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

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

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Preliminary Proxy Statement

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

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

Abbott Laboratories

(Name of Registrant as Specified In Its Charter)

 

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

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

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

 

 

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GRAPHIC


Table of Contents

Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-6400 U.S.A.

On the Cover: FreeStyle Libre System

GABRIELLE WEMPE
FreeStyle Libre user
The Netherlands


    
Since 2015, Gabrielle has relied on the
revolutionary technology in Abbott's
FreeStyle
Libre
system to monitor her glucose levels.


Table of Contents

TABLE OF CONTENTS

 
  PAGE

Notice of Annual Meeting of Shareholders

  2

Proxy Summary

 
3

Information About the Annual Meeting

 
9

Who Can Vote

  9

Notice and Access

  9

Cumulative Voting

  9

Voting by Proxy

  9

Revoking a Proxy

  9

Discretionary Voting Authority

  9

Quorum and Vote Required to Approve Each Item on the Proxy

  10

Effect of Withhold Votes, Broker Non-Votes, and Abstentions

  10

Inspectors of Election

  10

Cost of Soliciting Proxies

  10

Abbott Laboratories Stock Retirement Plan

  10

Confidential Voting

  11

Householding of Proxy Materials

  11

Nominees for Election as Directors
(Item 1 on Proxy Card)

 
12

The Board of Directors and its Committees

 
18

The Board of Directors

  18

Leadership Structure

  18

Director Selection

  19

Board Diversity and Composition

  19

Committees of the Board of Directors

  21

Communicating with the Board of Directors

  22

Corporate Governance Materials

  22

2017 Director Compensation

  23

Security Ownership of Executive Officers and Directors

 
25

Executive Compensation

 
26

Compensation Discussion and Analysis

  26

Compensation Committee Report

  41

Compensation Risk Assessment

  42

Summary Compensation Table

  44

2017 Grants of Plan-Based Awards

  47

2017 Outstanding Equity Awards at Fiscal Year-End

  48

2017 Option Exercises and Stock Vested

  55

Pension Benefits

  55

2017 Nonqualified Deferred Compensation

  58

Potential Payments Upon Termination or Change in Control

  58

CEO Pay Ratio

  61

 
  PAGE

Ratification of Ernst & Young LLP as Auditors (Item 2 on Proxy Card)

  62

Report of the Audit Committee

  63

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

 
64

Shareholder Proposal

 
66

Shareholder Proposal on Independent Board Chairman (Item 4 on Proxy Card)

  67

Proponent's Statement in Support of Shareholder Proposal

  67

Board of Directors' Statement in Opposition to the Shareholder Proposal

  68

Approval Process for Related Person Transactions

 
69

Additional Information

 
70

Information Concerning Security Ownership

  70

Section 16(a) Beneficial Ownership Reporting Compliance

  70

Other Matters

  70

Date for Receipt of Shareholder Proposals for the 2019 Annual Meeting Proxy Statement

  70

Procedure for Recommendation and Nomination of Directors and Transaction of Business at Annual Meeting

  71

General

  72

Exhibit A—Director Independence Standard

 
A-1

Annex I—Non-GAAP Reconciliation of Financial Information

 
I-1

Reservation Form for Annual Meeting

 
Back Cover

Abbott Laboratories      1


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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

YOUR VOTE IS IMPORTANT

Please sign and promptly return your proxy
in the enclosed envelope, or vote your
shares by telephone or using the Internet.


Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 27, 2018

The Annual Meeting of the Shareholders of Abbott Laboratories will be held at Abbott's headquarters, 100 Abbott Park Road, at the intersection of Route 137 and Waukegan Road, Lake County, Illinois, on Friday, April 27, 2018, at 9:00 a.m. for the following purposes:

    To elect 12 directors to hold office until the next Annual Meeting or until their successors are elected (Item 1 on the proxy card),

    To ratify the appointment of Ernst & Young LLP as auditors of Abbott for 2018 (Item 2 on the proxy card),

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

    To transact such other business as may properly come before the meeting, including consideration of a shareholder proposal, if presented at the meeting (Item 4 on the proxy card).

The Board of Directors recommends that you vote FOR Items 1, 2, and 3.

The Board of Directors recommends that you vote AGAINST Item 4.

The close of business on February 28, 2018, has been fixed as the record date for determining the shareholders entitled to receive notice of and to vote at the Annual Meeting.

Abbott's 2018 Proxy Statement and 2017 Annual Report to Shareholders are available at www.abbott.com/proxy.

If you are a registered shareholder, you may access your proxy card by either:

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

    Calling (in the United States, U.S. territories, and Canada) toll-free 1-800-652-VOTE (8683) on a touch-tone telephone, and following the simple instructions provided by the recorded message.

    Admission to the meeting will be by admission card only. If you plan to attend, please complete and return the reservation form on the back cover, and an admission card will be sent to you. Due to space limitations, reservation forms must be received before April 20, 2018. Each admission card, along with photo identification, admits one person. A shareholder may request two admission cards, but a guest must be accompanied by a shareholder.

By order of the Board of Directors.

Hubert L. Allen
Secretary

March 16, 2018

2      Abbott Laboratories


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PROXY SUMMARY

This summary contains highlights about Abbott and the upcoming 2018 Annual Meeting of Shareholders. This summary does not contain all of the information that you should consider in advance of the meeting, and we encourage you to read the entire proxy statement carefully before voting.

The accompanying proxy is solicited on behalf of the Board of Directors for use at the Annual Meeting of Shareholders. The meeting will be held on April 27, 2018, at Abbott's headquarters, 100 Abbott Park Road, at the intersection of Route 137 and Waukegan Road, Lake County, Illinois. This proxy statement and the accompanying proxy card are being mailed to shareholders on or about March 16, 2018.

ACHIEVING LEADING RETURNS

In 2017, Abbott achieved outstanding returns to shareholders, ranking #1 in our peer group. Abbott's one-year total shareholder return (TSR) was 52.0%, which was 30.2 and 23.9 percentage points above the robust growth of both the Standard & Poor's 500 Index (S&P 500) and the Dow Jones Industrial Average (DJIA), respectively. Abbott continues to be recognized as a member of the S&P 500 Dividend Aristocrat Index, having increased the dividend payout for 46 consecutive years.

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WELL-POSITIONED FOR LONG-TERM GROWTH

In 2017, Abbott continued to strategically shape its business through the additions of St. Jude Medical and Alere Inc. The St. Jude Medical business expands Abbott's presence into multiple new areas of cardiovascular care, as well as neuromodulation, transforming Abbott into a broad-based leader in medical devices. Alere Inc. extends Abbott's long-established presence and leadership in diagnostics into rapid testing, an attractive and high growth area of testing in both developed and emerging markets. In addition, Abbott continues to have a strong organic pipeline of innovative new products across each of our major businesses, including novel technologies for glucose-monitoring, neuromodulation, cardiovascular care and fully-integrated diagnostic testing solutions. Together, this high level of R&D productivity and strategic shaping gives Abbott an exciting portfolio of businesses with the presence and capabilities in both developed and emerging markets to create new market opportunities for long-term growth.

Abbott Laboratories      3


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STAYING CURRENT AND RELEVANT - 130 YEARS LATER

Abbott is celebrating an important milestone in 2018: the company's 130th anniversary. A key element of our longevity and success has been the ability to adapt and change continually to ensure Abbott remains current and relevant. Today, Abbott operates a diverse and balanced portfolio of businesses that are all leaders in large, attractive markets and aligned with favorable, long-term healthcare trends. The strategic actions we've taken over the last several years have created leading positions in the segments of healthcare where we compete.

  GRAPHIC
MEDICAL DEVICES

Leading positions in cardiovascular, neuromodulation and diabetes care. In cardiovascular devices, Abbott holds #1 or #2 positions across several large market segments, including coronary stents, cardiac rhythm management, atrial fibrillation, and heart failure.

          GRAPHIC
DIAGNOSTICS

A global leader in in vitro diagnostics offering a broad portfolio spanning immunoassay, clinical chemistry, hematology, blood screening, molecular and point of care diagnostics.

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  GRAPHIC
NUTRITION

Portfolio of science-based products addressing the unique nutrition needs for people of all ages. Abbott is the worldwide leader in Adult nutrition and the leading Pediatric nutrition company in the United States.

          GRAPHIC
ESTABLISHED PHARMACEUTICALS

High-quality, branded generic pharmaceuticals business that is focused on emerging geographies, with significant scale and leading positions in India, Russia and Latin America.

   

PEER GROUP

Our shareholders compare us to other global multinational companies, only some of which are in healthcare. These companies share similar investment identities and operating characteristics aligned with diversified growth, returns to shareholders, and capital structure.

The peer group used for performance and compensation benchmarking prior to 2017 was established at the time of the AbbVie separation in 2013. That group has been used without change from 2013 through 2016. Due to the acquisitions of St. Jude Medical and Alere Inc. and significant changes in several peers due to corporate transactions, the Compensation Committee (the Committee) and its consultant reviewed the peer group to be used for 2017 benchmarking. Based on that review, the Committee approved an update to the peer group to better align to our current size, scope, and global footprint.

In determining changes to our peer group for 2017 performance and compensation benchmarking, as in prior years, we considered:

    Globally diverse manufacturing-driven organizations with significant international operations

    Consumer-facing organizations

    Similar financial and operating measures, including market capitalization, revenue, and number of employees

    Similar return of cash profiles, including dividends and share repurchases

    Similar geographic mix of revenues and profits

3M Company

  Danaher   Johnson & Johnson   Mondelēz

Becton Dickinson

 

Eaton

 

Johnson Controls

 

Procter & Gamble

Bristol-Myers Squibb

 

Emerson Electric

 

Kimberly-Clark

 

Thermo Fisher Scientific

Coca-Cola

 

Honeywell International

 

Medtronic

 

United Technologies

4      Abbott Laboratories


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EXECUTIVE COMPENSATION

Over the past four years, we have averaged 95% shareholder support for our annual advisory vote on "Say on Pay", demonstrating strong support for our approach to executive compensation. Our compensation program provides an appropriate and competitive mix of elements to incentivize our executives to achieve the Company's business strategies and goals, while also aligning executive performance and awards with shareholder interests.

COMPENSATION ALIGNED WITH PERFORMANCE

The vast majority of compensation for our executive officers is performance-based and objectively determined. Long Term Incentives (LTI), which comprise the largest percentage of compensation for our executive officers, are directly linked to shareholder returns. Each year, LTI award guidelines are determined based on relative TSR performance compared to our peer group. The Compensation Committee looks at 1-, 3-, and 5-year TSR in making these determinations. The table below illustrates the relative TSR and award guidelines since 2013 for executive officers at Abbott.

    Relative TSR Percentile vs. Peers     2013     2014     2015     2016     2017  
    1-Year     26th     89th     61st     0th     100th  
    3-Year       84th       53rd       44th       17th       63rd    
    5-Year     11th     47th     83rd     28th     50th  
                                                 
    Average     40th     63rd     63rd     15th     71st  
    LTI Award Guideline Percentile       37th       50th       50th       25th       75th    

Not only is a direct link evident in these results; it can reasonably be concluded that Abbott has been conservative in setting target payout levels. This linkage translates into significant differentiation of pay for our executives, aligned with returns to our shareholders. The table below illustrates the pay outcomes for our CEO based on results each year since the separation of AbbVie. Again, a direct pay for performance link is very evident.

    Pay Linked to Performance     2013     2014     2015     2016     2017  
    CEO Pay Decisions*     $ 15,766,044     $ 19,905,536     $ 17,403,023     $ 15,062,628     $ 23,572,774  
    % Change in Pay vs. Prior Year         –30%         +26%         –13%         –13%         +56%    
    1-Year TSR     +24%     +20%     +2%     –12%     +52%  
*
Pay decisions represent summary compensation table earnings, excluding the change in pension value (which is primarily driven by changes in discount rates) and adjusted to reflect Stock Awards and Option Awards aligned to the year of grant (since the Committee grants those in February of each year based on the prior year performance).

KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM

  What We Do   What We Don't Do

 

 

  

 

Use multiple performance hurdles to determine long-term incentive awards (Relative TSR, Individual Performance, and ROE target)

 

Ø

 

No tax gross-ups under our executive officer pay program

 

 

  

 

Benchmark peers with investment profiles, operating characteristics, and employment and business markets similar to Abbott

 

Ø  

 

No guaranteed bonuses

 

 

  

 

Align annual incentive payouts to drivers of shareholder value (growth, EPS, free cash flow, etc.)

 

Ø

 

No employment contracts


 

  

 

Provide change in control benefits under double-trigger circumstances only

 

Ø  

 

No change in control agreement for the Chief Executive Officer

 

 

  

 

Forfeiture for misconduct provision in equity grants and recoup compensation when warranted

 

Ø

 

No highly leveraged incentive plans that encourage excessive risk taking


 

  

 

Require significant share ownership for officers and directors

 

Ø  

 

No immediate vesting of stock options or restricted stock

 

 

  

 

Grant 100% performance-based LTI awards

 

Ø

 

No hedging of Abbott shares


 

  

 

Cap incentive award payments

 

Ø  

 

No discounted stock options

Abbott Laboratories      5


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DIRECTOR NOMINEES

The Board of Directors recommends a vote FOR the election of each of the following nominees for director. All nominees are currently serving as directors. Additional information about each director's background and experience can be found beginning on page 12.

    Name
Principal Occupation

Age
Director
Since


Committee Memberships  
    Robert J. Alpern, M.D.   Professor and Dean,   67   2008  

Nominations &

 
        Yale School of Medicine           Governance  
             

Public Policy

 
    Roxanne S. Austin   President and CEO,     57   2000  

Audit

   
        Austin Investment Advisors            

Compensation (Chair)

   
                     

Executive

   
    Sally E. Blount, Ph.D.   Professor and Dean,   56   2011  

Nominations &

 
      J.L. Kellogg Graduate School           Governance  
      of Management      

Public Policy

 
    Edward M. Liddy   Retired Chairman and CEO,     72   2010  

Audit (Chair)

   
        The Allstate Corporation            

Compensation

   
                     

Executive

   
    Nancy McKinstry   CEO and Chairman,   59   2011  

Audit

 
        Wolters Kluwer N.V.      

Nominations &

 
                  Governance  
    Phebe N. Novakovic   Chairman and CEO,     60   2010  

Compensation

   
        General Dynamics Corporation            

Public Policy (Chair)

   
                     

Executive

   
    William A. Osborn   Retired Chairman and CEO,   70   2008  

Compensation

 
      Northern Trust Company      

Nominations &

 
                  Governance (Chair)  
             

Executive

 
    Samuel C. Scott III   Retired Chairman, President and CEO,     73   2007  

Audit

   
        Corn Products International, Inc.            

Compensation

   
    Daniel J. Starks   Retired Chairman, President and CEO,   63   2017  

Public Policy

 
      St. Jude Medical, Inc.        
    John G. Stratton   Executive Vice President and     57   2017  

Nominations &

   
        President of Global Operations,                 Governance    
        Verizon Communications, Inc.            

Public Policy

   
    Glenn F. Tilton   Retired Chairman, President and CEO,   69   2007  

Audit

 
        UAL Corporation      

Public Policy

 
    Miles D. White   Chairman and CEO,     63   1998  

Executive (Chair)

   
        Abbott Laboratories                  

6      Abbott Laboratories


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CORPORATE GOVERNANCE

Abbott is committed to good corporate governance and shareholder interests. The Board of Directors regularly monitors best practices in governance and adopts measures that it determines are in the best interest of Abbott and its shareholders.

GOVERNANCE HIGHLIGHTS

    Strong Lead Independent Director since 2005

    Two new directors in 2017 who are independent

    Four fully independent Board Committees: Audit, Compensation, Public Policy, and Nominations & Governance

    All directors elected annually by majority vote

    Executive sessions of independent directors at each regularly scheduled Board meeting

    Annual Board and Board committee self-assessment

    Annual succession planning for management

    Proxy Access

BOARD COMPOSITION

Our goal is to maintain a diverse board representing a wide range of skills, experience, and perspectives.

GRAPHIC

GRAPHIC

SHAREHOLDER OUTREACH

Active shareholder engagement throughout the year is essential to maintaining good corporate governance. We routinely seek investor input on a variety of topics including corporate governance, executive compensation, financial performance and other strategic matters. During 2017, we conducted outreach with a cross-section of shareholders representing more than 60% of our outstanding shares. Investor sentiment and specific feedback was summarized and shared with executive management and the Board of Directors for their respective decision making process.

Abbott Laboratories      7


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SUSTAINABILITY

At Abbott, we believe that being a responsible and sustainable business is an essential foundation for helping people live fuller, healthier lives. Abbott works hard to maximize the impact of the business in creating stronger communities around the world—focusing on operating responsibly and earning trust by doing the right things, for the long term.

Product Excellence—Committed to offering products and services consistent with the highest standards of quality and safety.

Improving Access—Dedicated to creating technologies and products that meet local needs around the world, as well as informing and empowering people to make well-informed choices about healthcare.

Safeguarding the Environment—We've set goals to significantly reduce our environmental impacts in the areas of carbon dioxide emissions, total water intake and total generated waste.

RECOGNITION BY THIRD-PARTY ORGANIZATIONS

    GRAPHIC   Dow Jones Sustainability Index Industry Group Leader for the 5th consecutive year. Currently Abbott is the only U.S.-based company recognized as a global industry group leader.       GRAPHIC   Recognized by Working Mother, Diversity Inc., Science and many other publications for workplace leadership and diversity.    

 

 

GRAPHIC

 

Ranked No. 1 for Social Responsibility in the Medical Products and Equipment sector on the Fortune Most Admired Companies list each of the past five years.

 

 

 

GRAPHIC

 

Ranked as one of the global 100 Best Corporate Citizens by Corporate Responsibility Magazine for nine consecutive years and named Healthcare Sector Leader in 2017.

 

 

To learn more about Abbott's sustainability efforts, please visit www.abbott.com/citizenship.

VOTING MATTERS AND BOARD RECOMMENDATIONS

    Item

  Matter

  Board Recommendation

  Page Reference
(for more information)


    Item 1       Election of 12 Directors       FOR All Nominees       12    
    Item 2       Ratification of Ernst & Young LLP as Auditors       FOR       62    
    Item 3       Say on Pay—An Advisory Vote on the Approval of Executive
Compensation
      FOR       64    
    Item 4       Shareholder Proposal on Independent Board Chairman       AGAINST       67    

8      Abbott Laboratories


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INFORMATION ABOUT THE ANNUAL MEETING

WHO CAN VOTE

Shareholders of record at the close of business on February 28, 2018 will be entitled to notice of and to vote at the Annual Meeting. As of January 31, 2018, Abbott had 1,746,333,892 outstanding common shares, which are Abbott's only outstanding voting securities. All shareholders have cumulative voting rights in the election of directors and one vote per share on all other matters.

NOTICE AND ACCESS

In accordance with the Securities and Exchange Commission's "Notice and Access" rules, Abbott mailed a Notice of Internet Availability of Proxy Materials (the "Notice") to certain shareholders in mid-March of 2018. The Notice describes the matters to be considered at the Annual Meeting and how the shareholders can access the proxy materials online. It also provides instructions on how those shareholders can vote their shares. If you received the Notice, you will not receive a print version of the proxy materials, unless you request one. If you would like to receive a print version of the proxy materials, free of charge, please follow the instructions on the Notice.

CUMULATIVE VOTING

Cumulative voting allows a shareholder to multiply the number of shares owned by the number of directors to be elected and to cast the total for one nominee or distribute the votes among the nominees, as the shareholder desires. Shareholders may not cumulate their votes against a nominee. If shares are voted cumulatively and there are more nominees than there are director vacancies, nominees who receive the greatest number of votes will be elected. If you wish to cumulate your votes, you must sign and mail in your proxy card or attend the Annual Meeting.

VOTING BY PROXY

All of Abbott's shareholders may vote by mail or at the Annual Meeting. Abbott's By-Laws provide that a shareholder may authorize no more than two persons as proxies to attend and vote at the meeting. Most of Abbott's shareholders may also vote their shares by telephone or the Internet. If you vote by telephone or the Internet, you do not need to return your proxy card. The instructions for voting can be found with your proxy card or on the Notice.

REVOKING A PROXY

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

    by delivering a written notice to the Secretary of Abbott,

    by delivering an authorized proxy with a later date, or

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

DISCRETIONARY VOTING AUTHORITY

Unless authority is withheld in accordance with the instructions on the proxy, the persons named in the proxy will vote the shares covered by proxies they receive to elect the 12 nominees named in Item 1 on the proxy card. Should a nominee become unavailable to serve, the shares will be voted for a substitute designated by the Board of Directors, or for fewer than 12 nominees if, in the judgment of the proxy holders, such action is necessary or desirable. The persons named in the proxy may also decide to vote shares cumulatively in their sole discretion so that one or more of the nominees may receive fewer votes than the other nominees (or no votes at all), although they have no present intention of doing so. The proxy holders may not cast your vote for any nominee from whom you have withheld authority to vote.

Where a shareholder has specified a choice for or against the ratification of the appointment of Ernst & Young LLP as auditors, the advisory vote on the approval of executive compensation, or the approval of a shareholder proposal, or where the shareholder has abstained on these matters, the shares represented by the proxy will be voted (or not voted) as specified. Where no choice has been specified, the proxy will be voted FOR the ratification of Ernst & Young LLP as auditors, FOR the approval of executive compensation, and AGAINST the shareholder proposal.

Abbott Laboratories      9


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

QUORUM AND VOTE REQUIRED TO APPROVE EACH ITEM ON THE PROXY

A majority of the outstanding shares entitled to vote on a matter, represented in person or by proxy, constitutes a quorum for consideration of that matter at the meeting. The affirmative vote of a majority of the shares represented at the meeting and entitled to vote on a matter shall be the act of the shareholders with respect to that matter.

EFFECT OF WITHHOLD VOTES, BROKER NON-VOTES, AND ABSTENTIONS

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

INSPECTORS OF ELECTION

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

COST OF SOLICITING PROXIES

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

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

ABBOTT LABORATORIES STOCK RETIREMENT PLAN

Participants in the Abbott Laboratories Stock Retirement Plan will receive voting instructions for their shares held in the Abbott Laboratories Stock Retirement Trust. The Stock Retirement Trust is administered by both a trustee and an Investment Committee. The trustee of the Trust is The Northern Trust Company. The members of the Investment Committee are Stephen R. Fussell, Karen M. Peterson, and Brian P. Wentworth, employees of Abbott. The voting power with respect to the shares is held by and shared between the Investment Committee and the participants. The Investment Committee must solicit voting instructions from the participants and follow the voting instructions it receives. The Investment Committee may use its own discretion with respect to those shares for which no voting instructions are received.

10      Abbott Laboratories


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CONFIDENTIAL VOTING

It is Abbott's policy that all proxies, ballots, and voting tabulations that reveal how a particular shareholder has voted be kept confidential and not be disclosed, except:

    where disclosure may be required by law or regulation,

    where disclosure may be necessary in order for Abbott to assert or defend claims,

    where a shareholder provides comments with a proxy,

    where a shareholder expressly requests disclosure,

    to allow the inspectors of election to certify the results of a vote, or

    in other limited circumstances, such as a contested election or proxy solicitation not approved and recommended by the Board of Directors.

HOUSEHOLDING OF PROXY MATERIALS

Shareholders sharing an address may receive only one copy of the proxy materials or the Notice of Internet Availability of Proxy Materials, unless their broker, bank, or other intermediary has received contrary instructions from any shareholder at that address. This is known as "householding." Shareholders wishing to discontinue householding and receive separate copies of the proxy materials or the Notice of Internet Availability of Proxy Materials should notify their broker, bank, or other intermediary.

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NOMINEES FOR ELECTION AS DIRECTORS

GRAPHIC   ROBERT J. ALPERN, M.D.
Director since 2008 Age 67
Ensign Professor of Medicine, Professor of Internal Medicine, and Dean of
Yale School of Medicine, New Haven, Connecticut
      

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

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


GRAPHIC   ROXANNE S. AUSTIN
Director since 2000 Age 57
President and Chief Executive Officer, Austin Investment Advisors, Newport Coast, California (Private Investment and Consulting Firm)
      

Ms. Austin is President and Chief Executive Officer of Austin Investment Advisors, a private investment and consulting firm, and chairs the U.S. Mid-Market Investment Advisory Committee of EQT Partners. Previously, Ms. Austin also served as the President and Chief Executive Officer of Move Networks, Inc., a provider of Internet television services. Ms. Austin served as President and Chief Operating Officer of DIRECTV, Inc. Ms. Austin also served as Executive Vice President and Chief Financial Officer of Hughes Electronics Corporation and as a partner of Deloitte & Touche LLP. Ms. Austin served on the Board of Directors of Telefonaktiebolaget LM Ericsson from 2008 to 2016. Ms. Austin currently serves on the Board of Directors of AbbVie Inc., Target Corporation, and Teledyne Technologies, Inc.

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

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GRAPHIC   SALLY E. BLOUNT, PH.D.
Director since 2011 Age 56
Dean of the J.L. Kellogg Graduate School of Management and the Michael L. Nemmers Professor of Management and Organizations at Northwestern University, Evanston, Illinois
      

Ms. Blount has served as Dean of the J.L. Kellogg Graduate School of Management and the Michael L. Nemmers Professor of Management and Organizations at Northwestern University since July 2010. From 2004 to 2010, she served as the Vice Dean and Dean of the undergraduate college of New York University's Leonard N. Stern School of Business. Ms. Blount joined the faculty of New York University's Leonard N. Stern School of Business in 2001 and was the Abraham L. Gitlow Professor of Management and Organizations. Prior to joining NYU in 2001, Ms. Blount held academic posts at the University of Chicago's Graduate School of Business from 1992 to 2001. Ms. Blount currently serves on the Board of Directors of Ulta Beauty, Inc.

As Dean of the J.L. Kellogg Graduate School of Management at Northwestern University and as the Vice Dean and Dean of the undergraduate college of New York University's Leonard N. Stern School of Business, Ms. Blount provides Abbott's Board with expertise on business organization, governance and business management matters.

 

GRAPHIC   EDWARD M. LIDDY
Director since 2010 Age 72
Retired Chairman & CEO, The Allstate Corporation, Northbrook, Illinois (Insurance Company)
      

Mr. Liddy served as a partner in the private equity investment firm Clayton, Dubilier & Rice, LLC from January 2010 to December 2015. At the request of the Secretary of the U.S. Department of Treasury, Mr. Liddy served as Interim Chairman and Chief Executive Officer of American International Group, Inc., a global insurance and financial services holding company, from September 2008 until August 2009. From January 1999 to April 2008, Mr. Liddy served as Chairman of the Board of the Allstate Corporation. He served as Chief Executive Officer of Allstate from January 1999 to December 2006, President from January 1995 to May 2005, and Chief Operating Officer from August 1994 to January 1999. Mr. Liddy currently serves on the Board of Directors of AbbVie Inc., 3M Company, and The Boeing Company.

Through his executive leadership at Allstate and American International Group, and his board service at several Fortune 100 companies across a broad range of industries, Mr. Liddy provides valuable insights on corporate strategy, risk management, corporate governance and many other issues facing large, global enterprises. Additionally, as a former chief financial officer, audit committee chair at Goldman Sachs and 3M Company, and partner at Clayton, Dubilier & Rice, LLC, Mr. Liddy provides significant knowledge and understanding of corporate finance, capital markets, financial reports and accounting matters.


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GRAPHIC   NANCY MCKINSTRY
Director since 2011 Age 59
Chief Executive Officer and Chairman of the Executive Board of Wolters
Kluwer N.V., Alphen aan den Rijn, the Netherlands (Global Information,
Software, and Services Provider)
      

Ms. McKinstry has been the Chief Executive Officer and Chairman of the Executive Board of Wolters Kluwer N.V. since September 2003 and a member of its Executive Board since June 2001. Ms. McKinstry also serves on the Board of Accenture, the Board of Overseers of Columbia Business School, and the Board of Directors of Russell Reynolds Associates. Ms. McKinstry is also a member of the European Round Table of Industrialists. Ms. McKinstry served on the Board of Directors of Telefonaktiebolaget LM Ericsson (LM Ericsson Telephone Company) from 2004 to 2012.

As the Chief Executive Officer and Chairman of the Executive Board of Wolters Kluwer N.V., Ms. McKinstry contributes global perspectives and management experience, including an understanding of key issues facing a multinational business such as Abbott's.


GRAPHIC   PHEBE N. NOVAKOVIC
Director since 2010 Age 60
Chairman and Chief Executive Officer, General Dynamics Corporation, Falls Church, Virginia (Worldwide Defense, Aerospace, and Other Technology
Products Manufacturer)
      

Ms. Novakovic has been Chairman and Chief Executive Officer of General Dynamics Corporation since January 1, 2013. Previously, she served as President and Chief Operating Officer from May 2012 to December 2012 and as Executive Vice President, Marine Systems of General Dynamics from May 2010 to May 2012. From May 2005 to April 2010, Ms. Novakovic served as its Senior Vice President—Planning and Development. She was elected Vice President of General Dynamics in October 2002 after joining the company in May 2001. Previously, Ms. Novakovic was Special Assistant to the Secretary and Deputy Secretary of Defense, and had been a Deputy Associate Director of the Office of Management and Budget.

As a member of the Board of Directors and Chief Executive Officer of General Dynamics Corporation, Ms. Novakovic has strong management experience with a major public company, including significant marketing, operational and manufacturing experience, and contributes valuable insights into finance and capital markets. Her tenure with the Office of Management and Budget and as Special Assistant to the Secretary and Deputy Secretary of Defense enables her to provide government perspective and experience in a highly regulated industry.

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GRAPHIC   WILLIAM A. OSBORN
Director since 2008 Age 70
Retired Chairman and Chief Executive Officer of Northern Trust Corporation
(Multibank Holding Company) and The Northern Trust Company, Chicago,
Illinois (Banking Services Company)
      

Mr. Osborn was Chairman of Northern Trust Corporation from 1995 through 2009 and served as its Chief Executive Officer from 1995 through 2007. Mr. Osborn currently serves as a Director of Caterpillar Inc. and General Dynamics Corporation. Mr. Osborn served on the Board of Directors of Nicor, Inc. from 1999 to 2006 and on the Board of Directors of Tribune Company from 2001 to 2012.

As the Chairman and Chief Executive Officer of Northern Trust Corporation and The Northern Trust Company, Mr. Osborn acquired broad experience in successfully overseeing complex global businesses operating in highly regulated industries.


GRAPHIC   SAMUEL C. SCOTT III
Director since 2007 Age 73
Retired Chairman, President and Chief Executive Officer of Corn Products
International, Inc., Westchester, Illinois (Corn Refining Company)
      

Mr. Scott retired as Chairman, President and Chief Executive Officer of Corn Products International in 2009. He served as Chairman, President, and Chief Executive Officer from February 2001 until he retired in May of 2009. He was President and Chief Operating Officer from January 1998 until February 2001. He was President of the Corn Refining Division of CPC International from 1995 through 1997, when CPC International spun off Corn Products International as a separate corporation. Mr. Scott currently serves on the Board of Directors of Bank of New York Mellon Corporation and Motorola Solutions, Inc.

As the Chairman, President and Chief Executive Officer of Corn Products International, Mr. Scott acquired valuable business, leadership and management experience, including critical insights into matters relevant to a major public company and experience in finance and capital markets matters.

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PHOTO   DANIEL J. STARKS
Director since 2017 Age 63
Retired Chairman, President and Chief Executive Officer of St. Jude Medical, Inc., St. Paul, Minnesota (Medical Device Manufacturer)
      

Mr. Starks served as the Chairman, President and Chief Executive Officer of St. Jude Medical, Inc., from 2004 until his retirement in January 2016, after which he served as its Executive Chairman of the Board until January 2017, when Abbott completed the acquisition of St. Jude Medical, Inc. Mr. Starks also served as President and Chief Operating Officer of St. Jude Medical, Inc. from 2001 to 2004 and as its President and CEO, Cardiac Rhythm Management Business from 1997 to 2001.

Having served as St. Jude Medical's Executive Chairman and its Chairman, President and Chief Executive Officer, and having joined St. Jude Medical in 1996, Mr. Starks contributes not only comprehensive and critical knowledge of St. Jude Medical's operations, but also extensive business and management experience operating a global public company in a highly regulated industry.


GRAPHIC   JOHN G. STRATTON
Director since 2017 Age 57
Executive Vice President and President of Global Operations, Verizon
Communications Inc., New York, New York (Telecommuncations and Media Company)
      

Mr. Stratton has served as Executive Vice President and President of Global Operations since February 2015. Previously, he served as Executive Vice President and President of Global Enterprise and Consumer Wireline from April 2014 to February 2015, as President of Verizon Enterprise Solutions from January 2012 to April 2014, and as Chief Operating Officer and Executive Vice President of Verizon Wireless from October 2010 to January 2012. Since October 2012, Mr. Stratton has also served as a member of The President's National Security Telecommunications Advisory Committee.

Through his executive leadership at Verizon Communications, Mr. Stratton contributes extensive business and management experience operating a global public company such as Abbott, including valuable insights on corporate strategy and risk management. His service on the National Security Telecommunications Advisory Committee enables him to provide government perspective and experience in a highly regulated industry.


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GRAPHIC   GLENN F. TILTON
Director since 2007 Age 69
Retired Chairman, President and Chief Executive Officer of UAL Corporation, Chicago, Illinois (Airline Holding Company)
      

Mr. Tilton served as Chairman, President and Chief Executive Officer of UAL Corporation, and Chairman and Chief Executive Officer of United Air Lines, Inc., an air transportation company and wholly owned subsidiary of UAL Corporation, from September 2002 to October 2010. Mr. Tilton also served on the Board of United Continental Holdings, Inc. from 2001 to 2013 and served as its Non-Executive Chairman of the Board from October 2010 to December 2012. Mr. Tilton is also a Director of AbbVie Inc. and Phillips 66. Mr. Tilton also served on the Board of Directors of Lincoln National Corporation from 2002 to 2007, of TXU Corporation from 2005 to 2007, of Corning Incorporated from 2010 to 2012, and as Chairman of the Midwest for JPMorgan Chase & Co. and a member of its companywide Executive Committee from June 2011 to June 2014.

Having previously served as Chief Executive Officer of UAL Corporation and United Air Lines, Non Executive Chairman of the Board of United Continental Holdings, Inc., Chairman of the Midwest for JPMorgan Chase & Co., Chairman, President, and Vice Chairman of Chevron Texaco, and as Interim Chairman of Dynegy, Inc., Mr. Tilton acquired strong management experience overseeing complex multinational businesses operating in highly regulated industries, as well as expertise in finance and capital markets matters.

 

GRAPHIC   MILES D. WHITE
Director since 1998 Age 63
Chairman of the Board and Chief Executive Officer, Abbott Laboratories
      

Mr. White has served as Abbott's Chairman of the Board and Chief Executive Officer since 1999. He served as an Executive Vice President of Abbott from 1998 to 1999. He joined Abbott in 1984. He currently serves as a Director of Caterpillar Inc. and McDonald's Corporation.

Serving as Abbott's Chairman of the Board and Chief Executive Officer since 1999 and having joined Abbott in 1984, Mr. White contributes not only his valuable business, management and leadership experience, but also his extensive knowledge of the Company and its global operations, as well as key insights into strategic, management and operation matters, ensuring the appropriate level of oversight and responsibility is applied to all Board decisions.

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THE BOARD OF DIRECTORS AND ITS COMMITTEES

THE BOARD OF DIRECTORS

The Board of Directors held 7 meetings in 2017. The average attendance of all directors at Board and committee meetings in 2017 was ninety-nine percent and each director attended at least seventy-five percent of the total number of Board meetings and meetings of the committees on which he or she served. Abbott encourages its Board members to attend the annual shareholders meeting. Last year, all of Abbott's directors attended the annual shareholders meeting.

The Board has determined that each of the following directors is independent in accordance with the New York Stock Exchange listing standards: R. J. Alpern, R. S. Austin, S. E. Blount, W. J. Farrell, E. M. Liddy, N. McKinstry, P. N. Novakovic, W. A. Osborn, S. C. Scott III, D. J. Starks, J. G. Stratton, and G. F. Tilton. To determine independence, the Board applied the categorical standards attached as Exhibit A to this proxy statement. The Board also considered whether a director has any other material relationships with Abbott or its subsidiaries and concluded that none of these directors had a relationship that impaired the director's independence. This included consideration of the fact that some of the directors are officers or serve on boards of companies or entities to which Abbott sold products or made contributions or from which Abbott purchased products and services during the year. In making its determination, the Board relied on both information provided by the directors and information developed internally by Abbott.

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

LEADERSHIP STRUCTURE

The Board has determined that the current leadership structure, in which the offices of Chairman and Chief Executive Officer are held by one individual and an independent director acts as lead director, ensures the appropriate level of oversight, independence, and responsibility is applied to all Board decisions, including risk oversight, and is in the best interests of Abbott and its shareholders.

Chairman/Chief Executive Officer

    Coherent leadership and direction for the Board and executive management

    Clear accountability and a single focus for the chain of command to execute our strategic initiatives and business plans

    CEO's extensive industry expertise, leadership experience, and familiarity with our business

    With our CEO leading management and chairing the Board, we benefit from his strategic and operational insights, enabling a focused vision encompassing the full range, from long-term strategic direction to day-to-day execution

Lead Independent Director

    Currently, the Chairman of the Nominations and Governance Committee acts as the lead director

    Chosen by and from the independent members of the Board of Directors, and serves as the liaison between the Chairman of the Board and the independent directors

    Facilitates communication with the Board and presides over regularly conducted executive sessions of the independent directors or sessions where the Chairman of the Board is not present

    Reviews and approves matters, such as agenda items, schedule sufficiency, and, where appropriate, information provided to other Board members

    Has the authority to call meetings of the independent directors and, if requested by major shareholders, ensures that he or she is available for consultation and direct communication

    The lead director, and each of the other directors, communicates regularly with the Chairman and Chief Executive Officer regarding appropriate agenda topics and other Board related matters

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DIRECTOR SELECTION

The Nominations and Governance Committee assists the Board of Directors in identifying individuals qualified to become Board members and recommends to the Board the nominees for election as directors at the next annual meeting of shareholders. The process used by the Nominations and Governance Committee to identify a nominee to serve as a member of the Board of Directors depends on the qualities being sought. From time to time, Abbott engages an executive search firm to assist the Committee in identifying individuals qualified to be Board members.

Abbott's outline of directorship qualifications, which is part of Abbott's corporate governance guidelines, is available in the corporate governance section of Abbott's investor relations website (www.abbottinvestor.com). These qualifications describe specific characteristics that the Nominations and Governance Committee and the Board take into consideration when selecting nominees for the Board, such as: strong management experience and senior level experience in medicine, hospital administration, medical and scientific research and development, finance, international business, government, and academic administration. An individual nominee is not required to satisfy all the characteristics listed in the outline of directorship qualifications and there is no requirement that all such characteristics be represented on the Board.

In addition, Board members should have backgrounds that, when combined, provide a portfolio of experience and knowledge that will serve Abbott's governance and strategic needs. Board candidates will be considered on the basis of a range of criteria, including broad-based business knowledge and relationships, prominence, and excellent reputations in their primary fields of endeavor, as well as a global business perspective and commitment to good corporate citizenship. Directors should have demonstrated experience and ability that is relevant to the Board of Directors' oversight role with respect to Abbott's business and affairs. Each director's biography includes the particular experience and qualifications that led the Board to conclude that the director should serve on the Board. The directors' biographies are on pages 12 through 17.

A description of the procedure for the recommendation and nomination of directors, including by proxy access, is on page 71.

BOARD DIVERSITY AND COMPOSITION

In the process of identifying nominees to serve as a member of the Board of Directors, the Nominations and Governance Committee considers the Board's diversity of relevant experience, areas of expertise, ethnicity, gender, and geography and assesses the effectiveness of the process in achieving that diversity. Five of the 12 directors nominated for election are women or minorities.

The process used to identify and select nominees has resulted in an experienced, diverse, and well-rounded Board of Directors that possesses the skills and perspectives necessary for its oversight role. All of Abbott's directors exhibit:

Global business perspective

Knowledge of corporate governance requirements and practices

 

Successful track record

High integrity

 

Innovative thinking

Commitment to good
corporate citizenship

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The following table details some of the attributes, skills, and experience represented on Abbott's Board of Directors.

    Abbott Business Characteristic

  Board Attributes, Skills, and Experience

 

A Broad and Diverse Company
with Different Healthcare
Businesses

     

Senior Leadership Experience with Diverse Business Models

Financial Literacy

   
         
  A Multinational Company    

Experience as a Director or Senior Officer of a
Multinational Corporation

Global Perspective


 
                 
    A Consumer-facing Company      

Academic and Senior Management Leadership Consumer
Product Experience

Senior Leadership Experience with Diverse Business Models

   
         
  Financial Expertise and Risk
Management

 
 

Financial Literacy

Public Company Financial Experience

 
                 
    Regulated Industry      

Senior Leadership Experience in Regulated Industries

Senior Level Government Experience

   
         
  Corporate Governance    

Senior Leadership Experience

Financial Literacy

Experience with Diverse Business Models

 


Other Board Composition Metrics

The directors nominated for election bring diverse and relevant skills, experience, and perspectives.

GRAPHIC

GRAPHIC

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COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has five committees established in Abbott's By-Laws: Audit Committee, Compensation Committee, Nominations and Governance Committee, Public Policy Committee, and Executive Committee. Each of the members of the Audit Committee, Compensation Committee, Nominations and Governance Committee, and Public Policy Committee is independent.

  Current Members

Audit*

Compensation

Nominations
and Governance


Public Policy

Executive


 


R. J. Alpern


 


 


GRAPHIC


GRAPHIC


 


 
  R. S. Austin GRAPHIC GRAPHIC GRAPHIC
  S. E. Blount     GRAPHIC GRAPHIC    
E. M. Liddy GRAPHIC GRAPHIC GRAPHIC
  N. McKinstry GRAPHIC   GRAPHIC      
P. N. Novakovic GRAPHIC GRAPHIC GRAPHIC
  W. A. Osborn   GRAPHIC GRAPHIC   GRAPHIC  
S. C. Scott III GRAPHIC GRAPHIC
  D. J. Starks       GRAPHIC    
J. G. Stratton GRAPHIC GRAPHIC
  G. F. Tilton GRAPHIC     GRAPHIC    
M. D. White GRAPHIC
  Total Meetings Held in 2017 7 3 4 4 1  

GRAPHIC

*
Each of the committee members is financially literate, as is required of audit committee members by the New York Stock Exchange. The Board of Directors has determined that Edward M. Liddy, the Audit Committee's Chair, is an "audit committee financial expert."

Audit Committee

The Audit Committee assists the Board of Directors in fulfilling its oversight responsibility with respect to Abbott's accounting and financial reporting practices and the audit process; the quality and integrity of Abbott's financial statements; the independent auditors' qualifications, independence, and performance; the performance of Abbott's internal audit function and internal auditors; and certain areas of legal and regulatory compliance. The Committee is governed by a written charter. A copy of the report of the Audit Committee is on page 63.

Compensation Committee

The Compensation Committee assists the Board of Directors in carrying out the Board's responsibilities relating to the compensation of Abbott's executive officers and directors. The Committee is governed by a written charter. The Compensation Committee annually reviews the compensation paid to the members of the Board and gives its recommendations to the full Board regarding both the amount of director compensation that should be paid and the allocation of that compensation between equity-based awards and cash. In recommending director compensation, the Compensation Committee takes comparable director fees into account and reviews any arrangement that could be viewed as indirect director compensation.

This Committee also reviews, approves, and administers the incentive compensation plans in which any executive officer of Abbott participates and all of Abbott's equity-based plans. It may delegate the responsibility to administer and make grants under these plans to management, except to the extent that such delegation would be inconsistent with applicable law or regulation or with the listing rules of the New York Stock Exchange. The processes and

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procedures used for the consideration and determination of executive compensation are described in the section of the proxy captioned, "Compensation Discussion and Analysis."

The Compensation Committee has the sole authority, under its charter, to select, retain, and/or terminate independent compensation advisors. The Committee engaged Meridian Compensation Partners, LLC as its compensation consultant for 2017. Meridian performs no other work for Abbott. The Committee engages compensation consultants to provide counsel and advice on executive and non-employee director compensation matters. The consultant and its principal report directly to the Chair of the Committee. The principal meets regularly and as needed with the Committee in executive sessions, has direct access to the Chair during and between meetings, and performs no other services for Abbott or its senior executives. The Committee determines what variables it will instruct the consultant to consider, and they include: peer groups against which performance and pay should be examined, financial metrics to be used to assess Abbott's relative performance, competitive long-term incentive practices in the marketplace, and compensation levels relative to market practice. The Committee negotiates and approves any fees paid to the consultant for these services. Based on its evaluation of Meridian's independence in accordance with the New York Stock Exchange listing standards and information provided by Meridian, the Committee determined that the work performed by Meridian does not present any conflicts of interest. A copy of the Compensation Committee report is on page 41.

Nominations and Governance Committee

The Nominations and Governance Committee assists the Board of Directors in identifying individuals qualified to become Board members and recommends to the Board the nominees for election as directors at the next annual meeting of shareholders; recommends to the Board the people to be elected as executive officers of Abbott; develops and recommends to the Board the corporate governance guidelines applicable to Abbott; and serves in an advisory capacity to the Board and the Chairman of the Board on matters of organization, management succession plans, major changes in the organizational structure of Abbott, and the conduct of Board activities. The Committee is governed by a written charter. The process used by this Committee to identify a nominee to serve as a member of the Board of Directors depends on the qualities being sought. From time to time, Abbott engages an executive search firm to assist the Committee in identifying individuals qualified to be Board members. The process used by the Committee to identify nominees is described on page 19 in the section captioned, "Director Selection."

Public Policy Committee

The Public Policy Committee assists the Board of Directors in fulfilling its oversight responsibility with respect to Abbott's public policy, certain areas of legal and regulatory compliance, and governmental affairs and healthcare compliance issues that affect Abbott. The Committee is governed by a written charter.

Executive Committee

The Executive Committee may exercise all the authority of the Board in the management of Abbott, except for matters expressly reserved by law for Board action.

COMMUNICATING WITH THE BOARD OF DIRECTORS

Interested parties may communicate with the Board of Directors by writing a letter to the Chairman of the Board, to the Chairman of the Nominations and Governance Committee, who acts as the lead director at the meetings of the independent directors, or to the independent directors c/o Abbott Laboratories, 100 Abbott Park Road, D-364, AP6D, Abbott Park, Illinois 60064-6400, Attention: Corporate Secretary. The General Counsel and Corporate Secretary regularly forwards to the addressee all letters other than mass mailings, advertisements, and other materials not relevant to Abbott's business. In addition, directors regularly receive a log of all correspondence received by the Company that is addressed to a member of the Board and may request any correspondence on that log.

CORPORATE GOVERNANCE MATERIALS

Abbott's corporate governance guidelines, outline of directorship qualifications, director independence standards, code of business conduct, and the charters of Abbott's Audit Committee, Compensation Committee, Nominations and Governance Committee, and Public Policy Committee are all available in the corporate governance section of Abbott's investor relations website (www.abbottinvestor.com).

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2017 DIRECTOR COMPENSATION

Our CEO is not compensated for serving on the Board or Board committees. Abbott's remaining directors, who are all non-employee directors, are compensated for their service under the Abbott Laboratories Non-Employee Directors' Fee Plan and the Abbott Laboratories 2017 Incentive Stock Program.

The following table sets forth a summary of the non-employee directors' 2017 compensation.

Name


Fees Earned
or Paid in Cash
($)(1)



Stock
Awards
($)(2)



Option
Awards
($)(3)



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








All Other
Compensation
($)(5)



Total
($)


R. J. Alpern

$ 126,000 $ 149,939 $ 0 $ 30,527 $ 25,000 (5) $ 331,466  

R. S. Austin

151,667 149,939 0 0 0 301,606

S. E. Blount

126,000 149,939 0 5,797 25,000 (5) 306,736  

W. J. Farrell

48,667 0 0 52,303 0 100,970

E. M. Liddy

144,667 149,939 0 0 0 294,606  

N. McKinstry

132,000 149,939 0 0 5,000 (5) 286,939

P. N. Novakovic

141,000 149,939 0 0 0 290,939  

W. A. Osborn

156,000 149,939 0 0 0 305,939

S. C. Scott III

132,000 149,939 0 0 25,000 (5) 306,939  

D. J. Starks

105,000 149,939 0 0 0 254,939

J. G. Stratton

63,000 0 0 0 0 63,000  

G. F. Tilton

132,000 149,939 0 0 25,000 (5) 306,939
(1)
Under the Abbott Laboratories Non-Employee Directors' Fee Plan, non-employee directors earn $10,500 for each month of service as a director. Audit Committee members, other than the Audit Committee chair, receive $500 for each month of service on the Audit Committee. Board Committee chairmen receive monthly fees of: $2,083.33 for the Audit Committee chairman, $1,666.66 for the Compensation Committee chairman, $1,250.00 for the Public Policy Committee chairman, and $1,250.00 for the chairman of any other Board committee. In addition, the lead director earns $2,500 for each month of such service and does not receive a fee for service as Nominations and Governance Committee chairman. Fees earned under the Abbott Laboratories Non-Employee Directors' Fee Plan are paid in cash to the director, paid in the form of vested non-qualified stock options (based on an independent appraisal of their fair value), deferred (as a non-funded obligation of Abbott), or paid currently into an individual grantor trust established by the director. The distribution of deferred fees and amounts held in a director's grantor trust generally commences when the director reaches age 65, or upon retirement from the Board of Directors, if later. The director may elect to have deferred fees and fees deposited in trust credited to either a guaranteed interest account or to a stock equivalent account that earns the same return as if the fees were invested in Abbott stock. If necessary, Abbott contributes funds to a director's trust so that as of year-end the stock equivalent account balance (net of taxes) is not less than seventy-five percent of the market value of the related common stock at year-end.

(2)
The amounts reported in this column represent the aggregate grant date fair value of the awards in accordance with Financial Accounting Standards Board ASC Topic 718. Abbott determines the grant date fair value of stock unit awards by multiplying the number of restricted stock units granted by the average of the high and low market prices of an Abbott common share on the date of grant. In addition to the fees described in footnote 1, each non-employee director elected to the Board of Directors at the annual shareholders meeting receives vested restricted stock units having a value of $150,000 (rounded down) under the Abbott Laboratories 2017 Incentive Stock Program (effective as of the 2018 Annual Meeting this will increase to $175,000 (rounded down)). In 2017, this was 3,437 units. The non-employee directors receive cash payments equal to the dividends paid on the shares covered by the units at the same rate as other shareholders. Upon termination, retirement from the Board, death, or a change in control of Abbott, a non-employee director will receive one share of common stock for each restricted stock unit outstanding under the Incentive Stock Program. The following Abbott restricted stock units were outstanding as of December 31, 2017: R. J. Alpern, 25,220; R. S. Austin, 32,883; S. E. Blount, 18,480;

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    E. M. Liddy, 20,647; N. McKinstry, 18,480; P. N. Novakovic, 20,647; W. A. Osborn, 27,137; S. C. Scott III, 28,867; D. J. Starks, 3,437; and G. F. Tilton, 28,867.

(3)
The following options were outstanding as of December 31, 2017: R. S. Austin, 20,852; W. J. Farrell, 6,691; E. M. Liddy, 19,890; N. McKinstry, 24,428; P. N. Novakovic, 77,869; W. A. Osborn, 21,448; and S. C. Scott III, 18,148.

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

(5)
Charitable contributions made by Abbott's non-employee directors are eligible for a matching contribution (up to $25,000 annually). The amounts reported in this column include charitable matching grant contributions, as follows: R. J. Alpern, $25,000; S. E. Blount, $25,000; N. McKinstry, $5,000; S. C. Scott III, $25,000; and G. F. Tilton, $25,000.

24      Abbott Laboratories


Table of Contents

SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS

The table below reflects the number of Abbott common shares beneficially owned as of January 31, 2018 by (i) each director, and (ii) the Chief Executive Officer, the Chief Financial Officer, and the other current and former executive officers listed in the Summary Compensation Table (collectively, the "named officers"), and (iii) all directors, named officers, and executive officers of Abbott as a group. It also reflects the number of stock equivalent units held by non-employee directors under the Abbott Laboratories Non-Employee Directors' Fee Plan and restricted stock units held by non-employee directors, named officers, and executive officers.

    Name

Shares
Beneficially
Owned(1)(2)



Stock Options
Exercisable
Within 60 Days of
January 31, 2018(3)




Stock
Equivalent
Units



 
    H. L. Allen   100,879   676,159   0    
  R. J. Alpern   25,220   0   6,671  
    R. S. Austin   39,727   20,852   0    
  S. E. Blount   23,580   0   0  
    E. S. Fain   445,218   0   0    
  R. B. Ford   132,378   480,238   0  
    E. M. Liddy   22,967   19,890   20,565    
  N. McKinstry   18,480   24,428   0  
    P. N. Novakovic   21,147   77,869   0    
  W. A. Osborn   51,137   21,448   27,570  
    M. T. Rousseau   629,294   774,049   0    
  D. G. Salvadori   73,798   159,652   0  
    S. C. Scott III   34,867   18,148   6,902    
  D. J. Starks   6,943,506   0   0  
    J. G. Stratton   0   0   1,145    
  G. F. Tilton   36,217   0   31,629  
    M. D. White   3,138,480   4,873,894   0    
  B. B. Yoor   63,823   327,339   0  
    All directors, named officers, and executive officers as a group(4)(5)   12,849,731   11,397,036   94,482    
(1)
This column includes shares held in the officers' accounts in the Abbott Laboratories Stock Retirement Trust as follows: M. D. White, 32,065; B. B. Yoor, 2,165; and all executive officers as a group, 54,963. Each officer has shared voting power and sole investment power with respect to the shares held in his or her account.

(2)
This column includes restricted stock units held by the non-employee directors and payable in stock upon their retirement from the Board as follows: R. J. Alpern, 25,220; R. S. Austin, 32,883; S. E. Blount, 18,480; E. M. Liddy, 20,647; N. McKinstry, 18,480; P. N. Novakovic, 20,647; W. A. Osborn, 27,137; S. C. Scott III, 28,867; D. J. Starks, 3,437; G. F. Tilton, 28,867; and all directors as a group, 224,665.

(3)
This column includes 41,392 restricted stock units held by all named officers and executive officers as a group that will be payable in stock within 60 days of January 31, 2018.

(4)
Certain executive officers of Abbott are fiduciaries of several employee benefit trusts maintained by Abbott. As such, they have shared voting and/or investment power with respect to the common shares held by those trusts. The table does not include the shares held by the trusts. As of January 31, 2018, these trusts owned a total of 31,971,674 (1.8%) of the outstanding shares of Abbott.

None of the directors, named officers, or executive officers has pledged shares.

(5)
Excluding the shared voting and/or investment power over the shares held by the trusts described in footnote 4, the directors, named officers, and executive officers as a group together own beneficially less than one percent of the outstanding shares of Abbott.

Abbott Laboratories      25


EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION

This Compensation Discussion and Analysis (CD&A) describes Abbott's executive compensation program in 2017. While the Summary Compensation Table on page 44 provides the required disclosures for this proxy statement, we will also discuss the LTI grant made in February 2018, since that grant was based on 2017 performance. The LTI grant disclosed in the Summary Compensation Table was made in February 2017 and was based on 2016 performance.

In particular, this CD&A explains how the Compensation Committee (the Committee) and Board of Directors made compensation decisions for the Company's executives, including the seven named officers: Miles D. White, Chairman of the Board and Chief Executive Officer; Brian B. Yoor, Executive Vice President, Finance and Chief Financial Officer; Hubert L. Allen, Executive Vice President, General Counsel and Secretary; Robert B. Ford, Executive Vice President, Medical Devices; Daniel G. Salvadori, Executive Vice President, Nutritional Products; Michael T. Rousseau, President, Cardiovascular and Neuromodulation; and Eric S. Fain, Senior Vice President, Group President, Cardiovascular and Neuromodulation. Mr. Rousseau and Mr. Fain left during 2017.

The CD&A also describes the pay philosophy the Committee has established for the Company's executive officers, the process the Committee utilizes to examine performance in the context of executive pay decisions, the performance goals and results for each named officer, and recent updates to our compensation program.

2017 PERFORMANCE

In 2017, Abbott achieved outstanding returns to shareholders, ranking #1 in our peer group. Abbott's one-year total shareholder return (TSR) was 52.0%, which was 30.2 and 23.9 percentage points above the robust growth of both the Standard & Poor's 500 Index (S&P 500) and the Dow Jones Industrial Average (DJIA), respectively. In addition, Abbott:

    Raised the dividend by nearly 6%, marking Abbott's 94th consecutive year of dividends paid and the 46th straight year the dividend has been increased.

    Returned $1.8 billion to Abbott shareholders through dividends.

    Increased pre-tax earnings from continuing operations by 58%; including a $1.46 billion estimated net impact of U.S. tax reform, decreased net earnings by 67% or, excluding the one-time impact of tax reform, increased net earnings by 71%.

    Increased adjusted EBITDA by 43%.

    Completed three major strategic initiatives in 2017 to shape the company for maximum competitiveness

      Divested Abbott Medical Optics (AMO)

      Acquired St. Jude Medical

      Acquired Alere Inc.

At a corporate level, all financial goals for officers were overachieved. This includes:

    Growing adjusted diluted EPS by 14%, from $2.20 to $2.50, above company targets and at the top end of the expected range.

    Growing adjusted sales by 31%, an increase of $6.2 billion.

    Increasing adjusted free cash flow by 113%, nearly 4 times the expected increase percentage.

As a result of the significant overachievement of these key financial and strategic goals, Abbott's market capitalization nearly doubled during 2017.

   

For reconciliation to GAAP, see Annex I.

26      Abbott Laboratories


VARIABLE PAY DECISIONS BASED ON 2017 PERFORMANCE

In February 2018, our Compensation Committee made pay decisions for our executive officers based on the design of our programs and our extremely strong performance in 2017. The results of those pay decisions were as follows:

    Average bonus payouts were 105% of target reflecting overachievement of goals related to EPS, net income, sales, cash flow, return on assets, and completion of three transactions critical to our strategic priorities. Individual payouts were aligned with individual performance and ranged from 18% to 163% of target.

    2018 LTI award guidelines were set at the 75th percentile of our peer group, consistent with extremely strong relative total shareholder returns through 2017. Individual awards were aligned with individual performance and ranged from the 24th to the 90th percentile.

It is important to understand the effect of the "lag" in the Summary Compensation Table, resulting from SEC proxy disclosure rules. Specifically, the amounts shown on page 44 reflect the annual bonus for 2017 performance. However, the LTI awards shown in the table are for 2016 performance and were granted in February 2017. During 2016, despite strong operational results and the initiation of important strategic actions, Abbott's returns to shareholders on a 1-, 3- and 5-year basis were in the lower quartile relative to our peers. Consistent with Abbott's philosophy to align LTI compensation with TSR performance, these relatively lower total shareholder returns resulted in significantly below market long-term incentive grants for 2017.

Due to the significantly different LTI amounts granted in 2017 (using the 25th percentile guidelines) vs. 2018 (using the 75th percentile guidelines), we have disclosed the 2018 grant in this proxy to aid shareholders in their understanding of our approach to compensation, which definitively aligns our LTI grant guidelines with relative TSR performance as illustrated below.

    Relative TSR Percentile vs. Peers     2013     2014     2015     2016     2017  
    1-Year     26th     89th     61st     0th     100th  
    3-Year       84th       53rd       44th       17th       63rd    
    5-Year     11th     47th     83rd     28th     50th  
                                                 
    Average     40th     63rd     63rd     15th     71st  
    LTI Award Guideline Percentile       37th       50th       50th       25th       75th    

Abbott Laboratories      27


COMPENSATION PHILOSOPHY AND COMPONENTS OF PAY

Abbott and its Compensation Committee have designed a compensation program to attract and retain executives whose talent and contributions support and advance the profitable growth of the Company and growth in shareholder value. The program is designed to be:

    Competitive: While we target competitive total compensation, actual payouts vary based upon Company and individual performance. The Compensation Committee sets LTI awards based on relative Company performance. Each year, we look at LTI market percentiles between the 10th and the 90th to determine appropriate award levels. Actual pay reflects actual performance relative to peers.

    Aligned to our shareholders' interests: Almost two-thirds of our pay is equity-based, directly tying a significant portion of executive compensation to shareholder returns.

    Performance-based: Other than base salary, which is the smallest component of our executives' compensation, all remaining components of Total Direct Compensation (i.e., annual cash incentive, performance-based restricted stock awards, and stock options) are aligned with Company and/or division performance.

    Balanced: Short- and long-term objectives focus our executives on actions that create value today while building for sustainable future success. Our compensation program rewards the achievement of

      Annual incentive payouts tied to current year operating performance vs. goals

      Long-term incentive awards tied to longer-term returns to shareholders relative to peers and sustained performance


TARGET TOTAL COMPENSATION MIX

GRAPHIC

28      Abbott Laboratories


CHANGES BASED ON SHAREHOLDER FEEDBACK AND MARKET PRACTICES

Last year, shareholders owning 95% of our shares approved the compensation of our named executive officers. During 2017, we conducted outreach with a cross-section of shareholders representing more than 60% of our outstanding shares. In those meetings, we discussed our pay programs broadly, including aspects that were previously subject to shareholder resolutions. Based on shareholder discussions and recommendations, the Committee, during its annual evaluation of the Company's compensation programs and evolving market practices, made several changes to our programs.

  
RECENT EXECUTIVE COMPENSATION CHANGES
    


 
 

 

Significantly strengthened peer group to reflect new business portfolio

Changed performance-based restricted stock awards to vest only over a 3-year term with no more than one-third of the award vesting in any one year

Increased the ROE target for vesting of performance shares granted in two of the last three years

Revised annual cash incentive plan goals and scoring methodology

 

Introduced new long-term incentive measures to reflect sustained performance over a three-year period

Increased disclosure related to payouts for both annual and long-term incentives

Implemented a hedging policy and a pledging policy

Implemented a strengthened recoupment policy

Increased director share ownership guidelines

Implemented a one-year minimum vesting period for long-term incentive grants
    


 

 

These recent changes continue our practice of evolving our program based upon shareholder feedback as well as a review of market practices. Over the past several years, we have made numerous other changes to our program, including:

    Using three performance assessments to determine the amount of equity awards:

      Relative TSR (compared to peer companies)—Determines, as an aggregate target, where our equity grant guidelines should be positioned relative to the market

      Individual performance—Determines individual officer awards based on equity grant guidelines (grant guideline x individual performance factor)

      The ROE target—Ensures that performance has been sustained before awards vest

    Granting equity awards with double-trigger vesting in the event of a change in control

    Eliminating tax gross-ups in our executive officer pay program

    Engaging a Compensation Committee consultant that performs no other work for Abbott

    Adding a share retention requirement which applies until share ownership guidelines are met

    Revising executive share ownership guidelines:

      Chief Executive Officer—6 times base salary

      Executive Vice President/Senior Vice President—3 times base salary

      All other officers—2 times base salary

Abbott Laboratories      29


HOW EXECUTIVE PAY DECISIONS ARE MADE

The Committee makes compensation decisions in the context of the objectives of our program. The Committee ensures the compensation delivered to our executives is competitive, based on performance, balanced between the short- and long-term, aligned with shareholder interests, and does not encourage excessive risk-taking.

To determine the competitiveness of our compensation and benefit programs, the Committee, in consultation with its independent consultant, annually compares the level of compensation, market pay practices, and our relative performance to those of peer companies.

Our shareholders compare us to other global multinational companies, only some of which are in healthcare. These companies share similar characteristics aligned with our investment identity of diversified growth, returns to shareholders, and capital structure.

The peer group used for performance and compensation benchmarking prior to 2017 was established at the time of the AbbVie separation in 2013. That group has been used without change from 2013 through 2016. Due to the acquisitions of St. Jude Medical and Alere Inc. and significant changes in several peers due to corporate transactions, the Committee and its consultant reviewed the peer group to be used for 2017 benchmarking. Based on that review, the Committee approved an update to the peer group to better align to our current size, scope, and global footprint.

Consistent with our prior approach, our peer group was selected to strike the appropriate balance between size (both revenues and market capitalization), return profiles, geographic breadth, and management and operating structure and has been overwhelmingly supported by our investors during shareholder outreach. The peer group purposely includes companies that are outside the healthcare industry.

In selecting our peer group for 2017 performance and compensation benchmarking, we considered:

    Globally diverse manufacturing-driven organizations with significant international operations, sales, and profits

    Consumer-facing organizations

    Similar financial and operating measures, including market capitalization, revenue, and number of employees

    Similar return of cash profiles, including dividends and share repurchases

    Similar geographic mix of revenues and profits

    Current proxy advisor guidelines regarding size of peers

The resulting peer group:

    Excludes service companies

    Has an average market capitalization well aligned with Abbott

    Has an average sales size well aligned with Abbott; some are larger; some are smaller, but none are less than 40% of Abbott's sales

30      Abbott Laboratories


This peer group is summarized below, showing the primary characteristics for which each company was selected.

    Company Name


Sales/Rev.1
(billions)

 


Market
Cap1
(billions)


 
% Rev.
Outside
U.S.


 
Similar #
Employees

 
Health Care-
Related

 
Mfg. Driven/
Consumer-
Facing


 
Similar
Operating
Characteristics


 
 
    3M Company   $ 31.7   $ 140.2   ü   ü   ü   ü   ü    
  Becton, Dickinson & Co.   $ 12.3   $ 57.0     ü   ü   ü   ü    
    Bristol-Myers Squibb   $ 20.8   $ 100.3           ü   ü   ü    
  The Coca-Cola Company   $ 37.3   $ 195.5   ü   ü     ü   ü    
    Danaher Corporation   $ 18.3   $ 64.6   ü   ü   ü   ü   ü    
  Eaton Corporation plc   $ 20.4   $ 34.8     ü     ü   ü    
    Emerson Electric Co.   $ 15.9   $ 44.5   ü   ü       ü   ü    
  Honeywell International Inc.   $ 40.5   $ 116.1   ü   ü     ü   ü    
    Johnson & Johnson   $ 76.5   $ 375.4       ü   ü   ü   ü    
  Johnson Controls   $ 30.5   $ 35.3   ü   ü     ü   ü    
    Kimberly-Clark Corporation   $ 18.3   $ 42.4   ü   ü   ü   ü   ü    
  Medtronic plc   $ 29.6   $ 109.3   ü   ü   ü   ü   ü    
    Mondelēz Inernational, Inc.   $ 25.9   $ 64.0   ü   ü       ü   ü    
  Procter & Gamble Co.   $ 65.7   $ 233.1   ü   ü   ü   ü   ü    
    Thermo Fisher Scientific, Inc.   $ 20.9   $ 76.1       ü   ü   ü   ü    
  United Technologies   $ 59.8   $ 101.9   ü       ü   ü    
    Peer Group Median   $ 27.8   $ 88.2   Peer group approximates Abbott in market cap and sales    
  Abbott 12/31/17   $ 27.4   $ 99.3   ü   ü   ü   ü   ü    
    Abbott + Alere Full Year 2017   $ 28.9 2       ü   ü   ü   ü   ü    
(1)
Data source: S&P's Capital IQ database reflects most recently disclosed (as of January 31, 2018) trailing 12 month sales/revenue. The market cap reflects values on December 31, 2017.

(2)
Abbott acquired Alere Inc. on October 3, 2017.

FIXED PAY—BASE SALARY

Base salary targets are set using the median of the peer group as an initial benchmark. Specific pay rates are based on an executive's performance, experience, contribution, unique skills, and internal equity with others at Abbott. Base salaries range from the 10th to the 90th percentile of the peer group, depending on experience, expertise, unique role requirements, and tenure. The average base salary of our executive officers was approximately at the market median. Once the rate of pay is set at the time of hire or upon promotion, subsequent changes in pay, including salary increases, are based on the executive's performance, the job he or she is performing, internal equity, and the Company's operating budget.

PERFORMANCE-BASED PAY

Abbott's primary performance-based compensation programs for executive officers are the annual cash incentive plan and the long-term incentive plan. These plans are described in more detail on the following pages. While both plans are formula-driven based on specific operating, strategic, and leadership results, the performance criteria differs in terms of the measures and the performance period. It is important to note that officer financial goals are based on adjusted measures that reflect the true results of our ongoing operations, which is what our investors focus on and invest in.

Abbott Laboratories      31


ANNUAL CASH INCENTIVE PLAN (PERFORMANCE INCENTIVE PLAN)

Our annual cash incentive plan is a key part of our officers' total compensation. It rewards executives for achieving specific annual goals at the corporate and divisional levels. It also rewards executives for achieving operational and strategic goals.

During 2017, Abbott's seven named officers participated in the 1998 Abbott Laboratories Performance Incentive Plan (PIP), which was designed to comply with the requirements of Section 162(m) of the Internal Revenue Code of 1986 for performance-based compensation.

Annual Cash Incentives Are Capped

Each year, the Committee sets the maximum award allocations under the PIP for each named officer as a percentage of consolidated net earnings. For 2017, the maximum award for the Chief Executive Officer was 0.15% of adjusted consolidated net earnings for the fiscal year-end and, for all of the other named officers, 0.075% of adjusted consolidated net earnings. Historically and in 2017, the Committee exercised its discretion to deliver PIP awards that were substantially below the maximum awards that are authorized by these formulas based on achieved performance against annual goals and other factors described below.

Process to Determine Awards

Under the PIP, the Committee sets a target payout (expressed as a percentage of base salary) for each officer based upon market benchmarks and internal equity. The final payout is determined based upon operating performance relative to annual goals. This process is described below. In 2017, annual incentive payouts for Abbott's executive officers ranged from 18% to 163% of target, with an average of 105% of target, reflecting strong performance on an operational and strategic basis during the year.

Step One: Fund Annual Incentive Pool Based on EPS Achievement

In order for the PIP to pay out, the EPS goal (see 2017 Performance Goals for Performance Incentive Plan on page 38) must be achieved. If the EPS goal is not achieved, then the PIP is not funded and there are no payouts.

Step Two: Assess Individual Performance vs. Goals

Individual goals are finalized at the beginning of each year based upon each executive officer's responsibilities. The weighting of goals depends upon whether the executive is a Business Unit leader or a Corporate leader, as follows:

     Goal Category     Business Unit Leader     Corporate Leader  
    Sales Growth vs Peers and Plan     30%     10%  
    Financial Return       40%       40%    
    Strategic Initiatives     20%     40%  
    Leadership       10%       10%    
    Total     100%     100%  

Sales Growth Goals—To stress the importance of top-line growth, each officer is measured against Abbott's internal targets, which are established to exceed peer group growth rates.

  

 

Results

    Payout  

 

 

Sales Growth < Market Growth

    0%  

 

 

Sales Growth ³ Market Growth but <Target

      50%    

 

 

Sales Growth ³ Market and Target

    100%  

 

 

Sales Growth Significantly > Market and Target

      125% or 150%    

Sales growth performance required to earn payouts above 100% varies by business to reflect each business's market. To exceed a target payout in Sales Growth, the business must grow market share, exceeding both peer sales growth rates and Abbott's internal targets. This approach sets a very high bar and is more rigorous than market practice.

32      Abbott Laboratories


Financial Return Goals—While top-line growth is important, that growth must be profitable in order to drive value for our shareholders. To stress the importance of profitability, each officer is assessed on relevant return goals, primarily earnings, margin contribution, and cash flow.

  

 

Results

    Payout  

 

 

Actual Return < Target

    0%  

 

 

Actual Return ³ Target

      100%    

 

 

Actual Return Significantly > Target

    125% or 150%  

Financial return performance required to earn payouts above 100% of target varies by business to reflect each business's market and operating environment.

Strategic Initiative Goals—Strategic initiative goals are primarily related to key planned strategic actions, such as portfolio expansion, key R&D milestones, gross margin expansion, and entry into new markets. Strategic goals are set such that fully successful achievement of the goals results in a 100% payout with no additional upside. Lower levels of achievement result in payouts of 75%, 50%, or 0% of target.

Leadership Goals—Leadership goals are primarily related to talent and succession planning initiatives. These goals are focused on stabilizing business leadership gaps, ensuring businesses have the talent they need to perform in the current period, and building our leadership bench to sustain our performance. Leadership goals are set such that fully successful achievement of the goals results in a 100% payout with no additional upside. Lower levels of achievement result in payouts of 75%, 50%, or 0% of target.

The following formula summarizes the PIP payout process for a Business Unit leader, assuming the EPS goal is achieved (the process is identical for a Corporate leader).

    For example:

Base
Salary
      Bonus
Target %
      Individual Goal Score       Final Award
Payout
              Goal Category   Goal Weighting   Payout   Goal Score      
            Sales Growth   30%   100%   30%        
$525,000   x   90%   x   Financial Return   40%   100%   40%   =   $448,875
            Strategic Initiatives   20%   75%   15%      
            Leadership   10%   100%   10%      
                    Total   95%      

Based on performance against goals, 2017 cash incentive payouts ranged from the 10th percentile to the 90th percentile of our peer group. The average 2017 cash incentive payout for our executive officers was at the 56th percentile of our peer group, consistent with strong performance in 2017.

LONG-TERM INCENTIVE PLAN (LTI)

Our long-term incentive plan is the largest component of our executive officers' total compensation. As such, we believe it is critical that LTI performance goals reflect Company and individual performance, on both an absolute and relative basis. The LTI process used in February 2017 (described below) resulted in annual grants to executive officers ranging from the 5th percentile to the 51st percentile of our peer group, with an average of the 27th percentile. A preview of the February 2018 grant (which will be disclosed in our 2019 Summary Compensation table) is also described below.

Process to Determine Awards

Our process for determining guidelines, individual awards, and vesting of those awards incorporates:

    TSR performance relative to our peers on a one-, three-, and five-year basis
    Individual officer achievement of three-year sales, profitability, and strategic goals
    Each officer's performance relative to other officers

Abbott Laboratories      33


This process is far more rigorous than automatically granting LTI at the median of the market and adjusting the awards only for relative TSR at the end of the performance cycle to determine the extent to which awards vest.

We followed a rigorous two-stage process to determine the size of LTI awards ultimately granted to our executive officers:

Stage One: Determine LTI Awards
Stage Two: Determine if Options and Shares Vest

Stage One: Determine LTI Awards

In order to determine LTI awards, Abbott follows three steps.

Step A—Determine Company LTI Award Guidelines—Abbott obtains survey data annually to assess the competitive LTI market for our peer group companies for each executive position. Each year, we position our LTI award guidelines relative to the competitive LTI market by comparing Abbott's TSR performance to our peers. While most of our peer companies simply set their annual LTI level at the 50th percentile of market, the following chart shows definitively how we adjust our LTI grant guidelines to align with our relative TSR performance. For example, guidelines for grants made in February 2017 were set at the 25th percentile of our peer group as illustrated in the 2016 Performance Year consistent with our relatively lower TSR vs. peers. Conversely, guidelines for grants made in February 2018 were set at the 75th percentile of our peer group, reflecting very strong TSR vs. our peers. The variability produced by this process illustrates the direct alignment of our officers' pay with our shareholders' returns.

     Performance Year     1 Year Relative
TSR Quartile1

 
  3 Year Relative
TSR Quartile1

 
  5 Year Relative
TSR Quartile1

 
  LTI Award
Guideline
Percentile


 
    2013     3rd     1st     4th     37% (February 2014 Grant)  
    2014       1st       2nd       3rd       50% (February 2015 Grant)    
    2015     2nd     3rd     1st     50% (February 2016 Grant)  
    2016       4th       4th       3rd       25% (February 2017 Grant)    
    2017     1st, #1 in peer group     2nd     2nd     75% (February 2018 Grant)  
(1)
Relative TSR quartile performance ranking uses a 1-4 scoring scale, with 1st representing highest quartile performance and 4th representing lowest quartile performance.

Step B—Determine Individual Officer Awards—The recommendation for each officer starts with the Company LTI award guideline (based on relative TSR performance as described above) for the officer's position, as established in Step A. Individual officer awards are then further adjusted up or down based upon assessment of their achievement of individual goals related to

    1)
    Three Year Sales and Market Growth
    2)
    Three Year Margin Contribution
    3)
    Three Year Strategic Milestones

Each officer is assigned an overall score based on whether they missed, achieved, or exceeded the specific targets in all three measures for all three years. That resulting assessment score determines the LTI performance adjustment.

Awards granted in 2017, based on individual officer performance in 2016, resulted in awards ranging from 26% to 135% of guideline award levels, with an average of 98% of the 25th percentile guideline. These awards resulted in annual grants to Abbott executive officers ranging from the 5th percentile to the 51st percentile of our peer group, with an average of the 27th percentile.

Awards granted in 2018, based on individual officer performance in 2017, resulted in awards ranging from 50% to 135% of guideline award levels, with an average of 104% of the 75th percentile guideline. These awards resulted in annual grants to Abbott executive officers ranging from the 24th percentile to the 90th percentile of our peer group, with an average of the 77th percentile.

34      Abbott Laboratories


Step C—Convert Individual LTI Award Values to Equity Grants—In 2017, to recognize the continued growth focus of Abbott and to directly align the interests of executive officers with the interests of our shareholders, the Compensation Committee granted the long-term incentive awards in the form of 50% stock options and 50% performance-restricted shares. This mix is consistent with the practices of our peer group with respect to performance-based equity grants and was continued for our grants in 2018.

Stage Two: Determine if Options and Shares Vest

Stock options vest over three years. Since stock options only accrue value through share price appreciation, the value realized upon the exercise of vested stock options directly aligns the compensation earned with the value shareholders received over the same period of time. Options are also aligned with shareholder value through the impact of relative TSR in determining the size of awards granted (Stage One).

Performance-restricted shares vest 1/3 each year that the performance target is achieved. Vesting is absolute—either 100% or 0%. There is no partial vesting if the target is missed or additional vesting upside if the Company over-performs. The Committee believes adjusted return on equity (ROE) is the appropriate performance measure for vesting because ROE measures how much profit the Company generates over the long-term with the capital that shareholders have invested and is a measure reflecting deployment of capital or capital allocation.

Although Company TSR performance and individual officer performance are used in Stage One to grant the appropriate award level, the focus on ROE for vesting provides a second shareholder protection to ensure our growth and investment return objectives are sustained after the initial grant is made. ROE is only used for vesting; it is not used in the determination of LTI award guidelines or individual officer performance.

In 2016, the ROE vesting target to determine future vesting was increased from 11% to 12%. This increase is after a similar increase from 10% to 11% for grants made in 2015. This is consistent with our stated intent to increase our ROE and ROE targets over time.

Prior to the separation of Abbott and AbbVie, the AbbVie business accounted for the majority (65%) of Abbott's adjusted net income. However, at the separation of AbbVie, Abbott retained the majority (90%) of the equity, which has resulted in lower than average ROE for Abbott since that time. While Abbott's ROE was disproportionally lower following the AbbVie separation, shareholders of Abbott at that time have seen a 135% appreciation in their holdings during the five years since separation.

(There was a similar impact on other rate of return measures, including Return on Assets.)


IMPACT OF ABBOTT/ABBVIE SEPARATION

GRAPHIC

PAY DECISIONS FOR NAMED EXECUTIVE OFFICERS

The following pages highlight the rationale for the pay decisions for each named officer. It is important to note that annual incentive pay decisions were made in early 2018 based on 2017 results. Long-term incentive decisions (options and performance shares) shown in the Summary Compensation Table of this proxy statement were made in early 2017 based on 2016 results (see prior year proxy statement for discussion of 2016 results). We have also included information about our February 2018 LTI grants since they were based on 2017 TSR performance. Specific 2017 financial goals are detailed on page 38.

Miles D. White

Base Salary—No increase. Mr. White last received a base salary increase in 2010.

Performance Incentive Plan—Mr. White's target bonus is 175% of base salary. Based on performance in 2017, Mr. White received a bonus in February 2018 of $4,500,000, which was equal to 135% of his target bonus. This payout reflects his significant overachievement of both financial and strategic goals, including 163% achievement of his free cash flow goal, sustained overachievement of his sales and return goals, and the successful reshaping of Abbott through the AMO divestiture and the acquisitions of St. Jude Medical and Alere Inc.

Abbott Laboratories      35


Long-Term Incentives—Based on performance in 2016, Mr. White received an LTI award in February 2017 with a value of $8,199,521, which was equal to approximately 100% of his 25th percentile LTI award guideline. This award reflects a significant reduction in his award vs. the prior year and reflects Abbott's 2016 TSR performance which was below our peers.

Based on performance in 2017, Mr. White received an LTI award in February 2018 with a value of $15,000,000, which was equal to approximately 137% of the market. This award reflects Abbott's very strong operational performance during 2017, TSR performance at the top of the peer group and well ahead of the S&P 500 and DJIA, and the achievement of several important strategic goals including the sale of AMO and acquisition of St. Jude Medical and Alere Inc. The award also reflects Abbott's sustained strong financial returns under Mr. White's leadership, including exceeding its adjusted diluted EPS growth commitments and consistently meeting or beating earnings targets annually for the past 15 years. Additional details regarding that award will be included in Abbott's 2019 proxy statement.

Brian B. Yoor

Base Salary—Mr. Yoor's annual base salary was increased from $600,000 to $650,000 in February 2017 in connection with his transition to Executive Vice President, Finance and Chief Financial Officer.

Performance Incentive Plan—Mr. Yoor's target bonus was increased in 2017 from 100% to 105% of his base salary. Based on performance in 2017, Mr. Yoor received a bonus in February 2018 of $1,062,400, which was equal to 156% of his target bonus. This payout reflects significant overachievement of both financial and strategic goals, including 163% achievement of his free cash flow goal, and overachievement of his sales and return goals. Mr. Yoor's strategic and leadership goals for 2017 included M&A activity support, transformation of the finance organization, and implementation of key financing and cash flow improvement initiatives which significantly overachieved their targets. In addition to the calculations derived from the scoring of financial and strategic goals, the plan allows further adjustments up or down by the Compensation Committee to reflect achievements not anticipated when goals were set. For 2017, the Committee adjusted Mr. Yoor's bonus (by $300,000) to reflect the unanticipated achievements.

Long-Term Incentives—Based on performance in 2016, Mr. Yoor received an LTI award in February 2017 with a value of $1,754,876, which was equal to 90% of his 25th percentile LTI award guideline.

Based on performance in 2017, Mr. Yoor received an LTI award in February 2018 with a value of $5,383,800, which was equal to approximately 135% of his 75th percentile LTI award guideline. This award reflects Abbott's and Mr. Yoor's strong performance during 2017. Additional details regarding that award will be included in Abbott's 2019 proxy statement.

Hubert L. Allen

Base Salary—No change in 2017.

Performance Incentive Plan—Mr. Allen's target bonus is 105% of his base salary. Based on performance in 2017, Mr. Allen received a bonus in February 2018 of $1,015,200, which was equal to 140% of his target bonus. This payout reflects significant overachievement of both financial and strategic goals, including 163% achievement of his free cash flow goal, and overachievement of his sales and return goals. Mr. Allen's strategic and leadership goals for 2017 included achieving key litigation and compliance initiatives, licensing and acquisition objectives, and successful integration activities. In addition to the calculations derived from the scoring of financial and strategic goals, the plan allows further adjustments up or down by the Compensation Committee to reflect achievements not anticipated when goals were set. For 2017, the Committee adjusted Mr. Allen's bonus (by $200,000) to reflect the unanticipated achievements.

Long-Term Incentives—Based on performance in 2016, Mr. Allen received an LTI award in February 2017 with a value of $2,144,861, which was equal to 110% of his 25th percentile LTI award guideline.

Based on performance in 2017, Mr. Allen received an LTI award in February 2018 with a value of $5,383,800, which was equal to approximately 135% of his 75th percentile LTI award guideline. This award reflects Abbott's and Mr. Allen's strong performance during 2017. Additional details regarding that award will be included in Abbott's 2019 proxy statement.

36      Abbott Laboratories


Robert B. Ford

Base Salary—No change in 2017.

Performance Incentive Plan—Mr. Ford's target bonus is 105% of his base salary. Based on performance in 2017, Mr. Ford received a bonus in February 2018 of $1,066,400, which was equal to 150% of his target bonus. This payout reflects significant overachievement of financial and strategic goals. Mr. Ford's strategic and leadership goals for 2017 included achieving key product approvals, successful integration of St. Jude Medical, and market share growth objectives. In addition to the calculations derived from the scoring of financial and strategic goals, the plan allows further adjustments up or down by the Compensation Committee to reflect achievements not anticipated when goals were set. For 2017, the Committee adjusted Mr. Ford's bonus (by $425,000) to reflect the unanticipated achievements.

Long-Term Incentives—Based on performance in 2016, Mr. Ford received an LTI award in February 2017 with a value of $1,949,869, which was equal to 90% of his 25th percentile LTI award guideline.

Based on performance in 2017, Mr. Ford received an LTI award in February 2018 with a value of $5,383,800, which was equal to approximately 135% of his 75th percentile LTI award guideline. This award reflects Abbott's and Mr. Ford's strong performance during 2017. Additional details regarding that award will be included in Abbott's 2019 proxy statement.

Daniel G. Salvadori

Base Salary—Mr. Salvadori's annual base salary was increased from $575,000 to $650,000 in July 2017 in connection with his promotion from Senior Vice President, Established Pharmaceuticals, Latin America to Executive Vice President, Nutritional Products.

Performance Incentive Plan—Mr. Salvadori's target bonus is 105% of his base salary. Based on performance in 2017, Mr. Salvadori received a bonus in February 2018 of $733,700, which was equal to 108% of his target bonus. This payout reflects 102.9% achievement of his regional sales goal, 109.4% achievement of his regional margin goal, and achievement of his other financial and strategic goals. Mr. Salvadori's strategic and leadership goals for 2017 included achieving new product development, market share growth, and talent related goals.

Long-Term Incentives—Based on performance in 2016, Mr. Salvadori received an LTI award in February 2017 with a value of $1,772,444, which was equal to 135% of his 25th percentile LTI award guideline. Mr. Salvadori received an additional award in July 2017 with a value of $739,794 in connection with his promotion to Executive Vice President, Nutritional Products.

Based on performance in 2017, Mr. Salvadori received an LTI award in February 2018 with a value of $3,988,000, which was equal to approximately 100% of his 75th percentile LTI award guideline. This award reflects Abbott's and Mr. Salvadori's strong performance during 2017. Additional details regarding that award will be included in Abbott's 2019 proxy statement.

Michael T. Rousseau

Base Salary—No increase.

Performance Incentive Plan—Mr. Rousseau's target bonus was 125% of base salary per the St. Jude Medical merger agreement. Based on the terms of his retention agreement, Mr. Rousseau received a prorated bonus in February 2018 of $643,800.

Long-Term Incentives—Mr. Rousseau did not receive an LTI award in 2017.

Eric S. Fain

Base Salary—No increase.

Performance Incentive Plan—Mr. Fain's target bonus was 100% of base salary per the St. Jude Medical merger agreement. Based on the terms of his retention agreement, Mr. Fain received a prorated bonus in February 2018 of $174,700.

Long-Term Incentives—Based on the terms of his retention agreement, Mr. Fain received an LTI award in February 2017 with a value of $2,049,857 which was equal to the value of his previous LTI grant at St. Jude Medical.

Abbott Laboratories      37


2017 PERFORMANCE GOALS FOR PERFORMANCE INCENTIVE PLAN

DISCUSSION OF NAMED OFFICERS' ACHIEVEMENT OF GOALS DURING 2017

FINANCIAL GOALS

The results shown below reflect the 2017 financial goals and results for the Named Officers.

 

Executive

  Metric

2016
Results
Achieved



2017
Expected
Results



2017
Results
Achieved



Percentage
Achieved


Percentage
Increase(1)
2017 vs. 2016
 

 

Miles D. White

 

Adjusted Sales(2)

 

$20.5 Billion

 

$26.4 Billion

 

$26.7 Billion

 

101%

 

31%

   

      Adjusted Diluted EPS(3)   $2.20   $2.45   $2.50   102%   14%    

      Adjusted Net Income(3)   $3.28 Billion   $4.3 Billion   $4.4 Billion   102%   34%    

      Adjusted Return on Assets(3),(4)   9.8%   7.5%   7.5%   100%   (4)    

      Adjusted Free Cash Flow(3)   $2.1 Billion   $2.7 Billion   $4.4 Billion   163%   113%    

 

Brian B. Yoor

 

Adjusted Sales(2)

 

$20.5 Billion

 

$26.4 Billion

 

$26.7 Billion

 

101%

 

31%

   

 

  Adjusted Diluted EPS(3)   $2.20   $2.45   $2.50   102%   14%    

 

  Adjusted Free Cash Flow(3)   $2.1 Billion   $2.7 Billion   $4.4 Billion   163%   113%    

 

Hubert L. Allen

 

Adjusted Sales(2)

 

$20.5 Billion

 

$26.4 Billion

 

$26.7 Billion

 

101%

 

31%

   

      Adjusted Diluted EPS(3)   $2.20   $2.45   $2.50   102%   14%    

      Adjusted Free Cash Flow(3)   $2.1 Billion   $2.7 Billion   $4.4 Billion   163%   113%    

 

Robert B. Ford

 

Adjusted Division Net Sales(2)

 

$5.2 Billion

 

$10.4 Billion

 

$10.4 Billion

 

100%

 

100%

 
 

 

  Adjusted Division Margin(3)   $1,335 Million   $2,992 Million