DEF 14A 1 d614669ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

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  Preliminary Proxy Statement
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  Definitive Proxy Statement
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  Soliciting Material under §240.14a-12

THERMO FISHER SCIENTIFIC INC.

(Name of Registrant as Specified In Its Charter)

 

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Table of Contents

LOGO


Table of Contents

 

 

 

From Our

President and Chief Executive Officer

  

 

LOGO

 

 

168 Third Avenue

Waltham, MA 02451

 

 

Dear Shareholders:

 

   LOGO

 

Marc N. Casper

         

Thermo Fisher Scientific is a company that brings cutting-edge science to our customers, and this ultimately benefits people around the world. As we continue to successfully execute our growth strategy, we consider our progress each year as much more than a contribution to our financial strength. What we do as a company truly creates a reason for optimism, and that gives us purpose as defined by our Mission: to enable our customers to make the world healthier, cleaner and safer.

 

Over the course of the year, we continued our growth trajectory, achieved outstanding results for our customers and delivered significant value for our shareholders. Year-over-year, we grew revenue by 16% to $24.36 billion, GAAP operating income by 28% to $3.78 billion and adjusted operating income* by 16% to $5.62 billion and achieved GAAP diluted earnings per share* growth of 30% to $7.24 per share and adjusted EPS growth of 17% to $11.12 per share.

 

We continued to successfully execute a proven growth strategy that consists of three pillars:

 

   Investing $1 billion in R&D annually to fuel high-impact innovation,

 

   Leveraging our leading presence in high-growth and emerging markets, and

 

   Strengthening our capabilities to enhance our unique customer value proposition.

 

In addition, through our disciplined approach to capital allocation, we de-levered our balance sheet – reducing debt by $2 billion, completed $540 million in strategic acquisitions, and returned $775 million to our shareholders through stock buybacks and dividends.

 

Beyond our growth strategy, financial performance and day-to-day execution, our Mission is what defines us and inspires us. We can’t fulfill our Mission without exceptional performance, and we achieve that by employing more than 70,000 colleagues around the world.

 

Our teams are committed to making our company stronger through our Practical Process Improvement (“PPI”) Business System. PPI is our discipline for improving quality, productivity and customer allegiance – all of which are core to who we are and how we operate at Thermo Fisher Scientific. PPI helps us to translate ideas and goals into tangible acceleration of organic growth, margin expansion and enhanced cash flow.

 

With a Mission-driven purpose, our accomplishments create tremendous value for our customers, our colleagues and our shareholders. We ask for your voting support on the matters described in this proxy statement so we can continue to build on our strong foundation and extend our long track record of outstanding performance. On behalf of our colleagues, as well as our customers and communities globally, I thank you for your investment in Thermo Fisher Scientific.

 

    

 

Yours very truly,

 

 

LOGO

MARC N. CASPER

President and Chief Executive Officer

April 9, 2019

 

 

* 

Adjusted earnings per share (“EPS”) and adjusted operating income are financial measures that are not prepared in accordance with generally accepted accounting principles (“GAAP”). Appendix A to this proxy statement defines these non-GAAP financial measures and reconciles them to the most directly comparable historical GAAP financial measures.


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LOGO

 

168 Third Avenue

Waltham, MA 02451

 

 

NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS

 

 

 

LOGO

  

 

DATE & TIME

Wednesday, May 22, 2019

1:00 p.m. (Eastern time)

         

 

LOGO

  

 

LOCATION

Park Hyatt New York

153 West 57th Street

New York, New York

 

         

 

LOGO

  

 

RECORD DATE

March 27, 2019

 

Items of Business

 

LOGO    Elect as directors the 12 nominees named in our proxy statement

 

 

LOGO

  

 

 

Vote on an advisory resolution to approve executive compensation

 

 

LOGO

  

 

 

Ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent auditors for 2019

 

 

LOGO

  

 

 

Consider any other business properly brought before the meeting

By Order of the Board of Directors,

 

 

LOGO

SHARON S. BRIANSKY

Vice President and Secretary

April 9, 2019

Directions to the Annual Meeting are available by calling Investor Relations at (781) 622-1111.

 

Review Your Proxy Statement and Vote in One of the Following Ways

 

LOGO   

VIA THE INTERNET

Visit the website listed on
your Notice of Internet
Availability, proxy card or
voting instruction form

   LOGO   

BY TELEPHONE

Call the telephone number on
your proxy card or voting
instruction form

   LOGO   

BY MAIL

Sign, date and return your
proxy card or voting
instruction form in the
enclosed envelope

 

Please refer to the enclosed proxy materials or the information forwarded by your bank, broker, trustee or

other intermediary to see which voting methods are available to you.

Important Notice Regarding the Availability of Proxy Materials for the

Annual Meeting of Shareholders to be Held on May 22, 2019.

The Proxy Statement and 2018 Annual Report are available at www.proxyvote.com.

This notice and the accompanying proxy statement, 2018 annual report, and proxy card or voting instruction form were first made available to shareholders beginning on April 9, 2019. You may vote if you owned shares of our common stock at the close of business on March 27, 2019, the record date for notice of and voting at our annual meeting.


Table of Contents

TABLE OF CONTENTS

 

     Page  

Thermo Fisher At A Glance

     1  

Who We Are

     1  

Our Mission

     2  

Our Values

     2  

How We Perform

     3  

 

Proxy Statement Summary

     5  

Voting Matters

     5  

Corporate Governance Highlights

     5  

Executive Compensation Highlights

     8  

Proposal 1: Election of Directors

     9  

Proposal Summary

     9  

Director Nominee Skills, Experience and Background

     10  

Nominees and Incumbent Directors

     12  

Corporate Governance

     17  

General/Overview

     17  

Director Nomination Process

     18  

Retirement Policy

     18  

How We Assess Director Independence

     18  

Relationships and Transactions Considered for Director Independence

     20  

How We Evaluate the Board’s Effectiveness

     20  

Board Diversity and Board Tenure

     21  

Director Attendance

     22  

Board Committees

     23  

Our Board’s Role in Risk Oversight

     25  

Executive Sessions

     26  

Shareholder Engagement

     26  

Communications from Shareholders and Other Interested Parties

     27  

Corporate Social Responsibility

     28  

Security Ownership

     31  

Public Policy Engagement and Political Participation

     33  

Related Person Transactions

     34  

Executive Compensation

     35  

Proposal 2 – Advisory Vote on Executive Compensation

     35  

Compensation Discussion and Analysis

     36  

Executive Summary

     36  

Compensation Design

     38  

Compensation Governance

     42  

2018 Compensation Decisions and Outcomes

     48  

Long-Term Incentives

     53  

Other Elements of Compensation

     57  

Additional Information

     58  


Table of Contents
     Page  

Compensation Committee Report

     58  

Summary Compensation Table

     59  

Long-Term Incentive Compensation

     61  

Pension Benefits

     66  

Nonqualified Deferred Compensation for 2018

     66  

Potential Termination Payments

     68  

Pay Ratio Disclosure

     72  

Director Compensation

     73  

Compensation Philosophy

     73  

Cash Compensation

     73  

Deferred Compensation Plan for Directors

     73  

Fisher Scientific International, Inc. Retirement Plan for Non-Employee Directors

     74  

Stock-Based Compensation

     74  

Matching Charitable Donation Program

     74  

Summary Director Compensation Table

     74  

Stock Ownership Policy for Directors

     76  

Audit

     77  

Proposal 3: Ratification of Selection of Independent Auditors

     77  

Independent Auditor Fees

     77  

Audit Committee’s Pre-Approval Policies and Procedures

     78  

Audit Committee Report

     78  

Voting and Meeting Information

     80  

Purpose of Annual Meeting

     80  

Voting Information

     80  

Proxy Solicitation and Distribution

     82  

Submitting 2019 Proposals

     83  

SEC Rule 14a-8

     83  

Advance Notice Bylaw

     83  

Proxy Access Nominations

     83  

Appendix A

     A-1  


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THERMO FISHER AT A GLANCE

 

Who We Are

Thermo Fisher Scientific Inc. (also referred to in this document as “Thermo Fisher,” “we,” and the “Company”) is the world leader in serving science.

We enable our customers to:

 

   

accelerate life sciences research,

 

   

solve complex analytical challenges,

 

   

improve patient diagnostics,

 

   

deliver medicines to market, and

 

   

increase laboratory productivity.

Thermo Fisher has approximately 70,000 employees and serves more than 400,000 customers within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies, as well as environmental, industrial quality and process control settings.

Through our premier brands – Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific and Unity Lab Services – we offer an unmatched combination of innovative technologies, purchasing convenience and comprehensive support.

We continuously increase our depth of capabilities in technologies, software and services, and leverage our extensive global channels to address our customers’ productivity and innovation needs. Our goal is to make our customers more productive in an increasingly competitive business environment, and to help them to solve their challenges, from complex research to improved patient care, environmental and process monitoring, and consumer safety.

 

LOGO

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

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Our Mission

At Thermo Fisher, everything we do begins with our Mission – to enable our customers to make the world healthier, cleaner and safer. We have a remarkable team of colleagues around the globe who are passionate about helping our customers address some of the world’s greatest societal challenges. Whether they are developing new treatments for disease, protecting the environment or ensuring public safety, our customers count on us to help them achieve their goals.

 

LOGO

Our Values

Thermo Fisher’s 4I Values of Integrity, Intensity, Innovation and Involvement make up our culture and guide our colleagues’ interactions — with our customers, suppliers and partners, and with each other. These four values are the very foundation of our culture, and are fundamental to our continued growth.

 

 

LOGO

 

 

    2    

 

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


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How We Perform

2018 Performance

In 2018, the combination of strong market conditions and great operational performance by our team led to our best year yet at Thermo Fisher Scientific. Our financial results were outstanding:

 

 

Revenue grew 16% to $24.36 billion

 

 

GAAP diluted EPS increased 30% to $7.24 and adjusted EPS* increased 17% to $11.12

 

 

GAAP operating income grew by 28% to $3.78 billion and adjusted operating income* grew by 16% to $5.62 billion

 

 

And we generated free cash flow* of $3.83 billion

We also continued to effectively deploy our capital in 2018 to create significant shareholder value by:

 

 

Reducing debt by $2 billion to strengthen our balance sheet following our acquisition of Patheon in 2017

 

 

Deploying $540 million to complete strategic acquisitions, including a bioprocessing business which added complementary cell culture products to help our customers increase yield during production of biologic drugs

 

 

Returning capital of $775 million through $500 million of stock buybacks and increasing our dividend by 13% for a total of $275 million

We became a stronger partner for our customers by continuing to successfully execute our growth strategy, which consists of three pillars:

 

 

High-impact innovation: We invested $1 billion in R&D in 2018 and launched a range of new products that strengthened our offering. Some examples include the Thermo Scientific Q Exactive UHMR mass spectrometer for life sciences research, the Ion GeneStudio S5 Series of next-generation sequencing systems and the Phadia 200 instrument for diagnosing allergies and autoimmune diseases.

 

 

Scale in high-growth and emerging markets: We continued our excellent growth momentum in emerging and high-growth markets, which now represent 21% of our total revenue, or about $5 billion. We achieved another very strong year in China, where we continued to expand our capabilities. We established a new commercial office and customer training center in Beijing and opened our first Bioprocess Design Center, in Shanghai, to support our customers’ development of biologic drugs.

 

 

Unique customer value proposition: We continued to strengthen our offering to help our customers accelerate innovation and enhance productivity. Our best example from 2018 is the successful integration of Patheon following our acquisition of the business a year ago. Adding these drug development and manufacturing services has significantly strengthened our offering for pharma and biotech customers. We can now support them at every stage of the drug lifecycle, from research, to development, through clinical trials, all the way to commercial production.

All of these achievements are designed to make Thermo Fisher Scientific a stronger partner for our customers. And when we help them achieve their goals, society benefits. Here are some examples from 2018:

 

 

A clinical-stage biotech company is relying on our pharmaceutical services to help them develop a breakthrough treatment for two serious genetic metabolic disorders

 

 

We are providing 100 environmental monitoring systems to the cities of Tai’an and Binzhou in Shandong Province, China, to improve air quality

 

 

The U.S. Department of Homeland Security is using thousands of our personal radiation detectors to stop potential threats at American borders, airports, railways and coastlines

This is how we fulfill our Mission and is what inspires us to position Thermo Fisher Scientific for an even stronger future.

 

*

Adjusted EPS, adjusted operating income and free cash flow are financial measures that are not prepared in accordance with GAAP. Appendix A to this proxy statement defines these non-GAAP financial measures and reconciles them to the most directly comparable historical GAAP financial measures.

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

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Long-Term Performance

Our record of delivering total shareholder return (“TSR”) reflects our commitment to long-term shareholder value creation.

TOTAL SHAREHOLDER RETURN

 

 

LOGO    LOGO    LOGO

 

*

Represents average TSR of companies included in our “Peer Group.” See page 45 for list of companies.

**

Represents average TSR of the S&P’s 500 Healthcare and S&P’s 500 Industrial Indices, weighted 70/30, respectively, to approximate the split of our revenue by the end market.

 

 

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Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


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PROXY STATEMENT SUMMARY

 

2019 Annual Meeting of Shareholders

 

DATE AND TIME:   Wednesday, May 22, 2019, at 1:00 p.m. (Eastern time)
PLACE:   Park Hyatt New York, 153 West 57th Street, New York, New York
RECORD DATE:   March 27, 2019

To assist you in reviewing the proposals to be acted upon at our 2019 Annual Meeting of Shareholders (“2019 Annual Meeting”), below is summary information regarding the meeting, each proposal to be voted upon at the meeting and Thermo Fisher’s corporate governance and executive compensation. The following description is only a summary. For more information about these topics, please review Thermo Fisher’s Annual Report on Form 10-K for the year ended December 31, 2018 and the complete Proxy Statement.

Voting Matters

 

PROPOSAL

   DESCRIPTION    BOARD
RECOMMENDATION

Proposal 1: Election of directors (page 9)

   We are asking our shareholders to elect each of the twelve director nominees identified below to serve until the 2020 Annual Meeting of shareholders.   

ü

FOR

each nominee

 

Proposal 2: Approval of an advisory vote on executive compensation

(page 35)

  

We are asking our shareholders to cast a non-binding, advisory vote on the compensation of the executive officers named in the Summary Compensation Table. In evaluating this year’s “say on pay” proposal, we recommend that you review our Compensation Discussion and Analysis, which explains how and why the Compensation Committee of our Board arrived at its executive compensation actions and decisions for 2018.

 

  

ü

FOR

Proposal 3: Ratification of the selection of the

independent auditors

(page 77)

 

  

We are asking our shareholders to ratify our Audit Committee’s selection of PricewaterhouseCoopers LLP (“PwC”) to act as the independent auditors for Thermo Fisher for 2019. Although our shareholders are not required to approve the selection of PwC, our Board believes that it is advisable to give our shareholders an opportunity to ratify this selection.

 

  

ü

FOR

Corporate Governance Highlights

Our Board of Directors (the “Board”) recognizes that Thermo Fisher’s success over the long-term requires a robust framework of corporate governance that serves the best interests of all our shareholders. Below are highlights of our corporate governance framework.

 

ü

Board refreshment and diversity of background and skills remain key areas of focus for us, as evidenced by the recent addition of James Mullen to our Board

 

ü

Our Bylaws provide for proxy access by shareholders

 

ü

Our Chairman and CEO positions are separate

 

ü

All of our directors are elected annually

 

ü

In uncontested elections, our directors must be elected by a majority of the votes cast, and an incumbent director who fails to receive such a majority is required to tender his or her resignation

 

ü

Our shareholders have the right to act by written consent

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

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Shareholder Engagement Program

Our Board and management are committed to engaging with and listening to our shareholders. Throughout 2018 and into 2019 we engaged with shareholders representing over 50% of our outstanding shares to solicit their feedback on our business and financial performance, governance and executive compensation programs, and environmental and social matters. Members of our investor relations team and senior management participated in each discussion, with certain engagements including a member of our Board. This dialogue has informed our Board’s meeting agendas, and led to governance enhancements that help us address the issues that matter most to our shareholders. This engagement process will assist us in achieving our strategic objectives, creating long-term value, maintaining our culture of compliance, and contributing to our environmental, social, and governance activities.

 

LOGO

 

 

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Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


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Our Director Nominees

Below is an overview of each of the director nominees you are being asked to elect at the 2019 Annual Meeting.

 

Director

   Age    Occupation   

Committee

Memberships

 

       

 Marc N. Casper

   51    President and Chief Executive Officer, Thermo Fisher Scientific   

Strategy and Finance

Science and Technology

       

 Nelson J. Chai

   53    Chief Financial Officer, Uber Technologies Inc.   

Audit

Nominating and Corporate Governance

       

 C. Martin Harris

   62    Associate Vice President of the Health Enterprise and Chief Business Officer, Dell Medical School at the University of Texas at Austin   

Nominating and Corporate Governance

Science and Technology

       

 Tyler Jacks

   58    David H. Koch Professor of Biology at the Massachusetts Institute of Technology and Director of the David H. Koch Institute for Integrative Cancer Research   

Science and Technology

Strategy and Finance

       

 

 Judy C. Lewent

  

 

70

  

 

Former Chief Financial Officer, Merck & Co., Inc.

  

 

Strategy and Finance

       

 Thomas J. Lynch

   64    Chairman of the Board and Former Chief Executive Officer, TE Connectivity Ltd.   

Audit

Compensation

       

 

 Jim P. Manzi

  

 

67

  

 

Chairman of the Board of Directors, Thermo Fisher Scientific

  

 

N/A

       

 

 James C. Mullen

  

 

60

  

 

Former Chief Executive Officer, Patheon N.V. and Former Chief Executive Officer, Biogen Inc.

  

 

Strategy and Finance

       

 Lars R. Sorensen

   64    Former President and Chief Executive Officer, Novo Nordisk A/S   

Nominating and Corporate Governance

Strategy and Finance

       

 Scott M. Sperling

   61    Co-President, Thomas H. Lee Partners, LP   

Compensation

Strategy and Finance

       

 

 Elaine S. Ullian

  

 

71

  

 

Former President and Chief Executive Officer, Boston Medical Center

  

 

Compensation

 

 Dion J. Weisler

 

  

 

51

 

  

 

President and Chief Executive Officer, HP Inc.

 

  

 

Audit

 

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

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Executive Compensation Highlights

Overview of Executive Compensation Program

Our executive compensation program is designed with Thermo Fisher’s mission of enabling our customers to make the world a healthier, cleaner and safer place at its core. Being successful, while delivering sustainable value creation for our shareholders in a responsible way, requires the right talent in the right roles focused on a combination of financial and non-financial performance.

Compensation of the Company’s executive officers named in the summary compensation table set forth under the heading “EXECUTIVE COMPENSATION” (the “Named Executive Officers” or “NEOs”) is delivered in base salary, an annual cash incentive and a mix of long-term incentives. This combination balances a focus on retention of talent, achievement of near-term business goals, and sustainable longer-term performance and shareholder value creation. Learn more on page 35.

 

Alignment with Strategy

 

For our compensation program to be successful, it needs to effectively align with our key strategic, financial and operational goals. We achieve this by delivering the majority of compensation in the form of at-risk variable pay.

 

The performance measures that apply to annual and long-term incentive awards reflect both our focus on organic top line growth, along with operational efficiency and profitability. To ensure alignment with shareholder value creation we also assess total shareholder return relative to some of the highest performing companies in the S&P 500.

 

Learn more about our performance measures and why they matter on page 39.

 

CEO

 

LOGO

 

 

 

Other Named Executive

Officers (Aggregate)

 

LOGO

 

 

Key Activities in 2018

During 2018, in addition to their typical annual activities, the Compensation Committee reviewed feedback collected as part of the extensive shareholder outreach efforts, as it related to executive compensation. This feedback was a critical input into a comprehensive review of the executive compensation program design during the year. As a result, the Committee approved select changes for 2019 and updated the Compensation Discussion & Analysis to enhance clarity and transparency around our executive compensation programs. Learn more on page 37.

 

 

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Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


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Compensation Governance

Our Compensation Committee also recognizes that the success of our executive compensation program over the long-term requires a robust framework of compensation governance. As a result, the Committee regularly reviews external executive compensation practices and trends and incorporates best practices into our executive compensation program:

 

 

WHAT WE DO

 

     

 

WHAT WE DON’T DO

 

   
  Benchmark compensation levels against appropriate companies operating in similar industries, of a similar size and business complexity     ×  

 

No tax gross ups

 
  Reference the market median when reviewing compensation for our CEO, and effective in 2019, for all of our named executive officers     ×  

No plans that encourage excessive risk

 
  Clawback policy for the recoupment of compensation in certain situations     ×  

 

No guaranteed pay increases

 
 

 

Regular shareholder engagement related to compensation

    ×  

 

No guaranteed bonuses or equity awards

 

 

 
  Caps under our performance-based incentive plans (annual cash incentive payout limit and share cap under performance-based long-term plans)     ×  

 

No dividends paid on equity awards prior to vesting

 
  Robust stock ownership requirements     ×  

No hedging or pledging of Company stock

 
  Two year holding requirement on 50% of net stock vesting under the CEO’s time-and performance-based restricted stock units     ×  

 

No excessive perquisites

 

 
  Engage an independent compensation consultant     ×  

 

No pension or SERPs (with the exception of legacy accumulated benefits from acquired companies)

 

 
  Deliver the majority of compensation in the form of at-risk, variable pay        
  Align pay with performance and Company strategy        
  Double-trigger change in control provisions        

 

 

PROPOSAL 1—ELECTION OF DIRECTORS

 

Proposal Summary

What Are You Voting On?

We are asking our shareholders to elect the 12 director nominees listed below to serve on the Board for a term expiring at the next annual meeting of shareholders. Information about the Board and each director nominee is included in this section.

Voting Recommendation

 

LOGO

After consideration of the individual qualifications, skills and experience of each of our director nominees and his or her prior contributions to the Board, we believe that a Board composed of the 12 director nominees would be well-balanced and effective.

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

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The Board, upon recommendation from the Nominating and Corporate Governance Committee, has nominated 12 directors for election at the 2019 Annual Meeting. Each of the directors elected at the 2019 Annual Meeting will hold office until the annual meeting of shareholders to be held in 2020 and until his or her successor has been elected and qualified, or until his or her earlier death, resignation, removal or disqualification. Each of the director nominees currently serves as a member of the Board of Directors.

Unless contrary instructions are given, the shares represented by a properly executed proxy will be voted “FOR” each of the director nominees presented below. If, at the time of the meeting, one or more of the director nominees has become unavailable to serve, shares represented by proxies will be voted for the remaining director nominees and for any substitute director nominee or nominees designated by the Board of Directors, unless the size of the Board is reduced. The Board knows of no reason why any of the director nominees will be unavailable or unable to serve. Proxies cannot be voted for a greater number of persons than the director nominees listed.

Director Nominee Skills, Experience, and Background

The Board regularly reviews the skills, experience, and background that it believes are desirable to be represented on the Board and in order to align with the Company’s strategic vision, business and operations. The following is a description of some of these skills, experience, and background:

 

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Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


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The following is a summary of some of the skills, experience, and background that our director nominees bring to the Board:

LOGO

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

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Nominees and Incumbent Directors

Set forth below are the names of the persons nominated as directors, their ages, their offices in the Company, if any, their principal occupations or employment for the past five years, the length of their tenure as directors and the names of other public companies in which they currently hold directorships or have held directorships during the past five years. We have also presented information below regarding each director’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director. Information regarding their beneficial ownership of the Company’s common stock, par value $1.00 per share (“Common Stock”), is reported under the heading “SECURITY OWNERSHIP.”

 

 

 

LOGO

  

 

Marc N. Casper

    
  

 

President and CEO

 

Director Since: 2009

 

Professional Highlights:

    Thermo Fisher Scientific Inc.

    President and CEO (2009 - Present)

    Executive VP and COO (2008 - 2009)

    Executive VP (2006 - 2008)

   Thermo Electron Corporation

    Senior VP (2005 - 2006)

    Senior VP and President, Life and Laboratory Sciences Group (2003 - 2005)

    VP, Life and Laboratory Sciences Sector (2002 - 2003)

    VP, Life Sciences Sector (2001 - 2002)

  

 

Independent: No

 

Age: 51

 

Other current directorships:

    USBancorp

 

As the only member of the Company’s management to serve on the Board, Mr. Casper contributes a deep and valuable understanding of Thermo Fisher history and day-to-day operations. This contribution is stemmed further from Mr. Casper’s 20-plus years in the life sciences and healthcare equipment industry, and his long standing employment with the Company. Additionally, Mr. Casper’s experience as the Chief Executive Officer of the Company, and previously serving in various senior level management roles, enables him to provide strategic leadership skills and financial acumen and expertise that are invaluable to the Board.

 

Key Skills and

Experience:

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   

 

 

LOGO

  

 

 

Nelson J. Chai

    
  

 

Director Since: 2010

 

Professional Highlights:

    CFO, Uber Technologies Inc.
(2018 - Present)

    President and CEO, The Warranty Group (2017 - 2018)

    President, CIT Group (2011 - 2015)

    Executive VP, Chief Administrative Officer and Head of Strategy, CIT Group (2010 - 2011)

    President, Asia-Pacific, Bank of America Corporation (2008 - 2010)

    Executive VP and CFO, Merrill Lynch & Co. (2007 - 2008)

  

 

 

Independent: Yes

 

Age: 53

 

Other current directorships:

    None

 

 

Mr. Chai’s broad background and experience makes him a suitable and valued member of our Board. Mr. Chai has held executive management positions in a variety of industries and organizations, including his current role as Chief Financial Officer of Uber Technologies Inc., a ridesharing company, and prior roles as President and CEO of The Warranty Group, a provider of specialty insurance products, and President of CIT Group, a financial institution. As a result of his vast background, Mr. Chai brings valuable CEO and strategic leadership, financial acumen and expertise, and accounting experience to our Board.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

  

 

 

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LOGO

  

 

C. Martin Harris

    
  

 

Director Since: 2012

 

Professional Highlights:

    Associate VP and Chief Business Officer, University of Texas Austin, Dell Medical School (2016 - Present)

    Cleveland Clinic Hospital

    Chief Strategy Officer, The Cleveland Clinic Foundation (2009 - 2016)

    Chief Information Officer and Chairman, Information Technology Division (1996 - 2016)

    Staff Physician, Foundation Department of General Internal Medicine (1996 -2016)

 

  

 

Independent: Yes

 

Age: 62

 

Other current directorships:

    Invacare Corporation

    HealthStream Inc.

    Colgate-Palmolive Company

 

 

Dr. Harris provides valuable insight and perspective on the healthcare industry stemming from his current role as Chief Business Officer of Dell Medical School of the University of Texas, Austin, and his previous long-standing career as a physician and Chief Information Officer of Cleveland Clinic Hospital, and Chief Strategy Officer of the Cleveland Clinic Foundation. Dr. Harris has been a strategic leader in healthcare organizations, and also brings valuable board-level experience from his many years served on public company boards in the healthcare industry, including his experience serving on various committees, including the Audit, Nominating and Corporate Governance, and Compensation committees.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO

  

 

 

LOGO

  

 

Tyler Jacks

    
  

 

Director Since: 2009

 

Professional Highlights:

    Investigator, Howard Hughes Medical Institute (2002 - Present)

    Massachusetts Institute of Technology, Koch Institute

    Director, Center for Cancer Research (2001 - Present)

    Professor, Department of Biology and Center for Cancer Research (2000 - Present)

 

  

 

Independent: No

 

Age: 58

 

Other current directorships:

    Amgen, Inc.

 

 

Dr. Jacks’ brings to the Board the benefits of his significant experience of many years in the cancer research industry. He has worked for nearly 20 years at Massachusetts Institute of Technology, Koch Institute, a cancer research institution, as a professor in the Department of Biology, and Director of the Center for Cancer Research. Dr. Jacks brings valuable board-level and industry specific experience from his years serving on public company boards in the biotechnology industry and as a member of multiple scientific advisory boards of biotechnology companies, pharmaceutical companies and academic institutions, including his experience serving on various committees, such as the Corporate Responsibility and Compliance and Nominating and Corporate Governance committees.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO

  

 

 

 

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LOGO

  

 

Judy C. Lewent

    
  

 

Director Since: 2008

 

Professional Highlights:

    Merck & Co., Inc.

    Chief Financial Officer (1990 - 2007)

    Executive VP (2001 - 2007)

    President, Human Health Asia (2003 - 2005)

  

 

Independent: Yes

 

Age: 70

 

Other current directorships:

    Motorola Solutions, Inc.

    GlaxoSmithKline plc.

 

 

Ms. Lewent’s nearly 20 years in executive management roles at Merck & Co., Inc., a global pharmaceutical company, enables her to bring valuable experience in a highly regulated industry to the Board. With her experience as the former Chief Financial Officer and Executive Vice President of Merck, Ms. Lewent brings financial acumen and expertise, strategic leadership skills and international experience to the Board. Ms. Lewent also brings valuable board-level experience from her many years served on public company boards, including her experience serving on various committees, such as the Audit, Nominating and Corporate Governance, and Science committees.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

  

 

 

LOGO

  

 

Thomas J. Lynch

    
  

 

Director Since: 2009

 

Professional Highlights:

    TE Connectivity, Ltd.

    Chairman (2018 - Present)

    Executive Chairman (2017 - 2018)

    Chairman & CEO (2013 - 2017)

    Director; CEO (2006 - 2017)

 

  

 

Independent: Yes

 

Age: 64

 

Other current directorships:

    TE Connectivity Ltd.

    Cummins Inc.

    Automatic Data Processing, Inc.

 

Mr. Lynch’s many years as the former Chief Executive Officer of TE Connectivity Ltd., a comparably-sized global company in the consumer electronics industry, enables him to bring valuable experience to the Board, such as strategic leadership skills, financial expertise, and international experience. Mr. Lynch also brings valuable board-level experience from his service on public company boards.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

  

 

 

LOGO

  

 

Jim P. Manzi

    
  

 

Chairman of the Board

 

Director Since: 2000

Chairman Since: 2007, and from January 2004 to November 2006

 

Professional Highlights:

    Chairman, Stonegate Capital (1995 - Present)

    Chairman, President and CEO, Lotus Development Corporation (1984 - 1995)

 

  

 

Independent: Yes

 

Age: 67

 

Other current directorships:

    None

Mr. Manzi brings to the Board valuable strategic leadership skills, operational management expertise and overall business acumen, as a result of his senior-level management experience leading Lotus Development Corporation, as Chief Executive Officer, prior to its acquisition, and his current role as Chairman of Stonegate Capital, a private equity firm. Mr. Manzi also brings valuable knowledge of the Company due to his nearly 20 years as a member of our Board, which we believe provides our Board with specific expertise and insight into our business.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

  

 

 

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LOGO

  

 

James C. Mullen

    
  

 

Director Since: 2018

 

Professional Highlights:

    Chief Executive Officer, Patheon N.V. (2011 - 2017)

    Chief Executive Officer, Biogen Inc. (2000 - 2010)

 

  

 

Independent: Yes

 

Age: 60

 

Other current directorships:

    Editas Medicine Inc.

 

Previously held directorships:

    Insulet Inc.

 

Mr. Mullen brings valuable industry knowledge to the Board, due to his 35 years of extensive management experience and his senior leadership background in the pharmaceutical and biotechnology industries. Mr. Mullen served as Chief Executive Officer of Patheon, a pharmaceutical contract development and manufacturing organization, prior to its acquisition by the Company in 2017, and as Chief Executive Officer of Biogen, Inc. We believe this experience provides our Board with specific expertise and insight into our business. Mr. Mullen also brings valuable board-level experience from his service on the boards of public companies in the pharmaceutical industry, including his experience serving on various committees, such as the Compensation and Nominating and Corporate Governance committees.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

  

 

 

LOGO

  

 

Lars R. Sørensen

    
  

 

Director Since: 2016

 

Previously served as a director: 2011 - 2015

 

Professional Highlights:

    President & CEO, Novo Nordisk A/S (2000 - 2017)

 

  

 

Independent: Yes

 

Age: 64

 

Other current directorships:

    Essity Aktiebolag

 

Previously held directorships:

    Carlsberg AS

 

Mr. Sorensen brings to the Board valuable strategic leadership skills, financial expertise, industry background, and international experience as a result of his long-standing tenure as Chief Executive Officer at Novo Nordisk A/S, a global healthcare company. Mr. Sorensen also brings valuable board-level experience from his years of serving on public company boards in the life sciences industry.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

  

 

 

 

 

LOGO

 

 

  

 

Scott M. Sperling

    
  

 

Director Since: 2006

 

Professional Highlights:

    Co-President, Thomas H. Lee Partners, LP (1994 - Present)

 

  

 

Independent: Yes

 

Age: 61

 

Other current directorships:

    Agiliti Health, Inc.

    iHeart Media, Inc.

    The Madison Square Garden Company

 

Mr. Sperling brings to the Board valuable strategic leadership skills, and corporate finance and acquisition experience due to his current role serving as Co-President of Thomas H. Lee Partners LP., a private equity firm. Mr. Sperling also brings valuable board-level experience from serving on public company boards, including his experience serving on the Nominating and Corporate Governance committees.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

  

 

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

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LOGO

 

  

 

Elaine S. Ullian

    
  

 

Director Since: 2001

 

Professional Highlights:

    President & CEO, Boston Medical Center (1996 - 2010)

 

  

 

Independent: Yes

 

Age: 71

 

Other current directorships:

    Vertex Pharmaceuticals, Inc.

 

Previously held directorships:

    Hologic Inc.

 

Ms. Ullian brings valuable experience to the Board stemming from her long-standing career at Boston Medical Center, an academic medical center, as President and Chief Executive Officer, including strategic leadership skills and industry knowledge. Ms. Ullian also brings valuable board-level and industry related experience from many years serving on public company boards in the pharmaceutical and life sciences industry, including her experience serving on various committees, such as the Nominating and Corporate Governance committees.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO

  

 

 

LOGO

  

 

Dion J. Weisler

    
  

 

Director Since: 2017

 

Professional Highlights:

    President & CEO, HP Inc. (2015 - Present)

    Hewlett-Packard Co.

    Executive VP, Printing and Personal Systems (2013 - 2015)

    Senior VP, Printing and Personal Systems (2012 - 2013)

 

  

 

Independent: Yes

 

Age: 51

 

Other current directorships:

    HP, Inc.

 

 

Mr. Weisler brings to the Board valuable strategic and senior management leadership skills, financial expertise, international experience, and M&A experience due to his current role serving as Chief Executive Officer at HP Inc., an information technology company. Mr. Weisler also brings valuable board-level experience from his service on a public company board during his time at HP Inc.

 

Key Skills and

Experience:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

  

 

LOGO

 

 

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CORPORATE GOVERNANCE

 

General / Overview

The Board has adopted Corporate Governance Guidelines to assist the Board in exercising its duties and to best serve the interests of the Company and its shareholders. In addition, the Company has adopted a Code of Business Conduct and Ethics that encompasses the requirements of the rules and regulations of the Securities and Exchange Commission (“SEC”) for a “code of ethics” applicable to principal executive officers, principal financial officers, principal accounting officers or controllers, or persons performing similar functions. The Code of Business Conduct and Ethics applies to all of the Company’s officers, directors and employees. The Company intends to satisfy SEC and New York Stock Exchange (“NYSE”) disclosure requirements regarding amendments to, or waivers of, the Code of Business Conduct and Ethics by posting such information on the Company’s website. We may also use our website to make certain disclosures required by the rules of the NYSE, including the following:

 

   

the identity of the presiding director at meetings of non-management or independent directors;

 

   

the method for interested parties to communicate directly with the presiding director or with non-management or independent directors as a group;

 

   

the identity of any member of the Company’s audit committee who also serves on the audit committees of more than three public companies and a determination by the Board that such simultaneous service will not impair the ability of such member to effectively serve on the Company’s audit committee; and

 

   

contributions by the Company to a tax exempt organization in which any non-management or independent director serves as an executive officer if, within the preceding three years, contributions in any single fiscal year exceeded the greater of $1 million or 2% of such tax exempt organization’s consolidated gross revenues.

We have long believed that good corporate governance is important to ensure that the Company is managed for the long-term benefit of our shareholders. We periodically review our corporate governance policies and practices and compare them to those suggested by various authorities in corporate governance and the practices of other public companies. As a result, we have adopted policies and procedures that we believe are in the best interests of the Company and our shareholders. In particular, we have adopted the following policies and procedures:

 

Proxy access. Our bylaws provide for proxy access, which permits a shareholder, or a group of up to 20 shareholders, owning 3% or more of Thermo Fisher’s outstanding common stock continuously for at least three years, to nominate and include in our proxy materials qualifying director nominees constituting up to the greater of (i) 20% of the number of directors currently serving or (ii) two nominees.

 

Declassified Board of Directors. Our bylaws provide that all of our directors will stand for election for a term expiring at the next annual meeting of shareholders.

 

Majority Voting for Election of Directors. Our bylaws provide for a majority voting standard in uncontested director elections, so a nominee is elected to the Board if the votes “for” that director exceed the votes “against” (with abstentions and broker non-votes not counted as for or against the election). If a nominee does not receive more “for” votes than “against” votes, the director must offer his or her resignation, which the Board would then determine whether to accept and publicly disclose that determination.

 

No Hedging or Pledging Policy. We prohibit all hedging and pledging transactions involving Company securities by our directors and officers.

 

Separation of Chief Executive Officer and Chairman Roles. We separate the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles. The CEO is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the Chairman of the Board provides guidance to the CEO and sets the agenda for Board meetings and presides over meetings of the Board.

You can access the current charters for our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, our Corporate Governance Guidelines and our Code of Business Conduct and Ethics at www.thermofisher.com or by writing to:

Investor Relations Department

Thermo Fisher Scientific Inc.

168 Third Avenue

Waltham, MA 02451

Phone: 781-622-1111

Email: investorrelations@thermofisher.com

 

 

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Director Nomination Process

The Nominating and Corporate Governance Committee considers recommendations for director nominees suggested by its members, other directors, management and other interested parties. It will consider shareholder recommendations for director nominees that are sent to the Nominating and Corporate Governance Committee to the attention of the Company’s Secretary at the principal executive office of the Company.

Role of the Nominating and Corporate Governance Committee

The process for evaluating prospective nominees for director, including candidates recommended by shareholders, includes meetings from time to time to evaluate biographical information and background material relating to prospective nominees, interviews of selected candidates by members of the Nominating and Corporate Governance Committee and other members of the Board, and application of the Company’s general criteria for director nominees set forth in the Company’s Corporate Governance Guidelines. These criteria include the prospective nominee’s integrity, business acumen, age, experience, commitment, and diligence. Our Corporate Governance Guidelines specify that the value of diversity on the Board should be considered by the Nominating and Corporate Governance Committee in the director identification and nomination process. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Committee believes that the backgrounds and qualifications of the directors considered as a group should provide a significant breadth of experience, knowledge and abilities to assist the Board in fulfilling its responsibilities. The Nominating and Corporate Governance Committee also considers such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, and, with respect to members of the Audit Committee, financial expertise.

After completing its evaluation, the Nominating and Corporate Governance Committee makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee has from time to time engaged a search firm to facilitate the identification, screening and evaluation of qualified, independent candidates for director to serve on the Board.

Retirement Policy

Under Thermo Fisher’s Corporate Governance Guidelines, a director is required to retire when he or she reaches age 72. A director elected to the Board prior to his or her 72nd birthday may continue to serve until the annual shareholders meeting following his or her 72nd birthday. On the recommendation of the Nominating and Corporate Governance Committee, the Board may waive this requirement as to any director if it deems a waiver to be in the best interests of the Company.

How We Assess Director Independence

Board Members

The Company’s Corporate Governance Guidelines require a majority of our directors to be independent within the meaning of the NYSE listing requirements. The Board has determined that all of our director nominees (listed under “Election of Directors” on page 9) other than Mr. Casper and Dr. Jacks are independent, and previously determined that William G. Parrett, who served on the Board until the 2018 Annual Meeting of Shareholders was independent.

 

   

The Board’s guidelines. For a director to be considered independent, the Board must determine that he or she does not have any material relationship with the Company. The Board has adopted the following standards to assist it in determining whether a director has a material relationship with the Company, which can be found in the Company’s Corporate Governance Guidelines, on the Company’s website at www.thermofisher.com. Under these standards, a director will not be considered to have a material relationship with the Company if he or she is not:

 

   

A director who is (or was within the last three years) an employee, or whose immediate family member is (or was within the last three years) an executive officer, of the Company;

 

   

A director who is a current employee or greater than 10% equity owner, or whose immediate family member is a current executive officer or greater than 10% equity owner, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues;

 

 

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A director who has received, or whose immediate family member has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

 

   

A director who is, or whose immediate family member is, a current partner of a firm that is the Company’s internal or external auditor; a director who is a current employee of a firm that is the Company’s internal or external auditor; a director whose immediate family member is a current employee of a firm that is the Company’s internal or external auditor and personally works on the Company’s audit; or a director who was, or whose immediate family member was, within the last three years (but is no longer) a partner or employee of a firm that is the Company’s internal or external auditor and personally worked on the Company’s audit within that time;

 

   

A director who is (or was within the last three years), or whose immediate family member is (or was within the last three years), an executive officer of another company where any of the Company’s current executive officers at the same time serve or served on the other company’s compensation committee;

 

   

A director who is (or was within the last three years) an executive officer or greater than 10% equity owner of another company that is indebted to the Company, or to which the Company is indebted, in an amount that exceeds one percent (1%) of the total consolidated assets of the other company; and

 

   

A director who is a current executive officer of a tax exempt organization that, within the last three years, received discretionary contributions from the Company in an amount that, in any single fiscal year, exceeded the greater of $1 million or 2% of such tax exempt organization’s consolidated gross revenues. (Any automatic matching by the Company of employee charitable contributions will not be included in the amount of the Company’s contributions for this purpose.)

Ownership of a significant amount of the Company’s stock, by itself, does not constitute a material relationship. For relationships or amounts not covered by these standards, the determination of whether a material relationship exists shall be made by the other members of the Board who are independent (as defined above).

 

   

Applying the guidelines in 2018. In assessing director independence for 2018, the Board considered relevant transactions, relationships and arrangements, including relationships between Board members and the Company. For details, see “Relationships and Transactions Considered for Director Independence” below.

Committee Members

All members of the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee must be independent, as defined by the Company’s Corporate Governance Guidelines. Some committee members must also meet additional standards:

 

   

Additional standards for Audit Committee members. Under a separate SEC independence requirement, Audit Committee members may not accept any consulting, advisory or other fees from the Company, except compensation for Board service, and cannot be an affiliate of the Company.

 

   

Additional standards for Compensation Committee members. In determining that Compensation Committee members are independent, NYSE rules require the Board to consider their sources of compensation, including any consulting, advisory or other compensation paid by the Company.

The Board has determined that all members of the Audit, Compensation and Nominating and Corporate Governance Committees are independent and also satisfy any committee-specific independence requirements.

 

 

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Relationships and Transactions Considered for Director Independence

 

            

Thermo Fisher

Transaction & 2018 Magnitude

Director

nominee

  Organization    Relationship   Purchases from
Thermo Fisher

Less than the
greater of 2% of
the other
company
’s revenue
and
$1m
 

Sales to
Thermo Fisher

Less than the
greater of 2% of
the other
company’s
revenue and
$1m

Chai

 

Uber Technologies Inc.

 

  

CFO

 

 

N/A

 

 

 

LOGO

Harris

 

University of Texas

 

  

Executive

 

 

 

LOGO

 

N/A

 

  Howard Hughes Medical Institute*    Investigator  

 

LOGO

  N/A

Jacks

  Massachusetts Institute of Technology    Professor and Director of David H. Koch Institute of Integrative Research   LOGO   N/A
    Dragonfly Therapeutics, Inc.    Greater than 10% equity owner   LOGO   N/A

Lynch

 

TE Connectivity

 

  

Chairman

 

 

 

LOGO

 

 

LOGO

Weisler

 

HP Inc.

 

  

CEO & Director

 

 

 

LOGO

 

 

LOGO

 

All directors

  Various charitable organizations    Executive  

Charitable contributions from Thermo Fisher <2% of the organization’s revenues

 

*

While the Company’s 2018 sales to Howard Hughes Medical Institute (“HHMI”) were under the 2% threshold (as were 2017 sales), the Company’s 2016 sales to the organization represented approximately 4% of HHMI’s 2016 consolidated gross revenues.

 

As a result of his relationship with HHMI, Dr. Jacks is not deemed independent under the Company’s Corporate Governance Guidelines.

How We Evaluate the Board’s Effectiveness

Annual Evaluation Process

Each year, our Board conducts a comprehensive self-evaluation in order to assess its own effectiveness and Board dynamics, and identify areas for enhancement. Our Board’s annual self-evaluation also is a key component of its director nomination process and succession planning.

The Nominating and Corporate Governance Committee (the “N&CG Commitee”) reviews and determines the overall process, scope, and content of our Board’s annual self-evaluation process. Each of our Nominating and Corporate Governance, Compensation and Audit Committees also conducts a separate self-evaluation process annually which is led by the respective committee chair.

The following chart reflects the key components of the Board’s annual self-evaluation process. Additional information on the topics covered in the scope of the evaluation is included below.

 

LOGO

 

 

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Topics Covered During the Board Self-Evaluation

In 2018, the Board self-evaluation included a comprehensive assessment of the following topics, among others:

 

Board

composition, performance, and materials

  u   

   Board composition and performance, including mix of skills, experience, tenure, and background

 

   Identification of knowledge, background, and skill-sets that would be useful additions to the Board

 

   Board refreshment and succession planning

 

   Board materials and management reporting, including the quality of materials and Board member interactions with management

 

Structure and effectiveness   u   

 

   Board and committee leadership, responsibilities, and effectiveness

 

   Committee structure and functioning, responsibilities, communication, and reporting from committees to the Board

 

   Effectiveness of meeting structure

 

Board

responsibilities

  u   

 

   Knowledge of the Company

 

   Strategic planning, including the process, format, and materials for the Board’s strategy review sessions

 

   Talent management and succession planning for the CEO and other senior management, including diversity and inclusion

 

   Candor of communications with the CEO

 

Board Diversity and Board Tenure

We believe that the varied perspectives and experiences resulting from having a diverse board of directors enhances the quality of decision making. We also believe diversity can help the board identify and respond more effectively to the needs of customers, shareholders, employees, suppliers and other stakeholders. Our Corporate Governance Guidelines specify that the value of diversity on the Board should be considered by the Nominating and Corporate Governance Committee in the director identification and nomination process. While the Board has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees, the Board and the Nominating and Corporate Governance Committee believe that considering diversity is consistent with the goal of creating a Board that best serves the needs of the Company and the interest of its shareholders, and it is one of the many factors that they consider when identifying individuals for Board membership. The Board and the Nominating and Corporate Governance Committee consider a number of demographics including, but not limited to, race, gender, ethnicity, age, culture and nationality in seeking to develop a board that, as a whole, reflects diverse viewpoints, backgrounds, skills, experiences and expertise. Director nominees are not discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis proscribed by law.

In addition, we believe that having directors with differing tenures is important in order to provide both fresh perspectives and deep experience and knowledge of the Company. The Board believes that a mix of long- and short-tenured directors ensures an appropriate balance of view and insights and allows the Board as a whole to benefit from the historical and institutional knowledge that longer-tenured directors possess and the fresh perspectives contributed by newer directors. In furtherance of the Board’s active role in Board succession planning, the Board has appointed two new directors since 2017.

 

 

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Our director nominees reflect those efforts and the importance of diversity to the Board. Of our 12 director nominees:

 

 

LOGO

Director Attendance

The Board met 7 times during 2018. During 2018, each of our directors attended at least 75% of the total number of meetings of the Board and the committees of which such director was a member. The Board has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, as well as Strategy and Finance, and Science and Technology Committees. The Company encourages, but does not require, the members of its Board to attend the annual meeting of shareholders. Last year, 10 of the 11 then-serving directors attended the 2018 Annual Meeting of Shareholders.

 

 

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Board Committees

 

Audit Committee

 

 

Chair:

Nelson J. Chai

 

 

LOGO

      

 

The Audit Committee is responsible for:

 

•  assisting the Board in its oversight of the integrity of the Company’s financial statements;

 

•  overseeing the Company’s compliance with legal and regulatory requirements;

 

•  assessing the independent auditor’s qualifications and independence; and

 

•  overseeing the performance of the Company’s internal audit function and independent auditors

 

Certain responsibilities of our Audit Committee and its activities during 2018 are described in the Report of the Audit Committee in this proxy statement under the heading “AUDIT COMMITTEE REPORT.”

 

Additional Committee Members:

Thomas J. Lynch

Dion J. Weisler

 

 

Meetings Held in 2018: 12

 

•  All Members Are Independent, Financially Literate

•  All Members qualify as Audit Committee Financial Experts

Compensation Committee

 

 

Chair:

Thomas J. Lynch

 

 

LOGO

      

 

The Compensation Committee is responsible for:

 

•  reviewing and approving compensation matters with respect to the Company’s chief executive officer and its other officers;

 

•  reviewing and recommending to the Board management succession plans; and

 

•  administering equity-based plans.

 

Certain responsibilities of our Compensation Committee and its activities during 2018 are described in this proxy statement under the heading “Compensation Discussion and Analysis.” The Compensation Committee also periodically reviews our director compensation, and makes recommendations on this topic to the Board as it deems appropriate, as described under the heading “DIRECTOR COMPENSATION.”

 

Role of Consultant

 

The Compensation Committee has sole authority to retain and terminate a compensation consultant to assist in the evaluation of CEO or senior executive compensation. Since October 2007, the Committee has retained Pearl Meyer & Partners (“Pearl Meyer”) as its independent compensation consultant. Pearl Meyer does not provide any other services to the Company and the Compensation Committee has determined that Pearl Meyer’s work for the Compensation Committee does not raise any conflict of interest.

 

The consultant compiles information regarding the components and mix (short-term/long-term; fixed/variable; cash/equity) of the executive compensation programs of the Company and its peer group (see page 44 of this proxy statement for further detail regarding the peer group), analyzes the relative performance of the Company and the peer group with respect to the financial metrics used in the programs, and provides advice to the Compensation Committee regarding the Company’s programs. The consultant also provides information regarding emerging trends and best practices in executive compensation.

 

The consultant retained by the Compensation Committee reports to the Compensation Committee Chair and has direct access to Committee members. The consultant periodically meets with members of the Committee either in person or by telephone.

Additional Committee Members:

Scott M. Sperling

Elaine S. Ullian

 

 

Meetings Held in 2018: 7

 

•  All Members Are Independent

 

  
    
    
    
    
    
    
    
    
    
    
    

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

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Nominating and Corporate Governance Committee

 

 

Chair:

Lars R. Sorensen

 

 

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The Nominating and Corporate Governance Committee is responsible for:

 

•  identifying persons qualified to serve as members of the Board;

 

•  recommending to the Board persons to be nominated by the Board for election as directors at the annual meeting of shareholders and persons to be elected by the Board to fill any vacancies; and

 

•  recommending to the Board the directors to be appointed to each of its committees.

 

In addition, the Nominating and Corporate Governance Committee is responsible for developing and recommending to the Board a set of corporate governance guidelines applicable to the Company (as well as reviewing and reassessing the adequacy of such guidelines as it deems appropriate from time to time) and overseeing the annual self-evaluation of the Board.

 

Additional Committee Members:

Nelson J. Chai

C. Martin Harris

 

 

Meetings Held in 2018: 5

 

•  All Members Are Independent

  

 

 

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Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


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Our Board’s Role in Risk Oversight

 

The Board

 

The Board’s role in risk oversight is consistent with the Company’s leadership structure, with our management having day-to-day responsibility for assessing and managing our risk exposure and the Board having ultimate responsibility for overseeing risk management with a particular emphasis on the most significant risks facing the Company, including strategic, competitive, economic, operational, financial, regulatory, compliance and reputational risks. Management periodically provides risk assessment reports to the Board and regularly provides updates to the Board related to legal and compliance risks and cybersecurity. The Board’s consideration of risk is not limited to discussions during Board and committee meetings. Rather, the Board communicates with senior management individually concerning our most significant risks whenever it deems such communications to be appropriate.

 

The Board administers its risk oversight responsibilities both through active review and discussion of key risks facing the Company and by delegating certain risk oversight responsibilities to the Board committees for further consideration and evaluation. Generally, each committee has responsibility to identify and address risks that are associated with the purpose of, and responsibilities delegated to, that committee. In performing this function, each committee has full access to management, as well as the ability to engage advisors, and each committee reports back to the full Board. Certain risk topics may be brought to the full Board for consideration where deemed appropriate to ensure broad Board understanding of the nature of the risk. The Board has not established a specific risk committee because the Board believes that the most significant risks the Company faces are most properly directly overseen by the full Board or, in certain cases, the appropriate standing committee which considers the risks within its area of responsibility.

     
   

Audit Committee

 

   Assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements.

 

   Discusses with management the Company’s policies with respect to risk assessment and risk management, including guidelines and policies to govern the process by which the Company’s exposure to risk is handled.

 

   Discusses with management the Company’s major financial risk exposures and steps management has taken to monitor and control such exposures.

 

   Oversees procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

 

   Reviews cybersecurity and other risks relevant to the Company’s information system controls and security.

 

Compensation Committee

 

   Assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs.

 

   Oversees the process for conducting annual risk assessments of the Company’s compensation policies and practices.

 

     
   

Nominating and Corporate Governance Committee

 

   Assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors, and corporate governance.

 

   Oversees risks associated with the Company’s corporate responsibility and sustainability efforts.

 

Strategy and Finance Committee

 

   Oversees the Company’s capital allocation framework, including prioritization, significant decisions and risk considerations related to the Company’s financial resources, capital structure and investments and uses of cash.

 

   Oversees risks related to the competitive landscape for the Company’s products and services, and significant exposures related to customers, counterparties or projects.

 

   Reviews cash flows and capital generation versus existing targets and plans.

 

 

 

 

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Executive Sessions

Independent directors meet at least twice a year in an executive session without management and at such other times as may be requested by any independent director. Jim P. Manzi, as the Chairman of the Board, presides at the meetings of the Company’s independent directors held in executive session without management.

Shareholder Engagement

We are committed to an active and robust shareholder engagement program. We believe that understanding the perspectives of our shareholders is a key component of good corporate governance. The goals of our shareholder engagement program include:

 

   

Providing visibility and transparency into our business, our financial and operational performance and our strategy;

 

   

Determining which issues are important to our shareholders and sharing our views on those issues; and

 

   

Discussing and seeking feedback on our business and our executive compensation and corporate governance policies and practices and our sustainability initiatives.

How We Engage

We approach shareholder engagement as an integrated, year-round process involving our investor relations team, senior management and a member of the Board as appropriate and/or requested. This includes participation in investor conferences and other formal events and one-on-one meetings and conference calls throughout the year.

Outreach Around Governance

Throughout 2018 and into 2019 we engaged with shareholders representing over 50% of our outstanding shares to solicit their feedback on our business and financial performance, governance and executive compensation programs, and environmental and social matters. Members of our investor relations team and senior management participated in each discussion, with certain engagements including a member of our Board.

Key Topics Discussed with Shareholders

In the engagements with our shareholders during 2018 and early 2019, we gained valuable feedback on several issues and topics of mutual interest, including those listed below by enhancing our engagement efforts to include a greater number of discussions regarding corporate governance, executive compensation and environmental and social issues.

 

 

What We Learned from our Meetings with Shareholders

 

 

 

  Shareholders appreciated being engaged on governance in general and specifically on executive compensation policies and design, corporate governance issues and environmental and social issues, and suggested that we enhance our proxy statement disclosure to provide a better picture of the Company’s practices in these areas

 

  A strong majority of the institutional shareholders we spoke with expressed support for our executive compensation program and generally commented that they viewed it as aligned with performance and shareholder interests. They suggested we enhance our proxy statement disclosure to provide greater transparency on our program

 

  Some investors preferred we target market median in our executive compensation programs and use separate metrics in our short and long term incentive programs, and suggested we explain our reasoning if taking a different approach

 

  Shareholders understand our Mission and the role that our environmental, social and governance (“ESG”) practices play in that. They acknowledged our strong ESG practices and suggested enhancements to the breadth and depth of our disclosures in this area

 

 

 

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Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


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Governance and Compensation Enhancements Informed by Shareholder Input

 

 

 

Our Board evaluates and reviews input from our shareholders in considering their independent oversight of management and our long-term strategy. As part of our commitment to constructive engagement with investors, we evaluate and respond to the views voiced by our shareholders. Our dialogue has led to enhancements in our corporate governance, ESG, and executive compensation activities, which our Board believes are in the best interest of the Company and our shareholders. For example, after considering input from shareholders and other stakeholders, we:

 

  Enhanced our shareholder engagement efforts to include a greater number of discussions regarding corporate governance, executive compensation and environmental and social issues

 

  Provided disclosure around our shareholder engagement program by including details of our program in our proxy statement

 

  Changed market reference point for compensation paid to our NEOs to median (other than our CEO, for whom the market reference point was already median), which will be used from 2019

 

  Replaced adjusted EPS with adjusted net income as a performance metric in 2019 annual incentive plan

 

  Enhanced our Compensation Discussion and Analysis disclosure to help readers better understand the compensation program features, rationale for metric selection, and impact of prospective changes made, and to better enable readers to tie the overall business strategy to pay results

 

  Enhanced our ESG disclosure in 2019 by including ESG highlights in our proxy statement

 

  Enhanced our corporate governance disclosure regarding our Board’s practices, including regarding our directors’ skills, their self-evaluation process, and oversight of risk

 

  Included disclosure on our political activities and lobbying in our proxy statement, with a detailed discussion of our participation in the political process

 

Also see “Shareholder Outreach Around Executive Compensation” on page 42 for a more detailed discussion of our compensation-related shareholder engagement.

 

Communications from Shareholders and Other Interested Parties

The Company has a process in place for shareholders and other interested parties to send communications to the Board or any individual director or groups of directors, including the Chairman of the Board and the independent directors. Shareholders and other interested parties who desire to send communications to the Board or any individual director or groups of directors should write to the Board or such individual director or group of directors care of the Company’s Corporate Secretary, Thermo Fisher Scientific Inc., 168 Third Avenue, Waltham, Massachusetts 02451. The Corporate Secretary will relay all such communications to the Board, or individual director or group of directors, as the case may be.

 

 

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Corporate Social Responsibility

At Thermo Fisher, everything we do begins with our Mission – to enable our customers to make the world healthier, cleaner and safer. We also believe that our 4i Values of Integrity, Intensity, Innovation and Involvement create a culture in which our colleagues can share their talents and perspectives and are empowered to make a difference for our customers, for each other, for our communities and for the environment.

Our corporate social responsibility (“CSR”) strategy is our commitment to make a positive impact through all that we do. Our approach is built on a framework of four key pillars: Operational Integrity, Colleagues, Communities and Environment.

 

LOGO

 

Operational Integrity

We take measures to ensure strong global citizenship practices both internally and across all our business relationships. We are committed to conducting our business ethically and in full compliance with our internal systems and the laws of the countries where we operate with rigor around governance & ethics, supply chain transparency, and compliance with environmental, health and safety regulations and quality management standards.

Supply Chain

We also believe that part of being a responsible corporate citizen and business partner is promoting diversity not only within our operations but also among those with whom we conduct business. We work with companies owned and operated by minorities, women, veterans, members of the LGBT community, and people with disabilities to help them grow their businesses. We source from 4,300+ small and/or diverse suppliers with over $895M in spend.

Colleagues

Creating a culture where colleagues are able to make connections and work as one global team is vital because it generates better outcomes for our colleagues and for our customers. That’s why we strive to connect our teams in new and innovative ways, embrace unique perspectives, empower our colleagues to improve our business and culture, and provide resources to allow our colleagues to reach their full potential.

Diversity and Inclusion

Diversity and inclusion (“D&I”) at Thermo Fisher is integral to our growth strategy and aligns with our 4i Values of Integrity, Intensity, Innovation and Involvement. We are committed to creating a global environment that embraces and leverages the unique qualities and differences of every individual colleague.

We integrate D&I metrics and data analysis into our business and human resources operations to enable meaningful actions that continue to progress and reinforce inclusive behaviors. We support our D&I culture through regular development offerings, trainings, and employee communications.

We also promote an inclusive culture through our D&I Recruiting Council and Employee Resource Group (“ERG”) members, who provide thought leadership on our D&I efforts. Through our D&I Recruiting Council we have developed relationships with key external diversity focused organizations to recruit top talent from underrepresented ethnic groups. Our ERGs, now structured with an executive sponsor and global leader, bring together colleagues through seven groups: African heritage, differing abilities, Latino heritage, LGBTA, millennials, women and veterans. With nearly 100 chapters worldwide, ERGs invite and embrace the many elements of diversity to promote learning, advancement and engagement within the Company, focusing on four key areas: acquiring talent, communicating value, developing careers and supporting the community.

 

 

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Colleague Safety

We are intensely focused on our commitment to provide our colleagues with a safe and secure work environment. For example, during 2018 our global security team launched the Everbridge Mass Notification System in North America to enable multichannel communication to colleagues in the event of an emergency.

Communities

Thermo Fisher Scientific supports the next generation of thinkers and leaders with in-kind, financial and volunteer support programs that encourage students to explore and develop their interest in STEM (science, technology, engineering and math). In addition, our Mission as a company spurs us to share our resources with the communities in which we operate.

STEM Education Support

 

By leveraging our colleagues, products and expertise, we have engaged thousands of students through three signature STEM education programs: STEM-credible Kits, STEM Design Challenge and Innovation Nation, with two new activities added to the Innovation Nation portfolio of activities in the last year – water quality and nanotechnology. Through these programs in 2018, our colleagues representing 22 countries have introduced students to our skilled workforce, our products, facilities and industry expertise. Thermo Fisher also maintains a corporate partnership with the Boys and Girls Club of

   LOGO

America to help the organization expand its STEM program for thousands of youth across the United States.

 

LOGO

Volunteerism

 

LOGO

 

 

 

In 2018, our colleagues contributed 107,141 hours of community service globally. Through our 100+ employee-led Community Action Councils (“CAC”), our colleagues are empowered to connect directly with their local communities, working with non-profit organizations and schools to drive support and awareness for causes important to the site’s colleagues.

 

Several of our CACs around the world received recognition in 2018 for their community involvement activities. For example, Cegos Group, a global services and solutions consulting company, recognized the CAC model in Spain and Portugal for its ability to empower colleagues to be the architects of social action projects and to develop themselves personally and professionally. One highlight of the Spain CAC in 2018 was installing a laboratory to promote hands-on science experimentation in the poverty stricken area of Los Pajaritos, Seville.

 

Additionally, our China CAC was awarded the Outstanding CSR Practice Award by the China Business Network, a leading financial and business media in China. The award recognized the team’s CSR initiatives including the Little Scientists program, launched jointly by Thermo Fisher and the China Youth Development Foundation, which has brought science boxes and the fun of learning science to more than 50,000 students across the country.

LOGO

 

 

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Our Giving

Our Charitable Giving Program provides our colleagues with a platform to engage with charities that they care about through volunteer engagement and employee donations, for which eligible gifts will be given a 50% match by the Company. In 2018, our colleagues initiated fundraisers to provide financial assistance to those impacted by wildfires, flooding and hurricanes. Our colleagues in India were recognized by the Indian Red Cross Society (Maharashtra

 

LOGO

 

State Branch) for their contributions towards the Kerala Flood Relief. In total, over $1.75 million was donated in 2018, supporting nearly 1,700 charities focused on education, disaster relief, and numerous other causes.

 

In 2018, over 250 students benefitted from university scholarships provided by Thermo Fisher, including a merit-based program for children of our colleagues and a STEM-focused program supporting qualified students at our four partner universities around the globe. The over $1.1 million in scholarships represents our commitment to our colleagues and STEM education; we know that investing in education is our investment in the future.

Environment

We continually look for ways to be a more responsible business partner for our customers. This commitment inspires innovations that reduce the resources we consume and the waste we generate while providing our customers with the means to achieve greater sustainability in their own businesses.

Product Innovation

Our Mission guides us to provide solutions that enable our customers to make the world cleaner. The U.S. Army is one example of an organization leveraging our products to do just that. In 2018, the U.S. Army started testing on the Thermo Scientific Process 11 Parallel Twin-Screw Extruder, using it to produce 3D filament from post-consumer polyethylene terephthalate (PET) found in plastic water bottles, one of the most common waste products left on the battlefield. This filament will be used to 3D print spare parts as needed to increase wartime readiness and reduce dependency on the logistical supply chain. This process will result in a reduction of plastic waste generated, as well as a reduction of cost and lead time for replacement parts needed by troops in remote areas.

We also invest in sustainable solutions that will help customers reduce their environmental footprint. With 48 greener product categories, we strive to provide our customers with alternatives that are less hazardous, more energy efficient and reduce waste, helping them to become more sustainable while improving safety and reducing costs.

Internal Progress

 

We are also committed to protecting the environment by minimizing our impact on the communities where we operate. We understand the importance of environmental sustainability and have undertaken meaningful efforts over the past several years to responsibly manage our environmental footprint as our company continues to grow.

 

Our energy-reduction efforts include Variable Frequency Drive installations on HVAC equipment and LED lightbulb retrofits, the latter saving nearly 24k kilowatt hours of energy. As one site-specific energy project example, our Carlsbad, Calif., site installed solar photovoltaic paneling in

  

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2018, which will generate 1.1 kilowatt-hours annually, equivalent to the amount of electricity needed to power 116 homes for a year. This will provide 50% of that building’s energy needs. The solar panels join the Carlsbad campus’s energy portfolio which already includes a one-megawatt fuel cell system and a Tesla Powerpack smart energy storage system that together supply power to buildings used for manufacturing and distribution of over 10,000 products.

 

 

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Security Ownership

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of February 11, 2019, the beneficial ownership of Common Stock by (a) each director and nominee for director, (b) each Name of Executive Officer, (c) all directors and executive officers as a group, and (d) persons known to the Company to be the beneficial owner of more than five percent of the Company’s Common Stock.

 

Name and Address of Beneficial Owner(1)

 

  

Amount and Nature

of Beneficial Ownership

 

 

Percent of Shares
 Beneficially Owned 

 

 

Vanguard Group Inc.

 

    

 

 

 

 

29,944,083

 

 

(2)

 

     

 

 

7.50

 

 

%

 

 

 

BlackRock, Inc.

 

    

 

 

 

 

26,177,278

 

 

(3)

 

     

 

 

6.56

 

 

%

 

 

 

 

Massachusetts Financial Services Company

    

 

 

 

 

18,717,002

 

 

(4)

 

     

 

 

4.69

 

 

%

 

 

 

Marc N. Casper

 

    

 

 

 

 

866,246

 

 

(5)

 

   

 

 

 

 

*

 

 

 

 

Nelson J. Chai

 

      

 

 

10,611

 

 

 

 

   

 

 

 

 

*

 

 

 

 

Patrick M. Durbin

 

    

 

 

 

 

67,931

 

 

(6)

 

   

 

 

 

 

*

 

 

 

 

C. Martin Harris

 

      

 

 

5,106

 

 

 

 

   

 

 

 

 

*

 

 

 

 

Gregory J. Herrema

 

    

 

 

 

 

105,739

 

 

(7)

 

   

 

 

 

 

*

 

 

 

 

Tyler Jacks

 

      

 

 

5,070

 

 

 

 

   

 

 

 

 

*

 

 

 

 

Judy C. Lewent

 

    

 

 

 

 

17,400

 

 

(8)

 

   

 

 

 

 

*

 

 

 

 

Thomas J. Lynch

 

      

 

 

13,120

 

 

 

 

   

 

 

 

 

*

 

 

 

 

Jim P. Manzi

 

      

 

 

28,439

 

 

 

 

   

 

 

 

 

*

 

 

 

 

James C. Mullen

 

    

 

 

 

 

 

 

(9)

 

   

 

 

 

 

*

 

 

 

 

Lars R. Sørensen

 

      

 

 

6,927

 

 

 

 

   

 

 

 

 

*

 

 

 

 

Scott M. Sperling

 

    

 

 

 

 

88,409

 

 

(10)

 

   

 

 

 

 

*

 

 

 

 

Mark P. Stevenson

 

    

 

 

 

 

344,596

 

 

(11)

 

   

 

 

 

 

*

 

 

 

 

Elaine S. Ullian

 

    

 

 

 

 

14,252

 

 

(12)

 

   

 

 

 

 

*

 

 

 

 

Dion J. Weisler

 

    

 

 

 

 

2,378

 

 

(13)

 

   

 

 

 

 

*

 

 

 

 

Stephen Williamson

 

    

 

 

 

 

89,833

 

 

(14)

 

   

 

 

 

 

*

 

 

 

 

All directors and executive officers as a group (19 individuals)

 

    

 

 

 

 

1,814,574

 

 

(15)

 

   

 

 

 

 

*

 

 

 

 

*

Less than one percent.

 

(1)

The address of each of the Company’s executive officers and directors is c/o Thermo Fisher Scientific Inc., 168 Third Avenue, Waltham, MA 02451. Except as reflected in the footnotes to this table, shares of Common Stock beneficially owned by executive officers and directors consist of shares owned by the indicated person or by that person for the benefit of minor children, and all share ownership includes sole voting and investment power. Generally, stock options granted to the Company’s officers and directors may be transferred by them to an immediate family member, a family trust or family partnership.

 

(2)

This information was obtained from Schedule 13G/A filed with the Securities and Exchange Commission on February 12, 2019, by The Vanguard Group Inc. (“Vanguard”), 100 Vanguard Blvd., Malvern, PA 19355, which reported such ownership as of December 31, 2018. The percentage of shares beneficially owned was calculated using the number of shares of Common Stock outstanding as of February 11, 2019. Vanguard reports sole voting power with respect to 467,654 shares, shared voting power with respect to 89,982 shares, sole dispositive power with respect to 29,394,075 shares, and shared dispositive power with respect to 550,008 shares.

 

(3)

This information was obtained from Schedule 13G/A filed with the Securities and Exchange Commission on February 6, 2019, by BlackRock, Inc. (“BlackRock”), 55 East 52nd Street, New York, NY 10055, which reported such ownership as of December 31, 2018. The percentage of shares beneficially owned was calculated using the number of shares of Common Stock outstanding as of February 11, 2019. BlackRock has sole voting power with respect to 22,930,955 shares, shared voting and dispositive power with respect to no shares and sole dispositive power with respect to 26,177,278 shares.

 

 

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(4)

This information was obtained from Schedule 13G/A filed with the Securities and Exchange Commission on February 13, 2019, by Massachusetts Financial Services Company (“MFS”), 111 Huntington Ave., Boston, MA 02199, which reported such ownership as of December 31, 2018. The percentage of shares beneficially owned was calculated using the number of shares of Common Stock outstanding as of February 11, 2019. MFS has sole voting power with respect to 16,853,247 shares, shared voting and dispositive power with respect to no shares and sole dispositive power with respect to 18,717,002 shares.

 

(5)

Includes 69,330 shares held indirectly, by the Marc N. Casper 2012 Irrevocable Trust, for the primary benefit of Mr. Casper’s minor children, over which Mr. Casper shares dispositive power with the trustee and as to which the trustee has sole voting power; 582,950 shares of Common Stock underlying stock options that are exercisable within 60 days of February 11, 2019; and 37,383 restricted stock units that will settle and pursuant to which shares will be delivered within 60 days of February 11, 2019.

 

(6)

Includes 43,312 shares of Common Stock underlying stock options that are exercisable within 60 days of February 11, 2019 and 6,824 restricted stock units that will settle and pursuant to which shares will be delivered within 60 days of February 11, 2019.

 

(7)

Includes 89,037 shares of Common Stock underlying stock options that are exercisable within 60 days of February 11, 2019 and 8,509 restricted stock units that will settle and pursuant to which shares will be delivered within 60 days of February 11, 2019.

 

(8)

Includes 740 stock-based units accrued under the Directors Deferred Compensation Plan that are payable in Common Stock at the time of distribution (See “DIRECTOR COMPENSATION — Deferred Compensation Plan for Directors”). These units may not be voted or transferred until they become shares of Common Stock.

 

(9)

Mr. Mullen became a director on November 8, 2018.

 

(10)

Includes 15,245 stock-based units accrued under the Directors Deferred Compensation Plan that are payable in Common Stock at the time of distribution (See “DIRECTOR COMPENSATION — Deferred Compensation Plan for Directors”). These units may not be voted or transferred until they become shares of Common Stock.

 

(11)

Includes 232,387 shares of Common Stock underlying stock options that are exercisable within 60 days of February 11, 2019, 36,663 shares of Common Stock underlying stock options that are immediately exercisable if Mr. Stevenson retires, 15,068 restricted stock units that will settle and pursuant to which shares will be delivered within 60 days of February 11, 2019, 14,890 restricted stock units that will vest immediately if Mr. Stevenson retires and 469 shares held in the Company’s 401(k) plan by Mr. Stevenson.

 

(12)

Includes 7,435 stock-based units accrued under the Directors Deferred Compensation Plan that are payable in Common Stock at the time of distribution (See “DIRECTOR COMPENSATION — Deferred Compensation Plan for Directors”). These units may not be voted or transferred until they become shares of Common Stock.

 

(13)

Includes 1,354 stock-based units accrued under the Directors Deferred Compensation Plan that are payable in Common Stock at the time of distribution (See “DIRECTOR COMPENSATION — Deferred Compensation Plan for Directors”). These units may not be voted or transferred until they become shares of Common Stock.

 

(14)

Includes 64,543 shares of Common Stock underlying stock options that are exercisable within 60 days of February 11, 2019 and 8,066 restricted stock units that will settle and pursuant to which shares will be delivered within 60 days of February 11, 2019.

 

(15)

Includes, in addition to the items described above for the named executive officers and directors, 534 shares held in the Company’s 401(k) Plan by executive officers other than the named executive officers, 111,623 shares of Common Stock underlying stock options held by executive officers other than the named executive officers that are exercisable within 60 days of February 11, 2019 (or immediately if certain eligible executive officers retire after February 28, 2019), and 7,994 restricted stock units held by executive officers other than the named executive officers that will settle and pursuant to which shares will be delivered within 60 days of February 11, 2019 (or immediately if certain eligible executive officers retire after February 28, 2019).

 

 

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s directors and executive officers, and beneficial owners of more than 10% of the Common Stock, to file with the Securities and Exchange Commission initial reports of ownership and periodic reports of changes in ownership of the Company’s securities. Based upon a review of such filings, all Section  16(a) filing requirements applicable to such persons were complied with during 2018.

Public Policy Engagement and Political Participation

Engaging in Public Policy

We operate in a highly regulated and competitive industry. It is fundamental to our business, our colleagues, our customers and our shareholders that we engage globally on public policy issues that may affect our ability to meet customers’ needs and enhance shareholder value. These issues include funding biomedical research; supporting healthcare innovation; protecting intellectual property rights; ensuring patient access to care and therapies; boosting environmental protections; and supplying government regulators with the most advanced tools for keeping citizens safe. We regularly work with governments to create and maintain an environment where innovation is a priority, our customers are well supported and governments function and do not inhibit growth.

Thermo Fisher is also a member of several broad-based industry and trade groups, including the National Association of Manufacturers, MedTech Europe, the U.S.-China Business Council, various American chambers of commerce globally, United for Medical Research, the Alliance for Regenerative Medicine, the Health Industry Distributors Association and the Institute of Clean Air Companies. These organizations, along with the others to which we belong, represent both our industry and the business community at large to bring about consensus on policy issues that can impact our business. Our support of these organizations is evaluated annually by the Company’s government relations leaders as we assess these organizations’ policy expertise and advocacy on Thermo Fisher’s issues. In addition to their positions on specific policy issues that relate to Thermo Fisher’s interests, these organizations may engage on a broad range of other issues that extend beyond the scope of issues of primary importance to Thermo Fisher. If concerns arise about a particular issue, we are able to voice our concerns, as appropriate, through our colleagues who serve on the boards and committees of these organizations. Thermo Fisher’s participation as a member of these organizations comes with the understanding that we may not always agree with the positions of the organization and/or its members.

Corporate Political Contributions

Thermo Fisher complies fully with all federal, state and local laws and reporting requirements governing corporate political contributions. We also request that trade associations receiving total payments of $25,000 or more from Thermo Fisher annually report the portion of Thermo Fisher dues and special assessments that were used for activities that are not deductible under section 162(e) of the Internal Revenue Code. Political contributions that use corporate funds are published annually in the Company’s Political Contributions report in compliance with Thermo Fisher’s Political Contributions Policy.

Policies and Procedures for Approval and Oversight of Corporate and PAC Political Expenditures

The Thermo Fisher Scientific Political Action Committee (“PAC”) is a non-partisan employee-funded organization that provides opportunities for a legally-restricted group of employees to participate in the American political process. All corporate and PAC political spending decisions undergo a rigorous review process conducted by the Company’s Vice President, Global Government Relations & Public Affairs, the General Counsel, and the Vice President, Corporate Communications. These executives ensure that contributions are not based on the political preferences or views of any individual colleague within Thermo Fisher.

The PAC looks for candidates who demonstrate integrity and intensity, support innovation and understand Thermo Fisher’s involvement in the policymaking process. The PAC considers factors including candidates’ views on issues relevant to our Company and mission, committee assignments and the presence of Thermo Fisher employees in their districts.

 

 

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Federal and State Lobbying Activity

The Company’s government relations leaders are responsible for the Company’s U.S. lobbying activities. All colleague communications with government and regulatory officials are governed by Thermo Fisher’s internal policies and procedures, which include guidelines published in our Code of Business Conduct and Ethics.

We file quarterly reports on our federal lobbying activity in compliance with the Lobbying Disclosure Act and the Honest Leadership and Open Government Act of 2007. In addition to our federal lobbying activity, the amount we report also includes the amount spent on federal lobbying activity by trade associations of which Thermo Fisher is a member. These reports are available to the public at www.senate.gov under “Public Disclosure.”

With regard to Thermo Fisher’s state lobbying activity, we comply with state registration and reporting requirements in all states where we are active.

Related Person Transactions

Review, Approval or Ratification of Transactions with Related Persons

Our Board has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which the Company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% shareholders (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our General Counsel. The policy calls for the proposed related person transaction to be directed to, for review by, one of the Audit, Nominating and Corporate Governance or Compensation Committees, as designated by the General Counsel. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its next meeting. A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:

 

   

the related person’s interest in the related person transaction;

 

   

the approximate dollar value of the amount involved in the related person transaction;

 

   

the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

 

   

whether the transaction was undertaken in the ordinary course of our business;

 

   

whether the terms of the transaction are no less favorable to the Company than terms that could have been reached with an unrelated third party;

 

   

the purpose of, and the potential benefits to the Company of, the transaction; and

 

   

any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, the Company’s best interests. The committee may impose any conditions on the related person transaction that it deems appropriate.

The policy exempts from the definition of related person transactions those transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, as well as the following: interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $1 million dollars or 2% of the

 

 

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annual consolidated gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of the Company’s annual consolidated gross revenues.

The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the Compensation Committee in the manner specified in its charter.

Transactions with Related Persons

As a result of the end of his service to Patheon upon the Company’s acquisition of Patheon, Mr. Mullen was entitled to receive severance pay of 24 months’ base salary ($2,200,000 in the aggregate) pursuant to his employment agreement with Patheon, payable in 24 monthly installments following the date of termination. These severance payments, which he will continue to receive in monthly installments through August 2019, were not contingent on continued service and Mr. Mullen has not provided services to the Company in any capacity since it acquired Patheon (other than as a director commencing in November 2018 for which he received the compensation reflected in the Summary Director Compensation Table on page 74). The severance pay was not subject to the Company’s related person transaction policy described above because it was negotiated as part of Mr. Mullen’s employment agreement with Patheon prior to the Acquisition.

 

 

EXECUTIVE COMPENSATION

 

Proposal 2—Advisory Vote on Executive Compensation

Every year, we provide our shareholders the opportunity to vote to approve, on an advisory, non-binding basis, the compensation of our Named Executive Officers as disclosed in this proxy statement in accordance with the SEC’s rules. This proposal is required by Section 14A of the Exchange Act.

Our executive compensation program ties a substantial portion of each executive’s overall compensation to the achievement of key strategic, financial and operational goals and uses a portfolio of equity awards to help align the interests of our executives with those of our shareholders. Key financial metrics include organic revenue growth, adjusted operating income margin, adjusted earnings per share, and free cash flow. Each of these metrics directly drove payouts to our Named Executive Officers in incentive programs used in 2018.

Our “Compensation Discussion and Analysis,” starting below, describes in detail our executive compensation programs and the decisions made by the Compensation Committee with respect to the year ended December 31, 2018.

As an advisory vote, this proposal is not binding. The outcome of this advisory vote does not overrule any decision by the Company or the Board of Directors (or any committee thereof), create or imply any change to the fiduciary duties of the Company or the Board of Directors (or any committee thereof), or create or imply any additional fiduciary duties for the Company or the Board of Directors (or any committee thereof). However, our Compensation Committee and Board of Directors value the opinions expressed by our shareholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for named executive officers.

 

LOGO

The Board recommends that shareholders vote in favor of the following resolution:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the compensation tables and any related material disclosed in this proxy statement, is hereby approved.

 

 

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Compensation Discussion and Analysis

Executive Summary

The Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program and reviews compensation decisions for our CEO, CFO and three other most highly compensated “Named Executive Officers” or “NEOs” for 2018. Our NEOs are as follows:

 

Named Executive Officer

   Title    Date of
Appointment to
Current Role
   Tenure

Marc N. Casper

   President and Chief Executive Officer    October 2009    17 years

Stephen Williamson

   Senior Vice President and Chief Financial Officer    August 2015    17 years

Mark P. Stevenson

   Executive Vice President and Chief Operating Officer    August 2017    27 years

Patrick M. Durbin

   Senior Vice President    October 2015    13 years

Gregory J. Herrema

   Senior Vice President    January 2014    17 years

 

The compensation of our Named Executive Officers with respect to 2018 is explained in the following sections and the Summary Compensation Table that follows.

Program Overview

 

   

Core elements of compensation comprise base salary, annual cash incentive and long-term incentives delivered in the form of time-based restricted stock units, performance-based restricted stock units and stock options

 

   

Performance measures include organic revenue growth, adjusted operating margin, adjusted EPS, free cash flow and other drivers of shareholder value creation of strategic significance

2018 Snapshot: Performance Highlights

In 2018, the combination of strong market conditions and great operational performance by our team led to our best year yet at Thermo Fisher Scientific. Our financial results were outstanding:

 

 

Revenue grew 16% to $24.36 billion

 

 

GAAP diluted EPS increased 30% to $7.24 and adjusted EPS* increased 17% to $11.12

 

 

GAAP operating income grew by 28% to $3.78 billion and adjusted operating income* grew by 16% to $5.62 billion

 

 

And we generated free cash flow* of $3.83 billion

We also continued to effectively deploy our capital in 2018 to create significant shareholder value by:

 

 

Reducing debt by $2 billion to strengthen our balance sheet following our acquisition of Patheon in 2017

 

 

Deploying $540 million to complete strategic acquisitions, including a bioprocessing business which added complementary cell culture products to help our customers increase yield during production of biologic drugs

 

 

Returning capital of $775 million through $500 million of stock buybacks and increasing our dividend by 13% for a total of $275 million

We also continued to pursue our corporate social responsibility strategy – our commitment to make a positive impact through all that we do, through our:

 

 

volunteerism, with 110 community action councils worldwide, up 17% from 2018, and a 23% increase in volunteer hours to 107,000 in support of 2,900 organizations

 

 

giving, with $1.75 million donated by employees and Company match, up 9% from 2017, and 250 scholarship recipients totaling over $1.1 million in direct student education support

 

 

STEM (science, technology, engineering and math) education programs, with 134,000 students and 5,800 educators engaged through our signature STEM education programs

 

*

Adjusted EPS, adjusted operating income and free cash flow are financial measures that are not prepared in accordance with GAAP. Appendix A to this proxy statement defines these non-GAAP financial measures and reconciles them to the most directly comparable historical GAAP financial measures.

 

 

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Long-Term Performance

Our record of delivering TSR reflects our commitment to long-term shareholder value creation.

TOTAL SHAREHOLDER RETURN

 

 

LOGO    LOGO    LOGO

 

*

Represents average TSR of companies included in our “Peer Group.” See page 45 for list of companies.

**

Represents average TSR of the S&P’s 500 Healthcare and S&P’s 500 Industrial Indices, weighted 70/30, respectively, to approximate the split of our revenue by the end market.

 

Key Activities in 2018

 

 

Key Decisions in 2018

 

   

    Extensive shareholder outreach on executive compensation policies and design, corporate governance issues and environmental and social issues

 

    Comprehensive review of executive compensation program design with select number of changes approved for 2019

 

    Updated CD&A to enhance clarity and transparency around executive compensation programs

 

    Enhanced the breadth and depth of disclosure of our ESG practices (see “Corporate Social Responsibility” on p. 28 for information on our CSR programs and initiatives)

 

    Based on investor feedback, changed market reference point for compensation paid to our NEOs to median (other than our CEO, for whom the market reference point was already median), which will be used from 2019

 

    Based on investor feedback that performance shares and annual incentive plan had overlapping metrics, replaced adjusted EPS with adjusted net income as a performance metric in 2019 annual incentive plan

 

    Approved annual cash incentive payouts ranging from 120.0% – 157.5% of target

 

    Achieved 175% payout on 2018 performance-based restricted stock units and achieved the performance requirements for the second 5-year performance period under the 2017 TSR stock option program

 

 

 

2018 Target vs. Actual Compensation        

 

LOGO

 

 

 

 

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Compensation Design

Compensation Philosophy and Objectives

Our executive compensation program ties a substantial portion of each executive’s overall compensation to the achievement of our key strategic, financial and operational goals, using a portfolio of equity awards to help align the interests of our executives with those of our shareholders.

The primary objectives of our executive compensation program are to:

 

   

attract and retain the best possible executive talent;

 

   

promote the achievement of key strategic and financial performance;

 

   

motivate long-term value creation; and

 

   

align executive officers’ interests with those of our shareholders.

We achieve these objectives through the design of our programs, including:

 

   

competitive positioning of pay versus our peers;

 

   

delivery of a significant portion of pay in the form of variable, at-risk compensation;

 

   

alignment of performance measures with our strategy;

 

   

use of a combination of vehicles that collectively promote the achievement of business results, retention and sustainable long-term value creation; and

 

   

use of stock ownership guidelines, a clawback policy, a stock holding requirement for our CEO, and other risk mitigation tools.

Alignment with Company Strategy

Our Company Mission is to enable our customers to make the world healthier, cleaner and safer. We help our customers accelerate life sciences research, solve complex analytical challenges, improve patient diagnostics, deliver medicines to market and increase laboratory productivity. Our ability to successfully achieve these ambitions, while delivering sustainable value creation for our shareholders, requires the right talent in the right roles with a focus on a combination of financial and non-financial performance. We are also committed to creating value in a responsible way, in the best interests of all of our stakeholders. This is evident in a variety of ways including our commitment to business sustainability, employee involvement and philanthropic giving.

 

 

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The performance measures that we use in our annual incentive plan (a cash-based annual incentive) and our performance-based long-term incentives reflect the alignment of our plans to our Company strategy.

 

Measure

 

     

Why it Matters

 

 

  Financial

 

   

 

 

Organic

revenue

   

 

    Reflects top line financial performance, which is a strong indicator of our long-term ability to drive shareholder value

    Allows comparison of financial results to both acquisitive and non-acquisitive peer companies

    Prevalent, industry-relevant measure of growth

 

   

 

Adjusted earnings

per share*

   

 

    Prevalent, industry-relevant measure of delivery of shareholder value

    Metric is closely followed by shareholders, analysts and investors

 

   

 

 

Adjusted operating

income as a percentage

of revenue (“adjusted operating margin”)

   

 

    Prevalent, industry-relevant measure of profitability

    Reflects achievement of our strategic goals by encouraging efficient operations and resource allocations, in order to maximize earnings relative to the revenue environment

    Ensures all employees can contribute to profitability of the Company

 

   

 

Free cash

flow

   

 

    Strong indicator of process discipline and execution capabilities

 

   

 

 

Total Shareholder

Return

   

 

    Offers clear alignment between the interests of management and shareholders

    Summary indicator of long-term performance

    Relative (as opposed to absolute) nature of goals accounts for macroeconomic factors impacting the broader market

 

 

Non-Financial

 

   

 

Customer allegiance

   

 

    Strong indicator of our long-term ability to drive shareholder value

 

   

 

Employer of

choice/diversity

   

 

    Ensuring the Company remains focused on attracting and retaining high potential employees and enhancing workforce diversity is important to ensure our ability to execute our other goals

 

   

 

Positioning for future revenue growth

 

   

 

    Strong indicator of our long-term ability to drive shareholder value by effectively meeting the needs of our customers in all of the end markets that we serve

 

   

 

 

Positioning for

future margin expansion

 

   

 

    Ensures that we deliver strong profitability in the future

   

 

 

Effectively execute capital

deployment strategy

   

 

    Properly managing the strategic use of capital through acquisitions, dividends, share repurchases and debt repayment is of paramount importance to the Company’s long-term financial health

 

*

Also referred to in this proxy statement as “adjusted EPS”

 

 

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Given the importance of organic revenue growth and adjusted EPS to our investors, and their significance in assessing how effective the Company is at delivering shareholder value, these measures were used in both the annual and long-term variable compensation programs in 2018, reflecting this criticality. This effectively enables the Committee to drive alignment, and assess and reward for performance in these areas.

In 2019, the Company replaced adjusted EPS with adjusted net income in the annual incentive plan. This change addressed the reliance on the same metrics in the annual and long-term incentive plans, while continuing to emphasize the importance of maximizing earnings by adding a metric that aligns with what virtually all of our employees can influence. The Company elected to continue to utilize organic revenue growth in both plans based on feedback from investors around the criticality of that metric in driving shareholder value creation.

Components of our Compensation Program

The following table summarizes the core components of our executive compensation program.

 

 

Element

 

       

 

Purpose

 

 

 

  Key Features for 2018

 

 

 

  Changes for 2019

 

         

 

 

Base

salary

     

 

Provide competitive, fixed compensation to attract and retain the best possible executive talent

 

 

    Cash-based

    Reviewed annually; changes effective March/April

    Reference market median for CEO

    Reference +/-10% of market median for NEOs other than the CEO

    Takes account of level of responsibility, time in role, performance and the ability to replace the individual

 

 

 

    Reference market median for all NEOs

         

 

 

Annual cash

incentive

bonus

     

 

Align executive compensation with our corporate strategies and business objectives; promote the achievement of key strategic and financial performance measures by linking annual cash incentives to the achievement of corporate performance goals

 

 

    Cash-based

    Reference market median for CEO

    Reference market 65th percentile for NEOs other than the CEO

    Maximum opportunity 2-times target

    Based on performance goals tied to organic revenue growth, adjusted operating margin, adjusted EPS, free cash flow, and a selection of strategic measures

 

 

 

    Reference market median for all NEOs for target total cash (base salary plus target annual incentive)

    Replaced adjusted EPS with adjusted net income as a performance metric

         

 

 

Long-term

incentives

     

 

Align executive compensation with our corporate strategies and business objectives; motivate the Company’s officers to create sustainable long-term value for our shareholders and achieve other business objectives; encourage stock ownership by the Company’s officers in order to align their financial interests with the long-term interests of our shareholders

 

 

    Equity-based

    Granted in a combination of

    Performance-based restricted stock units;

    Time-based restricted stock units; and

    Time-based stock options

    Reference market median for CEO

    Reference market 75th percentile for NEOs other than the CEO

    Based on performance goals tied to organic revenue growth and adjusted EPS (performance-based restricted stock units)

    Legacy award of performance-based stock options, subject to five-year relative TSR performance over four periods spanning 2013 – 2020

 

 

 

    Reference market median for all NEOs for target direct compensation (target total cash plus the grant date value of long-term incentives)

 

 

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Mix of our Named Executive Officers’ 2018 Target Compensation

The Compensation Committee annually reviews the mix of our core elements of compensation relative to the market. The majority of our Named Executive Officers’ target 2018 compensation is at-risk and variable, with the mix well aligned to practices in our peer companies. The results of the 2018 analysis are shown below. The Committee was comfortable that the overall mix of compensation remained appropriate, and that it was appropriate for the focus on equity-based compensation to be slightly more emphasized versus our peers.

 

CEO

 

 

LOGO

 

 

 

 

Other Named Executive

Officers (Aggregate)

 

LOGO

 

 

Peer Group Median

CEO

 

LOGO

 

 

Peer Group Median Other NEOs (Aggregate)

 

 

 

LOGO

 

Note: See page 44 for additional information on the composition of our compensation peer group and market analysis the Committee receives.

In addition to the core elements of our executive compensation program, our executive officers are eligible for the following programs, to ensure that their total compensation is market competitive and that it enables them to effectively discharge their duties.

 

   

Retirement plans: Eligible to participate in our 401(k) plan (available on the same terms to all eligible U.S. employees) and (for most executives) a supplemental deferred compensation plan

 

   

Perquisites: Eligible to receive supplemental long-term disability and life insurance, access to emergency medical service; and in the case of the CEO, limited use of Company aircraft for non-business purposes and limited additional personal security services

 

   

Severance and Change in Control Benefits: Eligible to receive cash and other severance benefits in connection with termination under certain scenarios

 

 

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Overview of our other Policies and Practices

Beyond the core elements of our compensation program, there are a number of features that ensure our practices adhere to the highest standards.

 

 

WHAT WE DO

 

     

 

WHAT WE DON’T DO

 

   
  Benchmark compensation levels against appropriate companies operating in similar industries, of a similar size and business complexity     ×  

 

No tax gross ups

 
  Reference the market median when reviewing compensation for our CEO, and effective in 2019, for all of our named executive officers     ×  

 

No plans that encourage excessive risk

 
  Clawback policy for the recoupment of compensation in certain situations     ×  

 

No guaranteed pay increases

 
 

 

Regular shareholder engagement related to compensation

    ×  

 

No guaranteed bonuses or equity awards

 

 
  Caps under our performance-based incentive plans (annual cash incentive payout limit and share cap under performance-based long-term plans)     ×  

 

No dividends paid on equity awards prior to vesting

 
  Robust stock ownership requirements     ×  

No hedging or pledging of Company stock

 

 
  Two year holding requirement on 50% of net stock vesting under the CEO’s time-and performance-based restricted stock units     ×  

 

No excessive perquisites

 

 
 

 

Engage an independent compensation consultant

    ×  

No pension or SERPs (with the exception of legacy accumulated benefits from acquired companies)

 
  Deliver the majority of compensation in the form of at-risk, variable pay        
  Align pay with performance and Company strategy        
  Double-trigger change in control provisions        

While defined benefit pension plans and SERPs continue to be preferred by many peer companies, the Company does not offer these plans (outside of legacy arrangements from acquired companies), electing to rely upon stock-based long-term incentives as the primary individual capital accumulation vehicle. Pearl Meyer & Partners’ 2018 compilation of information on executive compensation programs at the Company and its peer group (see page 45) highlighted that executives at 67% of the peer group companies receive significant pension benefits. Pearl Meyer’s analysis detailed that the equivalent executives to the Company’s NEOs were credited with an average of $604,000 from Change in Pension Value, while Company executives received no benefit from pensions in 2018.

The Company’s contributions toward executive retirement are limited to a matching contribution of 6% of eligible earnings (salary and annual incentive compensation), a benefit prevalent at peer group companies as well, with varying company match percentages.

Compensation Governance

Compensation Oversight

The Compensation Committee, chaired by Thomas J. Lynch and comprised of three independent directors, is responsible for discharging the Board’s responsibilities relating to compensation of our executive officers, including the Chief Executive Officer.

The Committee has overall responsibility for approving and evaluating all of our compensation plans, policies and programs as they affect our executive officers. This includes reviewing and approving the compensation of the Named Executive Officers, approving performance goals, reviewing the achievement of performance goals at year end, stock plan administration and management succession.

Shareholder Outreach Around Executive Compensation

Since the introduction of say-on-pay, the Company has enjoyed high levels of support from our shareholders, averaging over 95% votes in favor prior to 2018. At the Company’s 2018 Annual Meeting of Shareholders, our shareholders approved our say-on-pay with a 77% favorable advisory vote. While this level of support indicates that a sizable majority of our shareholders continue to support our overall compensation philosophy and executive compensation practices, it represents a decline from the 90+% levels of shareholder support we have received in prior years. Consequently, the Company took two actions to respond:

 

   

First, the Compensation Committee commenced a comprehensive evaluation of the Company’s executive compensation program structure, including the design and operation of our incentive programs. Details of the changes, and enhanced explanations of our rationale, are included within this report.

 

 

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Second, our investor relations team, with participation from our CEO, CFO and a member of our Board in certain engagements, met with shareholders representing over 50% of our outstanding shares to ensure that we heard firsthand their perspectives and concerns specifically related to our executive compensation programs. We value our shareholders’ input, and our goal is to continue to receive strong support for our compensation programs.

Given the timing of the 2018 Annual Meeting vis-a-vis when our compensation decisions are made, the changes implemented by the Compensation Committee are effective for compensation paid in respect of 2019 and onward.

While the Company has operated a long-standing shareholder engagement program, following the 2018 Annual Meeting we adapted our outreach program so that it was more focused on executive compensation. The purpose of this outreach was threefold:

 

   

Listen to areas of concern for our major shareholders, particularly those in the governance teams;

 

   

Discuss our current practices and performance; and

 

   

Establish ongoing channels of communication for continuous feedback in the future.

Our shareholders appreciated being engaged on the topic, and these meetings reinforced their support of our compensation programs. The meetings also served to highlight opportunities for enhanced disclosure, and to improve the impact of our proxy statement by better-presenting our approach to governance topics, including compensation. Pages 26 and 27 of this proxy statement provide detailed information on our shareholder engagement program, what we learned from our 2018 and 2019 meetings with shareholders, and changes we made to our governance and compensation programs based on shareholder input.

Looking to the future, the Company is committed to maintaining ongoing communication with our major shareholders specifically focused on executive compensation, to ensure we continue to remain fully aware of shareholder expectations and concerns.

Independent Advisors to the Committee

In exercising its duties, the Compensation Committee receives information and support from independent advisors on key issues and additional topics as required. In 2018 the Committee, in its sole discretion, retained Pearl Meyer & Partners as its independent compensation consultant. Pearl Meyer does not provide any other services to the Company and the Compensation Committee has determined that Pearl Meyer’s work for the Compensation Committee does not raise any conflict of interest.

In their role as advisor to the Committee, Pearl Meyer annually compiles information regarding the executive compensation programs of the Company and its peer group (see below), analyzes the relative performance of the Company and the peer group with respect to the financial metrics used in the programs, and provides advice to the Compensation Committee regarding the Company’s programs. The consultant also provides information regarding emerging trends and best practices in executive compensation. The Committee considers this information when making decisions about compensation levels and design.

In addition, the Committee has access to data from other outside firms, such as market surveys and analyses, to stay informed of developments in the design of compensation packages generally and to understand the officer compensation programs of companies with whom we compete for executive talent to ensure our compensation program is in line with current marketplace standards.

 

 

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Key Duties and Activities

The Compensation Committee undertakes a number of activities each year. The primary areas of focus are discussed in more detail below.

 

LOGO

Compensation Peer Group

The Compensation Committee reviews the companies that are included in the compensation peer group (“the Peer Group”), which is used to review and set executive compensation.

In determining appropriate companies for inclusion in the Peer Group, the Committee considers a number of factors, including revenue and market capitalization as a means to assess size relative to the Company.

In 2017, the Committee undertook a comprehensive review of the Peer Group, the first that resulted in major changes since 2013. This primarily reflected the changes in size, scope, complexity and operations of the Company over that period, including the acquisitions of Life Technologies Corporation (“Life Technologies”) and Patheon.

Nine companies were removed from the Peer Group in 2017:

 

   

M&A activity: EMC and Monsanto were excluded due to acquisition activity (by Dell and Bayer, respectively)

 

   

Size: Baxter International, Ingersoll-Rand, L-3 Communications, Parker-Hannifin, PPG Industries, Stryker and Textron were assessed to fall outside one or more of the defined size parameters

Five companies were added to the Peer Group in 2017, reflecting their relevance from both a size and operations standpoint. All five companies had annual revenue within 50%—200% of the pro-forma revenue for the combined Thermo Fisher/Patheon organization.

 

 

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This resulted in the following Peer Group:

 

   

2018 Peer Group (established July 2017)

        Removed from Peer Group

 

   3M

 

   Abbott Laboratories

 

   AbbVie

 

   Allergan *new*

 

   Amgen

 

   Becton Dickinson *new*

 

   Biogen *new*

 

   Bristol-Myers Squibb

 

   Danaher

  

 

   Eaton Corporation

 

   Eli Lilly *new*

 

   Emerson Electric

 

   Gilead Sciences

 

   Honeywell International

 

   Illinois Tool Works

 

   Medtronic

 

   Merck *new*

 

   Texas Instruments

     

 

•   Baxter International

 

•   EMC Corporation

 

•   Ingersoll Rand

 

•   L-3 Communications

 

•   Monsanto

 

•   Parker-Hannifin

 

•   PPG Industries

 

•   Stryker

 

•   Textron

The following chart illustrates the Company’s size compared to the Peer Group median of revenues, market capitalization and number of employees, using data provided to the Compensation Committee by Pearl Meyer.

Thermo Fisher Positioning Relative to Peer Group

 

LOGO

The Committee validated with Pearl Meyer that the resulting Peer Group was reasonable and appropriate for the purpose of gathering references and insights into compensation practices in the market. The Committee will keep the Peer Group under periodic review, with an eye to stability, appropriateness from a size standpoint and continued relevance with respect to business operations.

Strategic Pay Positioning

The Committee considers compensation data based on practices in the Peer Group when reviewing executive compensation for the Named Executive Officers. While this reference is just one consideration in the decision making process, the Committee has established guidelines around the strategic positioning of pay within a range that is deemed to be market competitive.

 

 

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Historically, the strategic market references for compensation were defined by ranges around the 50th — 75th percentile, depending on the role or element of compensation, and this continued to be the case in 2018. However, as a result of shareholder feedback and subsequent discussion, the Committee has adopted a revised market reference tied to the median which took effect in 2019.

 

    

2012 – 2018

  

2019

     CEO    Other NEOs    CEO and other NEOs

Base Salary

   +/- 10% of median    median

 

Annual Incentive

  

Target — 65th percentile with opportunity for

top quartile for strong performance

  

Not defined

 

Target Total Cash1

   specific reference not defined   

median

Target Long-Term Incentive (“LTI”)

   75th percentile    Not defined

Target Direct Compensation2

   +/- 10% of median    +/- 10% of 65th percentile   

median

Target Compensation3

   +/- 10% of median    +/- 10% of 60th percentile   

median

1 

Base salary and target annual incentive

 

2 

Base salary, target annual incentive and target LTI

 

3 

Base salary, target annual incentive, target LTI, change in pension value and nonqualified deferred compensation earnings, and all other compensation

Naturally, the individual positioning of pay will still vary as the Committee takes into account a range of factors when determining pay levels.

Annual Compensation Review

Typically during the first quarter of each calendar year, the Compensation Committee conducts an annual compensation review. As part of this review, the Committee reviews information provided by Pearl Meyer and recommendations presented by the Chief Executive Officer with respect to annual salary increases, bonuses and annual equity awards for the other executive officers.

As part of this process, the Compensation Committee reviews, with respect to Named Executive Officers, individual performance evaluations, the current value of prior equity grants, the balances in deferred compensation accounts, and the amount of compensation the executive officer would receive if he left the Company under a variety of circumstances.

In reaching decisions, the Committee applies its judgment to determine and set the appropriate mix and level of compensation for the executive officers. A range of perspectives is taken into account, including the peer group information provided by Pearl Meyer, Company and business unit performance, individual performance, prevailing market trends and the views of both the Chief Executive Officer and the other independent directors of the Board. The Committee will then approve any changes to base salary, bonus opportunities, and equity grant sizes and mix. As a final step, the Committee considers each element of pay in isolation and collectively, to ensure that in combination the overall total compensation is aligned with the Company’s compensation philosophy.

For 2018, the Committee concluded that all elements of compensation – both in isolation and in combination – were aligned to our strategic market positioning. The Committee will continue to review this on an annual basis to ensure compensation remains market competitive and aligned with the Company’s compensation philosophy.

Target Setting

We set rigorous annual goals based on Company and industry outlook for the year, historical and projected growth rates for the Company and its peers, and performance expectations from analysts. The annual incentive plan is aligned with the Company’s annual operating plan and is designed so that target payout requires achievement of a high degree of business performance without encouraging excessive risk-taking. The Company’s annual operating and three-year strategic plans serve as the basis of the annual earnings guidance we communicate to investors. The annual operating plan builds on the prior year’s results and is based on the anticipated business environment.

The Compensation Committee followed the process described above when establishing our 2018 performance targets. Consistent with prior years, our 2018 targets considered analyst expectations and competitors’ publicly disclosed projected performance.

 

 

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Managing Compensation Risk

The Committee believes that the Company’s executive compensation program supports the executive compensation objectives described in this report, without encouraging management to take unreasonable risk with respect to our business. The Committee believes that the program’s use of long-term, equity-based compensation, including the use of stock options and restricted stock units, our stock ownership guidelines, and the stock holding requirement on 50% of our Chief Executive Officer’s shares delivered upon vesting of restricted stock units encourage officers to take a long-term view of the Company’s performance, and discourage unreasonable risk-taking. The Committee has reviewed the Company’s key compensation policies and practices and concluded that any risks arising from our policies and programs are not reasonably likely to have a material adverse effect on the Company. In particular, the following features are noted as having a positive impact in managing compensation risk.

 

    Support long-term view and     sustainability of Company

 

    

    Equity compensation in the form of stock options and restricted stock units

       

    Stock ownership guidelines

    

    Stock holding requirement applied to all CEO time- and performance-based restricted stock units on 50% of shares delivered upon vesting

 

          

 

Ability to take action to affect current and recoup prior compensation

 

    

 

    Full Committee discretion to reduce awards and payouts under our annual incentive plan and stock incentive plans to zero for certain conduct detrimental to the Company

    

    Clawback policy

 

 

          

Committee Oversight

 

    

    Annual risk assessment presented to the Committee by General Counsel and VP Executive Compensation

       

    Assessment considers program design and payouts

 

 

Clawback Policy

We have the right to clawback incentive-based compensation to the extent it was awarded in the prior three years on the achievement of financial results subject to an accounting restatement that should have resulted in the executive receiving a lower amount of compensation had our financial results been properly reported.

Our equity award agreements also provide for the recoupment of all or part of any proceeds received upon the sale of vested awards in the prior 12 months, if there is a breach by the executive of the award agreement or any non-competition, non-solicitation, confidentiality or similar covenant or agreement with us.

Stock Ownership Guidelines

The Committee has adopted Stock Ownership Guidelines that require our executive officers to hold shares of the Company’s stock with a value equal to a specified multiple of their base salary as shown below. These guidelines help ensure that our executives build and maintain a long-term ownership stake in the Company, which aligns their financial interests with those of the Company’s shareholders.

The guidelines were initially adopted in 2003 and executives have five years from the adoption or the date of their appointment to attain the ownership levels. For purposes of the guidelines, the value of an executive’s stock ownership includes all shares of the Company’s Common Stock owned by the executive outright and the value of unvested time-based restricted stock units. All of our Named Executive Officers are in compliance with this policy.

 

 

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2018 Executive Officer Stock Ownership

Shares held as a multiple of base salary (dollar value of shares determined using the Company’s closing stock price as of December 31, 2018):

 

 

LOGO

Stock Holding Requirement

In addition to stock ownership guidelines, the Committee approved additional stock holding requirements for the Chief Executive Officer, reflecting the particular accountability of his role. All time- or performance-based restricted stock units awarded to Mr. Casper since 2009 are subject to a requirement that at least 50% of the net shares delivered upon vesting be held for at least two years. This provides further alignment with the sustainable long-term performance of the Company.

2018 Compensation Decisions and Outcomes

Base Salary

Base salary is used to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our executive officers. Decisions regarding individual positioning take into account the relative size and scope of the role, time in role, current salary and the Company’s ability to replace the individual serving in the role, as well as the most relevant external market reference.

In February 2018, the Compensation Committee considered the market data collected by Pearl Meyer in combination with the factors listed above. As a result of this review, in February 2018 the Committee approved increases to base salaries ranging from 3.0% - 5.3% for our Named Executive Officers.

 

Named Executive Officer

   2017 Base Salary     

2018 Base Salary

(Effective March 26, 2018)

     Increase  

Marc N. Casper

     $ 1,425,000        $ 1,500,000        5.3 %

Stephen Williamson

     $ 640,000        $ 659,200        3.0 %

Mark P. Stevenson

     $ 975,000        $ 1,014,000        4.0 %

Patrick M. Durbin

     $ 577,500        $ 606,400        5.0 %

Gregory J. Herrema

     $ 641,100        $ 670,000        4.5 %

Increases principally reflected tenure, competitive pay levels, strong individual performance and retention. In particular, in respect of the Chief Executive Officer, the approved salary took account of his long tenure in the role (appointed in 2009) and his performance in leading the Company.

 

 

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Annual Cash Incentive

Each year the Compensation Committee establishes a target incentive cash award, defined as a percentage of base salary, for each officer of the Company, including executive officers. For 2018, the Committee approved the following target opportunities:

 

Named Executive Officer

  2018 Target
  (% of Base Salary)  

Marc N. Casper

      200 %

Stephen Williamson

      90 %

Mark P. Stevenson

      110 %

Patrick M. Durbin

      85 %

Gregory J. Herrema

      85 %

The target bonus opportunities for Messrs. Williamson and Durbin increased modestly, by five percentage points, respectively, for 2018; opportunities for the other Named Executive Officers were unchanged.

The amount actually awarded can range from 0 to 200% of target, depending primarily on the financial and non-financial performance of the Company. Amounts are subject to adjustment based on the Committee’s subjective evaluation of an officer’s contributions towards the achievement of those results, and where relevant the performance of individual businesses under an executive officer’s control.

In setting performance goals, the Committee generally establishes standards such that the target payout (100% of target bonus) represents attractive financial performance within our industry and can be achieved with strong execution; payouts above 150% of this target require outstanding performance.

For the financial measures, the Company’s actual performance was measured relative to the Company’s internal operating goals for 2018. The weighting of the financial measures and performance targets for 2018 were:

 

 

2018 Annual Incentive Performance Measures

 

 
 
  
 

70%

Financial

      

   Organic revenue growth (35%)

   Adjusted operating margin (15%)

   Adjusted EPS (15%)

   Free cash flow (5%)

 

     
         
 

30% Non-

financial

   

   Customer allegiance

   Positioning the Company for accelerated revenue growth and margin expansion

   Employer of choice and workforce diversity

   Capital deployment strategy

 

 
         

 

 

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Financial Performance Measure Definitions

The Committee selected these financial measures, as opposed to financial measures computed under GAAP, because this is consistent with how the Company communicates performance to investors, and as such how management measures and forecasts the Company’s performance. The use of adjusted measures enables investors and management to compare the Company’s performance to the market on a like-for-like basis, which is particularly important given the varying degrees of acquisition across peer companies.

 

Performance

Measure

        Definition
     

Organic

revenue

      Reported revenue adjusted for the impact of acquisitions and divestitures and for foreign currency changes
     

 

Adjusted operating income as a percentage of revenue*

      Operating income before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition-related activities, restructuring and other costs/income including costs arising from facility consolidations such as severance and abandoned lease expense and gains and losses from the sale of real estate and product lines; and amortization of acquisition-related intangible assets; as a percentage of revenue
     

 

Adjusted earnings per share**

      Earnings per share before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition-related activities, restructuring and other costs/income including costs arising from facility consolidations such as severance and abandoned lease expense and gains and losses from the sale of real estate and product lines; amortization of acquisition-related intangible assets; and other gains and losses that are either isolated or cannot be expected to occur again with any predictability, tax provisions/benefits related to the previous items, the impact of significant tax audits or events and the results of discontinued operations
     

 

Free cash flow

      Operating cash flow net of capital expenditures and excluding operating cash flows from discontinued operations
*

Also referred to in this proxy statement as “adjusted operating margin”

**

Also referred to in this proxy statement as “adjusted EPS”

2018 Performance Achievements

 

 

Financial Performance Score: 150%

 

 

  Organic Revenue Growth (35%)  

 

   

The threshold level of performance required was 2.5%, which equated to a payout of 0%

 

   

For each 0.5% of organic revenue growth, the payout increased by 25 percentage points to 5.5% organic revenue growth

 

   

To reflect the additional investment and effort required, for exceptional growth between 5.5% - 6.0%, the payout increased by 25 percentage points for each 0.25% increase in organic revenue growth up to a maximum opportunity of 200%

 

   

Actual organic revenue growth for the year was 8.3%, resulting in a payout of 200% for this element

 

 

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  Adjusted Operating Income as a Percentage of Revenue (15%)  

 

   

The payout factors for this element link the variation in organic revenue growth to margin expansion, meaning that the “threshold” and “maximum” performance requirements (whether expressed as dollars or as a percentage) varied directly with actual organic revenue growth achievement

 

   

Regardless, the maximum payout in respect of this element is capped at 200%

 

   

The baseline goal, assuming target organic growth of 4.5%, was 23.38% of revenue. The payout factors for this metric recognize the incremental costs required to achieve accelerated organic revenue growth, and reflect the greater difficulty in achieving margin expansion on lower organic revenue

 

   

Actual adjusted operating income as a percentage of revenue for the year was 23.1%, resulting in a payout of 0% for this element

 

  Adjusted EPS (15%)  

 

   

The threshold level of performance required was $10.51, which equated to a payout of 0%

 

   

For each additional $0.06 of adjusted EPS, the payout increased by 25 percentage points to adjusted EPS of $10.99

 

   

Actual adjusted EPS for the year was $11.12, resulting in a payout of 200% for this element

 

  Free Cash Flow (5%)  

 

   

The threshold level of performance required was $3,800 million, below which no payout is earned

 

   

For free cash flow between $3,800 million and $3,849 million a payout of 100% is achieved, with a maximum payout achieved for free cash flow at or above $3,850 million

 

   

Actual free cash flow for the year was $3,835 million, resulting in a payout of 100% for this element

 

  Achievement Earned on Financial Performance Element  

Based on the weighted average of the organic revenue, adjusted operating margin, adjusted EPS and free cash flow payouts noted above, the Committee concluded an overall achievement of 150% of target was earned for the financial performance element.

 

 

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Non-Financial Performance Score: 175%

 

The Committee assesses performance in our five identified areas of strategic importance, taking account of the Company’s overall mission and commitments to all stakeholders.

 

 

  Customer Allegiance  

 

Key areas of focus

 

    Improve Customer Allegiance Score (“CAS”) vs. 2017

 

    Maximize the impact of eBusiness and cloud capabilities

  

Key achievements

 

    While CAS achieved a new high in 2018, the increase was below our target

 

    Progress on eBusiness and digital was strong

 

 

  Positioning the Company for Accelerated Revenue Growth  

 

Key areas of focus

 

    Improve impact from innovation

 

    Continue to strengthen competitive position in China and emerging markets

  

Key achievements

 

    Very strong product launches across the Company were well received in the marketplace, including mass spectrometry, electron microscopy and next gen sequencing product lines

 

    Strong growth across Asia Pacific led by outstanding performance in China

 

 

  Positioning the Company to Drive Margin Expansion over Mid-Term  

 

Key area of focus

 

    Execute projects to leverage Company scale to reduce infrastructure cost

  

Key achievements

 

    Opened shared services center in Budapest

 

    Made good progress on driving additional impact from our PPI business system, centrally-led procurement and low cost region facilities

 

 

  Employer of Choice/Diversity  

 

Key areas of focus

 

    Deepen culture of diversity, involvement and inclusion

 

    Build on CSR momentum through community action councils, employee resource groups, and corporate giving

 

    Continue to improve leadership diversity

 

    Drive personal ownership of ethics, quality, safety and regulatory compliance and cybersecurity

  

Key achievements

 

    Positive feedback from colleagues via the employee involvement survey highlighting the inclusiveness of our culture

 

    Significant impact from our CSR activities through philanthropy and volunteerism

 

    Continued to build a more diverse management and leadership team

 

 

  Effectively Execute Capital Deployment Strategy  

 

Key areas of focus

 

    Successfully integrate Patheon, achieving synergy targets

 

    Maintain strong pipeline of M&A targets

  

Key achievements

 

    Patheon had a strong 2018 and achieved synergy targets

 

    Acquired Becton Dickinson’s Advanced Bioprocessing business

 

  Achievement Earned on Non-Financial Performance  

Based on the key achievements noted above, the Committee concluded an overall achievement of 175% of target was earned for the non-financial performance element.

 

 

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  Overall Achievement  

After weighing the payouts of the financial and non-financial performance described above, the Committee concluded that a calculated payout of 157.5% was earned.

Additional Performance Considerations

The Committee elected this year to grant Messrs. Casper, Williamson and Stevenson, as corporate officers, 157.5% of target. Messrs. Durbin and Herrema were awarded 120% and 150%, respectively, of target bonus to reflect their contributions to the Company as business leaders, taking into account the performance of the operating businesses which they managed in 2018. The following payouts were earned:

 

Named Executive Officer

 

  

2018 Target
Award

 

    

2018
Approved
Award

 

    

 

2018
Payout
(% of
Target)

 

 

 

Marc N. Casper

 

  

 

$

 

 

2,965,479

 

 

 

 

  

 

$

 

 

4,670,630

 

 

 

 

     157.5

 

Stephen Williamson

 

  

 

$

 

 

589,303

 

 

 

 

  

 

$

 

 

928,153

 

 

 

 

     157.5

 

Mark P. Stevenson

 

  

 

$

 

 

1,105,527

 

 

 

 

  

 

$

 

 

1,741,205

 

 

 

 

     157.5

 

Patrick M. Durbin

 

  

 

$

 

 

509,787

 

 

 

 

  

 

$

 

 

611,744

 

 

 

 

     120.0

 

Gregory J. Herrema

 

  

 

$

 

 

563,847

 

 

 

 

  

 

$

 

 

845,770

 

 

 

 

     150.0

Long-Term Incentives

The objectives of our long-term equity incentive program are to provide a strong link to delivering long-term sustainable performance, create an ownership culture and facilitate executive retention through opportunities tied to the appreciation of our stock price over time, while delivering superior performance in accordance with our mission. This provides a clear alignment of interests between our executives and our shareholders.

We achieve this by granting our executive officers equity through a combination of vehicles, each serving a different objective.

 

 

Target Award Value by Award Type

 

LOGO

 

 

   Stock options incentivize long-term sustainable value creation

 

   Time-based restricted stock units promote executive retention while aligning executives’ interests with those of our shareholders

 

   Performance-based restricted stock units enable the Committee to reward executives for performance in areas of long-term strategic importance for the Company and our shareholders

 

 

 

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The Compensation Committee approves awards in respect of the year at a meeting in late February, such that target award values reflect our publicly released earnings for the just-completed year. The target values and actual award values as of the grant date in February 2018 are reflected in the table below. The difference between the approved target value and the actual grant date value reflects the variation between the 20-day average stock price used to approve the awards and the methodology used for accounting purposes.

 

   

 

Grant Date Accounting Value of 2018 Award

 

Named Executive Officer

 

 

Target 2018 LTI
Award Value

 

 

Stock Options

 

 

Time-Based
Restricted Stock
Units

 

 

Performance-
Based Restricted
Stock Units

 

 

  Total 2018 LTI  
Award Value

 

Marc N. Casper

    $ 11,502,000     $ 3,893,298     $ 4,002,920     $ 4,002,920     $ 11,899,138

Stephen Williamson

    $ 3,000,099     $ 994,299     $ 1,053,400     $ 1,053,400     $ 3,101,099

Mark P. Stevenson

    $ 5,250,259     $ 1,764,115     $ 1,832,916     $ 1,832,916     $ 5,429,947

Patrick M. Durbin

    $ 2,600,240     $ 829,905     $ 926,992     $ 926,992     $ 2,683,889

Gregory J. Herrema

    $ 2,600,240     $ 829,905     $ 926,992     $ 926,992     $ 2,683,889

Key Design Features

 

 

Stock Options

 

      

 

Time-Based Restricted Stock

Units

 

      

 

Performance-Based Restricted

Stock Units

 

    Four year ratable vesting (one quarter per annum)

 

    Seven-year term

 

    Exercise price equal to closing price on date grant approved

    

    Three-and-a-halfyear ratable vesting (15%, 25%, 30% and 30% after 6, 18, 30 and 42 months respectively)

 

    Dividendsaccrue (in form of dividend equivalents) and paid only on vested awards

 

    CEOawards subject to a two-year holding requirement on 50% of shares delivered upon vesting

    

    Three-yearratable vesting (one third per annum)

 

    Performancemeasured over one-year

 

    Novesting if minimum performance not met

 

    Dividendsaccrue (in form of dividend equivalents, only after performance conditions are met) and paid only on vested awards

 

    CEOawards subject to a two-year holding requirement on 50% of shares delivered upon vesting

Performance-Based Restricted Stock Units

Awards of performance-based restricted stock units since 2012 have been made subject to performance conditions of strategic importance to the Company and our shareholders:

 

   

Organic revenue growth; and

 

   

Adjusted EPS.

These two measures, which also feature under our annual incentive plan for 2018, are of particular importance as they directly reflect our ability to deliver on our strategic priorities. Furthermore they are two of the highest priority indicators of performance used by our investors against which they hold our executive team accountable.

 

 

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In respect of each measure, performance is measured over the fiscal year in which the award is made. The performance conditions and level of payout that apply to awards made in February 2018 are structured in a matrix, meaning that strong performance is required in respect of both elements to earn an above target payout.

The weighting of the financial measures and performance targets for 2018 were:

 

     Organic Revenue
Growth (50%)
1
   Adjusted Earnings
Per Share (50%)
1

 

Threshold (0% payout on each measure)

 

  

 

3.0%

 

  

 

$10.50

 

 

Baseline (50% payout on each measure)

 

  

 

4.5%

 

  

 

$10.74

 

 

Maximum (87.5% payout on each measure)

 

  

 

5.5%

 

  

 

$10.92

 

 

Actual Results

 

  

 

8.3%

 

  

 

$11.12

 

 

Payout Factor

 

  

 

175%

 

 

1 

There are a variety of payout scenarios for financial results between the threshold and maximum levels.

Payouts under the program are step-wise, based on standalone organic revenue growth in equal proportion to adjusted earnings per share, with no graduated payout at intermediate points. The plan was designed to provide some level of opportunity, but full downside risk. One-third of the total number of units earned vested on February 25, 2019, and the same number of restricted units will vest on both the first anniversary and the second anniversary of this vesting date so long as the executive officer is employed by the Company on each such date (subject to certain exceptions). Dividends paid by the Company accrue in the form of dividend equivalents on unvested restricted stock units (in the case of performance-based units, only after the performance conditions are met), and will be paid out if and when the underlying shares vest and are delivered.

 

  Overall Achievement  

Actual organic revenue growth for the year was 8.3% and actual adjusted EPS for the year was $11.12, resulting in a payout of 175%.

TSR Long-Term Incentive Award

 

In September 2017 the Compensation Committee approved a one-time award of performance-based stock options for senior leaders, including our executive officers.

 

This award was designed to further enhance the alignment of interests between senior leaders and our shareholders, by requiring sustained share price growth through the use of options, and delivery of sustained superior stock price and dividend performance through the use of multiple relative TSR performance requirements. It also provides a means to assess and reward the leadership teams’ success at integrating recent acquisitions in a way that generates shareholder value.

 

The peer group for the program (the “TSR Peer Group”) was constructed to focus on high-performing companies, meaning that to earn a payout, the Company needs to deliver exceptional, sustained performance against some of the higher performing companies in the S&P 500.

 

   For the five years ending December 31, 2016, the median compound annual growth in TSR for the TSR Peer Group was 19.1%, compared with 14.5% for the S&P 500 over the same period.

 

   For the five years ending December 31, 2017, the median compound annual growth in TSR for the TSR Peer Group was 18.4%, compared with 15.7% for the S&P 500 over the same period.

  

 

    Performance-based stock options

 

    Exercise price equal to price on date of grant

 

    Cliff vesting in March 2021

 

    Seven-year term

 

    Performance measured over four five-year periods spanning 2013 - 2020

 

    Vesting contingent on relative TSR

 

    TSR Peer Group of high performing companies with median TSR exceeding the S&P 500

 

    Full vesting requires performance in the top ten for all four periods

 

    For any vesting to occur the Company must rank in the top ten for at least two of the four periods

 

 

 

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TSR Peer Group

        

   3M Company

 

   Abbott Laboratories

 

   AbbVie Inc.

 

   Automatic Data Processing, Inc.

 

   Allergan plc

 

   Amgen Inc.

 

   Becton, Dickinson and Company

 

   Biogen Inc.

 

   Bristol-Myers Squibb Company

 

   Cigna Corporation

 

   CSX Corporation

 

   Danaher Corporation

 

   Eaton Corporation plc

 

   Eli Lily and Company

 

   Emerson Electric Co.

 

   Gilead Sciences Inc.

 

   Henry Schein, Inc.

 

   Honeywell International Inc.

 

   Illinois Tool Works Inc.

 

   International Paper Company

 

   Medtronic, Inc.

 

   Merck & Co., Inc.

 

   Merck KGaA, Darmstadt, Germany

 

   NIKE, Inc.

 

   PNC Financial Services Group

 

   State Street Corporation

 

   Stryker Corporation

 

   Texas Instruments Incorporated

 

   The Boeing Company

 

   Thermo Fisher Scientific Inc.

Relative TSR is measured over four periods, each five years in length. Thermo Fisher’s relative performance will determine the ultimate number of performance-based stock options that vest in March 2021.

 

 

 

LOGO

 

 

Number of Periods Thermo Fisher Ranks in Top 10 Companies (i.e. top third)

   Payout  

 

Four (All of the periods)

 

  

 

 

 

 

100

 

 

 

 

Three (75% of the periods)

 

  

 

 

 

 

75

 

 

 

 

Two (50% of the periods)

 

  

 

 

 

 

50

 

 

 

 

One (25% of the periods)

 

  

 

 

 

 

0

 

 

 

The first two 5-Year performance periods under the plan are now complete. The 5-Year CAGR for the first performance period of 25.1% placed the Company sixth in the TSR Peer Group, and in the top quartile of TSR Peer Group performance, slightly above the 75th percentile CAGR of 24.8%. The 5-Year CAGR for the second performance period of 15.8% placed the Company eighth in the TSR Peer Group, and in the top quartile of TSR Peer Group performance, slightly above the 75th percentile CAGR of 15.7%.

 

Performance Period

   Thermo Fisher
TSR
    75th
%ile
    Threshold TSR1   S&P 500 TSR2   Thermo Fisher
Rank
 

Performance  

Requirement Met  

1 Jan 2013 – 31 Dec 2017

     25.1     24.8   22.8%   15.7%   6th   Yes

1 Jan 2014 – 31 Dec 2018

     15.8     15.7   14.4%   8.5%   8th   Yes

1 Jan 2015 – 31 Dec 2019

     Calculated in Q1 2020

1 Jan 2016 – 31 Dec 2020

     Calculated in Q1 2021

 

1 

Minimum TSR required to rank in the top ten and meet the performance requirement

 

2 

Shown for reference given TSR Peer Group selected to hold Thermo Fisher accountable for delivering superior returns against some of the higher performing companies in the S&P 500

 

   Achievement To Date  

Based on performance to date, 50% of the award has been earned.

 

 

    56    

 

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


Table of Contents

Other Elements of Compensation

Executive Benefits

We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance and a 401(k) plan. Executives are eligible to participate in all of our employee benefit plans, in each case on the same basis as other eligible employees.

 

 

Benefit Plan

 

       

 

Key Features

 

     

 

401(k) Plan

     

 

    Tax qualified retirement savings plan for U.S.-based employees

 

    Contributions matched 1:1 up to the first 6% of compensation deferred

 

    2018 cap on matching contributions of 6% of $275,000

 

    Contributions are fully vested on contribution

 

    Matching contributions for employees joining after January 1, 2014 vest after two years of employment

 

     

 

Deferred Compensation Plan

     

 

    Available to executive officers and certain other highly-compensated employees

 

    Participants can defer receipt of annual salary and/or bonus until either employment ceases or a future date prior to termination

 

    Contributions matched 1:1 on the first 6% of pay that is deferred over the 401(k) limit

Perquisites

The Company provides executive officers with perquisites and other personal benefits that the Company and the Committee believe are reasonable and in accordance with our compensation philosophy. The core perquisites provided to our executive officers are supplemental long-term disability insurance, supplemental life insurance, and access to emergency medical services.

The Committee has approved additional perquisites for the Chief Executive Officer to reflect the specific nature of his role:

 

   

A $3 million term life insurance policy

 

   

Limited non-business use of the corporate aircraft, up to an annual incremental cost to the Company of $150,000 (treated as taxable income in accordance with the IRS regulations)

 

   

Security services, including home security systems, monitoring and additional personal security services

The Committee believes these perquisites are appropriate given the nature of the Chief Executive Officer role, the significant travel and time commitments that are required in relation to fulfilling the associated duties, and the range of security issues and personal security concerns faced by chief executives of multi-national companies like ours, particularly when travelling to higher-risk locations.

No tax gross-ups are provided on any perquisites.

Severance and Change in Control Benefits

In certain circumstances, Named Executive Officers are entitled to specified benefits on termination. These provisions are in place as the Company and Committee believe is in accordance with our compensation philosophy, enabling us to compete for executive talent. The terms offered are generally in line with those seen offered to comparable executives at other companies.

The change in control agreements that are in place for executive officers operate on a ‘double trigger’ basis, meaning that if there is a change in control and within 18 months the executive’s employment is terminated by the Company without cause or by the individual for good reason, they will be entitled to defined cash sums and severance benefits.

In his capacity as CEO, Mr. Casper has separate severance and change in control agreements with the Company, although the triggers remain comparable with the other executive officers.

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

    57    

 


Table of Contents

None of the Company’s change in control retention agreements with Named Executive Officers provide for a tax-gross up. Additional details on these agreements are included (see page 68).

Additional Information

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to certain of the Company’s executives. Pursuant to the Tax Cuts and Jobs Act of 2017 (the “TCJA”), for fiscal years beginning after December 31, 2017, the group of executives whose compensation is subject to the deduction limitation is broader than under prior law. For fiscal years beginning on or before December 31, 2017, certain compensation, including qualified performance-based compensation, was not subject to the deduction limit if certain requirements were met. Pursuant to the TCJA, subject to certain transition rules, for fiscal years beginning after December 31, 2017, the performance-based compensation exception to the deduction limitations under Section 162(m) is no longer available. Accordingly, for 2018 and future tax years, subject to the transition rules, all compensation in excess of $1 million paid to the specified executives will not be deductible, other than any compensation paid pursuant to plans that are “grandfathered” under the TCJA.

Equity Grant Practices

We typically make an initial equity award to newly-hired executives and to newly-promoted executives to reflect their new responsibilities, and annual equity grants in late February as part of our overall compensation program.

All equity grants to our officers are approved by the Compensation Committee. Equity grants for newly-hired or promoted non-officer employees are determined and approved by the Employee Equity Committee, which currently consists of Mr. Casper, and cannot exceed 25,000 shares per employee without Compensation Committee approval.

Vesting normally ceases upon termination of employment, except for acceleration upon qualifying retirements, death, disability, and in the case of certain terminations for Mr. Casper (see page 69). Stock option exercise rights normally cease for officers other than Mr. Casper shortly after termination, except in the cases of death, disability and qualifying retirement. Prior to the exercise of an option, the holder has no rights as a shareholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents. Prior to the issuance of shares after vesting of restricted stock units (which represent a right in the future to receive shares), the holder has no right to transfer or vote the underlying shares.

Accounting Considerations

Accounting considerations also play an important role in the design of our executive compensation programs and policies. ASC 718 requires us to expense the cost of stock-based compensation awards. We consider the relative impact in terms of accounting cost in addition to other factors such as shareholder dilution, retentive impact, and motivational impact when selecting long-term equity incentive instruments.

Compensation Committee Report

The members of the Company’s Compensation Committee hereby state:

We have reviewed and discussed the Compensation Discussion & Analysis contained in this proxy statement with management, and based on such review and discussions, we have recommended to the Company’s Board of Directors that the Compensation Discussion & Analysis be included in this proxy statement.

Compensation Committee

 

By:

Thomas J. Lynch

    

Scott M. Sperling

    

Elaine S. Ullian

 

 

    58    

 

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


Table of Contents

Summary Compensation Table

The following table summarizes compensation for services to the Company earned during the last three fiscal years (where applicable) by the Company’s chief executive officer, chief financial officer, and the three other most highly compensated executive officers of the Company during 2018. The executive officers listed below are collectively referred to in this proxy statement as the “Named Executive Officers” or “NEOs”.

 

Name and

Principal Position

   Year     

Salary

($)(1)

    

Stock
Awards

($)(2)

    

Option
Awards

($)(3)

    

Non-Equity
Incentive Plan
Compensation

($)(4)

    

 

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)(5)

    

All Other

Compensation

($)(6)

    

Total

($)

 

 

Marc N. Casper

 

President and Chief

 

Executive Officer

  

 

 

 

2018

 

 

  

 

$

 

1,482,740

 

 

  

 

$

 

8,005,840

 

 

  

 

$

 

3,893,298

 

 

  

 

$

 

4,670,630

 

 

  

 

$

 

 

 

  

 

$

 

554,595

 

 

  

 

$

 

18,607,103

 

 

  

 

 

 

2017

 

 

  

 

$

 

1,425,000

 

 

  

 

$

 

8,388,576

 

 

  

 

$

 

7,543,202

 

 

  

 

$

 

4,366,200

 

 

  

 

$

 

 

 

  

 

$

 

552,198

 

 

  

 

$

 

22,275,176

 

 

  

 

 

 

2016

 

 

  

 

$

 

1,407,471

 

 

  

 

$

 

8,097,648

 

 

  

 

$

 

3,579,114

 

 

  

 

$

 

4,196,625

 

 

  

 

$

 

 

 

  

 

$

 

519,803

 

 

  

 

$

 

17,800,661

 

 

 

Stephen Williamson

 

Senior Vice President and

 

Chief Financial Officer

  

 

 

 

2018

 

 

  

 

$

 

654,781

 

 

  

 

$

 

2,106,800

 

 

  

 

$

 

994,299

 

 

  

 

$

 

928,153

 

 

  

 

$

 

 

 

  

 

$

 

112,127

 

 

  

 

$

 

4,796,160

 

 

  

 

 

 

2017

 

 

  

 

$

 

631,635

 

 

  

 

$

 

1,829,088

 

 

  

 

$

 

1,747,914

 

 

  

 

$

 

833,408

 

 

  

 

$

 

 

 

  

 

$

 

102,349

 

 

  

 

$

 

5,144,394

 

 

  

 

 

 

2016

 

 

  

 

$

 

597,031

 

 

  

 

$

 

1,401,516

 

 

  

 

$

 

630,047

 

 

  

 

$

 

748,650

 

 

  

 

$

 

 

 

  

 

$

 

93,132

 

 

  

 

$

 

3,470,376

 

 

 

Mark P. Stevenson

 

Executive Vice President

 

and Chief Operating Officer

  

 

 

 

2018

 

 

  

 

$

 

1,005,025

 

 

  

 

$

 

3,665,832

 

 

  

 

$

 

1,764,115

 

 

  

 

$

 

1,741,205

 

 

  

 

$

 

 

 

  

 

$

 

250,400

 

 

  

 

$

 

8,426,577

 

 

  

 

 

 

2017

 

 

  

 

$

 

922,212

 

 

  

 

$

 

3,279,744

 

 

  

 

$

 

6,005,310

 

 

  

 

$

 

1,529,622

 

 

  

 

$

 

429,130

 

 

  

 

$

 

175,878

 

 

  

 

$

 

12,341,896

 

 

  

 

 

 

2016

 

 

  

 

$

 

850,301

 

 

  

 

$

 

2,984,710

 

 

  

 

$

 

1,331,341

 

 

  

 

$

 

1,399,650

 

 

  

 

$

 

263,500

 

 

  

 

$

 

162,127

 

 

  

 

$

 

6,991,629

 

 

 

Patrick M. Durbin(7)

 

Senior Vice President

  

 

 

 

2018

 

 

  

 

$

 

599,749

 

 

  

 

$

 

1,853,984

 

 

  

 

$

 

829,905

 

 

  

 

$

 

611,744

 

 

  

 

$

 

 

 

  

 

$

 

31,119

 

 

  

 

$

 

3,926,501

 

 

  

 

 

 

2017

 

 

  

 

$

 

571,154

 

 

  

 

$

 

1,450,656

 

 

  

 

$

 

1,585,908

 

 

  

 

$

 

646,800

 

 

  

 

$

 

 

 

  

 

$

 

28,589

 

 

  

 

$

 

4,283,107

 

 

 

Gregory J. Herrema(8)

 

Senior Vice President

  

 

 

 

2018

 

 

  

 

$

 

663,349

 

 

  

 

$

 

1,853,984

 

 

  

 

$

 

829,905

 

 

  

 

$

 

845,770

 

 

  

 

$

 

 

 

  

 

$

 

108,477

 

 

  

 

$

 

4,301,485

 

 

  

 

 

 

2017

 

 

  

 

$

 

637,846

 

 

  

 

$

 

1,829,088

 

 

  

 

$

 

1,676,934

 

 

  

 

$

 

834,840

 

 

  

 

$

 

 

 

  

 

$

 

105,518

 

 

  

 

$

 

5,084,226

 

 

 

(1)

Reflects salary earned for the year, though a portion of such salary may have been paid early in the subsequent year.

 

(2)

These amounts represent the aggregate grant date fair value of restricted stock unit awards made during 2018, 2017 and 2016, respectively, calculated in accordance with the Company’s financial reporting practices. For information on the valuation assumptions with respect to these awards, refer to note 6 of the Thermo Fisher financial statements in the Form 10-K for the year ended December 31, 2018, as filed with the SEC. For performance-based restricted stock unit awards made to Messrs. Casper, Williamson, Stevenson, Durbin and Herrema in February 2018, these amounts reflect the grant date fair value of such awards at the time of grant based upon the probable outcome (earning 100% of target) at the time of grant. The value of the performance-based restricted stock unit awards at the grant date in February 2018 assuming that the highest level of performance conditions was achieved was $7,005,110, $1,843,450, $3,207,603, $1,622,236 and $1,622,236 for Messrs. Casper, Williamson, Stevenson, Durbin and Herrema, respectively. The amounts reflected in this column do not represent the actual amounts paid to or realized by the Named Executive Officer for awards made during 2018, 2017 or 2016.

 

(3)

These amounts represent the aggregate grant date fair value of stock option awards made during 2018, 2017 and 2016, respectively, calculated in accordance with the Company’s financial reporting practices. For information on the valuation assumptions with respect to these awards, refer to note 6 of the Thermo Fisher financial statements in the Form 10-K for the year ended December 31, 2018, as filed with the SEC. The amounts reflected in this column do not represent the actual amounts paid to or realized by the Named Executive Officer for awards made during 2018, 2017 or 2016.

 

(4)

Reflects compensation earned for the year but paid early in the subsequent year.

 

(5)

These amounts represent the actuarial increase (if any) in the present value of Mr. Stevenson’s benefits under the Applera Corporation Supplemental Executive Retirement Plan (the “SERP”) during the year. Mr. Stevenson’s SERP balance decreased by $328,826 in 2018. As the SERP was a plan maintained by Life Technologies prior to the Company’s 2014 acquisition of Life Technologies (the “Life Technologies Acquisition”), and was frozen prior to the acquisition, only Mr. Stevenson (a former employee of Life Technologies) participates in the SERP.

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

    59    

 


Table of Contents
(6)

The amounts presented in this column are detailed in the table below and include (a) matching contributions made on behalf of the Named Executive Officers by the Company pursuant to the Company’s 401(k) Plan, (b) premiums paid by the Company with respect to long-term disability insurance for the benefit of the Named Executive Officers, (c) matching contributions made on behalf of the Named Executive Officers by the Company pursuant to the Company’s Non-Qualified Deferred Compensation Plan, (d) dividends accrued in the form of dividend equivalents on restricted stock units, (e) premiums paid by the Company with respect to supplemental group term life insurance, (f) access to emergency medical service through Massachusetts General Hospital’s global hospital network, and (g) with respect to Mr. Casper, premiums paid by the Company for a term life insurance policy for the benefit of Mr. Casper, personal security services and the incremental cost to the Company of Mr. Casper’s non-business use of Company aircraft. As described on page 57, Mr. Casper is permitted to use the aircraft for limited non-business purposes. The incremental cost to the Company during 2018 for non-business use represents the direct variable costs incurred due to usage of the Company aircraft including fuel, crew trip expense, crew meals, catering, landing fees, hangar/parking costs and other miscellaneous expenses. Since the aircraft is used primarily for business travel, the Company does not include in the calculation fixed costs which remain constant, such as pilots’ salaries, the acquisition costs of the aircraft, and the cost of maintenance not related to Mr. Casper’s personal trips. Mr. Casper’s annual allowance for personal use of the Company aircraft is limited to $150,000 in incremental cost to the Company.

 

   Name   Matching
401(k)
Contributions
    Long-term
Disability
Insurance
Premiums
    Matching
Deferred
Compensation
Plan
Contributions
    Dividend
Equivalents
    Term Life
Insurance
Policy
    Personal
Security
Services
    Personal
Aircraft
Usage
    Other     Total All Other
Compensation
 

 

Marc N. Casper

 

 

 

$

 

 

16,500

 

 

 

 

 

 

$

 

 

2,513

 

 

 

 

 

 

$

 

 

352,526

 

 

 

 

 

 

$

 

 

64,664

 

 

 

 

 

 

$

 

 

11,875

 

 

 

 

 

 

$

 

 

17,301

 

 

 

 

 

 

$

 

 

88,930

 

 

 

 

 

 

$

 

 

286

 

 

 

 

 

 

$

 

 

554,595

 

 

 

 

 

Stephen Williamson

 

 

 

$

 

 

16,500

 

 

 

 

 

 

$

 

 

2,843

 

 

 

 

 

 

$

 

 

78,431

 

 

 

 

 

 

$

 

 

13,620

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

733

 

 

 

 

 

 

$

 

 

112,127

 

 

 

 

 

Mark P. Stevenson

 

 

 

$

 

 

16,500

 

 

 

 

 

 

$

 

 

4,037

 

 

 

 

 

 

$

 

 

148,182

 

 

 

 

 

 

$

 

 

25,582

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

56,099

 

 

(9) 

 

 

 

$

 

 

250,400

 

 

 

 

 

Patrick M. Durbin

 

 

 

$

 

 

16,500

 

 

 

 

 

 

$

 

 

2,624

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

11,300

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

695

 

 

 

 

 

 

$

 

 

31,119

 

 

 

 

 

Gregory J. Herrema

 

 

 

$

 

 

16,500

 

 

 

 

 

 

$

 

 

2,742

 

 

 

 

 

 

$

 

 

73,979

 

 

 

 

 

 

$

 

 

14,517

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

739

 

 

 

 

 

 

$

 

 

108,477

 

 

 

 

 

(7)

Mr. Durbin became an executive officer of the Company on October 15, 2015, but was not a named executive officer for the year ended December 31, 2016.

 

(8)

Mr. Herrema became an executive officer of the Company on May 17, 2017.

 

(9)

Includes $55,357 of relocation expenses for Mr. Stevenson who relocated from California to the Company’s headquarters in 2018.

 

 

    60    

 

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 


Table of Contents

Long-Term Incentive Compensation

Grants of Plan-Based Awards for 2018*

 

        Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards
 

 

Estimated Future Payouts
Under Equity

Incentive Plan Awards

 

 

All Other
Stock
Awards:

Number
of Shares
of Stock
or Units

 

 

All Other
Option
Awards:

Number of
Securities
Underlying
Options

 

 

Exercise
or Base
Price of
Option
Awards

($/Sh)

 

 

Grant

Date Fair
Value of

   Stock and   
Option
Awards

($)(2)

 

Name

 

 

Grant
Date

 

 

Threshold

($)

 

 

Target

($)(1)

 

 

Maximum

($)

 

 

Threshold

 

 

Target

 

 

Maximum

 

Marc N.

Casper

   

 

 

 

2/27/2018

 

   

 

 

 

 

   

 

$

 

2,965,479

 

   

 

$

 

5,930,958

 

                           
   

 

 

 

2/27/2018

 

               

 

 

 

—(3)

 

 

   

 

 

 

19,000

 

(3)

   

 

 

 

33,250

 

(3)

               

 

$

 

4,002,920

 

   

 

 

 

2/27/2018

 

                           

 

 

 

19,000

 

(4)

           

 

$

 

4,002,920

 

   

 

 

 

2/27/2018

 

                               

 

 

 

85,850

 

(5)

   

 

$

 

210.68

 

   

 

$

 

3,893,298

 

 

Stephen

Williamson

   

 

 

 

2/27/2018

 

   

 

 

 

 

   

 

$

 

589,303

 

   

 

$

 

1,178,606

 

                           
   

 

 

 

2/27/2018

 

               

 

 

 

—(3)

 

 

   

 

 

 

5,000

 

(3)

   

 

 

 

8,750

 

(3)

               

 

$

 

1,053,400

 

   

 

 

 

2/27/2018

 

                           

 

 

 

5,000

 

(4)

           

 

$

 

1,053,400

 

   

 

 

 

2/27/2018

 

                               

 

 

 

21,925

 

(5)

   

 

$

 

210.68

 

   

 

$

 

994,299

 

 

Mark P.

Stevenson

   

 

 

 

2/27/2018

 

   

 

 

 

 

   

 

$

 

1,105,527

 

   

 

$

 

2,211,054

 

                           
   

 

 

 

2/27/2018

 

               

 

 

 

—(3)

 

 

   

 

 

 

8,700

 

(3)

   

 

 

 

15,225

 

(3)

               

 

$

 

1,832,916

 

   

 

 

 

2/27/2018

 

                           

 

 

 

8,700

 

(4)

           

 

$

 

1,832,916

 

   

 

 

 

2/27/2018

 

                               

 

 

 

38,900

 

(5)

   

 

$

 

210.68

 

   

 

$

 

1,764,115

 

 

Patrick M.

Durbin

   

 

 

 

2/27/2018

 

   

 

 

 

 

   

 

$

 

509,787

 

   

 

$

 

1,019,574

 

                           
   

 

 

 

2/27/2018

 

               

 

 

 

—(3)

 

 

   

 

 

 

4,400

 

(3)

   

 

 

 

7,700

 

(3)

               

 

$

 

926,992

 

   

 

 

 

2/27/2018

 

                           

 

 

 

4,400

 

(4)

           

 

$

 

926,992

 

   

 

 

 

2/27/2018

 

                               

 

 

 

18,300

 

(5)

   

 

$

 

210.68

 

   

 

$

 

829,905

 

 

Gregory J.

Herrema

   

 

 

 

2/27/2018

 

   

 

 

 

 

   

 

$

 

563,847

 

   

 

$

 

1,127,694

 

                           
   

 

 

 

2/27/2018

 

               

 

 

 

—(3)

 

 

   

 

 

 

4,400

 

(3)

   

 

 

 

7,700

 

(3)

               

 

$

 

926,992

 

   

 

 

 

2/27/2018

 

                           

 

 

 

4,400

 

(4)

           

 

$

 

926,992

 

   

 

 

 

2/27/2018

 

                               

 

 

 

18,300

 

(5)

   

 

$

 

210.68

 

   

 

$

 

829,905

 

 

*

All equity awards made during 2018 were granted under the Company’s 2013 Stock Incentive Plan.

 

(1)

Target awards are based on a percentage of the Named Executive Officer’s salary.

 

(2)

These amounts represent the aggregate grant date fair value of stock option and restricted stock unit awards made during 2018, calculated in accordance with the Company’s financial reporting practices. For information on the valuation assumptions with respect to these awards, refer to note 6 of the Thermo Fisher financial statements in the Form 10-K for the year ended December 31, 2018, as filed with the SEC. The amounts reflected in this column do not represent the actual amounts paid to or realized by the Named Executive Officer for these awards during 2018.

 

(3)

Represents the threshold, target and maximum number of achievable shares pursuant to a performance-based restricted stock unit award granted on February 27, 2018. (See “Compensation Discussion and Analysis — Long-Term Incentives” on page 53.)

 

(4)

Represents a time-based restricted stock unit award which vests over a three-and-a half-year period commencing on the date of grant (15%, 25%, 30% and 30% vesting at 6, 18, 30 and 42 months, respectively, from the date of grant) so long as the executive officer is employed by the Company on each such date (subject to certain exceptions). Dividends on the Common Stock for which the record date is after the grant date accrue in the form of dividend equivalents on unvested restricted stock units, and will be paid out if and when the underlying shares vest and are delivered.

 

(5)

Options vest in equal annual installments over the four-year period commencing on the first anniversary of the date of grant (i.e., the first 1/4 of the stock option grant would vest on the first anniversary of the date of grant) so long as the executive officer is employed by the Company on each such date (subject to certain exceptions).

 

 

Thermo Fisher Scientific Inc. | 2019 Proxy Statement

 

 

 

    61    

 


Table of Contents

Outstanding Equity Awards at 2018 Fiscal Year-End

 

   

 

Option Awards

 

 

Stock Awards

   

Name

  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(1)
 

Equity
Incentive
Plan Awards:

Number of
Securities
Underlying
Unexercised
Unearned
Options (#)

  Option
Exercise
Price ($)
  Option
Expiration
Date
  Number of
Shares or
Units of
Stock That
Have Not
Vested (#)(1)
  Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)
@ $223.79*
  Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not
Vested (#)
 

Equity

Incentive

Plan Awards:
Market or
Payout Value

of Unearned
   Shares, Units   
or Other

Rights That
Have
Not Vested ($)

   

 

Marc N.

Casper

   

 

 

 

150,713

 

   

 

 

 

 

   

 

 

 

 

    $ 73.24       2/26/2020                            
      131,500                 $ 124.28       2/26/2021                            
      90,000       30,000 (2)           $ 131.07       2/25/2022                            
      64,050       64,050 (3)           $ 129.77       2/24/2023                            
      31,600       94,800 (4)           $ 157.68       2/28/2024                            
                  116,300 (5)     $ 190.59       9/7/2024                            
            85,850 (6)           $ 210.68       2/27/2025