Pfizer 2011 Annual Review | Pfizer: the world's largest research-based pharmaceutical company


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Good corporate governance is fundamental to our success and to the confidence and trust of our stakeholders, especially our investors. Therefore, we seek to ensure that good governance and responsible business principles and practices are fully integrated into our culture, values and day-to-day business.

Pfizer remains a leader in corporate governance, including outreach to our shareholders and other stakeholders. We continue to drive innovations in policies, practices and disclosures on corporate political activities and other key governance areas. For example, in the wake of the United States Supreme Court's 2010 decision in Citizens United v. The Federal Election Commission, we have engaged in extensive discussions with shareholders and stakeholders seeking clarification about Pfizer's policies on corporate political expenditures. These discussions led to our decision in 2011 to adopt a strict policy against Pfizer making "independent expenditures" in connection with any federal or state election.

All of the members of our Board of Directors are independent, other than Ian Read, our Chairman and Chief Executive Officer. Our Directors are highly engaged, not only through attendance at Board and Committee meetings, but also through ongoing discussions with senior leaders and outside advisers, as well as reviews of reports and analyses. The scope of the Board's oversight is broad, covering a wide range of matters that impact shareholder value and affect our stakeholders, including strategy, financial performance, compliance and public policy.

One of the Board's key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management and a highly engaged and high-functioning Board. Based on its experience, considerable engagement with shareholders, and an assessment of research on this issue, the Board understands that there are a variety of viewpoints concerning a board's optimal leadership structure; that available empirical data concerning the impact of board leadership on shareholder value is inconclusive; and, accordingly, that there is no single, generally accepted approach to board leadership. Given the dynamic and competitive environment in which we operate, the right board leadership structure may vary as circumstances warrant. Consistent with this understanding, the independent Directors do not follow any particular structure as a presumed preferred approach and consider the Board's leadership structure on at least an annual basis. This consideration includes the pros and cons of alternative leadership structures in light of the Company's operating and governance environment at the time, with the goal of achieving the optimal model for Board leadership and effective oversight of management by the Board.

Based upon these considerations, and following a lengthy review, the independent Directors determined in December 2011 to elect Ian Read, our CEO, as Chairman. This determination was based on the independent Directors' strong belief that Mr. Read, particularly in view of his extensive experience and knowledge of the research-based biopharmaceutical industry, has demonstrated the leadership and vision necessary to lead the Board and the company in the current challenging industry and macroeconomic environment; that Mr. Read has a fundamentally investor-driven viewpoint; that Mr. Read's leadership had generated strong performance in 2011; and that Mr. Read does not have an employment agreement and would be serving as both Chairman and CEO at the pleasure of the Board. The independent Directors also believe that this unified structure provides our Company with strong and consistent leadership and that, given the significant regulatory and market environment in which we operate, having one clear leader in both roles provides decisive and effective leadership, both within and outside the Company.

At the same time, the independent Directors also selected George A. Lorch to serve as Lead Independent Director, a position that, at Pfizer, entails significant responsibility for independent Board leadership. He served as Non-Executive Chairman of the Board from December 2010 to December 2011 and will continue to exercise his strong leadership skills in his new role.

Executive Compensation Aligned With Shareholders' Interests

We believe that executive compensation policies should reflect that shareholder funds are at stake and must be used wisely. Therefore, the overarching goal of our compensation approach is to align each executive's compensation with Pfizer's short-term and long-term performance and to provide the compensation and incentives needed to attract, motivate and retain key executives who are crucial to Pfizer's long-term success. To this end, we regularly consult with shareholders to refine our executive compensation philosophy, program and practices.

The compensation of our Executive Leadership Team—the CEO and the executive officers reporting directly to the CEO—is determined by the Compensation Committee of Pfizer's Board of Directors. This Committee, composed exclusively of independent Directors, seeks to align our compensation program with our pay-for-performance philosophy and our shareholders' interests. The Committee has engaged an independent compensation consultant who has no other ties to the company or its management and who meets stringent selection criteria. We continue to implement and maintain appropriate practices, including a number of controls that mitigate risk, in our compensation program and related areas. Pfizer executives are required to own Pfizer common stock equal in value to a multiple of salary, ranging from at least six times salary for our CEO, to at least four times salary for the other members of our Executive Leadership Team. Ownership must be achieved over a five-year period.

For a detailed explanation of the Company's compensation philosophy, which is set by the Compensation Committee, please see the Compensation Discussion and Analysis section of Pfizer's Proxy Statement or visit the Investor's section of Pfizer's website