Governance Guidelines
I. Director Independence and Qualifications
II. Director Responsibilities
III. Board and Committee Meetings
IV. Board Committees
V. Director Access to Management and Independent Advisors
VI. Director Compensation and Indemnification
VII. Director Orientation and Continuing Education
VIII. Management Evaluation and Succession
IX. Annual Performance Evaluation of the Board
X. Stock Ownership Guidelines
XI. Code of Business Conduct
Exhibit A: Abbott Laboratories Outline for Directorship Qualifications
I. Director Independence and Qualifications
Independence.
A majority of the directors shall meet the New
York Stock Exchange listing standards for independence, as such requirements
are interpreted by the Board in its business judgment. All of the members of
the audit committee, compensation committee, the nominations and governance
committee, and the public policy committee shall be independent.
Qualifications.
The qualifications for Abbott’s directors are
set forth in the Outline for Directorship Qualifications, which is attached as
Exhibit A.
Change in Affiliation.
Directors are expected to report to the
chairman of the board and the chairman of the nominations and governance
committee when they experience a significant change in their business or
professional affiliation or responsibility and offer to resign from the board.
The nominations and governance committee, in consultation with the chairman of
the board, will determine whether the director continues to adequately meet the
requirements for service on the board of directors and whether or not to accept
the resignation.
Limit on the Number of Other
Directorships.
Directors are expected to devote sufficient
time to fulfill their responsibilities as directors in accordance with the
criteria set forth in the Outline for Directorship Qualifications. Accordingly,
directors may serve on the board of directors of other public companies, but
shall limit such service to that reasonable number of companies, which would
not conflict with his or her responsibilities as an Abbott director.
New Directorships.
Directors are expected to inform the chairman
of the board and the chairman of the nominations and governance committee of
any public company directorships that they have been offered before accepting
that directorship. In addition, no director shall serve on the board of
directors of any Abbott competitor.
Term Limits.
Abbott’s directors are not subject to term
limits because the board of directors has determined that the knowledge,
expertise and continuity provided by those directors who have experience with
Abbott and who continue to meet the qualifications set forth in the Outline for
Directorship Qualifications are valuable to Abbott.
Tenure.
A non-management director may only continue to
serve as a director until directors are elected at the annual shareholders’
meeting immediately following the director’s 72nd birthday.
Chairman of the Board and Chief Executive
Officer.
The board of directors believes that it is
important to retain the flexibility to allocate the responsibilities of the
offices of chairman of the board and chief executive officer in any manner that
it determines to be in the best interests of Abbott. The board of directors
specifically reserves the right to vest the responsibilities of chairman of the
board and chief executive officer in the same individual and currently believes
that it is in Abbott’s best interests for the chief executive officer to serve
as the chairman of the board.
II. Director Responsibilities
Preparation for and Attendance at
Meetings.
Directors are expected to prepare adequately
for and regularly attend the annual shareholders meeting and meetings of the
board of directors and board committees on which they serve.
Special Meetings.
Recognizing that situations arise requiring
prompt board action, directors shall make themselves available for special
meetings and shall promptly return documents requiring their signature.
Directors shall receive prompt notification of such special meetings.
Disclosure of Potential Conflicts of
Interest.
Directors must disclose to the rest of the
members of the board of directors any potential conflict of interest they may
have with respect to a matter under discussion and, if appropriate, refrain
from voting on a matter on which they may have a conflict.
Board Review.
The board of directors shall review and, where
appropriate, approve fundamental operating, financial, risk management and
other corporate strategies, as well as major plans and objectives and shall
monitor the effectiveness of management policies and decisions, including the
execution of strategies.
Public Statements.
Absent unusual circumstances, Abbott’s senior
management, as opposed to individual directors, provide the public voice of
Abbott.
III. Board and Committee Meetings
Meetings.
The board of directors generally meets at
least six times a year, on dates selected by the chairman of the board.
Directors will be given as much advance notice of meeting dates as reasonably
practicable.
Agenda.
The chairman of the board, in consultation
with the other board members, shall set the agenda for meetings of the board of
directors. The chairman of the board, in consultation with the chairman of each
committee, shall set the agenda for the meetings of the applicable committee.
Directors and committee members may suggest agenda items and may raise other
matters at meetings.
Executive Sessions.
The independent directors generally meet at
least twice a year in regularly scheduled executive sessions and may hold such
additional executive sessions as they determine necessary or appropriate. The
chairman of the nominations and governance committee shall normally preside at
these executive sessions.
IV. Board Committees
Audit, Nominations and Governance,
Compensation, and Public Policy Committees.
The board of directors shall at all times have
an audit committee, a nominations and governance committee, a compensation
committee, and a public policy committee. All of the members of these
committees shall be independent. Each of these committees shall operate in
accordance with applicable law, its charter, and the applicable rules of the
Securities and Exchange Commission and the New York Stock Exchange. Current
board practice is that the chairmen of these committees should not serve in
such capacity for more than five consecutive years.
Executive Committee.
The board of directors shall also have an
executive committee with the power to act on behalf of the board of directors,
except for powers reserved to the full board of directors pursuant to Illinois
law, Abbott’s by-laws or any standing board resolution. The chairman of the
board shall be the chairman of the executive committee. A majority of these
members shall be independent.
Other Committees.
The board of directors may also establish such
other committees as it deems appropriate and delegate to those committees any
authority permitted by applicable law and Abbott’s by-laws as the board of
directors sees fit, other than the responsibilities delegated to the audit
committee, nominations and governance committee, and compensation committee in
their charters or reserved to the full board of directors.
V. Director Access to Management and Independent Advisors
Access to Abbott’s Management.
Each director shall have complete access to
Abbott’s management. Abbott’s management will make itself available to answer
the directors’ questions about Abbott between meetings.
Independent Advisors.
The board of directors and board committees
may engage and consult with financial, legal, or other independent advisors at
Abbott’s expense.
VI. Director Compensation and Indemnification
Role of the Compensation Committee.
Each year, in accordance with the terms of its
charter, the compensation committee shall review the compensation paid to the
members of the board of directors and give its recommendations to the board of
directors regarding both the amount of director compensation that should be
paid and the allocation of that compensation between equity-based awards and
cash.
Director Compensation Guidelines.
The Compensation Committee shall establish
director compensation guidelines and review them as appropriate. In
recommending director compensation, the Compensation Committee shall take
comparable director fees into account and review any arrangement that could be
viewed as indirect director compensation, including substantial charitable
contributions made to organizations with which a director is affiliated and any
consulting contracts with, or other indirect compensation to, a director.
Indemnification.
In accordance with the terms of its articles
of incorporation, Abbott shall indemnify the members of the board of directors
to the fullest extent permitted by law.
VII. Director Orientation and Continuing Education
Director Orientation.
Following their election, every newly elected
member of the board of directors shall participate in an orientation program
established by Abbott. This orientation program shall include presentations
designed to familiarize directors with Abbott and its strategic plans, its
significant financial, accounting and risk management issues, its Code of
Business Conduct, compliance programs and other controls, its senior
management, and its internal and independent auditors. The program shall also
address procedures of the board of directors, directors’ responsibilities, the
board’s Corporate Governance Guidelines and board committee charters.
Continuing Education.
The board of directors encourages its members
to participate in continuing education programs sponsored by universities,
stock exchanges or other organizations or consultants specializing in director
education. Directors may attend continuing education programs at Abbott’s
expense.
VIII. Management Evaluation and Succession
Evaluation of Chief Executive Officer and
Other Management.
The nominations and governance committee shall
annually report to the board of directors on its evaluation of the chief
executive officer’s performance. The board of directors shall review this
report, including discussing it outside the presence of the management
directors, to satisfy itself that the chief executive officer is providing the
long-term and short-term leadership that the board of directors deems necessary
for Abbott. In addition, the nominations and governance committee, with the
input of the chief executive officer, shall conduct an annual assessment of the
performance and development of Abbott’s other senior management.
Succession Planning.
Succession planning for Abbott’s senior
management positions is critical to Abbott’s long-term success. The nominations
and governance committee shall annually review Abbott’s succession plans and
report on them to the board of directors. The nominations and governance
committee shall also identify potential successors for the chief executive
officer position, although this does not mean that it must at all times have
selected a particular individual as the designated successor chief executive
officer. The chief executive officer shall participate in this process by
providing the nominations and governance committee with recommendations or
evaluations of potential successors and identifying any development plans that
the chief executive officer recommends for such individuals. The chief
executive officer is expected to recommend to the board of directors on an
ongoing basis one or more successors in the event of an unexpected inability of
the chief executive officer to continue to serve.
IX. Annual Performance Evaluation of the Board
Self-Evaluation by the Board of
Directors.
Each year, the board of directors will conduct
a self-evaluation to determine whether it and its committees are functioning
effectively. The nominations and governance committee shall be responsible for
seeking comments from all directors and reporting its evaluation of board and
committee performance to the board of directors on an annual basis. The full
board of directors will discuss the evaluation report to determine what, if
any, action should be undertaken to improve board and board committee
performance.
Statement of Principles.
These Guidelines are a statement of principle
and intent. The board of directors reserves the right, unless otherwise
required by law or the rules of the New York Stock Exchange or the Securities
and Exchange Commission, to make exceptions to these guidelines where it
believes such action is warranted due to special circumstances and is in the
best interest of Abbott.
Evaluation of the Corporate Governance
Guidelines.
The board of directors recognizes that these
Corporate Governance Guidelines must continue to evolve to meet the changing
needs of Abbott and its shareholders and changing requirements. The board of
directors, with the assistance of its nominations and governance committee,
will periodically review these Corporate Governance Guidelines to determine
whether any changes are appropriate.
X. Stock Ownership Guidelines
Stock Ownership for
Directors.
Directors are encouraged to make a substantial
investment in Abbott stock. Accordingly, the Board of Directors has set minimum
stock ownership guidelines for directors. Each director is required to own
5,000 shares within five years of joining the Board or as soon thereafter as
practicable. Restricted stock units awarded to a director under the Abbott
Laboratories 1996 Incentive Stock Program will be included in the target
goal.
Stock Ownership for Officers.
Officers are encouraged to make a substantial
investment in Abbott stock. Accordingly, the board of directors has set minimum
stock ownership guidelines for officers in the following amounts:
- Chairman and Chief Executive Officer – 175,000 shares;
- Presidents and Chief Operating Officer - 100,000 shares;
- Executive and Senior Vice Presidents – 50,000 shares; and
- Vice Presidents – 25,000 shares.
Ownership of the target number of shares
includes stock owned directly by the officer, shares held in the officer's name
in the Abbott Laboratories Stock Retirement Plan, restricted shares and stock
beneficially owned by the officer through trusts, dividend reinvestment plans,
and similar arrangements. Each officer is expected to attain his/her ownership
target within five years of appointment to the position of Vice President,
Executive or Senior Vice President, President and Chief Operating Officer, and
Chairman and Chief Executive Officer, respectively.
XI. Code of Business Conduct
Directors shall adhere to Abbott’s Code of Business Conduct as it applies to
directors. Those portions of the Code which are applicable to directors are
summarized below.
Fair Dealing.
Directors shall deal honestly and ethically
with Abbott and on Abbott’s behalf in all matters.
Avoiding Conflicts of Interest.
Directors shall avoid actual or apparent
conflicts with Abbott’s interests.
As stated in Part II of these Guidelines,
directors must disclose to the rest of the members of the board of directors
any potential conflict of interest they may have with respect to a matter under
discussion and, if appropriate, refrain from voting on a matter on which they
may have a conflict.
Subject to the New York Stock Exchange listing
standards for independence, a non-management director may own a significant
financial interest in any firm or corporation which does or seeks to do
business with Abbott, or which is a competitor of Abbott. However, such
director must remove himself or herself from any board discussion or other
activity that directly impacts the relationship between Abbott and such firm or
corporation.
Subject to the New York Stock Exchange listing
standards for independence, a non-management director may hold a directorial,
managerial, employment, consulting or other position with any firm or
corporation which does or seeks to do business with Abbott. Again, however,
such director must remove himself or herself from any board discussion or other
activity that directly impacts the relationship between Abbott and such firm or
corporation.
As stated in Part I of these Guidelines, no
director shall serve on the board of directors of any Abbott competitor.
Subject to the New York Stock Exchange listing standards for independence, a
non-management director may hold a managerial, employment, consulting or other
position with an Abbott competitor only if the board of directors determines
that such position is not in conflict with this Principle.
Abbott Opportunities.
Directors shall advance Abbott’s business
interests when the opportunity to do so arises.
Protection of Confidential Information of
Customers and Others.
Directors shall protect the confidential
information of customers, suppliers and other parties, which they receive in
their capacity as directors of Abbott.
Compliance with Laws.
Directors shall comply with all laws, rules
and regulations applicable to their capacity as directors of Abbott, including,
among others, the insider trading laws, rules and regulations.
Protection of Abbott’s Assets.
Directors shall protect Abbott’s assets, and
promote their efficient and legitimate business use.
Protection of Abbott’s Confidential
Information.
Directors shall protect Abbott’s confidential
information.
Reporting of any Illegal or Unethical
Behavior.
Directors shall report violations of laws,
rules, regulations or the Code of Business Conduct to the Chairman of the Board
and Chief Executive Officer, the Vice President and Chief Ethics and Compliance
Officer, or any other appropriate Abbott personnel.
Waivers.
Any waiver of the Code of Business Conduct for
a director may be made only by the board of directors.
Abbott shall make prompt public disclosure, in
accordance with applicable laws, rules and regulations, of any such waiver.
Exhibit A: Abbott Laboratories Outline for Directorship Qualifications
The following characteristics shall be taken into consideration when
selecting nominees for the Board. Individual nominees do not need to satisfy
all the qualifications listed below and there is no requirement that all
qualifications be represented on the Board.
In addition to the specific characteristics set forth below, board members
should, at a minimum, have backgrounds that when combined provide a portfolio
of experience and knowledge that will serve Abbott’s governance and strategic
needs. Board candidates will be considered on the basis of a range of criteria
including broad-based business knowledge and relationships, prominence and
excellent reputations in their primary fields of endeavor, as well as a global
business perspective and commitment to good corporate citizenship. Directors
should have demonstrated experience and ability that is relevant to the Board
of Directors’ oversight role with respect to Abbott’s business and affairs.
1. Strong management experience, ideally with major public companies with
successful multinational operations, including, but not limited to:
A. Active or recently retired Chairmen and
Chief Executive Officers.
B. Presidents and Chief Operating
Officers.
C. Executive or Group Vice Presidents with
short term potential for movement to item A or B above.
2. Other areas of experience which are
desirable for representation on the Abbott Board, include, but are not limited
to:
A. Medicine.
B. Hospital Administration.
C. Medical and Scientific Research and
Development.
D. Finance.
E. International Business.
3. Other qualifications that would be helpful in addition to the above,
include, but are not limited to:
A. Senior level government experience.
B. Academic administration.
4. The Board shall include a range of ages and a diversity of ethnicity,
gender and geography.
5. Primary characteristics required in new Board candidates.
A. They must be first and foremost able and
willing to represent the stockholders’ short and long-term economic
interests.
B. They must be able to contribute to the
evaluation of the existing management of the Company.
C. They must also be cognizant of the
responsibilities of the Company to:
(1) Its employees.
(2) Its customers.
(3) Civic and social issues.
(4) Regulatory authorities.
D. They will be willing to take the necessary
time to properly prepare for Board and Committee meetings at a minimum based on
a thorough review of the material supplied before each Board meeting.
6. Primary characteristics required for renomination of incumbent
Directors.
A. Incumbent Directors should continue to meet
the general qualifications outlined above and, in addition, should abide by the
following criteria:
(1) Adequate preparation for Board and
Committee meetings, including a thorough review of and familiarity with the
written materials supplied before each meeting.
(2) Participation in and contributions to
Board and Committee discussions through useful and pertinent suggestions,
questions, and comments.
(3) Providing on-going advice and counsel to
management on the Director’s own initiative and when requested by
management.
(4) Regular attendance at Board and Committee
meetings.
(5) Maintaining an independent familiarity
with the external environments in which the Corporation operates and especially
in the Director’s own particular fields of expertise.