payments. “Misconduct” means any material violation of our Code of Conduct or other fraudulent or illegal activity for which an executive officer is personally responsible as determined by the Board. All executive officers are required to agree to this policy in writing.

Equity Compensation Forfeiture

The Company may require the return or forfeiture of cash and shares received or receivable in certain circumstances in which an employee has a termination of employment from the Company or any affiliate. The Company may exercise its ability to require forfeiture of awards if the employee receives or is entitled to receive delivery of shares or proceeds under an equity award program within six (6) months prior to or twelve (12) months following the date of termination of employment if the current or former employee engages in any of the following activities: (a) performing services for or on behalf of any competitor of, or competing with, the Company or any affiliate; (b) unauthorized disclosure of material proprietary information of the Company or any affiliate; (c) a violation of applicable business ethics policies or business policies of the Company or any affiliate; or (d) any other occurrence that is consistent with the intent noted in items a - c, as determined by the Compensation Committee.

Tax and Accounting Implications

In evaluating compensation programs applicable to our NEOs (including the Company’s annual and long-term incentive plans), the Compensation Committee considers the potential impact on the Company of Section 162(m) of the Internal Revenue Code, which places a limit of $1 million per year on the amount of compensation paid to certain of our executive officers that is deductible by the Company for federal income tax purposes. The Tax Cuts and Jobs Act, enacted on December 22, 2017, eliminates the performance-based exception to the $1 million deduction limit under Section 162(m) effective as of May 1, 2018 (the start of our first taxable year beginning after January 1, 2018). As a result, beginning in fiscal year 2019, compensation paid to our NEOs in excess of $1 million will generally be nondeductible, whether or not it is performance-based (except for certain performance-based compensation paid pursuant to a legally binding arrangement in place on November 2, 2017). The Compensation Committee will continue to maintain maximum flexibility in the design of our compensation programs and in making appropriate payments to NEOs even if not deductible by the Company.

The Compensation Committee also considers accounting treatment in the design of the long-term incentive plan.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed with management the section of this proxy statement entitled “Compensation Discussion and Analysis” required by Item 402(b) of Regulation S-K. Based on such review and discussions, the Compensation Committee recommended to the Board that the section entitled “Compensation Discussion and Analysis” be included in this proxy statement.

COMPENSATION COMMITTEE (as of June 21, 2018):

Craig Arnold, Chair Randall J. Hogan, III
Richard H. Anderson Kendall J. Powell
Scott C. Donnelly  

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EXECUTIVE COMPENSATION

2018 Summary Compensation Table

The following table summarizes all compensation for each of the last three fiscal years awarded to, earned by, or paid to the Company’s Chief Executive Officer, Chief Financial Officer, and three other most highly compensated executive officers during fiscal year 2018 (collectively, the named executive officers or “NEOs”). Please refer to the section entitled “Compensation Discussion and Analysis” beginning on page 31 of this proxy statement for a description of the compensation components for Medtronic’s NEOs. A narrative description of the material factors necessary to understand the information in the table is provided below, following the table.

Name and
Principal Position
Fiscal
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
Omar Ishrak 2018 1,641,583 4,500,036 2,943,204 8,109,248 240,491 150,569 17,585,131
Chairman and 2017 1,593,770 4,500,042 3,037,488 6,136,139 245,561 173,858 15,687,287
Chief Executive 2016 1,548,216 4,333,368 3,017,788 6,070,758 212,185 90,299 15,272,615
Officer                  
Karen L. Parkhill 2018 807,692 1,133,343 757,608 828,808 101,078 3,628,529
Executive Vice 2017 620,192 1,000,000 5,400,052 691,882 778,883 __ 934,554 9,425,993
President & Chief                  
Financial Officer                  
Michael J. Coyle 2018 896,923 1,366,696 910,217 2,360,649 121,066 5,655,551
Executive Vice 2017 876,923 5,366,729 939,375 1,721,808 123,725 9,028,989
President & 2016 799,000 1,216,722 864,734 1,653,720 110,221 4,644,397
Group President                  
Cardiac and                  
Vascular Group                  
Bradley E. Lerman 2018 815,385 1,000,083 670,408 1,815,588 107,587 4,409,051
Senior Vice 2017 798,077 250,000 1,000,009 691,882 1,266,988 208,532 4,215,488
President, 2016 749,039 250,000 933,348 667,416 706,605 261,504 3,567,913
General Counsel                  
and Corporate                  
Secretary                  
Rob ten Hoedt(1) 2018 806,107 766,730 517,786 1,711,243 2,565,216 131,877 6,498,959
Executive Vice 2017 781,417 1,766,748 534,380 1,044,847 1,068,942 187,227 5,383,561
President &                  
President Europe,                  
Middle East and                  
Africa Region                  
(1)  Mr. ten Hoedt was not a Named Executive Officer for fiscal year 2016. For Mr. ten Hoedt, amounts paid in Swiss francs were translated to U.S. dollars as of April 27, 2018 at a rate of 1 Swiss Franc = 1.05608 U.S. Dollars and as of April 28, 2017 at a rate of 1 Swiss Franc = 1.01389 U.S. Dollars.

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Salary

The salary column represents the base salary earned by the NEO during the applicable fiscal year. This column includes any amounts that the officer may have deferred under the Capital Accumulation Plan, which deferred amounts also are included in the 2018 Nonqualified Deferred Compensation Table on page 57 of this proxy statement. Each of the NEOs also contributed a portion of salary to the Medtronic Savings and Investment Plan, our 401(k) Plan.

Bonus

Ms. Parkhill’s 2017 amount represents a one-time $1,000,000 bonus following the commencement of her employment with the Company. Mr. Lerman’s 2017 and 2016 amounts represent $250,000 installments of his original sign-on bonus of $1,000,000.

Stock Awards

The stock awards column represents aggregate grant date fair value of restricted stock unit awards and performance-based restricted stock units assuming full (maximum) achievement of applicable performance criteria over the performance period (collectively, the “restricted stock awards”) granted in the respective fiscal year as computed in accordance with FASB ASC Topic 718, Compensation— Stock Compensation. Accordingly, the grant date fair value was determined by multiplying the number of restricted stock awards by the closing stock price on the date of grant. For a description of the vesting terms of the stock awards, see the narrative disclosure following the 2018 Grants of Plan-Based Awards table on page 52 and the footnotes to the 2018 Outstanding Equity Awards at Fiscal Year End table on page 53 of this proxy statement. Additional information regarding the assumptions used to calculate these amounts is incorporated by reference to Note 14 to the financial statements included in the Company’s Form 10-K for fiscal year 2018.

Option Awards

The option awards column represents the aggregate grant date fair value of stock option awards granted in the respective fiscal year as computed in accordance with FASB ASC Topic 718, Compensation— Stock Compensation. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option valuation model. The following table provides the assumptions underlying this estimate.

             
    Stock Option Grant Date 
   August 3, 2015  August 1, 2016  July 31, 2017
Fair value of options granted  $  13.58   $  14.86   $  13.73 
Assumption used:               
Risk-free rate(1)   1.77%   1.22%   2.00%
Expected volatility(2)   20.82%   21.15%   19.53%
Expected life(3)   5.9 yrs   6.2 yrs   6.2 yrs
Dividend yield(4)   1.95%   1.95%   2.19%
(1)The risk-free rate is based on the grant date yield of a zero-coupon U.S. Treasury bond whose maturity period equals or approximates the expected term of the option.
(2)The expected volatility is based on a blend of historical volatility and an implied volatility of the Company’s ordinary shares. Implied volatility is based on market traded options of the Company’s ordinary shares.
(3)The Company analyzes historical employee stock option exercise and termination data to estimate the expected life assumption. The Company calculates the expected life assumption using the midpoint scenario, which combines historical exercise data with hypothetical exercise data, as the Company believes this data currently represents the best estimate of the expected life of a new employee option.
(4)The dividend yield rate is calculated by dividing the Company’s annual dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date.

For a description of the vesting terms of the option awards, see the narrative disclosure following the 2018 Grants of Plan-Based Awards table on page 52 and the footnotes to the 2018 Outstanding Equity Awards at Fiscal Year End table on page 53 of this proxy statement. Additional information regarding the assumptions used to calculate these amounts is incorporated by reference to Note 14 to the financial statements included in the Company’s Form 10-K for fiscal year 2018.

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Non-Equity Incentive Plan Compensation

This column reflects the Medtronic MIP and LTPP payments earned by the NEOs during the applicable fiscal year and payable subsequent to fiscal year end. It includes any amounts deferred under the Capital Accumulation Plan (as stated in the 2018 Nonqualified Deferred Compensation table on page 57 of this proxy statement). The table below reflects compensation received by the NEO under each plan for the performance period ending through fiscal year 2018.

             
Name  MIP   2016-2018
LTPP
   Total Non-Equity
Incentive Plan Compensation
 
Omar Ishrak  $  2,675,247   $  5,434,001   $  8,109,248 
Karen L. Parkhill  $  828,808   $     $  828,808 
Michael J. Coyle  $  834,948   $  1,525,702   $  2,360,650 
Bradley E. Lerman  $  645,187   $  1,170,401   $  1,815,588 
Rob ten Hoedt  $  749,841   $  961,402   $  1,711,243 

For a more detailed description of the terms of the non-equity incentive plan awards, see page 39 of the Compensation Discussion and Analysis and the narrative disclosure following the 2018 Grants of Plan-Based Awards on page 52 of this proxy statement.

Change in Pension Value and Nonqualified Deferred Compensation Earnings

This column includes the estimated aggregate increase in the accrued pension benefit under Medtronic’s defined benefit pension plans. The change in the present value of the accrued pension benefit is influenced by variables such as additional years of service, age, pay and the discount rate used to calculate the present value of the change. In determining the present value of accrued pension benefits under Medtronic’s plans, a discount rate of 4.34% was used for fiscal year 2018 and a discount rate of 4.30% was used for fiscal year 2017 and fiscal year 2016.

The pension values are calculated based on the accrued pension benefits (qualified plan and the nonqualified NRPS) as of April 27, 2018 and the fiscal year-end 2018 ASC 715 disclosure the financial statements included in assumptions. Assumptions are described in Note 17 to the financial statements included in the Company’s Form 10-K for fiscal year 2018.

All Other Compensation

The all other compensation column includes the following:

Name  Fiscal Year   Perquisites
and Other
Personal
Benefits
(1)   Tax
Reimbursement
(2)   Registrant Contributions
to Defined
Contribution
Plans
(3)   Total 
Omar Ishrak  2018   $  139,837   $  72   $  10,660   $  150,569 
Karen L. Parkhill  2018   $  42,771   $  50   $  58,257   $  101,078 
Michael J. Coyle  2018   $  24,000   $  20   $  97,046   $  121,066 
Bradley E. Lerman  2018   $  24,000   $  59   $  83,528   $  107,587 
Rob ten Hoedt  2018   $  98,760   $  33,117   $     $  131,877 
(1)This column represents the aggregate incremental cost of the executives’ business allowances, physical exams, automobile leases, travel expenses and other benefits. The value of perquisites and other personal benefits for each NEO are as follows:
Mr. Ishrak includes a $40,000 business allowance and $99,837 attributable to personal use of Company aircraft. The amount disclosed does not include de minimis incremental costs incurred by the Company in connection with guests accompanying Mr. Ishrak on the Company aircraft during business flights. .
Ms. Parkhill includes a $24,000 business allowance and reimbursement of relocation expenses of $18,772.
Mr. Coyle includes a $24,000 business allowance.
Mr. Lerman includes a $24,000 business allowance.
Mr. ten Hoedt includes $15,841 of financial planning services, an automobile lease of $45,851 and reimbursement of schooling of $37,068.

The Company occasionally allows its executives to use tickets for sporting and special events previously acquired by the Company when no other business use has been arranged. There is no incremental cost to the Company for such use.

(2)For Mr. ten Hoedt, this amount represents a gross-up of taxes on schooling reimbursement.
(3)This amount reflects the contribution by Medtronic to match contributions NEOs elected to make to the SIP. Medtronic provides an automatic matching contribution equal to 50% of a participant’s elective deferrals up to 6% of eligible compensation. The Company also may provide a discretionary matching contribution based on our financial performance during the fiscal year that, when combined with the automatic matching contribution, will not exceed 150% of a participant’s elective deferrals up to 6% of eligible compensation. The fiscal year 2018 discretionary matching contribution was based on diluted EPS achievement of $4.74 and equaled a $0.658 matching contribution for every $1 elective deferral a participant contributed to the plan up to 6% of eligible compensation. The amount for Ms. Parkhill includes $47,597 in Company contributions to the qualified Medtronic Core Contribution Plan (“MCC”) ($8,100) and the nonqualified MCC ($39,497). Participants in the MCC receive a contribution from Medtronic equal to 3% of eligible pay at the end of the fiscal year. The amount for Mr. Coyle includes $86,387 in Company contributions to the qualified PIA ($13,500) and nonqualified PIA ($72,887). The amount for Mr. Lerman includes $72,869 in Company contributions to the qualified PIA ($13,500) and nonqualified PIA ($59,369). For additional information on the nonqualified MCC plan, see the 2018 Nonqualified Deferred Compensation table on page 57.

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2018 Grants of Plan-Based Awards

The following table summarizes all plan-based award grants to each of the NEOs during fiscal year 2018. Threshold amounts assume attainment of plan performance thresholds. You should refer to the Compensation Discussion and Analysis sections entitled “Fiscal Year 2018 Annual Incentive Plan Design” on page 39 and “Fiscal Year 2018 Long-Term Incentive Plan Design” beginning on page 41 to understand how plan-based awards are determined. A narrative description of the material factors necessary to understand the information in the table is provided below.

                               
            Estimated Future Payouts under
Non-Equity Incentive Plan Awards ($)
  Estimated
Future
Payouts Under
Equity
  All Other
Option Awards:
Number of
Securities
  Exercise
or Base
Price of
  Grant
Date Fair
Value of
Stock and
Name  Award
Type
  Grant
Date
  Approval
Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Incentive Plan
Awards Target
(# of shares)
  Underlying
Options
(#)
  Option
Awards
($/Sh)
  Option
Awards
($)
Omar Ishrak  MIP        479,332  2,875,992  5,751,984            
   LTPP        1,125,000  4,500,000  9,000,000            
   OPT  7/31/2017  6/22/2017              214,363  83.97  2,943,204
   RSU  7/31/2017  6/22/2017           53,591        4,500,036
Karen L. Parkhill  MIP        148,500  891,000  1,782,000            
   LTPP        283,334  1,133,334  2,666,668            
   OPT  7/31/2017  6/22/2017              55,179  83.97  757,608
   RSU  7/31/2017  6/22/2017           13,497        1,133,343
Michael J. Coyle  MIP        149,600  897,600  1,795,200            
   LTPP        341,667  1,366,668  2,733,336            
   OPT  7/31/2017  6/22/2017              66,294  83.97  910,217
   RSU  7/31/2017  6/22/2017           16,276        1,366,696
Bradley E. Lerman  MIP        115,600  693,600  1,387,200            
   LTPP        250,000  1,000,000  2,000,000            
   OPT  7/31/2017  6/22/2017              48,828  83.97  670,408
   RSU  7/31/2017  6/22/2017           11,910        1,000,083
Rob ten Hoedt  MIP        134,351  806,107  1,612,214            
   LTPP        191,667  766,668  1,533,336            
   OPT  7/31/2017  6/22/2017              37,712  83.97  517,786
   RSU  7/31/2017  6/22/2017           9,131        766,730

MIP = Annual performance-based plan award granted under the Medtronic Incentive Plan

LTPP = Long-term performance plan award granted under the Medtronic plc Amended and Restated 2013 Stock Award and Incentive Plan

OPT = Nonqualified stock options granted under the Medtronic plc Amended and Restated 2013 Stock Award and Incentive Plan

RSU = Restricted stock unit, with a performance threshold, granted under the Medtronic plc Amended and Restated 2013 Stock Award and Incentive Plan

Estimated Future Payouts Under Non-Equity Incentive Plan Awards

Amounts in these columns represent 2018 MIP at threshold, target and maximum performance and future cash payments under the FY2018-FY2020 LTPP. The LTPP provides for annual grants that are earned over a three-year period. Earned payouts under the LTPP can range from 25% to 200% of the target grant based on the Company’s performance relative to the following metrics: three-year cumulative compounded annual revenue growth rate and ROIC (12-month non-GAAP earnings after the removal of after-tax impact of amortization and excluding non-recurring items, plus interest expense net of tax all divided by Total Equity plus Interest-Bearing Liabilities less Cash and Cash Equivalents for each year averaged over the three-year period). Earned payouts under the MIP for each individual performance measure (annual revenue growth, diluted EPS, and cash flow indicator) can range from 50% to 200% of the target grant based on Company performance and a quality compliance modifier performance threshold as described on page 41 of this proxy statement. The threshold payout levels described above reflect threshold performance achievement for one performance metric in the respective LTPP and MIP. The maximum dollar value that may be paid to any participant in qualified performance-based awards denominated in cash in any fiscal year is $20 million for the Chief Executive Officer and $10 million for each other participant. Both the MIP and LTPP have separate diluted EPS goals. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in Appendix A of this proxy statement.

Estimated Future Payouts Under Equity Incentive Plan Awards

Amounts in this column represent grants of restricted stock units (RSUs). RSUs vest 100% on the third anniversary of the date of grant provided Medtronic achieves a minimum three-year cumulative diluted EPS threshold growth rate. Unvested RSUs receive dividend equivalent units (DEUs), which are credited and added to the share balance. DEUs are only paid to the extent the underlying RSUs are earned.

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All Other Option Awards/Exercise or Base Price of Option Awards

The exercise or base price of the stock option grant represents the closing market price of Medtronic ordinary shares on the date of grant. Option awards vest 25% on each anniversary of the date of grant over a four-year period.

Grant Date Fair Value of Stock and Option Awards

This column represents the grant date fair value of each equity award granted in fiscal year 2018 computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation. For a discussion of the assumptions used in calculating the amount recognized for stock options granted on July 31, 2017 see page 50 of this proxy statement. Additional information regarding the assumptions used to calculate these amounts are incorporated by reference to Note 14 to the financial statements included in the Company’s Form 10-K for fiscal year 2018.

2018 Outstanding Equity Awards at Fiscal Year End

The table below reflects all outstanding equity awards made to each of the NEOs that were outstanding at the end of fiscal year 2018. The market or payout value of unearned shares, units or other rights that have not vested equals $81.29, which was the closing price of Medtronic’s ordinary shares on the New York Stock Exchange on April 27, 2018, and for performance-based restricted stock units and for performance share plan awards presumes that the target performance goals are met.

                               
   Option Awards  Stock Awards
      Number of Securities
Underlying Unexercised
Options (#)
           Shares or Units of
Stock That Have
Not Vested
  Equity Incentive Plan
Awards: Unearned
Shares, Units or Other
Rights That Have
Not Vested(1)
Name  Option
Grant Date
  Exercisable  Unexercisable  Option
Exercise Price
($)
  Option
Expiration
Date
  Grant
Date
  Number
(#)
(1) Market
Value
($)
  Number
(#)
(1) Market or
Payout Value
($)
Omar Ishrak  07/30/2012  115,338    38.81  07/30/2022  08/03/2015        58,904  4,788,306
   07/29/2013  221,765    55.32  07/29/2023  08/01/2016        53,105  4,316,905
   07/28/2014  167,304  55,769  62.76  07/28/2024  07/31/2017        54,506  4,430,793
   08/03/2015  111,111  111,112  78.00  08/03/2025               
   08/01/2016  51,101  153,306  88.06  08/01/2026               
   07/31/2017    214,363  83.97  07/31/2027               
Karen L. Parkhill  08/01/2016  11,356  34,068  88.06  08/01/2026  06/20/2016  36,265  2,947,982      
   08/01/2016  284  852  88.06  08/01/2026  08/01/2016        11,802  959,385
   07/31/2017    53,988  83.97  07/31/2027  07/31/2017        13,728  1,115,949
   07/31/2017    1,191  83.97  07/31/2027               
Michael J. Coyle  02/01/2010  23,175    43.15  02/01/2020  08/03/2015        16,539  1,344,455
   08/02/2010  70,984    37.53  08/02/2020  08/01/2016  47,205  3,837,294      
   08/01/2011  84,060    34.88  08/01/2021  08/01/2016        16,129  1,311,126
   07/30/2012  75,548    38.81  07/30/2022  07/31/2017        16,554  1,345,675
   10/29/2012  2,404    41.60  10/29/2022               
   07/29/2013  55,441    55.32  07/29/2023               
   07/29/2013  1,808    55.32  07/29/2023               
   07/28/2014  42,639  14,213  62.76  07/28/2024               
   07/28/2014  1,195  399  62.76  07/28/2024               
   08/03/2015  31,197  31,197  78.00  08/03/2025               
   08/03/2015  641  642  78.00  08/03/2025               
   08/01/2016  15,519  46,560  88.06  08/01/2026               
   08/01/2016  284  852  88.06  08/01/2026               
   07/31/2017    65,103  83.97  07/31/2027               
   07/31/2017    1191  83.97  07/31/2027               

MEDTRONIC PLC    2018 Proxy Statement     53

 

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  Option Awards   Stock Awards
    Number of Securities
Underlying Unexercised
Options (#)
        Shares or Units of
Stock That Have
Not Vested
  Equity Incentive Plan
Awards: Unearned
Shares, Units or Other
Rights That Have
Not Vested(1)
Name Option
Grant Date
Exercisable Unexercisable Option
Exercise Price($)
Option
Expiration
Date
  Grant
Date
Number
(#)
(1) Market
Value
($)
  Number
(#)
(1) Market or
Payout Value
($)
Bradley E. 07/28/2014 29,876 9,959 62.76 07/28/2024   08/03/2015         12,687   1,031,326
Lerman 07/28/2014 1,195 399 62.76 07/28/2024   08/01/2016         11,802   959,385
  01/27/2015 50,775 74.84 01/27/2025   07/31/2017         12,114   984,747
  08/03/2015 23,932 23,932 78.00 08/03/2025                  
  08/03/2015 641 642 78.00 08/03/2025                  
  08/01/2016 11,356 34,068 88.06 08/01/2026                  
  08/01/2016 284 852 88.06 08/01/2026                  
  07/31/2017 47,637 83.97 07/31/2027                  
  07/31/2017 1,191 83.97 07/31/2027                  
Rob ten Hoedt 08/01/2011 7,168 34.88 08/01/2021   08/03/2015         10,423   847,286
  10/29/2012 2,404 41.60 10/29/2022   08/01/2016 11,802   959,385        
  07/29/2013 1,808 55.32 07/29/2023   08/01/2016         9,049   735,593
  07/29/2013 3,706 55.32 07/29/2023   07/31/2017         9,287   754,940
  07/28/2014 1,195 399 62.76 07/28/2024                  
  07/28/2014 5,178 5,179 62.76 07/28/2024                  
  08/03/2015 19,658 19,659 78.00 08/03/2025                  
  08/03/2015 641 642 78.00 08/03/2025                  
  08/01/2016 8,706 26,119 88.06 08/01/2026                  
  08/01/2016 284 852 88.06 08/01/2026                  
  07/31/2017 36,521 83.97 07/31/2027                  
  07/31/2017 1,191 83.97 07/31/2027                  
(1)Amounts in these columns may include dividend equivalents that will be distributed upon distribution of the underlying awards.

The amounts shown in the column entitled “Shares or Units of Stock That Have Not Vested” of the 2018 Outstanding Equity Awards at Fiscal Year-End table that correspond to a June 20, 2016, grant date for Ms. Parkhill reflect a time-based restricted stock unit award that vests 1/3 on each of the first, second, and third anniversaries of the grant date. For Mr. Coyle in the amount of 47,205, and Mr. ten Hoedt in the amount of 11,802, the August 1, 2016 grants vest in three years. The amounts shown in the column entitled “Equity Incentive Plan Awards: Unearned Shares, Units or Other Rights That Have Not Vested” of the 2018 Outstanding Equity Awards at Fiscal Year End table that correspond to August 3, 2015 August 1, 2016 and July 31, 2017 grant dates reflect performance-based restricted stock or restricted stock unit awards that vest on the third anniversary of the date of grant provided the established performance threshold for each award is achieved.

The table below shows the vesting schedule for all exercisable options.

    Vesting Schedule For Unexercisable Options
Name Grant Date 2018 2019 2020 2021
Omar Ishrak 07/28/2014 55,769      
  08/03/2015 55,556 55,556    
  08/01/2016 51,102 51,102 51,102  
  07/31/2017 53,590 53,591 53,591 53,591
Karen L. Parkhill 08/01/2016 11,356 11,356 11,356  
  08/01/2016 284 284 284  
  07/31/2017 13,497 13,497 13,497 13,497
  07/31/2017 297 298 298 298
Michael J. Coyle 07/28/2014 14,213      
  07/28/2014 399      
  08/03/2015 15,598 15,599    
  08/03/2015 321 321    
  08/01/2016 15,520 15,520 15,520  
  08/01/2016 284 284 284  
  07/31/2017 16,275 16,276 16,276 16,276
  07/31/2017 297 298 298 298

MEDTRONIC PLC    2018 Proxy Statement     54

 

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    Vesting Schedule For Unexercisable Options
Name Grant Date 2018 2019 2020 2021
Bradley E. Lerman 07/28/2014 9,959