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 ☒ |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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5301 Stevens Creek Boulevard
Santa Clara, California 95051 (800) 227-9770
Notice of Annual Meeting of Stockholders
TIME |
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8:00 a.m., Pacific Time, on Thursday, March 14, 2024 |
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PLACE |
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5301 Stevens Creek Blvd. |
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Santa Clara, California 95051 |
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AGENDA |
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1. To elect four directors to a three-year term. At the annual meeting, the Board of Directors intends to present the following nominees for election as directors: |
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• Mala Anand • Koh Boon Hwee • Michael R. McMullen and • Daniel K. Podolsky, M.D. |
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2. To approve, on a non-binding advisory basis, the compensation of our named executive officers. |
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3. To ratify the Audit and Finance Committee’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. |
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4. To vote on a stockholder proposal regarding simple majority vote. |
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5. To consider such other business as may properly come before the annual meeting. |
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RECORD DATE |
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You are entitled to vote at the annual meeting and at any adjournments, postponements or continuations thereof if you were a stockholder at the close of business on January 23, 2024. |
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VOTING |
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For instructions on voting, please refer to the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail or, if you received a hard copy of the proxy statement, on your enclosed proxy card. |
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ADMISSION |
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To attend the annual meeting, you will need to have pre-registered by 5:00 p.m., Pacific Time, on March 1, 2024. Specific instructions on pre-registration can be found in the General Information section of this proxy statement.
To be admitted to the annual meeting, you must present proof of ownership of our stock as of the record date. This can be a brokerage statement or letter from a bank or broker indicating ownership on January 23, 2024, the Notice of Internet Availability of Proxy Materials, a proxy card, or legal proxy or voting instruction card provided by your broker, bank or nominee. You may also be asked to present a form of photo identification such as a driver’s license or passport. The annual meeting will begin promptly at 8:00 a.m.,Pacific Time.
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WEBCAST: |
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If you are unable to attend the annual meeting in person, you may listen through the Internet or by telephone. To listen to the live webcast, log on at www.investor.agilent.com and select the link for the webcast. To listen by telephone, please call (888) 330-2388 (international callers should dial (240) 789-2707). The meeting identification number is 87316. The webcast will begin at 8:00 a.m., Pacific Time and will remain on the company’s website for one year. You cannot record your vote or ask questions on this website or at this phone number. |
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By Order of the Board of Directors |
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P. Diana Chiu |
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Vice President, Interim General Counsel and Secretary |
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This proxy statement and the accompanying proxy card are being first sent or given to the stockholders on or about February 2, 2024.
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SUMMARY INFORMATION |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is subject to the safe harbors created therein. The forward-looking statements contained herein are generally identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on the beliefs and assumptions of our management and on currently available information. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our annual report on Form 10-K for the fiscal year ended October 31, 2023. We undertake no responsibility to publicly update or revise any forward-looking statement.
PROXY SUMMARY
The following is a summary which highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you are urged to read the entire proxy statement carefully before voting.
Voting Matters and Vote Recommendations
We currently expect to consider four items of business at the 2024 annual meeting. The following table lists those items of business and our Board’s vote recommendation.
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PROPOSAL |
BOARD |
REASONS FOR RECOMMENDATION |
MORE |
(1) |
Election of four directors to a three-year term |
FOR |
The Board and the Nominating/Corporate Governance Committee believe our nominees possess the skills, experience and qualifications to effectively monitor performance, provide oversight and support management’s execution of our long-term strategy. |
7 |
(2) |
Advisory vote to approve the compensation of our named executive officers |
FOR |
Our executive compensation program incorporates a number of compensation governance best practices and reflects our commitment to pay for performance. |
58 |
(3) |
Ratification of the independent registered public accounting firm |
FOR |
Based on their assessment, the Board and the Audit and Finance Committee believe that the appointment of PricewaterhouseCoopers LLP is in the best interests of the company and our stockholders. |
59 |
(4) |
Stockholder proposal regarding simple majority vote |
NO RECOMMENDATION |
The Board makes no recommendation on this proposal. |
62 |
2
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SUMMARY INFORMATION |
Director Nominees
Our Board is currently divided into three classes serving staggered three-year terms. The following table provides summary information about each of the four director nominees who are being voted on at the annual meeting.
NAME |
AGE |
DIRECTOR |
OCCUPATION |
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COMMITTEE MEMBERSHIPS |
Mala Anand |
56 |
2019 |
Corporate Vice President, Customer Experience of |
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Compensation |
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Microsoft |
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Nominating/Corporate Governance |
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Koh Boon Hwee |
73 |
2003 |
Non-Executive Chairman of |
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Executive |
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Singapore Exchange Ltd. |
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Nominating/Corporate Governance |
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Michael R. McMullen |
62 |
2015 |
President & Chief Executive Officer and Director of |
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Agilent Technologies, Inc. |
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Daniel K. Podolsky, M.D. |
70 |
2015 |
President of the |
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Audit and Finance |
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University of Texas Southwestern Medical Center |
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Nominating/Corporate Governance |
Corporate Governance
The Board is committed to sound and effective governance practices that it believes promote long-term stockholder value and strengthen Board and management accountability to our stockholders, customers and other stakeholders. The following table highlights many of our key governance practices. Specific details on our governance practices can be found starting on page 16.
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Ten of our eleven directors are independent |
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Annual Board self-assessment process, including peer evaluations |
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Independent standing Board committees |
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Majority voting and director resignation policy in uncontested director elections |
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Strong independent Chairperson |
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Continued assessment of highly qualified, diverse and independent candidates for nomination to the Board |
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Regular meetings of our independent directors without management present |
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Strong focus on pay-for-performance |
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Diverse Board with an effective mix of skills, experience and perspectives |
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Proactive stockholder engagement |
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Three new independent directors added during the past five years |
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Policies prohibiting hedging, short selling and pledging of our common stock |
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Varied lengths of Board tenure with an average tenure of ten years |
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Robust stock ownership guidelines for executive officers and directors |
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Proxy access for our stockholders |
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Robust enterprise risk management approach, overseen by the Board through its Audit and Finance Committee |
Stockholder Engagement
We have a year-around stockholder engagement program that reaches a wide variety of stockholders, market participants and potential investors. This program involves periodic discussions with respect to various matters that may be of interest, such as our business, financial and operating performance, corporate governance initiatives, ESG-related disclosures and practices, diversity and inclusion topics, human capital management, risk management, compensation and corporate priorities. Feedback and perspectives from investors gathered from our engagement programs are regularly considered by our management team and Board, as the company seeks to incorporate valuable investor insights into deliberations and decision-making processes.
3
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SUMMARY INFORMATION |
Oversight of Cybersecurity Risk
Our security program is based on industry standards including ISO 27002 Code of Practice, NIST and the COBIT 5 Framework. Our policies, standards and operating procedures provide a comprehensive approach to maintain the confidentiality, integrity, and availability of the data and systems in our environment in order to meet our business goals and customer needs.
Security is a company-wide approach, and we continuously invest in our people, processes and tools to strengthen our security posture to protect both Agilent’s and our customers’ data. This includes educating our workforce on an on-going basis of cybersecurity threats and their role in our overall security approach. All users, including our employees and third party contractors, are required to complete annual training and to confirm their understanding of and compliance with our “Acceptable Use of Information Systems Policy” to retain access to our systems.
To support our company-wide approach, we have a dedicated IT Information Security and Risk Management (ISRM) department that is accountable for the following key areas: policy, standards and operating procedures, IT compliance, IT risk management, threat and vulnerability management, security awareness and security operations, which includes comprehensive security incident management, reporting and response protocols that are tested and maintained on a regular basis. We also engage external consultants to complete independent program and capability assessments, including scanning of our systems for vulnerabilities. The head of our ISRM organization, together with our Chief Information Officer, provide periodic updates to the Audit and Finance Committee regarding our cybersecurity program, including information about cyber risk management governance and status updates on various projects intended to enhance the overall cybersecurity posture of the company.
Corporate Social Responsibility (including as to ESG Matters)
We are strongly committed to progress on environmental, social responsibility and governance issues. This commitment is an important part of our mission – to advance the quality of life – and aligned with our core business objectives. In the past year, we have continued to take proactive actions to protect the health and safety of our employees, customers, partners and suppliers. We announced our commitment to achieve net-zero greenhouse gas emissions by 2050. We believe that, with our culture of innovation, we are in a strong position to contribute important solutions to reducing greenhouse gas emissions. As a company, we are committed to continued sustainable business operations, thoughtful social responsibility initiatives and maintaining governance structures that promote effective oversight.
Environmental Sustainability
In fiscal year 2021, we announced our commitment to achieve net-zero greenhouse gas emissions no later than 2050. To achieve these goals, we have also committed to interim greenhouse gas reduction targets. By 2030, we aim to reduce absolute scope 1 and 2 emissions by 50% and scope 3 emissions by at least 30% (with a stretch goal of 40%) from a base year of 2019. In addition, we plan to continue to invest in renewable energy and focus on three areas where our carbon footprint is greatest: purchased goods and services, sold products, and transportation and distribution. As part of our climate action plan, we have established near and long-term emission reduction targets to limit planetary warming to 1.5°C above pre-industrial levels which have been approved by the Science Based Targets initiative ("SBTi"). To provide investors with meaningful sustainability information, we also announced that we are adopting the Task Force on Climate-related Financial Disclosures (TCFD) recommendations for disclosing climate-related risks, alongside our reporting in accordance with SASB and GRI.
Diversity and Inclusion
As a global company, much of our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our entire workforce, from providing managers transparency of their workforce pay equity to working with managers to develop strategies for building diverse teams and promoting the advancement of leaders from different backgrounds. Agilent is committed to creating a diverse work environment and is proud to be an equal opportunity employer. We believe in an inclusive workforce, where employees from a number of cultures and countries are engaged and encouraged to leverage their collective talents. As of October 31, 2023, approximately 38% of our full-time employees were female. Approximately 42% of our board is comprised of directors representing traditionally underrepresented groups as of December 31, 2023. We also have launched a number of company-wide initiatives including employee-network groups aimed at promoting engagement of women, Black, LGBTQIA+, Asian, and Hispanic and Latino employees. To further our commitment to global diversity and inclusion efforts, in 2020 we hired an associate vice president of diversity and inclusion and launched a number of company-wide initiatives.
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SUMMARY INFORMATION |
Oversight and Management of Corporate Social Responsibility (including as to ESG Matters)
Our Board, through its Nominating/Corporate Governance Committee, oversees Agilent’s environmental, social and governance (ESG) program and the progress of our ESG efforts and initiatives. The Nominating/Corporate Governance Committee formally reviews our ESG efforts, including our sustainability initiatives, within the organization and reports to the Board on a regular basis. The Nominating/Corporate Governance Committee charter is located in the Investor Relations section of our website and can be accessed by clicking on “Committee Charters” or “Governance Documents” in the “Governance” section of our investor relations web page at www.investor.agilent.com. The Board and its Compensation Committee oversee the administration of the company’s employee benefits, including health and compensation plans.
For more information, refer to our annual Environmental, Social and Governance report, which is available on our website. Our Environmental, Social and Governance report and website are not part of or incorporated by reference into this proxy statement.
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TABLE OF CONTENTS |
2024 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
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Page |
7 |
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Director Nominees for Election to New Three-Year Terms That Will Expire in 2027 |
8 |
10 |
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12 |
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14 |
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Summary of Non-Employee Director Annual Compensation for the 2023 Plan Year |
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53 |
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PROPOSAL 2 – ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS |
58 |
PROPOSAL 3 – RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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A-1 |
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PROPOSAL 1 - ELECTION OF DIRECTORS |
PROPOSAL 1 – ELECTION OF DIRECTORS
Our Board is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires. Our Bylaws, as amended, allow the Board to fix the number of directors by resolution. Our Board currently consists of eleven directors divided into three classes.
The terms of our four directors Class III will expire at this annual meeting. The current composition of the Board and the term expiration dates for each director are as follows:
Class |
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Directors |
Term Expires |
I |
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Hans E. Bishop, Otis W. Brawley, M.D. and Mikael Dolsten, M.D., Ph.D. |
2025 |
II |
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Heidi K. Kunz, Sue H. Rataj, George A. Scangos, Ph.D. and Dow R. Wilson |
2026 |
III |
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Mala Anand, Koh Boon Hwee, Michael R. McMullen and Daniel K. Podolsky, M.D. |
2024 |
Please review our Director Qualifications Matrix and related disclosure below for deeper insight into the skills, experiences and diversity of our carefully constructed board of directors as a whole.
About Agilent
Agilent Technologies Inc. is a global leader in the life sciences, diagnostics, and applied chemical markets, delivering insight and innovation that advance the quality of life. Agilent’s full range of solutions includes instruments, software, services, and expertise that provide trusted answers to our customers' most challenging questions. We currently have three business segments comprised of the life sciences and applied markets business, the diagnostics and genomics business and the Agilent CrossLab business.
Director Qualification and Diversity Matrix
The members of the Board have a diversity of experience and a wide variety of backgrounds, skills, qualifications and viewpoints that strengthen their ability to carry out their oversight role on behalf of our stockholders. The following matrix is provided to illustrate the knowledge, skills and experience of the directors that serve on our Board, as well as certain diverse characteristics. The matrix does not encompass all of the knowledge, skills and experience of our directors, and the fact that a particular knowledge, skill or experience is not listed does not mean that a director does not possess it. In addition, the absence of a particular knowledge, skill or experience with respect to any of our directors does not mean the director in question is unable to contribute to the decision-making process in that area. However, a mark indicates a specific area of focus or expertise that the director brings to our Board. The determination of which particular knowledge, skill or experience is an area of focus or expertise for a director is based on their prior business and industry experience, training and background. More information on each director’s qualifications and background can be found in the following director biographies. We regularly review the attributes required of Board members in order to better facilitate our long-term goals and operational performance, enhance our corporate culture and promote diversity and inclusiveness at our company.
Anand |
Bishop |
Brawley |
Dolsten |
Koh |
Kunz |
McMullen |
Podolsky |
Rataj |
Scangos |
Wilson |
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Knowledge, Skills and Experience |
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International |
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✓ |
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✓ |
✓ |
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✓ |
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✓ |
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✓ |
Life Sciences/ Healthcare |
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✓ |
✓ |
✓ |
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✓ |
✓ |
✓ |
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✓ |
✓ |
Technology/ Innovation Strategy |
✓ |
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✓ |
✓ |
✓ |
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✓ |
✓ |
✓ |
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M&A |
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✓ |
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✓ |
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✓ |
Public Company Executive |
✓ |
✓ |
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✓ |
✓ |
✓ |
✓ |
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✓ |
✓ |
✓ |
Accounting/Finance |
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✓ |
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✓ |
Branding/Marketing |
✓ |
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✓ |
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Regulatory |
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✓ |
✓ |
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Age, Gender, Race/Ethnicity |
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Age |
56 |
59 |
64 |
65 |
73 |
69 |
62 |
70 |
66 |
75 |
64 |
Gender |
F |
M |
M |
M |
M |
F |
M |
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F |
M |
M |
Race/Ethnicity* |
A |
C |
AA |
C |
A |
C |
C |
C |
C |
C |
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PROPOSAL 1 - ELECTION OF DIRECTORS |
“C” refers to Caucasian |
“A” refers to Asian/Pacific Islander |
Director Nominees for Election to New Three-Year Terms That Will Expire in 2027
Directors elected at the 2024 annual meeting will hold office for a three-year term expiring at the annual meeting in 2027 (or until their respective successors are elected and qualified, or until their earlier death, resignation or removal). All nominees are currently serving as our directors. To the best knowledge of the Board, all of the nominees are able and willing to serve. Each nominee has consented to be named in this proxy statement and to serve if elected. Information regarding each nominee is provided below as of December 31, 2023. There are no family relationships among our executive officers and directors.
MALA ANAND |
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Age: 56 |
Board Committees: |
Other Public Directorships: |
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Director Since: March 2019 |
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Compensation |
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None |
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Nominating/Corporate Governance |
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Former Public Directorships Held During the Past Five Years: |
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None |
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Ms. Anand has served as Corporate Vice President, Customer Experience of Microsoft since November 2019. Prior to joining Microsoft, she served as President, Intelligent Enterprise Solutions and Industries of SAP SE from October 2016 to October 2019. From July 2014 to October 2016, Ms. Anand served as Senior Vice President, Data & Analytics and Automation Software Platform group at Cisco Systems, Inc. and as Vice President and General Manager, Services Platform Group at Cisco from October 2007 to June 2014, and she holds multiple technology patents. Prior to that, Ms. Anand held various senior executive positions in software products, go-to-market, services, and technology businesses and served as entrepreneur in residence for Kleiner Perkins Caufield and Byers, a venture capital firm. She holds a bachelor’s degree in computer science from the University of Massachusetts and a master’s degree in computer science from Brown University.
Qualifications
Ms. Anand possesses significant leadership and experience in software and analytics, which provides her valuable insight into the role of digital technology in the life science field. In addition, Ms. Anand has executive and operation expertise gained from executive management experience at large, global organizations.
KOH BOON HWEE |
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Age: 73 |
Board Committees: |
Other Public Directorships: |
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Director Since: May 2003 |
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Executive |
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Singapore Exchange Ltd. |
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Nominating/Corporate Governance |
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Former Public Directorships Held During the Past Five Years: |
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Far East Orchard Ltd. |
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Sunningdale Tech, Ltd. |
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Yeo Hiap Seng Limited |
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Mr. Koh has served as non-Executive Chairperson of our Board since March 2017. As of January 2023, Mr. Koh is the non-Executive Chairman of the Singapore Exchange Ltd. He has been the managing partner of Altara Ventures Pte. Ltd., a venture capital fund, since December 2011. Mr. Koh has served as the non-Executive Chairperson of Sunningdale Tech Ltd., a privately held company, since April 2021. He served as the non-Executive Chairperson and Chief Executive Officer of Sunningdale Tech Ltd., a public company, from January 2009 to March 2021 and served as its Executive Chairperson and Chief Executive Officer from July 2005 to January 2009. He served as the non-Executive Chairperson of Far East Orchard Ltd. from April 2013 to April 2022; served as the non-Executive Chairperson of Yeo Hiap Seng Ltd. from April 2010 to December 2019; as Executive Director of MediaRing Limited from February 2002 to August 2009; Chairperson of DBS Bank Ltd. from January 2006 to April 2010; Chairperson of Singapore Airlines from July 2001 to December 2005 and Chairperson of Singapore Telecom from April 1992 to August 2001. Mr. Koh spent fourteen years with Hewlett-Packard Company in its Asia Pacific region.
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PROPOSAL 1 - ELECTION OF DIRECTORS |
Qualifications
Mr. Koh possesses a strong mix of leadership and operational experience from his various senior positions with Sunningdale Tech, AAC Technologies, MediaRing Limited, DBS Bank, Singapore Airlines and Singapore Telecom. In addition, Mr. Koh has deep experience in the Asia Pacific region and brings that knowledge and perspective to the Board. Mr. Koh has extensive experience with our company and its predecessor, Hewlett-Packard, having served on our Board for over 10 years and having spent 14 years with Hewlett-Packard.
MICHAEL R. MCMULLEN |
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Age: 62 |
Board Committees: |
Other Public Directorships: |
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Director Since: March 2015 |
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Executive |
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KLA Corporation |
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Former Public Directorships Held During the Past Five Years: |
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Coherent, Inc. |
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Mr. McMullen has served as Chief Executive Officer since March 2015 and as President since September 2014. From September 2014 to March 2015, he also served as Chief Operating Officer. From September 2009 to September 2014, he served as Senior Vice President, Agilent and President, Chemical Analysis Group. Prior to that, he served in various capacities for Agilent, including as our Vice President and General Manager of the Chemical Analysis Solutions Unit of the Life Sciences and Chemical Analysis Group and Country Manager for Agilent's China, Japan and Korea Life Sciences and Chemical Analysis Group. Prior to that, Mr. McMullen served as Controller for the Hewlett‑Packard company and Yokogawa Electric Joint Venture from July 1996 to March 1999. Mr. McMullen was appointed to the KLA Corporation Board of Directors in July 2023. He served as a member of the Board of Directors of Coherent, Inc. from September 2018 to July 2022.
Qualifications
Mr. McMullen has broad and deep experience with the company and its businesses having been an employee of the company and its predecessor, Hewlett-Packard, for over 30 years. During the course of his career, he has developed considerable expertise in, and in-depth knowledge of, our businesses from the perspective of an individual contributor and at numerous levels of management. This perspective gives valuable insight to the Board.
DANIEL K. PODOLSKY, M.D. |
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Age: 70 |
Board Committees: |
Other Public Directorships: |
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Director Since: July 2015 |
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Audit and Finance |
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None |
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Nominating/Corporate Governance |
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Former Public Directorships Held During the Past Five Years: |
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None |
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Dr. Podolsky has served as President of the University of Texas Southwestern Medical Center, a leading academic medical center, patient care provider and research institution, since September 2008. Previously Dr. Podolsky also served concurrently as Mallinckrodt Professor of Medicine at Harvard Medical School and the Chief of Gastroenterology at Massachusetts General Hospital. From 2005 to 2008, Dr. Podolsky served as Chief Academic Officer and Faculty Dean, Academic Programs of Partners Healthcare System, Inc., a non-profit health care system committed to patient care, research, teaching and service. Dr. Podolsky holds the Philip O’Bryan Montgomery, Jr., M.D. Distinguished Presidential Chair in Academic Administration, and the Doris and Bryan Wildenthal Distinguished Chair in Medical Science. He is a member of the Board of the Southwestern Medical Foundation.
Qualifications
Dr. Podolsky’s current responsibilities in leading a large academic medical center give him relevant insight into healthcare delivery and bring scientific expertise to the Board.
9
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PROPOSAL 1 - ELECTION OF DIRECTORS |
Vote Required
Under our majority voting standard, in uncontested elections of directors, such as this election, each director must be elected by the affirmative vote of a majority of the votes cast by the shares present at the annual meeting or represented by proxy and entitled to vote. A “majority of the votes cast” means that the number of votes cast “FOR” a director must exceed 50% of the votes cast with respect to that director, including votes to withhold authority. Abstentions and broker non-votes will not count as a vote cast and thus will have no effect in determining whether a director nominee has received a majority of the votes cast.
The Board of Directors recommends a vote FOR the election to the Board of each of the foregoing nominees.
The directors whose terms are not expiring this year and who will continue to serve as a director are listed below. They will continue to serve as directors for the remainder of their terms or such other date, in accordance with our Bylaws. Information regarding each of such directors is provided below as of December 31, 2023.
Directors Whose Terms Expire in 2025
HANS E. BISHOP |
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Age: 59 |
Board Committees: |
Other Public Directorships: |
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Director Since: July 2017 |
• |
Compensation |
• |
Lyell Immunopharma, Inc. |
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• |
Nominating/Corporate Governance |
• |
Sana Biotechnology, Inc. |
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Former Public Directorships Held During the Past Five Years: |
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• |
Avanir Pharmaceuticals, Inc. |
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• |
Celgene Corporation |
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• |
Juno Therapeutics, Inc. |
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• |
JW (Cayman) Therapeutics Co. Ltd. |
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Mr. Bishop is the President, Co-Founder and Co-Chairman of Altos Labs, Inc. since January 2022. He is a member of the Board of Directors of Lyell Immunopharma, Inc. since August 2018. Mr. Bishop has served as Chairman of the Board of Directors of Sana Biotechnology, Inc. since August 2018. He has been a member of the board of directors of Ophirex, Inc. since March 2020. He served as a director of JW (Cayman) Therapeutics Co. Ltd. from September 2013 to December 2022. Mr. Bishop served as Chief Executive Officer of GRAIL, Inc. from June 2019 to October 2021, and served as a member of GRAIL’s Board of Directors from August 2016 to October 2021. He served as a member of the Board of Directors of Celgene Corporation from April 2018 to November 2019 when Celgene Corporation was acquired by Bristol-Myers Squibb Company. Mr. Bishop served as President, Chief Executive Officer and a member of the Board of Directors of Juno Therapeutics, Inc. from September 2013 to March 2018 when Juno was acquired by Celgene Corporation. From February 2012 until October 2012, Mr. Bishop was the chief operating officer of Photothera Inc., a late-stage medical device company owned by Warburg Pincus, and he continued working with Warburg Pincus as an Executive in Residence until October 2013. Prior to joining Photothera Inc., Mr. Bishop served as executive vice president and chief operating officer at Dendreon Corporation, a publicly traded biopharmaceutical company, from January 2010 to September 2011. Mr. Bishop has also served as the president of the specialty medicine business at Bayer Healthcare Pharmaceuticals Inc. from December 2006 to January 2010, where he was responsible for a diverse portfolio of neurology, oncology and hematology products.
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PROPOSAL 1 - ELECTION OF DIRECTORS |
Qualifications
Mr. Bishop brings a valuable set of skills to the Board through his broad experience as an operating officer within the pharmaceutical industry and executive experience in the biotechnology industry.
OTIS W. BRAWLEY, M.D. |
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Age: 64 |
Board Committees: |
Other Public Directorships: |
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Director Since: November 2021 |
• |
Compensation |
• |
Incyte Corporation |
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• |
Nominating/Corporate Governance |
• |
Lyell Immunopharma, Inc. |
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• |
PDS Biotechnology Corp |
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Former Public Directorships Held During the Past Five Years: |
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• |
None |
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Dr. Brawley has served as the Bloomberg Distinguished Professor of Oncology and Epidemiology at Johns Hopkins University since 2019. He has served on the board of directors of Incyte Corporation since September 2021. He is on the board of directors of Lyell Immunopharma, Inc. since April 2021. Dr. Brawley is a member of the board of directors of PDS Biotechnology, Inc. since November 2020. Dr. Brawley served as the Chief Medical and Scientific Officer at the American Cancer Society from 2007 to 2018. He served as an Internist and Oncologist and Professor of Hematology, Oncology, Medicine and Epidemiology at Emory University from 2001 to 2018. Dr. Brawley has served on the board of directors of Incyte Corporation, a public biotechnology company, since September 2021. He has served on the board of directors of Lyell Immunopharma, Inc., a public biotechnology company, since April 2021. He has served on the board of directors of PDS Biotechnology Corp, a public biotechnology company, since November 2020.
Qualifications
Dr. Brawley brings to the Board scientific expertise and relevant insight into healthcare delivery through his current responsibilities in a leading large academic medical center.
MIKAEL DOLSTEN, M.D., Ph.D. |
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Age: 65 |
Board Committees: |
Other Public Directorships: |
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Director Since: September 2021 |
• |
Audit and Finance |
• |
Vimian Group |
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• |
Nominating/Corporate Governance |
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Former Public Directorships Held During the Past Five Years: |
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• |
Karyopharm Therapeutics Inc. |
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Dr. Dolsten has served on the board of directors of Vimian Group, a public company supporting veterinary professionals, since April 2021. He has also served as President of Worldwide Research, Development and Medical, Chief Scientific Officer and Executive Vice President of Pfizer since 2010. He served as President of Worldwide Research and Development and Senior Vice President of Pfizer from May 2010 until December 2010 and President of Pfizer BioTherapeutics Research & Development Group and Senior Vice President of Pfizer from 2009 until 2010. From 2008 to 2009, Dr. Dolsten served as Senior Vice President of Wyeth Pharmaceuticals, Inc., a public biopharmaceutical company that was acquired by Pfizer in 2009, and President of Wyeth Research from 2008 to 2009. Prior to joining Wyeth, Dr. Dolsten was a Private Equity Partner at Orbimed Advisors, LLC and Executive Vice President, Head of Pharma Research at Boehringer Ingelheim, a pharmaceutical company. Dr. Dolsten also previously held research leadership positions at AstraZeneca plc, Pharmacia and Upjohn Company. Dr. Dolsten served on the board of directors of Karyopharm Therapeutics Inc., a public pharmaceutical company from March 2015 to December 2021.
Qualifications
Dr. Dolsten has significant experience in the pharmaceutical and biotechnology industries, including his experience serving in senior management positions with Wyeth Pharmaceuticals, Inc., Boehringer Ingelheim, AstraZeneca plc, Pharmacia and Upjohn Company. In addition, Dr. Dolsten brings considerable public company director experience as well as extensive experience within our industry and expertise in business finance.
11
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PROPOSAL 1 - ELECTION OF DIRECTORS |
Directors Whose Terms Expire in 2026
HEIDI K. KUNZ |
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Age: 69 |
Board Committees: |
Other Public Directorships: |
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Director Since: February 2000 |
• |
Compensation |
• |
Icosavax, Inc. |
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• |
Nominating/Corporate Governance |
• |
Phathom Pharmaceuticals, Inc. |
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Former Public Directorships Held During the Past Five Years: |
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• |
Avanos Medical, Inc. |
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• |
Financial Engines, Inc. |
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Ms. Kunz has served as a member of the Board of Directors of Phathom Pharmaceuticals, Inc. since September 2019. She is a member of the Board of Directors of Icosavax, Inc. since May 2021. She has served as Executive Vice President and Chief Financial Officer of Blue Shield of California from 2003 through 2012 and as Executive Vice President and the Chief Financial Officer of Gap, Inc. from 1999 to 2003. Prior thereto, Ms. Kunz served as the Chief Financial Officer of ITT Industries, Inc. from 1995 to 1999. From 1979 to 1995, she held senior financial management positions at General Motors Corporation, including Vice President and Treasurer.
Qualifications
Ms. Kunz possesses significant experience in management and financial matters, having served as the Chief Financial Officer of both public and private companies. Ms. Kunz previously served as the chairperson of our Audit and Finance Committee and was qualified as a financial expert under SEC guidelines. In addition, Ms. Kunz has considerable experience and expertise with our company having been a member of the Board for over 10 years.
SUE H. RATAJ |
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Age: 66 |
Board Committees: |
Other Public Directorships: |
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Director Since: September 2015 |
• |
Audit and Finance |
• |
Cabot Corporation |
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• |
Nominating/Corporate Governance |
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Former Public Directorships Held During the Past Five Years: |
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• |
Bayer A.G. |
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Ms. Rataj was elected as Cabot Corporation’s non-executive Chairman of the Board in March 2018. She was Chief Executive, Petrochemicals for BP, a global energy company, until she retired in April 2011. In this role, she held responsibility for all of BP’s global petrochemical operations. Prior thereto, Ms. Rataj held a variety of senior management positions with BP, most recently serving as Group Vice President, Health, Safety, Operations and Technology for the Refining and Marketing Segment.
Qualifications
Ms. Rataj possesses significant leadership experience and business expertise from her executive positions with BP. Ms. Rataj has lived and worked extensively in the Asia Pacific and European regions and brings a global perspective to the Board. In addition, Ms. Rataj brings public company director experience and knowledge of public company management and governance practices.
GEORGE A. SCANGOS, Ph.D. |
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Age: 75 |
Board Committees: |
Other Public Directorships: |
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Director Since: January 2011 |
• |
Compensation (Chair) |
• |
VIR Biotechnology, Inc. |
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• |
Nominating/Corporate Governance |
• |
Voyager Therapeutics, Inc. |
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Former Public Directorships Held During the Past Five Years: |
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• |
Biogen Inc. |
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• |
Exelixis, Inc. |
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Dr. Scangos retired as Chief Executive Officer of Vir Biotechnology in April 2023. He has served as a director of Vir Biotechnology, Inc. since January 2017. From May 2023, Dr. Scangos is a director of Voyager Therapeutics, Inc. He is a co-founder and the Chairperson of the Board of Rezo Therapeutics, Inc. since May 2023. From July 2010 to January 2017, Dr. Scangos served as
12
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PROPOSAL 1 - ELECTION OF DIRECTORS |
the Chief Executive Officer and a director of Biogen Inc., a biopharmaceutical company. From 1996 to July 2010, Dr. Scangos served as the President and Chief Executive Officer of Exelixis, Inc., a drug discovery and development company. From 1993 to 1996, Dr. Scangos served as President of Bayer Biotechnology, where he was responsible for research, business development, process development, manufacturing, engineering and quality assurance of Bayer’s biological products. Before joining Bayer in 1987, Dr. Scangos was a Professor of Biology at Johns Hopkins University for six years. Dr. Scangos served as the Chair of the California Healthcare Institute in 2010 and was a member of the Board of the Global Alliance for TB Drug Development from 2006 until 2010. He serves on the Board of Advisors of the University of California, San Francisco and is currently an Adjunct Professor of Biology at Johns Hopkins University.
Qualifications
Dr. Scangos has extensive training as a scientist, significant knowledge and experience with respect to the biotechnology, healthcare and pharmaceutical industries, and a comprehensive leadership background resulting from service on various boards of directors and as an executive in the pharmaceutical industry.
DOW R. WILSON |
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Age: 64 |
Board Committees: |
Other Public Directorships: |
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Director Since: March 2018 |
• |
Audit and Finance (Chair) |
• |
Siemens Healthineers AG |
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• |
Nominating/Corporate Governance |
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Former Public Directorships Held During the Past Five Years: |
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• |
Varex Imaging Corporation |
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• |
Varian Medical Systems, Inc. |
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Mr. Wilson was appointed to serve on the Board of Directors of Siemens Healthineers AG in February 2023. He retired as President and Chief Executive Officer of Varian Medical Systems, Inc. in April 2021, a position he held since September 2012. Prior to that, Mr. Wilson served in various capacities with Varian, including Executive Vice President and Chief Operating Officer from October 2011 to September 2012 and Vice President Varian Medical and President of Varian Medical Oncology Systems business from January 2005 to September 2011. Prior to joining Varian Medical in 2005, Mr. Wilson held various senior management positions with GE Healthcare, a diversified industrial company.
Qualifications
Mr. Wilson has a deep knowledge of the medical and healthcare industries as well as possesses significant experience in management and financial matters through serving as President and Chief Executive Officer of Varian Medical Systems. He also has critical insight into operational requirements of a company with worldwide reach, knowledge of corporate and business unit strategies and operational expertise, gained from his executive management experience at GE Healthcare and Varian Medical Systems.
13
|
COMPENSATION OF NON-EMPLOYEE DIRECTORS |
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Directors who are employed by us do not receive any compensation for their Board services. As a result, Mr. McMullen, our Chief Executive Officer, received no additional compensation for his services as a director. The general policy of the Board is that compensation for non-employee directors should be a mix of cash and equity-based compensation that is competitive with the compensation paid to non-employee directors within our peer group. The non-employee directors’ compensation plan year begins on March 1 of each year (the “Plan Year”).
Summary of Non-Employee Director Annual Compensation for the 2023 Plan Year
The table below sets forth the annual retainer, equity grants and committee premiums for the non-employee directors and the Non-Executive Chairperson for the 2023 Plan Year. Each non-employee director may elect to defer all or part of the cash compensation to the 2005 Deferred Compensation Plan for Non-Employee Directors (“Director Deferral Plan”). Any deferred cash compensation is notionally invested into deferred shares of our common stock.
Board Compensation Elements |
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|
|
Member (1) |
Chair (2) |
Board Cash Retainer |
|
$105,000 |
$155,000 |
Audit and Finance Committee Retainer |
|
$10,000 |
$25,000 |
Compensation Committee Retainer |
|
– |
$20,000 |
Nominating/Corporate Governance Committee Retainer |
|
– |
– |
Annual Stock Grant (3) |
|
$235,000 |
value |
A non-employee director who joins the Board after the start of the Plan Year will have his or her cash retainer, equity grant and committee premium pro-rated based upon the remaining days in the Plan Year that the director will serve.
14
|
COMPENSATION OF NON-EMPLOYEE DIRECTORS |
Non-Employee Director Compensation for fiscal year 2023
The table below sets forth information regarding the compensation earned by each of our non-employee directors during the fiscal year ended October 31, 2023:
|
|
Cash |
|
Non-Executive |
|
Committee |
|
Audit Committee |
|
Stock |
|
|
|
|
Retainer (1) |
|
Chair Retainer (1) |
|
Chair Retainer (1) |
|
Member Retainer (1) |
|
Awards (2)(3) |
|
Total |
Name |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
Mala Anand |
|
105,000 |
|
– |
|
– |
|
– |
|
226,848 |
|
331,848 |
Hans E. Bishop |
|
105,000 |
|
– |
|
– |
|
– |
|
226,848 |
|
331,848 |
Otis W. Brawley, M.D. |
|
105,000 |
|
– |
|
– |
|
– |
|
226,848 |
|
331,848 |
Mikael Dolsten, M.D., Ph.D. |
|
105,000 |
|
– |
|
– |
|
10,000 |
|
226,848 |
|
341,848 |
Koh Boon Hwee (4) |
|
105,000 |
|
155,000 |
|
– |
|
– |
|
226,848 |
|
486,848 |
Heidi K. Kunz |
|
105,000 |
|
– |
|
– |
|
– |
|
226,848 |
|
331,848 |
Daniel K. Podolsky, M.D. |
|
105,000 |
|
– |
|
– |
|
10,000 |
|
226,848 |
|
341,848 |
Sue H. Rataj |
|
105,000 |
|
|
|
– |
|
10,000 |
|
226,848 |
|
341,848 |
George A. Scangos, Ph.D. |
|
105,000 |
|
– |
|
20,000 |
|
– |
|
226,848 |
|
351,848 |
Dow R. Wilson |
|
105,000 |
|
– |
|
– |
|
25,000 |
|
226,848 |
|
356,848 |
Non-Employee Director Reimbursement
Non-employee directors are reimbursed for travel and other out-of-pocket expenses incurred in connection with their service on our Board.
Non-Employee Director Stock Ownership Guidelines
Non-employee directors are required to own shares of our common stock having a value of at least six times an amount equal to the annual cash retainer. The shares counted toward the ownership guidelines include shares owned outright and the shares of our common stock in the non-employee director’s deferred compensation account. For recently appointed non-employee directors, these ownership levels must be attained within five years from the date of their initial election or appointment to the Board of Directors. All of our incumbent non-employee directors have either achieved the recommended ownership level or are expected to achieve the recommended ownership level within five years of their initial election or appointment to our Board.
15
|
CORPORATE GOVERNANCE |
CORPORATE GOVERNANCE
We have had formal corporate governance standards in place since our inception in 1999. We have reviewed internally and with the Board the provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), the rules of the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange’s (“NYSE”) corporate governance listing standards regarding corporate governance policies and processes and are in compliance with the rules and listing standards.
We have adopted charters for our Audit and Finance Committee, Compensation Committee, Executive Committee and Nominating/Corporate Governance Committee consistent with the applicable rules and standards. Our committee charters, Amended and Restated Corporate Governance Standards, Standards of Business Conduct and Director Code of Ethics are located in the Investor Relations section of our website and can be accessed by clicking on “Committee Charters” or “Governance Documents” in the “Governance” section of our investor relations web page at www.investor.agilent.com.
We currently separate the positions of chief executive officer and chairperson of the Board. Mr. Koh was appointed chairperson of the Board in March 2017. The responsibilities of the chairperson of the Board include: setting the agenda for each Board meeting in consultation with the chief executive officer; chairing the meetings of independent directors; and facilitating and conducting, with the Nominating/Corporate Governance Committee, the annual self-assessments by the Board and each standing committee of the Board, including periodic performance reviews of individual directors. Separating the positions of chief executive officer and chairperson of the Board allows our chief executive officer to focus on our day-to-day business, while allowing the chairperson of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management. The Board believes that having an independent director serve as chairperson of the Board is the appropriate leadership structure for the company at this time.
However, our Corporate Governance Standards permit the roles of the chairperson of the Board and the chief executive officer to be filled by the same or different individuals. This provides the Board with flexibility to determine whether the two roles should be combined in the future based on our needs and the Board’s assessment of our leadership from time to time. Our Corporate Governance Standards provide that in the event that the chairperson of the Board is also the chief executive officer, the Board may consider the election of an independent Board member as a lead independent director.
In 2022, we amended the Corporate Governance Standards to remove the mandatory retirement age for directors. The Board made the change in recognition of the contribution that experienced directors, with knowledge of the company, bring to effective Board oversight and of the active role the Board plays in director refreshment and management. The Board believes that the skillset and perspectives of its members should remain sufficiently current and broad in dealing with current and changing business dynamics, and therefore seeks to maintain a balance of directors with varying lengths of service and ages. The Board recognizes that a mandatory retirement age may have the unintended consequence of forcing the Board and the company to lose the contribution of directors who over time have developed increased knowledge of and valuable insight into the company and its operations. The Board also believes that there are other, more effective means to address board refreshment, including through its robust annual self-assessment process. The Nominating/Corporate Governance Committee will continue to evaluate our Board members annually and evaluate board refreshment to ensure the Board continues to reflect the success of our business and represent our stockholders interest by evaluating our directors qualifications, skills, diversity and experience.
Board Assessment
We annually evaluate the performance of the Board and its Committees. The Board believes it is important to assess both its overall performance and the performance of its Committees and to solicit and act upon feedback received, where appropriate. As part of the Board’s self-assessment process, directors consider various topics related to Board composition, structure, effectiveness, and responsibilities, as well as the overall mix of director skills, experience, and backgrounds. From time to time, these evaluations are conducted by an independent third party to refresh the process.
16
|
CORPORATE GOVERNANCE |
Board’s Role in Strategy and Risk Oversight
One of the key Board responsibilities is to engage deeply with management on our strategy, strategic planning process and business-related priorities as we navigate an evolving industry environment, consider industry trends, our competitive position, technological developments and stakeholder-related developments relevant to our business. The Board conducts a comprehensive review of the company’s strategic plans and overall business every year and works with management to evaluate potential opportunities and risks and assess the company’s progress in meeting various strategic goals. This process enables the Board to oversee, assess and consider adjustments with management to the company’s strategy over the short, intermediate and long term.
The Board has the ultimate responsibility for, and is actively engaged in, oversight of the company’s risk management both at the full Board level and through its committees. The full Board is kept abreast of risk oversight and other activities of its committees through reports of the committee chairpersons to the full Board during Board meetings. Senior management may also provide risk assessment reports directly to the Board on certain issues, including by invitation of the Board.
The Audit and Finance Committee has primary responsibility for overseeing our enterprise risk management program, which encompasses, among others, the primary risks facing the company and associated risk mitigation measures, compliance and regulatory, information technology and cybersecurity, environmental and sustainability, key site and public health risks. The Audit and Finance Committee receives updates and discusses individual and overall risk areas during its meetings, including our financial risk assessments, cybersecurity program and cyber risk management governance, risk management policies and major financial risk exposures and the steps management has taken to monitor and control such exposures.
The Compensation Committee oversees risks associated with our compensation policies and practices with respect to both executive compensation and compensation generally. The Compensation Committee receives reports and discusses whether our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the company. The Compensation Committee also oversees risks relating to organization talent and culture and human capital management, including diversity and inclusion programs and initiatives.
The Nominating/Corporate Governance Committee oversees the management of risks related to corporate governance matters, including director independence, Board composition and succession and overall Board effectiveness, as well as risks and opportunities associated with ESG matters.
Majority Voting for Directors
Our Bylaws provide for majority voting of directors regarding director elections. In an uncontested election, any nominee for director shall be elected by the vote of a majority of the votes cast with respect to the director. A “majority of the votes cast” means that the number of shares voted “FOR” a director must exceed 50% of the votes cast with respect to that director, including votes to withhold authority. Abstentions and broker non-votes will not count as a vote cast and thus will have no effect in determining whether a director nominee has received a majority of the votes cast. If a director is not elected due to a failure to receive a majority of the votes cast and his or her successor is not otherwise elected and qualified, in accordance with our bylaws, the director shall promptly offer to tender his or her resignation following certification of the stockholder vote.
The Nominating/Corporate Governance Committee will consider the resignation offer and recommend to the Board whether to accept or reject it, or whether other action should be taken. The Board will act on the Nominating/Corporate Governance Committee’s recommendation within 90 days following certification of the stockholder vote and disclose their decision and the rationale behind it. Any director who tenders his or her offer to resign pursuant to the Bylaws shall not participate in the Nominating/Corporate Governance Committee recommendation or Board action regarding whether to accept the resignation offer.
Board Communications
Stockholders and other interested parties may communicate with the Board and our Non-Executive Chairperson of the Board by filling out the form at “Contact Chairperson” under “Governance” at www.investor.agilent.com or by writing to Koh Boon Hwee, c/o Agilent Technologies, Inc., Interim General Counsel, 5301 Stevens Creek Blvd., MS 1A-11, Santa Clara, California 95051. The Interim General Counsel will perform a legal review in the normal discharge of duties to ensure that communications forwarded to the Non-Executive Chairperson preserve the integrity of the process. For example, items that are unrelated to the duties and responsibilities of the Board such as spam, junk mail and mass mailings, product complaints, personal employee complaints, product
17
|
CORPORATE GOVERNANCE |
inquiries, new product suggestions, resumes and other forms of job inquiries, surveys, business solicitations or advertisements (the “Unrelated Items”) will not be forwarded to the Non-Executive Chairperson. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will not be forwarded to the Non-Executive Chairperson.
Any communication that is relevant to the conduct of our business and is not forwarded will be retained for one year (other than Unrelated Items) and made available to the Non-Executive Chairperson and any other independent director on request. The independent directors grant the Interim General Counsel discretion to decide what correspondence shall be shared with our management and specifically instruct that any personal employee complaints be forwarded to our Human Resources Department.
Director Stockholder Meeting Attendance
We encourage, but do not require, our Board members to attend the annual meeting of stockholders. Two of our Board members attended the 2023 annual meeting of stockholders.
Director Independence
We have adopted standards for director independence in compliance with the NYSE corporate governance listing standards. These independence standards are set forth in our Corporate Governance Standards. The Board has affirmatively determined that all of our directors meet these independence standards with the exception of Michael R. McMullen because of his role as our President and Chief Executive Officer.
Our non-employee directors meet at regularly scheduled executive sessions without management. The Non-Executive Chairperson of the Board presides at executive sessions of the non-employee directors.
Compensation Committee Member Independence
We have adopted standards for Compensation Committee member independence in compliance with the NYSE corporate governance listing standards. In affirmatively determining the independence of any director who will serve on the Compensation Committee, the Board considers all factors specifically relevant to determining whether such director has a relationship to the company or any of its subsidiaries which is material to such director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to:
Director Nomination Criteria: Qualifications and Experience
The Nominating/Corporate Governance Committee will consider director candidates for nomination by stockholders, provided that the recommendations are made in accordance with applicable the procedures in the Bylaws as described in the section entitled “General Information” located at the end of this proxy statement. Candidates recommended for nomination by stockholders that comply with these procedures will receive the same consideration as other candidates recommended by the Nominating/Corporate Governance Committee.
We typically hire a third-party search firm to help identify and facilitate the screening and interview process of candidates for director. To be considered by the Nominating/Corporate Governance Committee, a director candidate must have:
18
|
CORPORATE GOVERNANCE |
In addition to these minimum requirements, the Nominating/Corporate Governance Committee will also consider whether the candidate’s skills are complementary to the existing Board members’ skills; the diversity of the Board with respect to factors such as age, race, gender, national origins, experience in technology, manufacturing, finance and marketing, international experience and culture; and the Board’s needs for specific operational, management or other expertise. The Nominating/Corporate Governance Committee from time to time reviews the appropriate skills and characteristics required of board members, including factors that it seeks in board members such as diversity of business experience, viewpoints and personal background, and diversity of skills and experience in technology, finance, marketing, international business, financial reporting and other areas that are expected to contribute to an effective Board of Directors. In evaluating potential candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers these factors in the light of the specific needs of the Board of Directors at that time. The search firm screens the candidates, does reference checks, prepares a biography of each candidate for the Nominating/Corporate Governance Committee to review and helps set up interviews. The Nominating/Corporate Governance Committee and our Chief Executive Officer interview candidates that meet the criteria, and the Nominating/Corporate Governance Committee selects candidates that best suit the Board’s needs.
Our Bylaws provide a proxy access right for stockholders, pursuant to which a stockholder, or a group of up to 20 stockholders, owning at least three percent of our outstanding common stock continuously for at least three years, may nominate and include in our proxy materials director nominees constituting up to the greater of two individuals or twenty percent of the Board, subject to certain limitations and provided that the stockholders and the nominees satisfy the requirements specified in our Bylaws.
19
|
CORPORATE GOVERNANCE |
Committees of the Board of Directors
Our Board met twelve times in fiscal 2023. Each director attended at least 75% of the aggregate number of Board and applicable committee meetings held when the director was serving on the Board. Set forth below are the four standing committees of the Board, their primary duties, their members and the number of meetings held during fiscal 2023.
Audit and Finance Committee |
Members |
Meetings |
|
||
|
Responsible for the oversight of: |
Dow R. Wilson†(Chair) |
13 |
|
|
|
- |
the quality and integrity of our consolidated financial statements; |
|
||
|
- |
compliance with legal and regulatory requirements, including our Standards of Business Conduct, and material reports or inquiries from regulators; |
|
||
|
- |
qualifications and independence of our independent registered public accounting firm; |
|
||
|
- |
performance of our internal audit function and independent registered public accounting firm; and |
|
||
|
- |
other significant financial matters, including borrowings, currency exposures, dividends, share issuance and repurchase and the financial aspects of our benefit plans. |
|
||
|
Has the sole authority to appoint, compensate, oversee and replace the independent registered public accounting firm, reviews its internal quality-control procedures, assesses its independence and reviews all relationships between the independent auditor and the company; |
|
|||
|
Approves the scope of the annual internal and external audit; |
|
|||
|
Pre-approves all audit and non-audit services and the related fees; |
|
|||
|
Reviews our consolidated financial statements and disclosures in our reports on Form 10-K and Form 10-Q; |
|
|||
|
Monitors the system of internal controls over financial reporting and reviews the integrity of the company’s financial reporting process; |
|
|||
|
Reviews funding and investment policies and their implementation and the investment performance of our benefit plans; |
|
|||
|
Establishes and oversees procedures for (a) complaints received by the company regarding accounting, internal accounting controls or auditing matters, and (b) the confidential anonymous submission by employees of the company of concerns regarding questionable accounting or auditing matters; and |
|
|||
|
Reviews disclosures from our independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee. |
|
|||
|
Oversees the company’s annual enterprise risk management assessment, which includes the review of the primary risks facing the company and the company’s associated risk mitigation measures. |
|
|
|
|
Compensation Committee |
Members |
Meetings |
|
||
|
Approves the corporate goals and objectives related to the compensation of the chief executive officer and other executives, evaluates their performance and approves their annual compensation packages; |
George A. Scangos, Ph.D. (Chair) |
3 |
|
|
|
Monitors and approves our benefit plan offerings; |
|
|||
|
Reviews and approves the Compensation Discussion and Analysis; |
|
|||
|
Oversees the administration of our incentive compensation, variable pay and stock programs; |
|
|||
|
Assesses the impact of our compensation programs and arrangements on company risk; |
|
|||
|
Recommends to the Board the annual retainer fee as well as other compensation for non-employee directors; and |
|
|||
|
Has sole authority to retain and terminate executive compensation consultants. |
|
20
|
CORPORATE GOVERNANCE |
Nominating/Corporate Governance Committee |
Members |
Meetings |
|
|
|
Recommends the size and composition of the Board, committee structures and membership; |
Koh Boon Hwee (Chair) |
5 |
|
|
Establishes criteria for the selection of new directors and proposes a slate of directors for election at each annual meeting; |
|
||
|
Reviews special concerns which require the attention of non-employee directors; |
|
||
|
Reviews matters of corporate responsibility and sustainability, including potential impacts of environmental and social issues; |
|
||
|
Oversees the evaluation of Board members and makes recommendations to improve the Board’s effectiveness; and |
|
||
|
Develops and reviews corporate governance principles. |
|
||
Members |
Meetings |
|
||
|
Meets or takes written action between meetings of the Board; and |
Koh Boon Hwee (Chair) |
0 |
|
|
Has full authority to act on behalf of the Board to the extent permitted by law with certain exceptions. |
|
|
† Audit Committee Financial Expert
Our Standards of Business Conduct and Director Code of Ethics require that all employees and directors avoid conflicts of interests that interfere with the performance of their duties or the best interests of the company. In addition, we have adopted a written Related Person Transactions Policy and Procedures (the “Related Person Transactions Policy”) that prohibits any of our executive officers, directors or any of their immediate family members from entering into a transaction with the company, except in accordance with the policy. For purposes of the policy, a “related person transaction” includes any transaction involving the company and any related person that would be required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Our Related Person Transactions Policy provides that the Nominating/Corporate Governance Committee or, at the Nominating/Corporate Governance Committee’s request, the disinterested members of the Board review related person transactions in accordance with the terms of the policy. In making the determination whether to approve or ratify a transaction, the Nominating/Corporate Governance Committee or the disinterested members of the Board shall consider all relevant available information and, as appropriate, must take into consideration the following:
The Related Person Transactions Policy provides for standing pre-approval of the following transactions with related persons:
We will disclose the terms of related person transactions in our filings with the SEC to the extent required.
21
|
CORPORATE GOVERNANCE |
We purchase services, supplies, and equipment in the normal course of business from many suppliers and sell or lease products and services to many customers. In some instances, these transactions occur with companies with which members of our management or Board have relationships as directors or executive officers. For transactions entered into during fiscal year 2023, no related person had or will have a direct or indirect material interest. While not required under the policy, the members of the Nominating/Corporate Governance Committee, excluding the respective related person for his company’s transactions only, reviewed, approved and ratified certain transactions with Altos Labs, Inc. ("Altos Labs"), Pfizer Inc. (“Pfizer”) and the University of Texas Southwestern Medical Center (“UTSW”).
Hans E. Bishop is President, Co-Founder and Co-Chairman of Altos Labs, Mikael Dolsten, M.D., Ph.D., is President of Worldwide Research, Development and Medical, Chief Scientific Officer and Executive Vice President of Pfizer, and Daniel K. Podolsky, M.D., is the President of UTSW.
22
|
CORPORATE GOVERNANCE |
Dear Stockholder,
Fiscal year 2023 was a challenging year in Life Sciences as high inflation and a market slowdown occurred after several years of rapid growth. To proactively address a slowdown in orders, rising costs, macro-economic challenges and political uncertainties, Agilent acted quickly. The Agilent team took decisive action to reduce spending and adjust the company's cost structure and still delivered leveraged earnings growth as evidenced by our 4.2% EPS growth and 1.1% margin expansion. While economic uncertainties will persist in FY24, we believe Agilent is well-positioned with the right team and right strategy to be successful.
While market conditions changed significantly in FY23, our compensation program continued to drive strong stockholder alignment for our executives. Our short- and long-term incentive plans are designed to motivate our executive team to deliver leveraged earnings growth and superior stockholder returns relative to peers. Our long-term performance plan rewards for superior EPS growth and relative TSR, while our short-term Pay for Results incentive plan ties rewards to achieving our aggressive revenue growth and operating margin plans. Payouts for these programs scale with company performance and short- and long-term funding tied to FY23 results were below target given slower revenue and EPS growth.
While funding fell short of target for FY23, we believe our programs are working well, and our stockholders agree. During our annual outreach to our largest stockholders, they expressed support for our program and encouraged us to maintain the design. 89% stockholder support, along with support from the major stockholder advisory firms, for our Management Say on Pay proposal last year is further evidence of this strong support. We believe that consistency of design drives the desired behaviors, and as such, we plan no significant changes to our executive compensation program for fiscal year 2024.
In the Compensation Discussion and Analysis that follows, we discuss our fiscal year 2023 CEO and executive officer compensation in more detail. You will see that our commitment to both pay for performance and clear, transparent disclosure is strong. We encourage you to review this analysis carefully and believe you will agree that our executive compensation program is achieving our objectives of supporting the company’s growth strategy and creating long-term stockholder value.
|
Compensation Committee |
|
|
|
George A. Scangos, Ph.D., Chairperson Mala Anand Hans E. Bishop Otis Brawley, M.D. Heidi K. Kunz |
23
|
CORPORATE GOVERNANCE |
COMPENSATION DISCUSSION AND ANALYSIS
This section of the proxy statement describes the compensation arrangements for our Named Executive Officers (NEOs) for fiscal year 2023, which were exclusively determined by our independent Compensation Committee and which are further detailed in the 2023 Summary Compensation Table and other compensation tables contained in this proxy statement. This Compensation Discussion and Analysis (CD&A) also includes additional information on how the Compensation Committee arrived at its fiscal year 2023 compensation decisions for the NEOs and an overview of our executive compensation philosophy and our executive compensation program.
Our NEOs for fiscal year 2023 are as follows:
In this CD&A, we provide the following:
* Mr. Raha resigned from the company effective December 8, 2023.
24
|
CORPORATE GOVERNANCE |
Executive Summary
Fiscal year 2023 at a glance:
Performance and Compensation Highlights |
CEO and NEO Compensation |
|||||
• EPS growth despite challenging economic conditions. • Continued investment in high-growth businesses. • Executive compensation in line with financial results. |
|
|
|
|
|
|
|
|
Total Target Compensation |
% of Total Target Compensation at Risk |
|
||
|
McMullen |
$15,918,000 |
92% |
|
||
|
Other NEOs (average) |
$3,623,750 |
82% |
|
||
|
|
|
||||
FY23 Executive Compensation Program Highlights |
Pay for Performance |
|||||
• Maintained earnings per share and relative TSR metrics with respect to our performance shares, in the long-term performance plan (LTPP) at 60% overall weight of annual NEO grants. • Maintained restricted stock units and stock options in long-term incentive (LTI) mix with 20% weighting for each within our annual NEO grants. • Maintained operating margin and revenue metrics in short-term incentive (STI) program. |
• Consistent with company performance below plan targets, the STI program financial payouts for Agilent results were funded at 56% of target. • 25% of the total short-term incentive payout for Agilent’s business presidents was determined based on their respective group's revenue and operating margin, where funding was 150% of target for ACG and 47% of target for DGG. • 25% of the total short-term incentive payout for Agilent's CFO, business presidents and SVP of Order Fulfillment was determined based on select key business initiatives (KBIs) approved by the Compensation Committee. These KBIs funded at 56% on average in fiscal year 2023. • To support company expense measures, Pay for Results payouts were further reduced by the Compensation Committee upon recommendation by management by 50% for Agilent's CEO and 25% for Agilent's Officers other than the CEO. • In fiscal year 2023, the payout % achieved for our LTI-TSR grants was 84% as our relative TSR was at the 45th percentile of our S&P 500 Health Care and Materials Indexes peer group. The payout % achieved for the LTI-EPS grants was 139% as 48% funding for FY23 was combined with above target funding for FY21 and FY22.
|
|||||
Stockholder Engagement |
||||||
We are pleased with the 89% support for our 2023 Say-on-Pay proposal and continue to engage with stockholders regarding our executive pay program. In 2023, consistent with prior years, we met with several of our largest stockholders on our current executive compensation program, and our plan is to make no material changes for fiscal year 2024. |
25
|
CORPORATE GOVERNANCE |
Financial Performance Highlights
Year-over-year financial results as compared to fiscal year 2022 results:
Measure |
|
Fiscal 2022 |
|
Fiscal 2023 |
|
YOY % |
S&P 500 TSR* |
|
8,218.70 |
|
9,052.31 |
|
10.1% |
Agilent TSR* |
|
$137.38 |
|
$103.37 |
|
(24.8%) |
Revenue (Actual) |
|
$6.8B |
|
$6.8B |
|
- |
Operating Margin |
|
23.6% |
|
19.8% |
|
(16.1%) |
Operating Margin (non-GAAP)** |
|
27.1% |
|
27.4% |
|
1.1% |
Diluted EPS |
|
$4.18 |
|
$4.19 |
|
0.2% |
Diluted EPS (non-GAAP)** |
|
$5.22 |
|
$5.44 |
|
4.2% |
* Stock prices shown for fiscal years 2022 and 2023 are as of 10/31/2022 and 10/31/2023 respectively and include reinvested dividends.
** Non-GAAP operating margin and non-GAAP diluted EPS are further defined and reconciled to the most directly comparable GAAP financial measures in Appendix A to this proxy statement.
Correlation of CEO Total Direct Compensation to Company Performance
The chart below demonstrates how the historical total direct compensation (salary, actual bonus and grant value of equity awards) of our CEO compares to our five-year indexed TSR. The numbers shown as the indexed TSR for each year are based on the dollar amount a stockholder would have held at the end of the indicated fiscal year assuming the stockholder invested $100 in Agilent common stock on October 31, 2018.
26
|
CORPORATE GOVERNANCE |
Aligning CEO and NEO Pay with Performance
For fiscal year 2023, approximately 92% of Mr. McMullen’s and 82% of our other NEOs’ total direct compensation consisted of short-term and long-term incentives and was “at risk”— which means that this component can vary year to year depending on the performance of the company and our stock price performance.
Stockholder Outreach
We received 89% stockholder support on our 2023 Say-on-Pay proposal, along with support from the major stockholder advisory firms. While pleased with these results, our Compensation Committee and members of management believe ongoing dialogue with stockholders regarding executive compensation is crucial. In the summer of 2023, we contacted our 50 largest stockholders to recap our executive compensation program for fiscal year 2023 and discuss our strategy for fiscal year 2024; we had direct meetings with a number of these stockholders which provided valued insight into the design of our executive compensation program. The combination of stockholder support on our say on pay proposal and our direct discussions affirmed our plan to maintain the current design for fiscal year 2024.
Fiscal year 2023 Program Highlights
We maintained operating margin and revenue as the financial metrics in the short-term incentive program and earnings per share and relative TSR as our metrics in the long-term incentive program.
Our mix of long-term incentive vehicles was also unchanged from fiscal year 2022, with 60% of the long-term incentive award delivered in long-term performance shares (30% tied to an earnings per share metric and 30% tied to a relative TSR metric); 20% delivered in restricted stock units; and 20% delivered in non-qualified stock options. We intend to maintain this long-term incentive mix in fiscal year 2024.
The performance targets for our long-term TSR plan continue to use a peer group consisting of the companies that comprise the S&P 500 Health Care and Materials sectors. Meanwhile, we establish an annual EPS target for the long-term EPS program, which we believe supports establishing sufficiently rigorous targets in our cyclical markets for each year of the 3-year performance period and ensures long-term performance plan targets align with management's external guidance to stockholders. For more information about our LTI program design, please see the LTI sections below.
27
|
CORPORATE GOVERNANCE |
Determining Executive Pay
Our executive pay decisions are grounded in a core philosophy that applies to all elements of compensation. Our compensation philosophy is intended to:
The following principal elements of compensation are provided under our executive compensation program:
Elements of Pay |
|
Base Pay |
Baseline for competitive total compensation. Normally 20% or less of total direct compensation for NEOs. |
Short-Term Incentives |
Focuses executives on critical operating and strategic goals best measured annually. Provides downside risk for underperformance and upside reward for success. Leverages financial measures such as revenue and operating margin, supplemented with select strategic initiatives. |
Long-Term Incentives |
The majority of NEO target compensation is performance-based and “at risk”. Motivates and rewards multi-year stockholder value creation. Facilitates executive stock ownership. Enables retention. Delivered through performance shares, stock options and RSUs, with a mandatory one-year post-vest holding period for performance shares and RSUs to encourage long-term orientation. Performance measures include long-term financial objectives and the relative performance of our stock. |
Our actual total compensation for each NEO varies based on (i) company performance measured against external metrics that correlate to long-term stockholder value, (ii) performance of the business organizations against specific targets, and (iii) individual performance. These three factors are considered in positioning salaries, determining earned short-term incentives and determining long-term incentive grant values.
28
|
CORPORATE GOVERNANCE |
Pay Practices
Our executive compensation program is supported by a set of strong governance provisions and pay practices.
Philosophy / Practice |
Result |
We structure compensation to create strong alignment with stockholder interests |
Majority of pay is “at risk,” delivered via performance-based vehicles such as long-term performance shares and annual cash incentives. Robust stock ownership guidelines. Mandatory one-year post-vest holding period on annual performance awards under the long-term performance plan and executive RSU awards. |
We design our programs to avoid excessive risk taking (1) |
Strong recoupment and anti-hedging and pledging policies in place. Annual compensation risk assessment. Balanced internal and external goals. |
We follow best practices in executive compensation design |
Limited perquisites. Double trigger on change in control benefit provisions and no tax gross-up agreements. No dividends / dividend-equivalents on unearned performance awards and unvested stock awards. No acceleration of vesting of equity awards, including LTPP performance shares, upon retirement (awards continue to vest) Independent Compensation Committee consultant. |
Independent Compensation Committee and Consultant
The Compensation Committee is composed solely of independent members of the Board and operates under a Board-approved charter which outlines the Committee’s major duties and responsibilities. This charter is available on our Investor Relations website.
Semler Brossy, our independent compensation consultant, does not perform any other work for us, does not trade our stock, has independence policies that are reviewed annually and has agreed to proactively notify the Compensation Committee chair of any potential or perceived conflicts of interest. The Compensation Committee found no conflict of interest during fiscal year 2023.
For fiscal year 2023, our independent compensation consultant advised the Compensation Committee on several compensation matters, including but not limited to:
29
|
CORPORATE GOVERNANCE |
Process for Determining Compensation
To determine total target compensation for the upcoming fiscal year, the Compensation Committee considered:
Our independent compensation consultant presents and analyzes market data for each individual position and provides insight on market practices for the Compensation Committee’s actions, but it does not make any specific compensation recommendations on the individual NEOs. Our consultant does collaborate with the Committee Chair to develop CEO pay recommendations. The Compensation Committee then determines the form and amount of compensation for all executive officers after considering the market data and company, business unit and individual performance.
Peer Group for Executive Compensation
Each year, the Compensation Committee meets with our independent compensation consultant to review and approve the peer group companies that satisfy our selection criteria. For fiscal year 2023, our approach to determining the peer group for executive compensation was as follows. The compensation peer group consisted of the 29 companies listed below from the S&P 500 Health Care Index (excluding the Health Care Distributors, Health Care Facilities and Managed Health Care subsectors) with revenues between 0.5x and 2.5x times our trailing twelve-month actual revenue, supplemented with three of our most direct competitors (Thermo Fisher, Danaher and Waters). The range of annual revenues for peer group members was determined so that Agilent's annual revenue would fall around the median of the peer group. We believe our approach determines a set of peers that is limited to our most direct competitors for talent, but large enough to provide year-over-year stability. We used data from this peer group to set each NEO’s compensation for fiscal year 2023, with aggregate compensation targeted at around the peer group median.
|
Align Technology |
|
DENTSPLY Sirona |
|
Organon |
|
Zimmer |
|
Baxter Intl |
|
Edwards Lifesciences |
|
Perkin Elmer |
|
Zoetis |
|
Biogen |
|
Hologic |
|
Quest Diagnostics |
|
|
|
Boston Scientific |
|
IDEXX Labs |
|
Regeneron Pharma |
|
|
|
Catalent |
|
Illumina |
|
ResMed |
|
|
|
Cerner |
|
Incyte |
|
Steris |
|
|
|
Charles River Labs |
|
Intuitive Surgical |
|
Thermo Fisher |
|
|
|
Danaher |
|
IQVIA |
|
Vertex Pharma |
|
|
|
DaVita Healthcare |
|
Mettler-Toledo |
|
Waters |
|
|
Peer Group for the Long-Term Performance Program
The Compensation Committee believes that an expanded peer group is more appropriate for determining relative TSR under the company’s LTPP, as an expanded peer group better represents a range of alternative investment options for stockholders and reduces the volatility inherent in small comparator groups. Therefore, the Compensation Committee continued to use the approximately 92 companies in the Health Care and Materials Indexes of the S&P 500 for determining TSR under the LTPP. Only companies that are included in one of these indexes at the beginning of the performance period and which have three years of stock price performance at the end of the performance period are included in the final calculation of results. Any change in the expanded peer group is solely due to Standard & Poor’s criteria for inclusion in the indexes.
30
|
CORPORATE GOVERNANCE |
Role of Management
The CEO and the Chief Human Resources Officer consider the responsibilities, performance and capabilities of each of our named executive officers, other than the CEO, and the compensation package they believe will attract, retain and motivate these senior leaders. The Chief Human Resources Officer does not provide input on setting his own compensation. A comprehensive analysis is conducted using a combination of the market data based on our compensation peer group and proxy data, performance against targets, and overall performance assessment. This data is used to determine if an increase in compensation is warranted and the amount and type of any increase for each of the total compensation components for the then-current fiscal year. After consulting with the Chief Human Resources Officer, the CEO makes compensation recommendations, other than for his own compensation, to the Compensation Committee at its first meeting of the fiscal year.
CEO Compensation
The Compensation Committee establishes the CEO’s compensation based on a thorough review of the CEO’s performance that includes:
The Compensation Committee reviews the CEO’s total direct compensation package annually and presents its recommendation to the other independent directors for review and comment before making the final determinations on compensation for the CEO.
Fiscal year 2023 Compensation
Base Salary
Our salaries reflect the responsibilities of each NEO and the competitive market for comparable professionals in our industry and are set to create an incentive for executives to remain with us. Base salaries and benefits packages are the fixed components of our NEOs’ compensation and do not vary with company performance. Each NEO’s base salary is set by considering market data as well as the performance of each NEO. For fiscal year 2023, our NEOs’ base salaries ranged between the 40th and 75th percentile of our compensation peer group. Our CEO received a slight salary increase of 3% for the first time in four years, while Messrs. McMahon, Ancher-Jensen, Raha and McDonnell received salary increases between 2-6%, generally consistent with typical increases provided to the broader Agilent employee population.
Name |
|
FY22 Salary |
|
FY23 Salary |
|
Increase |
Michael R. McMullen |
|
$1,280,000 |
|
$1,320,000 |
|
3% |
Robert McMahon |
|
$700,000 |
|
$730,000 |
|
4% |
Padraig McDonnell |
|
$575,000 |
|
$610,000 |
|
6% |
Henrik Ancher-Jensen |
|
$660,000 |
|
$675,000 |
|
2% |
Sam Raha |
|
$600,000 |
|
$635,000 |
|
6% |
Short-Term Cash Incentives
The Performance-Based Compensation Plan reflects our pay-for-performance philosophy and directly ties short-term incentives to short-term business performance. These awards are linked to specific annual financial goals and key business initiatives for the overall company and the three business groups (LSAG, ACG and DGG). Annual cash incentives are paid to reward achievement of critical shorter-term operating, financial and strategic measures and goals that are expected to contribute to stockholder value creation over time. Financial goals are pre-established by the Compensation Committee at the beginning of the period based on
31
|
CORPORATE GOVERNANCE |
recommendations from management. The financial goals are based on our fiscal year 2023 financial plan established by the Board of Directors and were not changed after they were approved by the Compensation Committee. The Compensation Committee certifies the calculations of performance against the goals for each period and payouts, if any, are made in cash.
For fiscal year 2023, the awards under the Performance-Based Compensation Plan were determined by multiplying the individual’s base salary for the performance period by the individual’s target award percentage and the performance results, as follows:
Financial Goals |
Annual Salary |
X |
Individual Target Bonus % (varies by individual) |
X |
Financial Portion of Target Bonus |
X |
Attainment % |
Key Business |
Annual Salary |
X |
Individual Target Bonus % (varies by individual) |
X |
Strategic Portion of Target Bonus |
X |
Attainment % |
Target Award Percentages and FY23 Actual Payouts
Our Compensation Committee set the fiscal year 2023 short-term incentive target amounts based on a percent of base salary pre-established for each NEO considering the relative responsibility of each NEO. For fiscal year 2023, short-term incentive target bonuses were set at 140% of base salary for the CEO and 80% of base salary for the other NEOs (see chart below). The CEO was not assigned to group level financial or key business initiative metrics for fiscal year 2023.
The payouts under the Performance-Based Compensation Plan for fiscal year 2023 are provided in the chart below and in the “Non-Equity Incentive Plan Compensation” column in the “Summary Compensation Table.” To support expense measures taken by Agilent during the fiscal year, the Compensation Committee supported Management’s recommendation to reduce the final payouts by 50% for the CEO and by 25% for the NEOs. The chart below shows the targets, calculated payout based on results and the actual payout after the reduction was applied.
32
|
CORPORATE GOVERNANCE |
Financial Goals and Fiscal year 2023 Operational Results
The Performance-Based Compensation Plan financial goals were based on (1) our adjusted operating margin percentage and our revenue and (2) the adjusted operating margin percentage and revenue goals for each of the business units. The Compensation Committee chose those metrics because:
The financial targets that must be met to receive the target payout are based on our financial plan. We use a non-GAAP adjusted operating margin that excludes the ongoing impact of certain mergers and acquisitions, currency, hedging and interest costs related to mergers and acquisitions. To determine earned awards, we use payout matrices that link the metrics and reflect threshold-to-maximum opportunities based on various achievement levels of the metrics. No awards are paid unless the operating margin percentage threshold is achieved and the maximum award under the plan is capped at 200% of the target award. The target metrics set for our short-term incentives and their corresponding results were as follows:
|
|
Operating Margin % |
Revenue $ |
|
||||||||||||||||
|
|
Threshold |
|
Target |
|
Max |
|
Results |
|
Goal |
|
Target |
|
Max |
|
Results |
|
Goal |
|
Payout Percentage |
Agilent |
|
24.7% |
|
28.4% |
|
30.4% |
|
27.7% |
|
97.5% |
|
$7,153 |
|
$7,510 |
|
$6,659 |
|
93% |
|
55.7% |
LSAG |
|
26.8% |
|
30.8% |
|
33.0% |
|
29.2% |
|
95.0% |
|
$4,156 |
|
$4,363 |
|
$3,763 |
|
91% |
|
48.4% |
ACG |
|
23.7% |
|
27.2% |
|
29.1% |
|
29.5% |
|
108.5% |
|
$1,520 |
|
$1,596 |
|
$1,518 |
|
100% |
|
150.0% |
DGG |
|
19.8% |
|
22.8% |
|
24.4% |
|
21.6% |
|
94.5% |
|
$1,477 |
|
$1,551 |
|
$1,378 |
|
93% |
|
46.9% |
* The adjusted non-GAAP operating margin and adjusted non-GAAP revenue measures used in our executive compensation programs may differ from GAAP and non-GAAP operating margin and GAAP and non-GAAP revenue as reported in our quarterly earnings releases as they exclude the impact of mergers and acquisitions, currency and hedging. See Appendix A to this proxy statement for a reconciliation to the most directly comparable GAAP financial measures.
Payout Matrices to Measure Financial Metrics
We use payout matrices to determine payout percentages for our fiscal year 2023 short-term incentive program. The payout matrices are designed to reward profitable growth by increasing payout percentages commensurate with increased operating margin and / or revenue achievement as illustrated in the table below.
|
|
FY23 - Revenue Achievement (% of target) |
||||
|
|
<=93% |
97.0% |
100.0% |
103.0% |
105.0% |
|
107% |
95% |
126% |
150% |
180% |
200% |
FY23 - OM |
104% |
81% |
108% |
129% |
159% |
179% |
Achievement |
100% |
63% |
84% |
100% |
130% |
150% |
(% of target) |
94% |
45% |
67% |
83% |
108% |
125% |
|
87% |
25% |
46% |
63% |
82% |
95% |
|
86% |
0% |
0% |
0% |
0% |
0% |
Note: This specific payout matrix was used to determine the company level payout percentage. The payout percentage is determined by finding the intersection between goal attainments as a percentage of plan for each financial metric. Payout percentages are assigned to each intersection of revenue and adjusted operating margin percentage throughout the payout matrix. Payouts between the numbers represented in the table above are calculated on a linear payout matrix and the threshold amount for adjusted operating margin percentage must be met in order for a payout to be made. Payout matrices vary by business group. No payouts are awarded for Operating Margin achievement below the 87% threshold.
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|
CORPORATE GOVERNANCE |
Key Business Initiatives – Targets and Results
For fiscal year 2023, under the Performance-Based Compensation Plan, we continued to utilize annual key business initiatives to align NEOs’ objectives with strategic company priorities. These key business initiatives are established at the same time as the financial goals and account for 25% of the total target bonus for each NEO who was assigned to key business initiatives. The maximum payout per NEO for satisfaction of the strategic component is the lesser of (i) up to 200% of key business initiative performance results or (ii) 0.75% of non-GAAP pre-tax earnings for the company, and the Compensation Committee may exercise negative discretion in determining the final payout.
The key business initiatives were selected to focus NEOs on strategic priorities such as revenue growth for certain acquisitions, company online order growth, and productivity improvements that support- leveraged earnings growth. The following table sets forth (i) each key business initiative and its threshold, target and maximum achievement levels, (ii) the NEOs assigned to each key business initiative, and (iii) the final attainment and payout percentage for each objective. If an NEO is assigned to more than one objective, the weighting is equally distributed. For fiscal year 2023, Mr. McMullen was not assigned to any key business initiatives. The targets were established with the rigor necessary to drive desired results for each initiative. For competitive purposes, specific threshold, target and maximum amounts are not shown in the descriptions that follow.
Officer |
FY23 Key Business Initiative |
Threshold |
Target |
Maximum |
Payout Percentage |
Messrs. McDonnell and Raha |
Agilent Online Orders |
92% of plan |
Achieve Plan |
105% of plan |
98.7% |
Mr. Raha |
Project Rainstorm Revenue |
75% of plan |
Achieve Plan |
125% of plan |
0.0% |
Messrs. McMahon, McDonnell, Ancher-Jensen and Raha |
Agilent Productivity Improvement |
103% of plan |
Achieve Plan |
97% of plan |
70.0% |
_____________________
Notes: If an NEO is assigned to more than one key business initiative within a category, those initiatives are equally weighted. For foreign exchange conversion purposes, all Orders/Revenue assume the November accounting rate.
Actual payout tables for key business initiatives use a straight-line payout slope (and/or key milestones) from threshold to target and from target to maximum. Final payouts for each key business initiative are recommended by the CEO and approved by the Compensation Committee.
Long-Term Incentives – Performance Stock Units and Restricted Stock Units
Performance Stock Units Earned in Fiscal year 2023 – Relative TSR
Fifty percent of the performance stock units granted in fiscal year 2021 for the FY21 to FY23 performance period were measured based on relative TSR versus all companies in the S&P 500 Health Care and Materials Indexes for fiscal years 2021 through 2023. We believe that a 100% payout at median TSR performance is appropriate as we feel it represents the right balance of risk versus reward for a long-term TSR plan. We want our plan to reward actions that improve stockholder returns over the long-term rather than motivate actions designed to bolster short-term stock price returns that may not be in the stockholders' long-term interests. The company did not establish an absolute TSR target as we believe performance is best measured on a relative basis against our selected peer group with the payout percentages as follows:
|
|
Peer Group TSR |
|
Payout Percentage |
75th Percentile |
|
44.2% |
|
200% |
Median |
|
9.7% |
|
100% |
25th Percentile |
|
-9.9% |
|
25% |
Agilent |
|
5.8% |
|
84% |
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|
CORPORATE GOVERNANCE |
In November 2023, the Compensation Committee certified the relative TSR results for the FY21 to FY23 performance period. Agilent’s stock price performance was at the 45th percentile of our peer group and resulted in an 84% payout percentage. See table below:
|
|
Target |
|
Original |
|
Resulting |
|
Resulting |
Michael R. McMullen |
|
25,528 |
|
3,300,000 |
|
84.0% |
|
21,444 |
Robert McMahon |
|
6,382 |
|
825,000 |
|
84.0% |
|
5,361 |
Padraig McDonnell |
|
3,481 |
|
450,000 |
|
84.0% |
|
2,924 |
Henrik Ancher-Jensen |
|
3,829 |
|
495,000 |
|
84.0% |
|
3,216 |
Sam Raha |
|
4,293 |
|
555,000 |
|
84.0% |
|
3,606 |
Note: The final share amount was determined by multiplying the target award shares by the resulting payout percentage.
Our relative TSR performance (or percentile position) compared to that of our LTPP peer group and the payout percentages for the LTPP for the past five performance periods are set forth below:
Note: A 200% payout is achieved when our relative TSR is at or above the 75th percentile of our LTPP-TSR peer group.
Performance Stock Units Earned in Fiscal year 2023 – Earnings Per Share
Fifty percent of the performance stock units granted in fiscal year 2021 for the FY21 to FY23 performance period had financial goals based on adjusted earnings per share. The 139% payout percentage earned under these performance stock units was determined by calculating the adjusted earnings per share attained at the end of each of the three fiscal years in the performance period compared to the targets (which were set at the midpoint of external guidance that is determined and publicly announced at the beginning of each fiscal year during the three-year performance period). We set our EPS goals on an annual basis to maximize the alignment of the program with our aggressive long-term growth plans. We believe setting EPS targets at the time of grant for the full three-year period risks establishing goals that could be insufficiently or overly aggressive in years two and/or three of the performance-period given the shorter cyclical nature of our business and risks misalignment with the annual EPS guidance we provide to stockholders at the beginning of each fiscal year. Annual goal setting for EPS goals is a common practice among our peer companies, and we find it has had the intended motivational effect for our executive team through a particularly volatile period in the market as it has oriented them around aggressive, context-sensitive EPS growth targets each year. We use non-GAAP adjusted
35
|
CORPORATE GOVERNANCE |
diluted earnings per share, subject to Compensation Committee approval. Once set, the target is not subject to change during the fiscal year. The payout percentage for the FY21 to FY23 award, which was certified by the Compensation Committee at the November 2023 meeting, was a simple average of the payout percentage certified for fiscal year 2021, fiscal year 2022 and fiscal year 2023. The threshold, target, maximum and final attainment numbers are set forth in the table below:
|
|
Long-Term Performance Shares - EPS |
||||||||
Fiscal Year |
|
Threshold |
|
Target |
|
Maximum |
|
Actual Adjusted |
|
Attainment |
FY21 |
|
$3.28 |
|
$3.62 |
|
$3.96 |
|
$4.36 |
|
200% |
FY22 |
|
$4.34 |
|
$4.81 |
|
$5.28 |
|
$5.14 |
|
170% |
FY23 |
|
$5.22 |
|
$5.65 |
|
$6.08 |
|
$5.35 |
|
48% |
Payout |
|
|
|
|
|
|
|
|
|
139% |
* The adjusted non-GAAP EPS measure used in our executive compensation programs for FY21, FY22 and FY23 may differ from GAAP and non-GAAP EPS as reported in our quarterly earnings releases as it excludes the impact of mergers and acquisitions, currency, hedging and interest costs related to mergers and acquisitions, material share repurchase deviations from plan and associated debt expense, and material differences in our corporate tax rate due to the impact of significant, unplanned tax legislation during the fiscal year. See Appendix A to this proxy statement for a reconciliation to the most directly comparable GAAP financial measure.
In November 2023, the Compensation Committee certified the LTPP-EPS results for the FY21 to FY23 performance period. Agilent’s strong adjusted earnings per share performance resulted in a 139% payout percentage as shown in the table below:
|
|
Target Awards (Shares) |
|
Original Target Award Value |
|
Resulting Share payout |
|
Resulting Share payout |
Michael R. McMullen |
|
32,593 |
|
3,300,000 |
|
139% |
|
45,304 |
Robert McMahon |
|
8,148 |
|
825,000 |
|
139% |
|
11,326 |
Padraig McDonnell |
|
4,444 |
|
450,000 |
|
139% |
|
6,177 |
Henrik Ancher-Jensen |
|
4,889 |
|
495,000 |
|
139% |
|
6,796 |
Sam Raha |
|
5,481 |
|
555,000 |
|
139% |
|
7,619 |
Note: The final share amount was determined by multiplying the target award shares by the resulting payout percentage.
Relative TSR Performance Stock Units – FY22 to FY24 Performance Period
Fifty percent of the performance stock units granted in fiscal year 2022 for the FY22 to FY24 performance period had financial goals based on relative TSR versus all companies in the S&P 500 Health Care and Materials Indexes for fiscal year 2022 through fiscal year 2024. We believe that a 100% payout at median TSR performance is appropriate as we feel it represents the right balance of risk versus reward for a long-term TSR plan. We want our plan to reward actions that improve stockholder returns over the long-term rather than motivate actions designed to bolster short-term stock price returns that may not be in the stockholders long-term interests. Relative TSR performance stock units are completely “at risk” compensation because our performance must be at or above the 25th percentile for the individuals to receive a payout. The final and only payout will be at the end of fiscal year 2024 based on the relative TSR for the three-year performance period.
|
|
Payout as a |
|
|
Percentage of |
Relative TSR Performance |
|
Target |
Below 25th Percentile Rank (threshold) |
|
0% |
25th Percentile Rank |
|
25% |
50th Percentile Rank (target) |
|
100% |
75th Percentile Rank and Above |
|
200% |
Earnings Per Share Performance Stock Units – FY22 to FY24 Performance Period
Fifty percent of the performance stock units granted in fiscal year 2022 for the FY22 to FY24 performance period had financial goals based on adjusted earnings per share. Awards will be determined by calculating the adjusted earnings per share attained at the end of each of the three fiscal years in the performance period compared to the targets (which are set at the beginning of each
36
|
CORPORATE GOVERNANCE |
fiscal year during the three-year performance period). The FY22 and FY23 EPS targets were set at the mid-point of external guidance issued at the beginning of each respective fiscal year. We use non-GAAP adjusted diluted earnings per share and all targets are subject to Compensation Committee approval. The final and only payout will be at the end of fiscal year 2024 based on an average of the payout percentage for each fiscal year. The threshold, target and maximum levels as well as FY22 and FY23 results are set forth in the table below:
|
|
Long-Term Performance Shares - EPS |
||||||||
Fiscal Year |
|
Threshold |
|
Target |
|
Maximum |
|
Actual Adjusted |
|
Attainment |
FY22 |
|
$4.34 |
|
$4.81 |
|
$5.28 |
|
$5.14 |
|
170% |
FY23 |
|
$5.22 |
|
$5.65 |
|
$6.08 |
|
$5.35 |
|
48% |
FY24 |
|
TBD |
|
TBD |
|
TBD |
|
TBD |
|
TBD |
Payout |
|
|
|
|
|
|
|
|
|
TBD |
* The adjusted non-GAAP EPS measure used in our executive compensation programs for FY22, FY23 and FY24 may differ from non-GAAP EPS as reported in our quarterly earnings releases as it excludes the impact of mergers and acquisitions, currency, hedging and interest costs related to mergers and acquisitions, material share repurchase deviations from plan and associated debt expense, and material differences in our corporate tax rate due to the impact of significant, unplanned tax legislation during the fiscal year. See Appendix A to this proxy statement for a reconciliation to the most directly comparable GAAP financial measure.