Edwards Lifesciences Corporation
Edwards Lifesciences Corp (Form: DEF 14A, Received: 03/29/2018 16:18:20)
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.                )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

Edwards Lifesciences Corporation

 

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

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

 

  (1)

Title of each class of securities to which transaction applies:

     

  (2)

Aggregate number of securities to which transaction applies:

     

  (3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

     

  (4)

Proposed maximum aggregate value of transaction:

     

  (5)

Total fee paid:

     

 

Fee paid previously with preliminary materials.

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

 

  (1)

Amount Previously Paid:

     

  (2)

Form, Schedule or Registration Statement No.:

     

  (3)

Filing Party:

     

  (4)

Date Filed:

     


Table of Contents

LOGO


Table of Contents
LOGO  

Edwards Lifesciences Corporation

 

One Edwards Way

Irvine, California 92614

Phone: 949.250.2500

www.edwards.com

 

 

LOGO  

  

March 29, 2018

  

 

 

Dear Fellow Stockholders:

 

On behalf of the Edwards Board of Directors, it is my pleasure to invite you to attend our 2018 Annual Meeting of Stockholders. The meeting will be held at our corporate headquarters located at One Edwards Way, Irvine, California, on Thursday, May 17, 2018, at 10:00 a.m., PT. Registration will begin at 9:00 a.m.

 

Details of the business to be conducted at the Annual Meeting are included in the attached Notice of 2018 Annual Meeting of Stockholders and Proxy Statement. Stockholders also may access the Notice of 2018 Annual Meeting of Stockholders and the Proxy Statement via the Internet at www.edwards.com .

 

I look forward to having the opportunity to discuss with you our performance in 2017, which was a year of continued strong results, progress on our strategic initiatives and active engagement by our Board. I am proud that we continued our focus on regularly communicating with our stockholders, and welcome further discussion at the annual meeting.

 

2017 Performance

 

Our company finished the year strong with 16 percent growth in sales. Our growth in 2017 was driven by clinician and patient preferences for our innovative therapies, and we are positioned well for 2018 and beyond because of our continued investments in our technology pipeline and infrastructure. We expect to achieve a number of important milestones this year to support progress in the development of transformative therapies across all of our product lines, and we are focused on staying at the forefront by creating strong evidence for promising new therapies for the patients we serve.

 

Commitment to our Stockholders

 

Our Board is comprised of members with balanced and diverse skillsets and experiences who collectively possess the expertise to ensure effective oversight of our corporate strategy to generate stockholder value. In addition, our Board proactively engages with stockholders and has historically taken action in response to stockholder feedback, to align our corporate governance practices with our stockholders’ interests.

 

In addition to our routine investor relations efforts, since our 2017 Annual Meeting, we reached out to stockholders representing more than 55 percent of our outstanding shares to discuss corporate governance, executive compensation, sustainability, and other topics of prime importance to stockholders. Our Board values the insights we gain from these engagements, and we are committed to ensuring our corporate governance is aligned with stockholder perspectives.

 

Stockholder feedback is an important factor in the Board’s decision-making process. This input was integral to the evolution of Edwards’ board and corporate governance practices over the past few years, including the decision to reduce the threshold for stockholders’ right to call special meetings and the adoption of proxy access.

 

We sincerely appreciate your continued interest in Edwards, as well as your input and support. Thank you, and we look forward to seeing you at the Annual Meeting.

 

Sincerely,

 

LOGO

Michael A. Mussallem

Chairman of the Board and

Chief Executive Officer


Table of Contents

NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS

 

Date and Time:    Place:
May 17, 2018    Edwards Lifesciences Corporation
10:00 a.m. PT    One Edwards Way, Irvine, CA 92614

Matters to be voted on at the 2018 Annual Meeting of Stockholders (the “Annual Meeting”):

 

  Proposal 1.

Election of eight director nominees named in the attached Proxy Statement to serve until our next annual meeting of stockholders and until their respective successors are duly elected and qualified

 

  Proposal 2.

Approval, on an advisory basis, of the named executive officer compensation disclosed in the attached Proxy Statement

 

  Proposal 3.

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018

 

  Proposal 4.

A stockholder proposal, if properly presented at the Annual Meeting

 

  Proposal 5.

Any other business that may properly come before the Annual Meeting or any postponement or adjournment of the meeting

The Proxy Statement accompanying this notice describes each of the items of business in more detail.

Record Date: If you were a holder of record of the common stock of Edwards Lifesciences Corporation at the close of business on March 22, 2018, you are entitled to notice of, and to vote at, the Annual Meeting.

Your vote is very important. Please submit your proxy or voting instructions as soon as possible to ensure that your shares will be represented at the Annual Meeting whether or not you expect to attend the Annual Meeting.

 

 

 

 

How to Vote Your Shares

 

 
 

 

LOGO

  

 

Via the Internet

Visit the website listed on your proxy card, notice, or voting instruction form

    

 

LOGO

  

 

By Phone

Call the phone number listed on your proxy card or voting instruction form

 
  LOGO   

By Mail

Complete, sign, date, and return your proxy card or voting instruction form in the envelope provided

 

 

     LOGO   

In Person

Attend our Annual Meeting and vote by ballot

 

By Order of the Board of Directors,

 

 

LOGO

Linda J. Park

Vice President, Associate General Counsel, and Corporate Secretary

March 29, 2018

 

Important notice regarding the availability of proxy materials for our

2018 Annual Meeting of Stockholders to be held on May 17, 2018:

Our Proxy Statement and 2017 Annual Report to stockholders are available on the Internet at

www.proxyvote.com.

Edwards Lifesciences Corporation      One Edwards Way, Irvine, CA 92614     www.edwards.com


Table of Contents

 

  

 

 

TABLE OF CONTENTS

 

    Page  

PROXY SUMMARY

    i  

GENERAL MEETING AND VOTING INFORMATION

    1  

BOARD OF DIRECTORS MATTERS

    4  

PROPOSAL 1 – ELECTION OF DIRECTORS

    4  

Corporate Governance Policies and Practices

    11  

Corporate Governance Highlights

    11  

Active Stockholder Engagement Program

    11  

Director Independence

    12  

Corporate Governance Guidelines

    12  

Board Leadership Structure

    12  

Board Role In Risk Oversight

    13  

Meetings of the Board

    14  

Board Composition

    14  

Committees of the Board

    14  

Succession Planning

    16  

Communications with the Board

    16  

Corporate Social Responsibility

    16  

Director Compensation

    18  

Director Compensation Table – 2017

    18  

Retainers and Fees

    19  

Nonemployee Directors Stock Incentive Program

    19  

Deferral Election Program

    19  

Directors’ Stock Ownership Guidelines and Holding Requirement

    20  

Expense Reimbursement Policy

    20  

Outstanding Nonemployee Director Equity Awards

    21  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    22  

EXECUTIVE COMPENSATION AND OTHER INFORMATION

    23  

Executive Officers

    23  

Compensation Discussion and Analysis

    25  

Executive Summary

    25  

Compensation Philosophy and Objectives for NEOs

    28  

Compensation Process

    29  

Independent Compensation Consultant

    29  

Use of Competitive Data

    30  

Elements of Compensation

    31  

Stock Ownership Guidelines and Holding Requirement

    39  

Prohibition on Pledging and Hedging

    39  
    Page  

Market Timing of Equity Awards

    39  

Benefits and Perquisites

    39  

Deferred Compensation

    40  

Employment and Post-Termination Agreements

    40  

Tax Implications – Policy Regarding Section 162(m)

    41  

2018 Compensation Decisions

    41  

Compensation and Governance Committee Report

    41  

Executive Compensation

    42  

Summary Compensation Table

    42  

Grants of Plan-Based Awards in Fiscal Year 2017

    44  

Non-Equity Incentive Plan Awards

    44  

Equity Incentive Plan Awards

    45  

Outstanding Equity Awards at 2017 Fiscal Year-End

    48  

Option Exercises and Stock Vested in Fiscal Year 2017

    50  

Nonqualified Deferred Compensation Plans

    50  

Potential Payments Upon Termination or Change in Control

    51  

CEO Pay Ratio

    54  

PROPOSAL 2 –  ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

    55  

EQUITY COMPENSATION PLAN INFORMATION

    57  

AUDIT MATTERS

    58  

PROPOSAL 3 –  RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    58  

Fees Paid to Principal Accountants

    58  

Pre-Approval of Services

    59  

Audit Committee Report

    59  

OTHER MATTERS AND BUSINESS

    60  

PROPOSAL 4 –  STOCKHOLDER PROPOSAL REGARDING ACTION BY WRITTEN CONSENT

    60  

Additional Information

    64  

Section 16(a) Beneficial Ownership Reporting Compliance

    64  

Related Persons Transactions

    64  

Indemnification of Directors and Officers

    64  

Deadline for Receipt of Stockholder Proposals and Director Nominations for the 2019 Annual Meeting

    64  

Annual Report on Form 10-K

    65  

Delivery of Proxy Materials

    65  
 

 

 


Table of Contents

 

  

 

 

This Proxy Statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements contained in this Proxy to be covered by the safe harbor provisions of such Acts. All statements other than statements of historical fact in this Proxy or referred to or incorporated by reference into this Proxy are “forward-looking statements” for purposes of these sections. These statements include, among other things, any predictions of earnings, revenues, expenses, or other financial items, plans, or expectations with respect to development activities, clinical trials, or regulatory approvals, any statements of plans, strategies, and objectives of management for future operations, any statements concerning our future operations, financial conditions, and prospects, and any statements of assumptions underlying any of the foregoing. These statements can sometimes be identified by the use of the forward-looking words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “should,” “anticipate,” “plan,” “goal,” “continue,” “seek,” “pro forma,” “forecast,” “intend,” “guidance,” “optimistic,” “aspire,” “confident,” other forms of these words, or similar words or expressions or the negative thereof. Investors are cautioned not to unduly rely on such forward-looking statements. These forward-looking statements are subject to substantial risks and uncertainties that could cause our results or future business, financial condition, results of operations, or performance to differ materially from our historical results or experiences or those expressed or implied in any forward-looking statements contained in this Proxy. See the risks listed in Edwards’ Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and our other reports filed with the Securities and Exchange Commission, to which your attention is directed. These forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections.

 

 


Table of Contents

PROXY SUMMARY

This summary contains highlights about Edwards and the upcoming Annual Meeting. This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement prior to voting.

STOCKHOLDER VOTING MATTERS (Page 1)

 

  Proposal     Board’s Voting
Recommendation
     

Annual Meeting of Stockholders

 

  Proposal 1:

 

 

Election of Directors

 

 

               FOR

         each nominee

   

 

Date and Time:

May 17, 2018

10:00 a.m. PT

  Proposal 2:   Advisory Vote to Approve Named Executive Officer Compensation                  FOR    

Place:

Edwards Lifesciences

One Edwards Way

Irvine, CA 92614

         
  Proposal 3:  

Ratification of Appointment of Independent Registered Public Accounting Firm

 

                 FOR    

 

  Proposal 4:

 

 

Advisory Vote on a Stockholder Proposal Regarding Action By Written Consent

 

 

               AGAINST

 

   

 

Record Date:

March 22, 2018

 

BOARD OF DIRECTOR NOMINEES (Page 4)

All eight of our current directors are standing for election for a one-year term at the Annual Meeting. The following chart provides key information on each of our current directors.

 

                      

Committee Memberships

     
  Name    Age    Director
Since
   Independent   Audit
Committee**
  

Compensation

and Governance
Committee

  

Other Public  

Company  
Boards  

 

Kieran T. Gallahue

Former Chairman and CEO

CareFusion Corporation

   54    2015    Yes  

LOGO

 

      1

Leslie S. Heisz

Former Managing Director

Lazard Frères & Co

   57    2016    Yes  

LOGO

 

      1

William J. Link, Ph.D.

Managing Director and
Co-Founder Versant Ventures

   71    2009    Yes      LOGO

 

   2

Steven R. Loranger

Former Chairman, President, and
CEO ITT Corporation

   66    2016    Yes      LOGO

 

   1

Martha H. Marsh

Retired President and CEO
Stanford Hospital & Clinics

   69    2015    Yes      LOGO

 

   2

Michael A. Mussallem

Chief Executive Officer and Chairman

Edwards Lifesciences Corporation

   65    2000    No         0

Wesley W. von Schack *

Chairman

AEGIS Insurance Services, Inc.

   73    2010    Yes  

LOGO

 

      1

Nicholas J. Valeriani

Former CEO, West Health Institute
Former EVP, Johnson & Johnson

   61    2014    Yes        LOGO

 

  

1

 

*

Presiding Director

**

Each member is an audit committee financial expert

C   =  Chairperson



 

 

LOGO     Edwards Lifesciences Corporation     |      2018 Proxy Statement     i


Table of Contents

Our Board of Directors (our “Board”) strives to maintain a highly independent, balanced, and diverse set of directors that collectively possess the expertise to ensure effective oversight of management.

 

 

LOGO    LOGO    LOGO    LOGO

CORPORATE GOVERNANCE HIGHLIGHTS (Page 11)

Our commitment to good corporate governance practices and accountability to stockholders is described below.

 

 

 

LOGO

WHAT WE DO

 

 

 

 

Annual election of directors

 

 

 

 

Majority vote standard in uncontested elections, with director resignation policy

 

 

 

 

Special stockholders meetings can be called by stockholders owning at least 15% of our outstanding shares

 

 

 

 

Proxy access right to permit a stockholder, or a group of up to 30 stockholders, owning at least 3% of our outstanding shares continuously for at least 3 years, to nominate up to the greater of 2 directors or 20% of our Board for inclusion in our proxy statement

 

 

 

 

Independent Board, all but our Chief Executive Officer

 

 

 

 

Executive session of independent directors held at each Board and committee meeting

 

 

 

 

Independent Presiding Director provides strong independent leadership of our Board

 

 

 

 

Retirement policy for directors

 

 

 

 

Annual Board and committee self-evaluations and peer reviews

 

 

 

 

Nonemployee directors expected to hold net shares upon vesting or exercise of equity awarded after 2011 until Board service ends

 

 

 

 

Senior management succession planning considered at each regularly scheduled Board meeting

 

 

 

 

Active stockholder engagement

 

 

 

 

Robust code of ethics in our Global Business Practice Standards

 

 

 

 

Corporate sustainability report

 

 

 

 

“Clawback” policy for performance-based compensation

 

 

 

 

LOGO

WHAT WE DON’T DO

 

 

 

No stockholder rights plan (“poison pill”)

 

 

 

No supermajority voting provisions in the Company’s organizational documents

 



 

 

ii          LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

ACTIVE STOCKHOLDER ENGAGEMENT PROGRAM (Page 11)

Edwards’ Board and management are committed to engaging with Edwards’ stockholders and incorporating feedback into their decision-making processes. Throughout the year, our CEO, CFO, and Vice President of Investor Relations meet by phone and face-to-face with current and prospective stockholders to discuss Edwards’ strategy, business, and financial results. Our Corporate Secretary and Investor Relations teams, together with other members of management and, from time to time, our Presiding Director, engage stockholders to solicit their views and feedback on corporate governance, compensation and other related matters and to discuss the issues that matter most to our stockholders. Stockholder feedback is shared with the Board and its committees, which enhances our corporate governance practices, facilitates future dialogue between stockholders and the Board and provides additional transparency to our stockholders. Since the 2017 Annual Meeting, our Corporate Secretary and Investor Relations teams contacted our top stockholders representing more than 55% of our outstanding shares. In this engagement, we received feedback from stockholders on a range of issues including corporate governance, compensation, and sustainability.

Over time, we have amended our Charter and Bylaws to adopt various stockholder rights and to align our corporate governance practices with our stockholders’ interests.

 

 

Topic

 

 

 

Action Taken in Response to Stockholder Feedback

 

 

Proxy Access

 

 

 

 

  Adopted proxy access at 3% and 3 year ownership and holding period duration thresholds

 

Right to Call Special Meetings

 

 

  In response to a non-binding stockholder proposal requesting the right to act by written consent, engaged with stockholders representing over 50% of shares outstanding to better understand investor views and, in response to feedback received, reduced the threshold to call a special meeting to 15%

 

  Amended our Bylaws to permit holders of 25% of outstanding shares to call a special meeting

 

 

Declassified Board

 

 

 

  Amended our Charter to eliminate the classified board

 

 

No Supermajority

Voting

 

 

  Amended our Charter to eliminate supermajority voting

 

 

Poison Pill

 

 

 

  Did not renew poison pill when it expired in March 2010

 

 

Majority Voting

in   Director

Elections

 

 

 

  Amended our Bylaws to provide for majority voting in uncontested director elections

 

 

 

CORPORATE SOCIAL RESPONSIBILITY (Page 16)

Our Board recognizes the importance of our sustainability initiatives and the need to provide effective oversight. Our Compensation Committee maintains formal oversight responsibilities with regular discussions at meetings of the full Board. We have established a robust framework for ensuring that our efforts are properly managed and implemented, including the establishment of a cross-functional Sustainability Council which includes leaders from across the organization.

We received numerous recognitions for our sustainability and environmental responsibilities practices in 2017, some of which are highlighted below:

 

 

Ethisphere’s World’s Most Ethical Companies ;

 

First time constituent of the DJSI ESG North America Index —the Dow Jones Sustainability North America tracks the performance of the top 20% of the 600 largest United States and Canadian companies in the S&P Global Broad Market Index that lead the field in sustainability;

 

CPA-Zicklin Trendsetter from the 2017 CPA-Zicklin Index of Corporate Political Disclosure and Accountability—companies in the S&P 500 are scored for their corporate political policies, disclosure and oversight transparency; and



 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement     iii


Table of Contents
 

Constituent of the global MSCI ACWI ESG Leaders Index —index provides exposure to companies with high ESG performance relative to their sector peers and consists of large and mid-cap companies across 23 Developed Markets and 24 Emerging Markets countries.

EXECUTIVE COMPENSATION (Page 23)

Executive Summary .     Edwards is the global leader in patient-focused medical innovations for structural heart disease and critical care monitoring. Driven by a passion to help patients, we partner with the world’s leading clinicians and researchers and invest in research and development to transform care for those impacted by structural heart disease or require hemodynamic monitoring during surgery and in intensive care. Edwards Lifesciences has a proud history, six decades long, as a leader in these areas. Since our founder, Lowell Edwards, first dreamed of using engineering to address diseases of the human heart, we have steadily built a company on the premise of imagining, building, and realizing a better future for our patients.

Pay-for-Performance Philosophy .     The Compensation and Governance Committee of the Board (the “Compensation Committee”) strives to create a pay-for-performance culture and strongly believes that executive compensation should be tied not only to performance, but also directly to the successful implementation of our corporate strategy. As a direct result of our strategy, we have introduced new therapies such as transcatheter aortic valve replacement, rapid-deployment surgical heart valves and noninvasive advanced hemodynamic monitoring, all while achieving our stated financial and operating objectives. Managing our business well in a challenging, highly regulated, dynamic environment requires talented and energetic leaders who champion our strategy and deliver on our commitments.

EDWARDS’ CORPORATE STRATEGY INFORMS PAY DESIGN

 

 

 

LOGO

2017 Financial and Operating Performance.     Overall, we achieved outstanding financial results and operating performance in 2017, exceeding our goals for sales growth, net income growth and free cash flow. We also made important progress on future advancements for patients.

Strong sales growth of 16% was driven by:

 

 

Clinician and patient preferences for our innovative transcatheter valve therapies, including the best-in-class Edwards SAPIEN 3 transcatheter heart valve;

 

Continued adoption of our newest surgical valve therapy systems, Edwards INTUITY Elite and INSPIRIS RESILIA; and

 

Broad use of our critical care technologies, including the recently launched HemoSphere next-generation advanced monitoring platform.



 

 

iv          LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

Additionally, we continued to invest aggressively in our technology pipeline and infrastructure, growing research and development investments by 25% to advance our transformational transcatheter structural heart programs.

Stock Performance.     As a general indicator of our pay-for-performance culture, the Compensation Committee considers how Edwards’ cumulative total return to stockholders compares to both the S&P 500 Index and the S&P Health Care Equipment Select Industry Index (the “SPHESI”). The table below illustrates our Company’s 5-year cumulative total stockholder return on common stock with the cumulative total returns of the S&P 500 Index and the SPHESI.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*

 

LOGO

 

  *

$100 invested on December 31, 2012 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

 

2017 Annual Incentive Plan Outcomes and Long Term Incentives.     Our financial results in 2017 surpassed the cash incentive plan target achievement percentages for all three financial measures by significant margins, and resulted in financial performance at 175% of target under the cash incentive plan. In addition, our overall achievement of KODs for 2017 was 122%. Accordingly, our cash incentive plan for corporate employees funded at 175% of target. Final incentive amounts for the Named Executive Officers (“NEOs”) for 2017 also took into account each employee’s individual performance. The PBRSUs that vested in 2017 were based on Edwards’ total stockholder return (“TSR”) compared to that of companies in a subset of the SPHESI (the “SPHESI Subset”). The payout of these PBRSUs tracked the strong performance of our stock over the three-year period and paid out at 175% of target.



 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement     v


Table of Contents

COMPENSATION PROGRAM HIGHLIGHTS (Page 28)

Compensation Program Highlights.     The Compensation Committee believes that its executive compensation and benefits philosophy and objectives have resulted in programs that align executives with stockholder interests.

 

 

 

LOGO

WHAT WE DO

 

 

 

 

Pay-for-Performance. Approximately 89% of the total direct compensation of our CEO, and an average of 78% of the total direct compensation of our other NEOs, was performance-based in 2017.

 

   

 

 

 

Linkage Between Performance Measures and Strategic Imperatives. Performance measures for incentive compensation are linked to our Strategic Imperatives through achievement of KODs and are designed to create long-term stockholder value and hold executives accountable for their individual and Edwards’ performance.

 

   

 

 

 

 

 

Performance -Based Equity. Our PBRSUs vest based on our relative TSR over a three-year period.

 

   

 

 

 

Minimum Three -Year Vesting. Equity compensation is structured to vest over a minimum period of three years, subject to limited exceptions.

 

   

 

 

 

Robust Executive Stock Ownership Guidelines with Holding Period Requirements. Executives are required to hold Edwards’ stock with a value not less than six-times salary for our CEO and three-times salary for each other NEO. Fifty percent of net shares received as equity compensation must be retained until the guideline has been met.

 

   

 

 

 

 

 

CEO Stock Ownership. Our CEO far exceeds his six-times salary ownership guideline and has continued to increase his ownership of Edwards’ stock each year.

 

   

 

 

 

 

 

Modest Perquisites. We provide modest perquisites and have a business rationale for the perquisites that we do provide.

 

   

 

 

 

“Double Trigger” in the Event of a Change in Control. Severance benefits are paid, and equity compensation awarded starting in May 2015 accelerates in connection with a severance, only upon a “double trigger” in connection with a change in control (meaning a termination of the executive’s employment is required, in addition to the occurrence of a change in control, in order for the benefits to be triggered).

 

   

 

 

 

Use of Tally Sheets. The Compensation Committee annually reviews summaries of prior and potential future compensation levels (referred to as “tally sheets”) when making compensation decisions.

 

   

 

 

 

“Clawback” Policy. We maintain a recoupment policy for performance-based compensation .

 

   

 

 

 

Independent Compensation Consultant. The Compensation Committee engages an independent compensation consulting firm that provides us with no other services.

 

   

 

 

LOGO

WHAT WE DON’T DO

 

 

 

 

No excise tax gross -ups for executive officers.

 

   

 

 

 

No repricing or buyout of underwater stock options.

 

   

 

 

 

No pledging of Edwards’ securities by directors, executives, employees with a title of “vice president” or above, and “insiders” under our insider trading policy.

 

   

 

 

 

No hedging of Edwards’ securities by directors, executives, employees with a title of “vice president” or above, and “insiders” under our insider trading policy.

   

 

 

We align executive compensation

with the interests of our

stockholders.

 

 

 

Executive compensation programs

are designed to avoid excessive risk

and foster long-term value creation.

 

 

 

We adhere to strong executive

compensation and corporate governance practices.

 



 

 

vi          LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  

 

 

EDWARDS LIFESCIENCES CORPORATION

 

 

PROXY STATEMENT FOR THE

2018 ANNUAL MEETING OF STOCKHOLDERS

GENERAL MEETING AND VOTING INFORMATION

Our Board is soliciting your proxy for use at the Annual Meeting to be held at 10:00 a.m., PT, on Thursday, May 17, 2018, at our corporate headquarters, located at One Edwards Way, Irvine, California 92614.

Unless the context otherwise requires, references in this Proxy Statement to “Edwards,” “the Company,” “we,” “our,” “us,” and similar terms refer to Edwards Lifesciences Corporation, a Delaware corporation.

Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on May 17, 2018

We are pleased to take advantage of Securities and Exchange Commission (the “SEC”) rules that allows us to furnish our proxy materials, including our 2017 Annual Report and this Proxy Statement (the “Proxy Materials”), over the Internet. As a result, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of the Proxy Materials. The Notice contains instructions on how to access those documents over the Internet and how to submit your proxy via the Internet. The Notice also contains instructions on how to request a paper copy of the Proxy Materials. All stockholders who do not receive a Notice will receive a paper copy of the Proxy Materials by mail or an electronic copy of the Proxy Materials by e-mail. This process allows us to provide our stockholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing the Proxy Materials. This Proxy Statement and our 2017 Annual Report are available at http://ir.edwards.com/annuals-proxies.cfm .

The Notice and the Proxy Materials are first being made available to stockholders on or about March 29, 2018.

Voting Matters and the Recommendations of the Board

The items of business scheduled to be voted on at the Annual Meeting and our Board’s recommendation on each item are as follows:

 

 

   Proposal              Board Vote
Recommendation
    

 

  Proposal 1.

  

 

Election of Directors

   

 

        FOR

  each nominee

 

 

  Proposal 2.

 

  

 

Advisory Vote to Approve Named Executive Officer Compensation

 

   

 

        FOR

 

 

 

  Proposal 3.

 

  

 

Ratification of Appointment of Independent Registered Public Accounting Firm

 

   

 

        FOR

 

 

 

  Proposal 4.

 

  

 

Advisory Vote on a Stockholder Proposal Regarding Action By Written Consent

 

     

 

       AGAINST

 

   

Stockholders will also be asked to consider and transact such other business as may properly come before the Annual Meeting or any postponement or adjournment thereof. Pursuant to our Bylaws, the chairman of the Annual Meeting will determine whether any business proposed to be brought before the Annual Meeting has been properly presented. If the chairman determines that the business was not properly brought before the Annual Meeting, the chairman will declare to the Annual Meeting that such business was not properly brought and such business will not be transacted.

Record Date and Stockholders List

The Board has fixed the close of business on March 22, 2018 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting. A list of stockholders of record entitled to vote at the Annual Meeting will be available for inspection by any stockholder, for any purpose germane to the meeting, during normal business hours, for a period of ten days prior to and including the date of the meeting, at our corporate headquarters located at One Edwards Way, Irvine, California 92614.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      1


Table of Contents

 

 

  GENERAL MEETING AND VOTING INFORMATION

 

 

Who Can Vote

You are entitled to vote your shares at the Annual Meeting if our records show that you held your shares as of the record date, March 22, 2018. At the close of business on that date, 210,520,704 shares of our common stock were outstanding and entitled to vote at the Annual Meeting. We have no other class of voting securities outstanding. Each stockholder is entitled to one vote per share on each proposal to be voted upon at the Annual Meeting.

How to Vote

You may hold Edwards’ shares in multiple accounts and therefore receive more than one proxy card or voting instruction form and related materials. Please vote EACH proxy card and voting instruction form that you receive.

Shares Held of Record .      If you hold your shares in your own name as a holder of record with our transfer agent, Computershare, you may authorize that your shares be voted at the Annual Meeting in one of the following ways:

 

 

By Internet

 

   

If you received a Notice or a printed copy of the Proxy Materials, follow the instructions in the Notice or on the proxy card.

 
 

By Telephone

 

   

If you received a printed copy of the Proxy Materials, follow the instructions on the proxy card.

 
 

By Mail

 

   

If you received a printed copy of the Proxy Materials, complete, sign, date, and mail your proxy card in the enclosed, postage-prepaid envelope.

 

 
 

In Person

 

   

You may also vote in person if you attend the Annual Meeting.

 

Shares Held in Street Name .      If you hold your shares through a broker, bank or other nominee (that is, in street name), you will receive instructions from your broker, bank or nominee that you must follow in order to submit your voting instructions to have your shares voted at the Annual Meeting. If you want to vote in person at the Annual Meeting, you must obtain a legal proxy from your broker, bank or other nominee and bring it to the meeting.

Shares Held in Our 401(k) Plan .      If you participate in the Edwards Lifesciences Corporation 401(k) Savings and Investment Plan or the Edwards Lifesciences Technology Sarl Retirement Savings Plan (formerly known as the Edwards Lifesciences Corporation of Puerto Rico Savings and Investment Plan), you will receive a request for voting instructions with respect to the shares allocated to your plan account. You are entitled to direct the plan trustee how to vote your plan shares. If the plan trustee does not receive voting instructions for shares in your plan account, the shares attributable to your account will be voted in the same proportion as the allocated shares for which voting instructions have been received.

Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy or voting instructions in advance of the Annual Meeting as described above so that your vote will be counted if you later decide not to attend or are unable to attend the Annual Meeting.

Deadline to Vote

If you are a stockholder of record, your proxy must be received by telephone or the Internet by 11:59 p.m. ET on May 16, 2018 in order for your shares to be voted at the Annual Meeting. If you are a stockholder of record and you received a printed copy of the Proxy Materials, you may instead mark, sign, date and return the enclosed proxy card, which must be received before the polls close at the Annual Meeting.

If you hold your shares in street name through a broker, bank or other nominee, please follow the instructions provided by the broker, bank or other nominee who holds your shares. If you hold shares in one of our 401(k) plans, to allow sufficient time for voting by the plan trustees, your voting instructions must be received by telephone or the Internet by 11:59 p.m. ET on May 14, 2018.

Appointment of Proxies

The Board has appointed William J. Link, Michael A. Mussallem and Wesley W. von Schack to serve as proxy holders to vote your shares according to the instructions you submit. If you properly submit a proxy but do not indicate how you want your shares to be voted on one or more items, your shares will be voted in accordance with the recommendations of our Board as set forth above under “Voting Matters and the Recommendations of the Board.” With respect to any other matter properly presented at the Annual Meeting, your proxy, if properly submitted, gives authority to the proxy holders to vote your shares on such matter in accordance with their best judgment.

 

 

2      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

  GENERAL MEETING AND VOTING INFORMATION  

 

 

Revocation of Your Proxy

If you are a holder of record, you may revoke your proxy at any time before it is voted at the Annual Meeting by delivering written notice of revocation to the Corporate Secretary of the Company by submitting a subsequently dated proxy by mail, telephone or the Internet in the manner described above under “How to Vote,” or by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not itself revoke an earlier submitted proxy. If you hold your shares in street name, you must follow the instructions provided by your broker, bank or nominee to revoke your voting instructions, or, if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares at the Annual Meeting, by attending the Annual Meeting and voting in person.

Any change to your proxy or voting instructions that is provided by telephone or the Internet must be submitted by 11:59 p.m. ET on May 16, 2018, except that if you are voting shares held in one of our 401(k) plans, the deadline is 11:59 p.m. ET on May 14, 2018.

Broker Voting

Brokers holding shares of record for their customers are entitled to vote on certain routine matters, such as the ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”), our independent registered public accounting firm (Proposal 3), without instructions from their customers. However, these brokers are generally not entitled to vote on certain non-routine matters, including the election of directors, matters relating to equity compensation plans or executive compensation, and certain corporate governance proposals, unless their customers submit voting instructions. If you hold your shares in street name through a broker and the broker does not receive your voting instructions, the broker will not be permitted to vote your shares in its discretion on any of the proposals at the Annual Meeting other than the proposal to ratify the appointment of PwC (Proposal 3). If you do not submit voting instructions and your broker votes your shares on Proposal 3 in its discretion, your shares will constitute “broker non-votes” on each of the other proposals.

Quorum

The presence at the Annual Meeting, in person or by proxy, of holders of at least a majority of the outstanding shares of common stock entitled to vote is necessary to constitute a quorum to transact business at the Annual Meeting. Shares represented at the Annual Meeting are counted toward a quorum even if the holder of such shares abstains from voting. Shares held through brokers are not counted toward a quorum unless the broker has authority to vote, and votes such shares, upon at least one matter at the Annual Meeting.

Vote Required on Proposals

The following summary describes the vote required to approve each of the proposals at the Annual Meeting.

 

   Voting Item        Vote Standard  

Treatment of Abstentions and Broker

Non-Votes

    

 

  Proposal 1.

 

 

 

Election of Directors

 

 

 

   Majority of votes cast

 

 

 

   Abstentions and broker non-votes not counted as votes cast

 

 

 

  Proposal 2.

  Proposal 3.

 

  Proposal 4.

 

 

Executive Compensation (Advisory)

Ratification of Independent Registered Public Accounting Firm

Stockholder Proposal (Advisory)

 

 

   Majority of shares represented at the Annual Meeting and entitled to vote on the proposal

 

 

   Abstentions will have the effect of votes “against”

   Broker non-votes will not be counted as shares entitled to vote on the proposal

 

   

Proxy Solicitation Costs

Your proxy for the Annual Meeting is being solicited on behalf of our Board and we will pay the cost of solicitation. At our expense, we will also request brokers and other custodians, nominees and fiduciaries to forward proxy soliciting materials to the beneficial owners of shares held of record by such persons. In addition, we have retained Georgeson Inc. (“Georgeson”) to assist with the distribution and solicitation of proxies for a fee of $20,000, plus expenses for these services. We also agreed to indemnify Georgeson against liabilities and expenses arising in connection with the proxy solicitation unless caused by Georgeson’s gross negligence or intentional misconduct. Georgeson and our officers, directors and regular employees may also solicit proxies by telephone, facsimile, e-mail and personal solicitation. We will not pay additional compensation to our officers, directors and regular employees for these activities.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      3


Table of Contents

 

  

 

 

BOARD OF DIRECTORS MATTERS

PROPOSAL 1 – ELECTION OF DIRECTORS

 

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR

General.     Our Board currently consists of eight directors forming one single class of directors, and all directors will be standing for election for a one-year term at the Annual Meeting.

Since our 2017 annual meeting, the Board appointed Leslie S. Heisz as Chairperson of the Audit Committee following the retirement of John T. Cardis. Ms. Heisz, who has served on our Board since July 2016, has a distinguished investment banking career, and her deep financial expertise positions her well to chair the Audit Committee. Since 2010, Ms. Heisz has served on other public company boards further balancing her skills to oversee financial reporting, enterprise and operational risk management.

The Board has nominated the eight individuals identified below for election to the Board, to serve until the next annual meeting of stockholders and until their respective successors are elected and qualified, or until their earlier resignation or removal.

Each of the nominees standing for election has consented to serve as a director if elected. However, if any nominee becomes unable or unwilling for good cause to serve before the election, the shares represented by proxy may be voted for a substitute nominee designated by the Board. No arrangement or understanding exists between any nominee and any other person or persons pursuant to which any nominee was or is to be selected as a director or nominee, and none of our directors has any family relationship with any other director or with any of our executive officers. More information regarding the Board, the committees of the Board, director independence, and related matters follows this Proposal 1.

Identification and Evaluation of Director Candidates.     Our Board carefully considers the skills, experiences, and diversity of its members as part of a robust process for director evaluation, education, and refreshment. Even though our Compensation Committee makes recommendations to the Board regarding candidates for election as directors of the Company, all members of the Board are very engaged in the process of, and discussions regarding, refreshment.

The Compensation Committee maintains formal criteria for selecting director nominees who will best serve the interests of the Company and its stockholders. These criteria are described in more detail below under “Board Criteria and Diversity Policy.” In addition to these requirements, the Compensation Committee also evaluates whether the candidate’s skills and experience are complementary to the existing Board members’ skills and experience, recognizing that the Board’s skills evolve in order to align with the Company’s strategy as well as emerging risks and opportunities. Some or all of the members of the Compensation Committee interview candidates that meet the criteria and the Compensation Committee selects nominees that it believes best suit the needs of the Board.

Since 2014, the Board has embarked upon a thoughtful and deliberate process of Board refreshment, resulting in the election of five new directors. This process has involved participation of all directors to take advantage of their broad range of expertise and experience as part of the decision-making process.

From time to time, the Compensation Committee may engage the services of an executive search firm to assist in identifying and evaluating candidates for the Board. The Compensation Committee will consider qualified candidates for director nominees suggested by the Company’s stockholders. Stockholders can suggest qualified candidates for director nominees by writing to the Corporate Secretary of the Company at One Edwards Way, Irvine, California 92614. Submissions received that meet the criteria described below are forwarded to the Compensation Committee for further review and consideration. The Compensation Committee does not intend to evaluate candidates proposed by stockholders any differently than other candidates.

Board Criteria and Diversity Policy.     Our Board, led by the Compensation Committee, is responsible for assessing, identifying, evaluating, and, ultimately, recommending to the stockholders, individuals qualified to be directors of the Company. We believe that diverse backgrounds and experiences strengthen Board performance and promote long-term stockholder value creation.

The Compensation Committee’s charter sets forth the membership criteria against which potential director candidates are evaluated. These written membership criteria state that the Company “seeks a board with diversity of background

 

 

4      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

PROPOSAL 1 — ELECTION OF DIRECTORS  

 

 

among its members, including diversity of experience, gender, race, ethnic or national origin, and age.” In performing this responsibility, the Compensation Committee considers women and minority candidates consistent with the membership criteria and the Company’s non-discrimination policies.

The Compensation Committee also seeks director candidates and nominees with the following qualities:

 

 

intelligence,

 

 

honesty,

 

 

perceptiveness,

 

 

good judgment,

 

 

maturity,

 

 

high ethics and standards,

 

 

integrity,

 

 

fairness and responsibility,

 

 

a background that demonstrates an understanding of business and financial affairs and the complexities of a large, multifaceted, global business, governmental or educational organization, and

 

 

the ability to hold independent opinions and express them in a constructive manner.

Of equal importance, the Compensation Committee and the Board seek individuals who are compatible and able to work well with other directors and executives. The satisfaction of these criteria is implemented and assessed through ongoing consideration of directors and potential nominees by the Compensation Committee and the Board, with a discussion of Board succession planning held at regularly scheduled meetings of the Board and certain specially called meetings. These discussions have included reviews of current director skills against an established skills matrix and consideration of each director’s retirement horizon, as well as the Board’s self-evaluation and peer evaluation processes, as described below under “Board Evaluations.” Based upon these activities and its review of the current composition of the Board, the Compensation Committee and the Board believe that the nominating criteria have been satisfied. As a result, the Board believes its members represent diverse backgrounds and experience that are aligned with our Company’s strategy, including financial, industrial, entrepreneurial, and international experience.

Board Evaluations.     The Board conducts an annual Board and Committee self-evaluation every July or August, soliciting each director’s views on, among other things, Board and Committee performance and effectiveness, size, composition, agenda, processes and schedule. In addition, the directors conduct annual peer evaluations focusing on each individual director’s personal interactions and skills. This is a robust process that culminates in one-on-one meetings during which peer feedback is provided to each director by the General Counsel. Our Board views the self- and peer-evaluation processes as an integral part of its commitment to cultivating excellence and best practices in its performance.

Board Retirement Policy.     As set forth in the Corporate Governance Guidelines, the Board has adopted a retirement policy that no director shall stand for election to the Board after reaching the age of 75.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      5


Table of Contents

 

 

  PROPOSAL 1 — ELECTION OF DIRECTORS

 

 

In light of the robust process described above, our Board believes our nominees’ skills, expertise, and experience and their mix of qualifications and attributes strengthen our Board’s independent leadership and effective oversight of management.

 

LOGO    LOGO    LOGO    LOGO

 

Diverse Range of Qualifications and Skills Represented by Our Nominees

Medical Technology

Industry Experience

  

Executive International

Experience

   Corporate Governance

Regulatory and

Compliance

   Senior Leadership    Operations Management

Innovation/Technology

  

Risk Management

  

Risk Oversight

Finance and Financial

Industry

  

Human Resources

  

Financial Reporting

Our Board strives to maintain a highly independent, balanced, and diverse set of directors that collectively possess the expertise to ensure proper oversight.

 

 

6      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

PROPOSAL 1 — ELECTION OF DIRECTORS  

 

 

LOGO     

 

 

Michael A. Mussallem        

 

Age:     65

Director Since:     2000

 

 

Edwards Board Roles:

 

  Chairman of the Board

 

Select Professional Experience and Highlights:

 

  Edwards Lifesciences Corporation

 

– Chairman and CEO, since 2000

 

  Baxter International Inc.

 

– Group Vice President, Cardiovascular businesses,
from 1994 to 2000

 

– Group Vice President, Biopharmaceutical business,
from 1998 to 2000

 

– Held a variety of positions with increasing responsibility in engineering and product development, from 1979 to 1994

 

   Advanced Medical Technology Association (AdvaMed)

 

– Member of the Board, since 2001

 

– Member of the Executive Committee, since 2006

 

– Chairman, from 2008 to 2010

 

   University of California, Irvine Foundation

 

– Member of the Board of Trustees, since 2008

 

   Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California

 

– Advisory Member of the Board, since 2014

 

   Rose-Hulman Institute of Technology

 

– Member of the Board of Trustees, since 2017

 

 

 

 

   California Healthcare Institute

 

– Member of the Board, from 1996 to 2014

 

– Chairman, from 2004 to 2005

 

   Forum for Corporate Directors Hall of Fame

 

   University of California Irvine Medal Award

 

   The Phoenix Conference Lifetime Achievement Award

 

   WomenHeart Excellence in Corporate Leadership Wenger Award

 

Select Skills and Qualifications:

 

Mr. Mussallem has an extensive knowledge of the medical technology industry in general, and of the people, operations, processes and products of the Company in particular, built over a more than 35-year career with the Company and its predecessor. In addition, in his roles with AdvaMed and other healthcare-related organizations, he has become a recognized leader in the medical technology industry, making important contributions to healthcare policy discussions in California, the United States and the key global markets that the Company serves. These experiences have established relationships, which are helpful in developing our Board’s strategic perspective, and enhanced his leadership of the Company and contributions to our Board.

 

 

 

LOGO     

 

 

Kieran T. Gallahue        

 

Age:     54

Director Since:     2015

 

 

Edwards Board Roles:

 

  Audit Committee Member

 

Other Current Public Company Directorships:

 

  intersect ENT, Inc., since 2015

 

– Lead Independent Director, since 2015

 

– Member of the Audit Committee, since 2015

 

Other Public Company Directorships in Past Five Years:

 

  CareFusion Corporation, from 2011 to 2015

 

  Volcano Corporation, from 2007 to 2015

 

Select Professional Experience and Highlights:

 

   CareFusion Corporation, a global medical technology company (acquired by Becton, Dickinson and Company in March 2015)

 

–  Chairman and Chief Executive Officer, from 2011 to 2015

 

  ResMed, Inc.

 

–  Member of the Board, from 2008 to 2011

 

–  Chief Executive Officer, from 2008 to 2011

 

–  President, from 2004 to 2011

 

–  President and COO, Americas, from 2003 to 2004

 

  Nanogen, Inc.

 

–  Various positions, including President and Chief Financial Officer, from 1998 to 2002

 

   Prior to 1998, various marketing, sales, and financial positions within Instrumentation Laboratory, the Procter & Gamble Company, and the General Electric Company

 

   Served on the Board and Executive Committee, and as Chairman of the International Committee and Treasurer of Advanced Medical Technology Association (AdvaMed)

 

Select Skills and Qualifications:

 

Mr. Gallahue provides valuable insights and direction to our Board gained through extensive executive management experience at medical technology companies. His leadership roles on other public company boards and committees and prior experience as a public company chief financial officer also enables him to contribute valuable financial and accounting perspectives to our Board and Audit Committee.

 

 

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      7


Table of Contents

 

 

  PROPOSAL 1 — ELECTION OF DIRECTORS

 

 

 

LOGO     

 

 

Leslie S. Heisz        

 

Age:      57

Director Since:      2016

 

 

 

 

Edwards Board Roles:

 

  Chair of the Audit Committee

 

Other Current Public Company Directorships:

 

  Public Storage, Independent Trustee, since 2017

–  Member of the Audit and Nominating and Governance Committees, since 2017

 

Other Public Company Directorships in Past Five Years:

 

  Ingram Micro Inc., from 2007 to 2016

 

  Towers Watson & Co., from 2012 to 2016

 

  HCC Insurance Holdings, Inc., from 2010 to 2014

 

Select Professional Experience and Highlights:

 

   Kaiser Foundation Hospitals and Kaiser Foundation Health Plan, Inc., since 2015

 

–  Member of the Audit Committee, since 2015

–  Member of the Finance Committee, since 2018

–  Member of the Governance and Community Benefit Committees, from 2015 to 2017

 

  Lazard Freres & Co., from 2003 to 2010

 

– Served as Senior Advisor then Managing Director for six years

 

   Dresdner Kleinwort Wasserstein (and its predecessor Wasserstein Perella & Co.), Mergers & Acquisitions and Corporate Finance, from 1995 to 2002

 

– Served as Director then Managing Director for six years

 

 

 

  Salomon Brothers Inc., from 1987 to 1995

 

– Served as Associate then Vice President, Corporate Finance for four years

 

  PricewaterhouseCoopers LLP, from 1982 to 1986

 

– Served as Staff Consultant then Senior Consultant for two years

 

   National Association of Corporate Directors’ Directorship 100 Award

 

Select Skills and Qualifications:

 

Ms. Heisz’s career in the banking industry, in-depth knowledge of capital markets, and previous public company board and audit committee experience enhances our Board’s ability to effectively oversee financial reporting, enterprise and operational risk management, as well as corporate finance, tax, treasury, and governance matters.

 

 

 

 

LOGO     

 

 

William J. Link, Ph.D.        

 

Age:     71

Director since:     2009

 

 

Edwards Board Roles:

 

  Chair of the Compensation and Governance Committee

 

Other Current Public Company Directorships:

 

  Second Sight Medical Products, Inc., since 2003

 

– Member of the Audit and Nominating and Corporate Governance Committees, since 2003

– Chair of the Compensation Committee, since 2014

 

  Glaukos Corporation, since 2001 (became a public company in July 2015)

 

– Chairman, and Member of the Compensation, Nominating and Governance Committee, since 2001

 

Select Professional Experience and Highlights:

 

  Versant Ventures, a venture capital firm investing in early-stage healthcare companies

 

–  Managing Director and Co-Founder, since 1999

 

  Brentwood Venture Capital, since 1998

 

–  General Partner

 

  Chiron Vision (acquired by Bausch & Lomb, Inc.), from 1986 to 1997

 

–  Founder, Chairman, and Chief Executive Officer

 

 

 

   American Medical Optics, Inc. (acquired by Allergan, Inc.), from 1978 to 1986

 

–  Founder and President

 

   Before entering the healthcare industry, was an assistant professor in the Department of Surgery at the Indiana University School of Medicine

 

Select Skills and Qualifications:

 

Dr. Link’s corporate leadership and long history successfully commercializing products in the medical technology industry provide our Board with a valuable perspective in evaluating the prospects of, and risks associated with, existing business operations. In addition, his extensive experience in identifying new business opportunities and his strong technical and engineering background have proven beneficial in assessing the potential for future innovations.

 

 

 

 

 

8      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

PROPOSAL 1 — ELECTION OF DIRECTORS  

 

 

LOGO     

 

 

 

Steven R. Loranger        

 

Age:     66

Director Since:     2016

 

 

Edwards Board Roles:

 

   Compensation and Governance Committee Member

 

Other Current Public Company Directorships:

 

  Xylem Inc., since 2011

 

– Member of the Audit Committee, since 2011

– Member of the Finance, Innovation, and Technology Committee, since 2017

– Member of the Nominating and Governance Committee, from 2011 to 2017

 

Other Public Company Directorships in Past Five Years:

 

  FedEx Corporation, until 2014

 

  ITT Exelis, Inc., until 2013

 

Select Professional Experience and Highlights:

 

  Xylem Inc., a global water technology provider

 

–  Interim CEO and President, from 2013 to 2014

 

  ITT Corporation

 

– Chairman, President, and CEO, from 2004 to 2011

 

  Textron, Inc.

 

– Executive Vice President and Chief Operating Officer, from 2002 to 2004

 

 

 

   Honeywell International Inc. and its predecessor company, AlliedSignal, Inc.

–  Various executive positions, including serving as President and Chief Executive Officer of its Engines, Systems and Services businesses, from 1981 to 2002

 

   Senior Advisor to the CEO of FlightSafety International and serves on the Boards of the Smithsonian National Air and Space Museum and the Congressional Medal of Honor Foundation (Emeritus)

 

Select Skills and Qualifications:

 

Mr. Loranger is a seasoned executive with global manufacturing and operational experience in highly regulated, high-tech industries. His decades of experience leading large, global innovation-focused corporations with intensive data privacy components is particularly valuable to our Board.

 

 

LOGO     

 

 

 

Martha H. Marsh        

 

Age:     69

Director Since:     2015

 

 

Edwards Board Roles:

 

   Compensation and Governance Committee Member

 

Other Current Public Company Directorships:

 

  AMN Healthcare Services, Inc., since 2010

 

–  Member of the Compensation and Corporate Governance Committees, since 2010

–  Chair of the Compensation Committee, since 2012

 

  Owens & Minor Inc., since 2012

 

–  Chair of the Governance and Nominating Committee, and member of the Compensation and Benefits, and Executive Committees, since 2014

 

Other Public Company Directorships in Past Five Years:

 

  Thoratec Corporation, until 2015

 

Select Professional Experience and Highlights:

 

   Stanford Hospital & Clinics

 

–  President and Chief Executive Officer, from 2002 until her retirement in 2010

 

 

   University of California Davis Medical Center

–  Chief Executive Officer, from 1999 to 2002

  University of California Davis Health System

–  Chief Operating Officer, from 1999 to 2002

  University of Pennsylvania Health System

–  Senior Vice President for Professional Services and Managed Care, from 1996 to 1998

–  Vice President for Managed Care, from 1994 to 1996

 

Select Skills and Qualifications:

 

Ms. Marsh’s experience of more than 30 years in an increasingly complex and evolving healthcare system as a president and chief executive officer, combined with years of board experience that includes corporate governance chairmanships, provide a unique perspective as our Board considers the execution of our patient-focused innovation strategy.

 

 

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      9


Table of Contents

 

 

  PROPOSAL 1 — ELECTION OF DIRECTORS

 

 

 

LOGO     

 

 

Wesley W. von Schack        

 

Age:     73

Director Since:     2010

 

 

Edwards Board Roles:

 

 

   Presiding Director

   Audit Committee Member

 

Other Current Public Company Directorships:

 

  Teledyne Technologies, since 2006

 

Other Public Company Directorships in Past Five Years:

 

 

  Bank of New York Mellon Corporation, until 2016

– Former Lead Director and Chair of Executive Committee

 

Select Professional Experience and Highlights:

 

   Energy East Corporation, an energy services company (acquired by Iberdrola S.A. in 2008)

 

– Chairman, President, and Chief Executive Officer, from 1996 until his retirement in 2009

 

 

   AEGIS Insurance Services, Inc.

– Chairman, since 2006, Chair of the Risk Managers Advisory Committee and Director, since 1997

 

 

 

 

   AEGIS Managing Agency Limited, which manages Syndicate 1225 at Lloyd’s of London

 

– Non-executive Director and member of the Audit Committee, since 2006

 

 

Select Skills and Qualifications:

 

Mr. von Schack’s experience of more than 30 years in the highly regulated energy industry as both a chief executive officer and a chief financial officer, combined with many years of board experience and audit and compensation committee chairmanships, enable him to make significant contributions in assessing and managing risks. In addition, the operational and leadership skills developed over his career have provided valuable insights and support to our Board as its Presiding Director.

 

 

LOGO     

 

 

Nicholas J. Valeriani        

 

Age:     61

Director Since:     2014

 

 

Edwards Board Roles:

 

  Compensation and Governance Committee Member

 

Other Current Public Company Directorships:

 

   RTI Surgical, Inc., since 2016

 

Other Public Company Directorships in Past Five Years:

 

   Roka Bioscience, Inc., from 2015 to January 2018

 

Select Professional Experience and Highlights:

   Gary and Mary West Health Institute, an independent, nonprofit medical research organization that works to create new, more effective ways of delivering care at lower costs

 

 

– Chief Executive Officer, from 2012 to 2015

 

  Johnson & Johnson

– Company Group Chairman, Ortho Clinical Diagnostics, from 2009 to 2012

 

 

– Member of the Executive Committee

– Vice President, Office of Strategy and Growth, from 2007 to 2009

 

– Served 34 years in key positions, including Worldwide Chairman, Medical Devices and Diagnostics, and Corporate Vice President, Human Resources

 

 

 

   Member of the Boards of the Gary and Mary West Health Institute and the Gary and Mary West Health Policy Center

 

 

   Member of the Board of AgNovos Healthcare, since 2016

 

   Member of the Board of SPR Therapeutics, since 2018

   Served on the Boards of the Robert Wood Johnson University Hospital, until 2016, and the Center for Medical Interoperability, until 2015

 

Select Skills and Qualifications:

 

Mr. Valeriani’s 40 years of medical technology industry experience in a large and complex global company and experience directing strategy informs his contribution to the development of our innovation strategy and assessment of future business opportunities. In addition, his background in human resources enables him to contribute valuable insights to the Compensation and Governance Committee.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR

 

 

10      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

BOARD OF DIRECTORS MATTERS  

 

 

CORPORATE GOVERNANCE POLICIES AND PRACTICES

Corporate Governance Highlights.     The Company and the Board take seriously our commitment to good corporate governance. We believe the regular review of our corporate governance practices with current issues and trends in mind, the discussions we hold with our stockholders and advisers and the practice enhancements we consider as a result, help us to compete more effectively, sustain our successes and build long-term value for our stockholders. Our commitment to good corporate governance practices and accountability to stockholders is described in the following chart.

 

 

 

LOGO

WHAT WE DO

 

 

 

 

 

Annual election of directors

 

 

 

 

 

Board refreshment and director skill set aligned with corporate strategy

 

 

 

 

 

Majority vote standard in uncontested elections, with director resignation policy

 

 

 

 

 

Special stockholders meetings can be called by stockholders owning at least 15% of our outstanding shares

 

 

 

 

 

Proxy access right to permit a stockholder, or a group of up to 30 stockholders, owning at least 3% of our outstanding shares continuously for at least 3 years, to nominate up to the greater of 2 directors or 20% of our Board for inclusion in our proxy statement

 

 

 

 

 

Independent Board, all but our Chief Executive Officer

 

 

 

 

 

Executive session of independent directors held at each Board and committee meeting

 

 

 

 

 

Independent Presiding Director provides strong independent leadership of our Board

 

 

 

 

 

Retirement policy for directors

 

 

 

 

 

Annual Board and committee self-evaluations and peer reviews

 

 

 

 

 

Encourage continuing director education with designated annual reimbursement policy

 

 

 

 

 

Formal director orientation and continuing education program

 

 

 

 

 

Nonemployee directors expected to hold net shares upon vesting or exercise of equity awarded after 2011 until Board service ends

 

 

 

 

 

Senior management succession planning considered at each regularly scheduled Board meeting

 

 

 

 

 

Active stockholder engagement

 

 

 

 

 

Robust code of ethics in our Global Business Practice Standards

 

 

 

 

 

Board oversight of risk management

 

 

 

 

 

Corporate sustainability report

 

 

 

 

 

“Clawback” policy for performance-based compensation

 

 

 

LOGO

WHAT WE DON’T DO

 

 

 

 

 

No pledging or hedging of Edwards’ securities by directors, executives, employees with a title of “vice president” or above and “insiders” under our insider trading policy

 

 

 

 

 

No stockholder rights plan (“poison pill”)

 

 

 

 

 

No supermajority voting provisions in the Company’s organizational documents

 

Active Stockholder Engagement Program.     The Board and management are committed to engaging with Edwards’ stockholders. Throughout the year our CEO, CFO and Vice President of Investor Relations meet, by phone and face-to-face, with current and prospective stockholders to discuss Edwards’ strategy, business and financial results. Our Corporate Secretary and Investor Relations teams, together with other members of management and, from time to time, our Presiding Director, engage stockholders to solicit their views and feedback on corporate governance, compensation and other related matters and to discuss the issues that matter most to our stockholders. Stockholder feedback is shared with the Board and its committees, which enhances our corporate governance practices, facilitates future dialogue between stockholders and the Board and provides additional transparency to our stockholders. Since the 2017 Annual Meeting, our Corporate Secretary and Investor Relations teams contacted our top stockholders representing more than 55% of our outstanding shares. In this engagement, we received feedback from stockholders on a range of issues including corporate governance, executive compensation, and sustainability.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      11


Table of Contents

 

 

  BOARD OF DIRECTORS MATTERS

 

 

Over time, we have amended our Charter and Bylaws to adopt various stockholder rights and to align our corporate governance practices with our stockholders’ interests.

 

 

Topic

 

 

 

Action Taken in Response to Stockholder Feedback

 

 

Proxy Access

 

 

 

  Adopted proxy access at 3% and 3 year ownership and holding period duration thresholds

 

Right to Call Special Meetings

 

 

  In response to a non-binding stockholder proposal requesting the right to act by written consent, engaged with stockholders representing over 50% of shares outstanding to better understand investor views and, in response to feedback received, reduced the threshold to call a special meeting to 15%

 

  Amended our Bylaws to permit holders of 25% of outstanding shares to call a special meeting

 

 

Declassified Board

 

 

 

  Amended our Charter to eliminate the classified board

 

No Supermajority

Voting

 

 

  Amended our Charter to eliminate supermajority voting

 

 

Poison Pill

 

 

 

  Did not renew poison pill when it expired in March 2010

 

 

 

Majority Voting

in   Director

Elections

 

 

  Amended our Bylaws to provide for majority voting in uncontested director elections

Director Independence.     Under the corporate governance rules of the New York Stock Exchange (“NYSE”), a majority of the members of the Board must satisfy the NYSE criteria for independence. No director qualifies as independent unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder, or officer of an organization that has a relationship with the Company). The Board has determined that each of Mr. Gallahue, Ms. Heisz, Dr. Link, Mr. Loranger, Ms. Marsh, Mr. Valeriani and Mr. von Schack is independent under the NYSE rules. Mr. Mussallem is not independent as a result of his position as our Chief Executive Officer. The Board had also determined that Mr. Cardis, who retired from the Board in 2017, was independent during his Board service.

Corporate Governance Guidelines.     Our Board has adopted a set of Corporate Governance Guidelines (the “Governance Guidelines”) to assist the Board and its committees in performing their duties and serving the best interests of the Company and its stockholders. The Governance Guidelines cover topics including, but not limited to, director selection and qualification, director responsibilities and operation of the Board, director access to management and independent advisors, director compensation, director orientation and continuing education, succession planning, recoupment of performance-based compensation and the annual evaluations of the Board. The Governance Guidelines are available on our website at www.edwards.com under “Investors—Corporate Governance.”

Board Leadership Structure.     Our Chief Executive Officer also serves as the Chairman of the Board. This leadership structure has been in place since we first became a public company in 2000. Our Board believes it has been and continues to be effective for our Company. Under this model, the Company has experienced strong financial and operational growth over its 18 years as a public company, most recently providing a cumulative total return of 150% to stockholders from 2012 to 2017. We have a single leader, and our Chairman and Chief Executive Officer is seen by customers, business partners, investors and others as providing strong leadership for the Company in the communities we serve and in our industry. Our Board believes that combining the roles of Chairman and Chief Executive Officer has fostered a more constructive and cooperative relationship between the Board and management, and that their communications are more open and effective than they would be under a different structure. Our Board also believes that, given its size and constructive working relationships, changing the existing structure would not improve the Board’s performance. The directors bring a broad range of leadership experience to the boardroom and regularly contribute to the thoughtful discussion involved in overseeing the affairs of the Company. All directors are well-engaged in their responsibilities, express their views, and are open to the opinions expressed by other directors.

 

 

12      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

BOARD OF DIRECTORS MATTERS  

 

 

Our Board believes that it is important to have an active, engaged and independent Board. Our Governance Guidelines provide that a substantial majority of our Board and all of the members of our Audit Committee and Compensation Committee will be independent under the applicable rules of the NYSE. All members of our Board, other than the Chairman, are independent. In order to assure that the independent directors are not inappropriately influenced by management, the non-management members of the Board meet in executive session, without management, in conjunction with each regularly scheduled meeting of the Board and each committee, and otherwise as deemed necessary. These executive sessions allow directors to speak candidly on any matter of interest, without the CEO or other members of management present. Our Governance Guidelines provide that if our Chairman is not independent, our independent directors shall annually select an independent director to serve as Presiding Director. Mr. von Schack is currently designated as the Presiding Director and, as such, he presides at the executive sessions of the Board.

In discharging his responsibilities under our Governance Guidelines, Mr. von Schack:

 

 

serves as a liaison between the independent members of the Board and the Chairman and other members of management;

 

 

provides feedback to management from the Board’s executive sessions;

 

 

coordinates the activities of the independent directors, including calling meetings of the independent directors as necessary and appropriate to address their responsibilities;

 

 

provides advice and counsel to the Chairman; and

 

 

consults and directly communicates with major stockholders, as appropriate, including participation in the Company’s stockholder outreach efforts.

Board Role in Risk Oversight.     Effective risk oversight is an important priority of the Board. Its role includes understanding the critical risks in the business, allocating the responsibilities for risk oversight among the full Board and its committees, evaluating the Company’s risk management processes and facilitating open communication between management and the directors.

While the Board oversees risk management, the Company’s management is charged with managing risk and bringing to the Board’s attention emerging risks as well as the most material risks. We have robust internal processes that facilitate the identification and management of risks and assure regular communication with the Board and the Audit Committee.

At least once per quarter, the Company’s management provides the full Board with an analysis of the Company’s most significant risks.

The Board implements its risk oversight function both as a whole and through delegation to its committees. Both committees play significant roles in carrying out the risk oversight function.

The Audit Committee oversees risks related to the financial statements, the financial reporting process and accounting matters. It also regularly reviews Edwards’ risk management processes and enterprise-wide risk management, focusing primarily on manufacturing processes and supplier quality, product development processes and systems, continuity of our operations and regulatory compliance issues. The Audit Committee also regularly reviews treasury risks (insurance, credit, debt, currency risk and hedging programs), legal and compliance risks, information technology infrastructure and cyber-security risk, and other risk management functions. In addition, the Audit Committee considers risks to the Company’s reputation and related to the maintenance of a confidential anonymous reporting hotline for ethical and compliance issues. The Audit Committee periodically receives reports on, and discusses, the risk management and escalation process and reviews significant risks and exposures with the subject matter experts in management, the internal auditors, or the independent public accountants who identity the risks and report them to the Audit Committee.

The Compensation Committee considers risks related to succession planning, the attraction and retention of talent and risks relating to the design of compensation programs and arrangements. As part of its normal review of these risks, the Compensation Committee considers the Company’s compensation policies and practices to determine if their structure or implementation provides incentives to employees to take unnecessary or inappropriate risks that could have a material adverse effect on the Company. The Compensation Committee also reviews compensation and benefits plans affecting employees, in addition to those applicable to executive officers. The Compensation Committee has determined that the implementation and structure of the compensation policies and practices do not encourage unnecessary and inappropriate risks that could have a material adverse effect on the Company. The Compensation Committee further

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      13


Table of Contents

 

 

  BOARD OF DIRECTORS MATTERS

 

 

determined that the Company’s compensation programs and practices appropriately encourage employees to maintain a strong balance sheet, improve operating performance and create value for stockholders, without encouraging unreasonable or unrestricted risks. In making these determinations, the Compensation Committee considered the views of the Company’s compensation staff, legal counsel and internal audit team, as well as its Compensation Consultant (as defined below). In addition, the Compensation Committee oversees risks associated with the Company’s political activities and expenditures, as well as its sustainability practices.

The full Board considers strategic risks and opportunities and regularly receives reports from the committees regarding risk oversight in their areas of responsibility. Our Board believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks and therefore do not materially affect its choice of leadership structure as described under “Board Leadership Structure” above.

Meetings of the Board.     During the year ended December 31, 2017, the Board held seven meetings. Each director attended at least 75% of the total of all meetings of the Board and any applicable committee held during the period of his or her tenure in 2017.

The Company encourages, but does not require, its directors to attend annual meetings of stockholders. All but one of our then-current directors attended the 2017 annual meeting.

Board Composition.     Our Board has fixed the number of directors at eight.

The ages of our directors range from 54 to 73, with an average age of approximately 65. We believe in a balanced approach to director tenure that allows the Board to benefit from a mix of newer directors who bring fresh perspectives and seasoned directors who bring continuity and a deep understanding of our business. Director lengths of service on our Board range from approximately two years to approximately 17 years, with an average tenure of approximately six years. Our Board gender diversity is 25%. None of our directors currently serves on the boards of directors of more than two other public companies.

Committees of the Board.     To facilitate independent director review, and to make the most effective use of the directors’ time and capabilities, we have established the Audit Committee and the Compensation and Governance Committee. The Board is permitted to establish other committees from time to time as it deems appropriate.

Audit Committee

 

 

Audit Committee Membership

 

Leslie S. Heisz, Chair

 

 

Kieran T. Gallahue

 

 

Wesley W. von Schack

 

Key Highlights :

 

 

Ms. Heisz was appointed as Chair of the Audit Committee on May 11, 2017 after Mr. Cardis retired at the 2017 annual meeting of stockholders.

 

 

Each member is “independent,” “financially literate,” and an “audit committee financial expert” under applicable rules of the NYSE and the SEC.

 

 

The Audit Committee held nine meetings in 2017.

Purpose.     The Audit Committee assists the Board in fulfilling its oversight responsibilities relating to:

 

 

the integrity of the Company’s financial statements;

 

 

compliance with legal and regulatory requirements;

 

 

monitoring the independent registered public accounting firm’s qualifications, performance and independence;

 

 

the performance of the Company’s internal audit function;

 

 

the Company’s investment and hedging activities; and

 

 

enterprise-wide risk management practices.

 

 

14      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

BOARD OF DIRECTORS MATTERS  

 

 

The Company has a full-time internal audit function that reports to the Audit Committee and to the CFO, and is responsible for, among other things, objectively reviewing and evaluating the adequacy, effectiveness and quality of the Company’s system of internal controls. The Company also has a Chief Responsibility Officer who manages the Company’s ethics and compliance programs reporting to the Audit Committee and the CEO.

The Audit Committee appoints, retains, terminates, determines compensation for, and oversees the independent registered public accounting firm, reviews the scope of the audit by the independent registered public accounting firm and inquiries into the effectiveness of the Company’s accounting and internal control functions. The Audit Committee also assists the Board in establishing and monitoring ethics and compliance with the Global Business Practice Standards of the Company. The Company’s Global Business Practice Standards are posted on our website at www.edwards.com under “About Us—Corporate Responsibility.” The Audit Committee also reviews, with the Company’s management and the independent registered public accounting firm, the Company’s policies and procedures with respect to risk assessment and risk management and reviews and approves or ratifies any related party transactions, as described under “Other Matters and Business—Related Party Transactions” below.

The full responsibilities of the Audit Committee are included in its written charter, which is posted on our website at www.edwards.com under “Investors—Corporate Governance.”

Compensation and Governance Committee

 

Compensation and Governance

Committee Membership

 

William J. Link, Ph.D., Chair

 

 

Steven R. Loranger

 

 

Martha H. Marsh

 

 

Nicholas J. Valeriani

 

Key Highlights:

 

 

Each member is “independent” under the rules of the NYSE, a “nonemployee director” under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and an “outside director” as defined in Treasury Regulation § 1.162-27(e)(3).

 

 

The Compensation Committee held five meetings in 2017.

Purpose .     The Compensation Committee’s responsibilities include:

 

 

determining the compensation of executive officers and recommending to the Board the compensation of outside directors;

 

 

exercising the authority of the Board concerning employee benefit plans;

 

 

advising the Board on other compensation and employee benefit matters and approving the compensation clawback policy applicable to our executive officers; and

 

 

overseeing the evaluation of the Board and executive officers.

In making its decisions, the Compensation Committee considers recommendations provided by our CEO and Corporate Vice President of Human Resources regarding compensation of the NEOs (other than the CEO), as further described under “Compensation Discussion and Analysis—Compensation Process” below. The Compensation Committee has also delegated to the CEO the authority to grant stock options or other equity awards to eligible employees who are not executive officers.

In 2017, the Compensation Committee retained the services of Semler Brossy Consulting Group as its independent compensation Consultant (“Compensation Consultant”). See “Compensation Discussion and Analysis—Independent Compensation Consultant” for additional information regarding the Compensation Committee’s engagement of its Compensation Consultant.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      15


Table of Contents

 

 

  BOARD OF DIRECTORS MATTERS

 

 

The Compensation Committee also advises the Board on Board committee structure and membership and corporate governance matters. It evaluates the governance environment, receives feedback from management interactions with stockholders, and reviews and recommends to the Board corporate governance enhancements that are in the best interest of the Company and its stockholders.

The Compensation Committee also oversees Edwards’ political activities, including the periodic review of its policy on political expenditures and its payments that may be used for political purposes, and confirms that political expenditures from corporate funds are consistent with the policy. In addition, the Compensation Committee reviews and oversees Edwards’ principles, programs and practices on sustainability topics, including environmental and social affairs. Reports concerning political activities and sustainability efforts and metrics are presented periodically to the Compensation Committee.

The full responsibilities of the Compensation Committee are included in its written charter, which is posted on our website at www.edwards.com under “Investors—Corporate Governance.”

Succession Planning.     Our Board is actively engaged and involved in talent management to identify and cultivate our future leaders. At every Board meeting, directors discuss the Company’s leadership and talent development. Our directors also have an opportunity to meet with Company leaders, including executive officers, business group leaders and functional leaders through regular reports to the Board from senior management, technology showcases and meals with management. In addition, Board members have freedom of access to all employees, and have made site visits to meet local management.

We maintain a robust mid-year and annual performance review process for our employees, as well as a leadership development program that cultivates leadership principles in our future leaders. Management develops leadership at lower levels of the organization by identifying key talent and exposing them to the skills and capabilities that will allow these individuals to become future leaders.

Communications with the Board.     Any interested party who desires to contact any member of the Board, including the Presiding Director or the non-management members of the Board as a group, may write to any member or members of the Board at: Board of Directors, c/o Corporate Secretary, Edwards Lifesciences Corporation, One Edwards Way, Irvine, California 92614. Communications will be received by the Corporate Secretary of the Company and, after initial review and determination of the nature and appropriateness of such communications, will be distributed to the appropriate members of the Board depending on the facts and circumstances described in the communication.

CORPORATE SOCIAL RESPONSIBILITY

Our Board recognizes the importance of our sustainability initiatives and the need to provide effective oversight. Our Compensation Committee maintains formal oversight responsibilities with regular discussions at meetings of the full Board. We have established a robust framework for ensuring that our efforts are properly managed and implemented including the establishment of a cross-functional Sustainability Council which includes leaders from across the organization.

We received numerous recognitions for our sustainability and environmental responsibilities practices in 2017, some of which are highlighted below:

 

 

Ethisphere’s World’s Most Ethical Companies ;

 

 

First time constituent of the DJSI ESG North America Index —the Dow Jones Sustainability North America tracks the performance of the top 20% of the 600 largest United States and Canadian companies in the S&P Global Broad Market Index that lead the field in sustainability;

 

 

CPA-Zicklin Trendsetter from the 2017 CPA-Zicklin Index of Corporate Political Disclosure and Accountability—companies in the S&P 500 are scored for their corporate political policies, disclosure and oversight transparency; and

 

 

Constituent of the global MSCI ACWI ESG Leaders Index —index provides exposure to companies with high ESG performance relative to their sector peers and consists of large and mid-cap companies across 23 Developed Markets and 24 Emerging Markets countries.

 

 

16      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

BOARD OF DIRECTORS MATTERS  

 

 

Edwards’ Sustainability Report discusses our programs and practices designed to promote ethical business practices, good corporate governance, and the well-being and health of our environment, employees, and the communities in which we live and work. We conducted a comprehensive materiality assessment through engagement with internal and external stakeholders that identified the sustainability topics that matter most for the Company. Sustainability targets were set that align with our five Corporate Aspirations. And, we published our Sustainability Metrics at-a-Glance to provide a snapshot of our environmental, social responsibility, and corporate governance data. Our Sustainability Report is posted on our website at www.edwards.com under “About Us – Corporate Responsibility.”

 

 

Board Oversight Over Environmental, Sustainability, and Corporate Social Responsibility

 

 

Our Board has designed robust internal processes to oversee our

Company’s sustainability principles, strategies, and initiatives

 

 

LOGO

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      17


Table of Contents

 

 

  BOARD OF DIRECTORS MATTERS

 

 

DIRECTOR COMPENSATION

In 2017, changes were made to the director compensation program to align director pay with the peer median:

 

 

eliminated the initial equity award granted to new nonemployee directors;

 

 

eliminated Committee meeting fees paid for attendance at Committee meetings;

 

 

increased the annual retainer paid to each nonemployee director from $60,000 to $65,000;

 

 

increased the annual equity grant value from $200,000 to $225,000;

 

 

increased the Audit Committee Chair’s fee from $20,000 to $25,000;

 

 

added an Audit Committee member annual retainer fee of $5,000; and

 

 

added a $1,500 per meeting fee, but only if meetings exceeded 10 meetings for the Board, 10 meetings for the Audit Committee, or 7 meetings for the Compensation and Governance Committee.

Director Compensation Table – 2017

The following table presents the 2017 compensation paid or awarded to each individual who served as a nonemployee director at any time during 2017. The compensation paid to Mr. Mussallem is presented in the “Executive Compensation” disclosures beginning on page 42. Mr. Mussallem does not receive additional compensation for his service as a director.

 

   Name

 

   Fees Earned or
Paid in Cash
($) (1)
   Stock
Awards
($) (2)
   Option
Awards
($) (2)
  

Total

($)

 

 

Mr. Cardis (3)

 

    

 

 

 

$10,000

 

                  

 

$

 

10,000   

 

 

 

Mr. Gallahue

 

    

 

 

 

14,000

 

    

 

$

 

224,940

 

    

 

$

 

60,360

 

    

 

 

 

299,300   

 

 

 

Ms. Heisz

 

    

 

 

 

33,000

 

    

 

 

 

224,940

 

    

 

 

 

60,360

 

    

 

 

 

318,300   

 

 

 

Dr. Link

 

    

 

 

 

23,000

 

    

 

 

 

289,967

 

           

 

 

 

312,967   

 

 

 

Mr. Loranger

 

    

 

 

 

4,000

 

    

 

 

 

289,967

 

    

 

 

 

 

    

 

 

 

293,967   

 

 

 

Ms. Marsh

 

    

 

 

 

69,000

 

    

 

 

 

224,940

 

           

 

 

 

293,940   

 

 

 

Mr. von Schack

 

    

 

 

 

39,000

 

    

 

 

 

289,967

 

           

 

 

 

328,967   

 

 

 

Mr. Valeriani

 

    

 

 

 

69,000

 

    

 

 

 

224,940

 

           

 

 

 

293,940   

 

 

(1)

Consists of annual retainer fees and meeting fees for service as a director and a member of Board committees. Please see the “Retainers and Fees” section below. Excludes retainer fees deferred into stock-based awards, as described in footnote 2 below.

 

(2)

Includes annual retainer fee deferred into a stock or option award, as the case may be, under the Nonemployee Directors Program (as defined below).

 

    

Amounts disclosed in these columns reflect the aggregate grant-date fair value of the stock award or option award, as applicable, granted to our nonemployee directors during 2017 as determined under the principles used to calculate the grant-date fair value of equity awards for purposes of our financial statements in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. For a discussion of the assumptions and methodologies used to value the awards reported in these columns, please see the discussion of stock awards and option awards contained in Note 13 of the “Notes to Consolidated Financial Statements” in the 2017 Annual Report.

 

    

Please see the information under “Nonemployee Directors Stock Incentive Program” and “Outstanding Nonemployee Director Equity Awards” below for the grant-date fair value of each stock and option award granted to our nonemployee directors in 2017 as well as the stock and option awards held by each nonemployee director at the end of 2017.

 

(3)

Mr. Cardis retired from the Board on May 11, 2017 in accordance with the Company’s director retirement policy.

 

 

18      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

BOARD OF DIRECTORS MATTERS  

 

 

Retainers and Fees.     Nonemployee directors received the following retainers and fees in 2017:

 

 

   Nonemployee Director Retainers and Fees

 

       

 

Annual Retainers

  

 

Nonemployee Director

  

 

$

 

65,000

 

 

 

Presiding Director

  

 

$

 

 

25,000

 

 

 

 

 

Audit Committee Chair

   $ 25,000  

 

Audit Committee Member

   $ 5,000  

 

Additional Meeting Fees if meetings exceed the following:

  

 

$

 

 

1,500

 

 

 

 

    – 10 meetings for the Board

  

 

    – 10 meetings for the Audit Committee

  

 

    – 7 meetings for the Compensation and Governance Committee

  

 

 

Compensation Committee Chair

  

 

$

 

18,000

 

 

*

Per meeting; Meeting fees cannot be deferred.

A director may elect to receive stock options or restricted shares in lieu of the annual cash retainers as described in “Deferral Election Program” below. Meeting fees, however, cannot be deferred. Retainers are paid in advance. Directors beginning service during the year receive a prorated amount of the retainer.

Nonemployee Directors Stock Incentive Program.     In order to align the nonemployee directors’ interests more closely with the interests of our stockholders, we have implemented our Nonemployee Directors Stock Incentive Program (the “Nonemployee Directors Program”), pursuant to which each nonemployee director receives an annual grant of options for up to 40,000 shares of our common stock, or RSUs for up to 16,000 shares of our common stock, or a combination of options and RSUs with a maximum grant-date value of approximately $225,000, which was increased from $200,000 in 2017. The Compensation Committee recommends to the Board for its approval the actual amount and type of award for each year.

The annual equity award is granted on the day after our annual meeting. The option exercise price is the closing price of our common stock on the grant date. Options are valued as of the grant date using the Black-Scholes valuation model, and the RSUs are valued at the fair market value of the common stock on the grant date.

On May 12, 2017, each nonemployee director who was serving on that date received 2,034 RSUs as an annual grant (the grant-date fair value of such award was $224,940, determined as noted in footnote (2) to the Director Compensation Table above).

These RSUs vest 100% upon the earlier of the completion of one year of service on the Board measured from the grant date, or the date of the next annual meeting, subject to earlier vesting in the event of the nonemployee director’s death or disability. Once the RSUs vest, the shares must be held until the nonemployee director no longer serves on the Board.

Prior to 2017, upon a nonemployee director’s initial election to the Board, the new nonemployee director received a grant of the number of RSUs or stock options determined by dividing $200,000 by the fair value of a share on the grant date for RSUs, or the fair value of an option on the grant date, estimated using the Black-Scholes valuation model, and in either case rounding up to the nearest whole share, provided that in no event shall such number exceed twenty thousand (20,000) shares. Initial stock option awards vest one-third each year over three years from the grant date, subject to the nonemployee director’s continued service on the Board, and subject to earlier vesting in the event of the nonemployee director’s death or disability. The exercise price of an option is the closing price of our common stock on the date of the award. With respect to initial stock option awards granted after May 14, 2013, the shares of our common stock issued upon exercise of the options must be held until the nonemployee director no longer serves on the Board.

Deferral Election Program.     In lieu of all or part of a nonemployee director’s annual cash retainer, the director may elect to receive either stock options or restricted shares under the Nonemployee Directors Program. If a director makes a timely election to receive stock options, such options are granted on the date the cash retainer would otherwise have been paid, and the number of shares subject to the option is equal to four times the number of shares that could have been purchased on the grant date with the amount of the director’s cash retainer that was foregone to receive the award. The options are exercisable and vested in full on the grant date, and the exercise price per share is the fair market value of the

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      19


Table of Contents

 

  BOARD OF DIRECTORS MATTERS

 

 

common stock on the grant date. If a director makes a timely election to receive a restricted share award, the shares are granted on the date the cash retainer would otherwise have been paid, and the number of shares granted is equal to the portion of the cash retainer to be paid in the form of restricted shares divided by the fair market value per share of the common stock on the grant date. The restrictions on the restricted shares lapse upon the earlier of (1) the one-year anniversary of the grant date or (2) the date of the next regular annual meeting of stockholders at which members of the Board are to be elected.

On May 12, 2017, Mr. Gallahue and Ms. Heisz each received 2,352 stock options in lieu of his or her annual cash retainer (the grant-date fair value of each such award was $60,360, determined as noted in footnote (2) to the table above). On the same date, Messrs. Loranger and von Schack, and Dr. Link each received a grant of 588 restricted shares in lieu of his annual cash retainer (the grant-date fair value of each such award was $65,027, determined as noted in footnote (2) to the Director Compensation Table above).

Directors’ Stock Ownership Guidelines and Holding Requirement.     Under the stock ownership guidelines, each nonemployee director is expected to own shares of our common stock equal to $360,000. This amount equals almost six times the annual cash retainer received by each nonemployee director. Stock that is counted toward meeting the guideline includes any shares owned outright, restricted stock, RSUs and 25% of the value of vested, in-the-money stock options. Upon vesting or exercise of equity awarded after 2011, each director is required to hold the underlying common stock (net of any shares sold to cover the exercise price and applicable taxes) until the director’s Board service ends. The holding requirement does not apply to equity awards directors elect to receive in lieu of their cash retainers.

Expense Reimbursement Policy.     Directors are reimbursed for travel expenses related to their attendance at Board and committee meetings as well as for the costs of attending director continuing education programs.

The Board may change compensation arrangements for nonemployee directors from time to time.

 

 

20      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

BOARD OF DIRECTORS MATTERS  

 

 

Outstanding Nonemployee Director Equity Awards

The following table sets forth, as of December 31, 2017, the stock options and unvested stock awards (RSUs and restricted shares) held by each nonemployee director who served on the Board in 2017.

 

          Option Awards          Stock Awards  
   Name    Grant Date   

Exercise
Price

($)

   Unvested
Option
Awards
(#)
  Option Awards
Vested and
Outstanding
(#)
           Stock Awards  
  Not Vested  
  (#)   

 

Mr. Gallahue

    

 

 

 

02/19/2015

 

    

 

$

 

66.860

 

    

 

 

 

3,584

 

(1)

   

 

 

 

7,168

 

(1)  

        

 

 

 

 

       05/12/2017        110.590              2,352 (2)             
       05/12/2017                                2,034 (3)  
                  

 

 

          

 

 

 

Total

                         9,520                2,034
                  

 

 

          

 

 

 

 

Ms. Heisz

    

 

 

 

07/14/2016

 

    

 

 

 

107.030

 

    

 

 

 

4,372

 

(1)

   

 

 

 

2,185

 

(1)  

        

 

 

 

 

       05/12/2017        110.590              2,352 (2)             
       05/12/2017                                2,034 (3)  
                  

 

 

          

 

 

 

Total

                         4,537            2,034
                  

 

 

          

 

 

 

 

Dr. Link

    

 

 

 

05/12/2017

 

    

 

 

 

 

    

 

 

 

 

   

 

 

 

 

        

 

 

 

2,034

 

(3)  

       05/12/2017                                588 (4)  
                  

 

 

          

 

 

 

Total

                                    2,622
                  

 

 

          

 

 

 

 

Mr. Loranger

    

 

 

 

05/12/2016

 

    

 

 

 

105.590

 

    

 

 

 

4,400

 

(1)

   

 

 

 

2,199

 

(1)  

        

 

 

 

 

       05/12/2017                                2,034 (3)  
       05/12/2017                                588 (4)  
                  

 

 

          

 

 

 

Total

                         2,199            2,622
                  

 

 

          

 

 

 

 

Ms. Marsh

    

 

 

 

11/19/2015

 

    

 

 

 

77.965

 

    

 

 

 

3,192

 

(1)

   

 

 

 

6,382

 

(1)  

        

 

 

 

 

       05/12/2017                                2,034 (3)  
                  

 

 

          

 

 

 

Total

                         6,382            2,034
                  

 

 

          

 

 

 

 

Mr. von Schack

    

 

 

 

05/12/2017

 

    

 

 

 

 

    

 

 

 

 

   

 

 

 

 

        

 

 

 

2,034

 

(3)  

       05/12/2017                                588 (4)  
                  

 

 

          

 

 

 

Total

                                    2,622
                  

 

 

          

 

 

 

 

Mr. Valeriani

    

 

 

 

11/13/2014

 

    

 

 

 

62.275

 

    

 

 

 

 

   

 

 

 

11,536

 

(1)  

        

 

 

 

 

       05/12/2017                                2,034 (3)  
                  

 

 

          

 

 

 

Total

                         11,536            2,034
                  

 

 

          

 

 

 
                                                                 

 

(1)

Initial stock option awards vest one-third annually on the anniversary of the grant date, subject to the nonemployee director’s continued service on the Board.

 

(2)

Annual retainer fees deferred into stock options under the Deferral Election Program vest 100% immediately upon grant.

 

(3)

Annual awards vest on the earlier of (i) the one-year anniversary of the grant date or (ii) the date of the next regular annual meeting of stockholders at which members of the Board are to be elected.

 

(4)

Annual retainer fees deferred into restricted shares under the Deferral Election Program vest on the earlier of (i) the one-year anniversary of the grant date or (ii) the date of the next regular annual meeting of stockholders at which members of the Board are to be elected.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      21


Table of Contents

 

       

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of the Company’s common stock as of February 28, 2018 by each stockholder known by the Company to own beneficially more than 5% of the Company’s common stock. Percent of beneficial ownership is based upon 210,437,220 shares of the Company’s common stock outstanding as of February 28, 2018.

 

  Principal Stockholder Name and Address   

Total Shares

Beneficially

Owned

  

 Percentage 

of Class

    

 

BlackRock, Inc. (1)

55 East 52nd Street

New York, NY 10055

 

       15,410,737       

 

7.32

 

%

 

 

 

The Vanguard Group (2)

100 Vanguard Blvd.

Malvern, PA 19355

 

       21,328,999       

 

10.14

 

%

 

   

 

(1)

Based solely on information contained in the Schedule 13G/A filed with the SEC by BlackRock, Inc. on its own behalf, on January 29, 2018. The Schedule 13G/A indicates BlackRock, Inc. has sole voting power for 13,392,921 shares and sole dispositive power for 15,410,737 shares.

 

(2)

Based solely on information contained in the Schedule 13G/A filed with the SEC by The Vanguard Group, on its own behalf, on February 9, 2018. The Schedule 13G/A indicates The Vanguard Group has sole voting power for 300,699 shares, shared voting power for 44,779 shares, sole dispositive power for 20,990,147 shares and shared dispositive power for 338,852 shares.

The following table sets forth certain information regarding beneficial ownership of the Company’s common stock as of February 28, 2018 by (i) each of the NEOs (as named below); (ii) each of our directors; and (iii) all of our directors and executive officers as a group. Percent of beneficial ownership is based upon 210,437,220 shares of the Company’s common stock outstanding as of February 28, 2018.

Under the column “RSUs and Shares Underlying Options,” we include the number of shares that could be acquired within 60 days of February 28, 2018 pursuant to the exercise of stock options or the vesting of stock awards. These shares are not deemed outstanding for purposes of computing the beneficial ownership of any other person. Unless otherwise indicated, we believe that the stockholders listed have sole voting and investment power with respect to all shares, subject to applicable community property laws.

 

  Named Executive Officers, Executive Officers and Directors:    Outstanding
Shares
Beneficially
Owned
(1)
   RSUs and
Shares
Underlying
Options
   Total
Shares
Beneficially
Owned
  

 Percentage 

of Class

    

 

Mr. Mussallem

 

    

 

 

 

 

822,032

 

 

 

    

 

 

 

 

1,566,820

 

 

 

    

 

 

 

 

2,388,852

 

 

 

    

 

 

 

 

1.14

 

 

%

 

   

 

Mr. Ullem

 

    

 

 

 

 

61,659

 

 

 

    

 

 

 

 

264,011

 

 

 

    

 

 

 

 

325,970

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Mr. Bobo

 

    

 

 

 

 

88,640

 

 

 

    

 

 

 

 

251,683

 

 

 

    

 

 

 

 

339,801

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Ms. Szyman

 

    

 

 

 

 

14,424

 

 

 

    

 

 

 

 

53,996

 

 

 

    

 

 

 

 

68,420

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Mr. Wood

 

    

 

 

 

 

98,828

 

 

 

    

 

 

 

 

156,377

 

 

 

    

 

 

 

 

255,205

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Mr. Gallahue

 

    

 

 

 

 

11,566

 

 

 

    

 

 

 

 

13,104

 

 

 

    

 

 

 

 

24,670

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Ms. Heisz

 

    

 

 

 

 

 

 

 

    

 

 

 

 

4,537

 

 

 

    

 

 

 

 

4,537

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Dr. Link

 

    

 

 

 

 

38,562

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

38,562

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Mr. Loranger

 

    

 

 

 

 

7,529

 

 

 

    

 

 

 

 

2,199

 

 

 

    

 

 

 

 

9,728

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Ms. Marsh

 

    

 

 

 

 

1,941

 

 

 

    

 

 

 

 

6,382

 

 

 

    

 

 

 

 

8,323

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Mr. von Schack

 

    

 

 

 

 

37,894

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

37,894

 

 

 

    

 

 

 

 

*

 

 

 

   

 

Mr. Valeriani

 

    

 

 

 

 

4,983

 

 

 

    

 

 

 

 

11,536

 

 

 

    

 

 

 

 

16,519

 

 

 

    

 

 

 

 

*

 

 

 

   

 

All directors and executive officers as a group (14 persons)

 

    

 

 

 

 

1,297,645

 

 

 

    

 

 

 

 

2,574,521

 

 

 

    

 

 

 

 

3,872,088

 

 

 

    

 

 

 

 

1.84

 

 

%

 

         

 

*

Less than 1%

 

(1)

Includes shares held by family trust, members of his or her household, or jointly as follows: Mr. Mussallem, 698,095; Mr. Ullem, 61,659; Mr. Bobo, 67,968; Ms. Szyman, 3,942; Mr. Gallahue, 11,566; Dr. Link, 16,000; and Mr. von Schack, 5,000.

 

 

22      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

       

 

 

EXECUTIVE COMPENSATION AND OTHER INFORMATION

EXECUTIVE OFFICERS

Set forth below is the biographical information regarding our current executive officers, other than Mr. Mussallem, whose biographical information is set forth under “Proposal 1—Election of Directors—Director Nominees” above. None of the executive officers has any family relationship with any other executive officer or any of our directors.

 

 

LOGO

 

  

Donald E. Bobo, Jr., age 56. Mr. Bobo has been Corporate Vice President since 2007 and is responsible for Edwards’ corporate strategy and corporate development functions. In addition, Mr. Bobo has executive responsibility for the Company’s disease awareness and heart failure initiatives, as well as the healthcare solutions and commercial services team. Mr. Bobo has more than 30 years of experience in the medical products and healthcare industry and has served in various operating roles at Edwards, including most recently, the leadership of the Company’s transcatheter mitral and tricuspid therapies organization and the global heart valve therapy business and global valve manufacturing operations. Prior to joining Edwards in 1995, Mr. Bobo held a variety of roles with increasing levels of responsibility with American Hospital Supply and Baxter Healthcare Corporation. Mr. Bobo has served on the Board of Innerspace Neuro Solutions Inc. since 2013. He has served on the Board and Executive Committee of the California Life Sciences Association since 2015 and as its Chairman of the Board since May 2017.

 

 

LOGO

 

  

 

Jean-Luc Lemercier , age 60. Mr. Lemercier has been Corporate Vice President, EMEA (Europe, Middle East and Africa), Canada and Latin America since July 2017. Prior to assuming his current role, Lemercier served as Vice President of Transcatheter Heart Valves EMEA from 2008. Under his leadership, Edwards successfully launched the SAPIEN transcatheter heart valve technology and built its leadership position in Europe. Before joining Edwards, Mr. Lemercier served in various leadership roles with Johnson & Johnson Cordis from 1996 to 2008, including leader of the structural heart disease group in the United States; Vice President of New Business Development in Europe; Vice President of the Cordis Cardiology Division in Belgium; and General Manager of Cordis France. Mr. Lemercier has more than 30 years of medical technology experience, beginning with Baxter in France, and held several sales and marketing management positions within Baxter Europe and the United States. Mr. Lemercier has served on the Board of CARMAT since January 2017.

 

 

LOGO     

 

  

 

Catherine M. Szyman, age 51. Ms. Szyman has been Corporate Vice President, Critical Care since 2015. Prior to 2015, she was employed for more than 20 years at Medtronic, LLC, where she served as its Senior Vice President and President of Medtronic’s global diabetes business from 2009 to 2014, overseeing research, development, operations, sales and marketing for Medtronic’s insulin infusion pumps and continuous glucose monitoring systems. Prior to that, she held a variety of leadership roles at Medtronic, including Senior Vice President of Corporate Strategy and Business Development, General Manager of Endovascular Innovations and Vice President of Finance for the Cardiovascular Business. Ms. Szyman previously served on the Boards of Tornier, Inspire Medical Systems, and the California Healthcare Institute.

 

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      23


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

 

LOGO

 

  

Scott B. Ullem, age 51. Mr. Ullem became Corporate Vice President, Chief Financial Officer in January 2014. Prior to joining Edwards, he served from May 2010 to December 2013 as Chief Financial Officer of Bemis Company Inc., a publicly traded global supplier of packaging and pressure sensitive materials used in leading food, consumer, and healthcare products. Mr. Ullem also had leadership responsibility for one of Bemis’ three business segments and the company’s information technology function. Before joining Bemis, Mr. Ullem spent 17 years in investment banking, serving as Managing Director at Goldman Sachs and later for Bank of America. He has served on the Board and Compensation Committee of Berry Plastics Group, Inc. since 2016 and is a Henry Crown Fellow at the Aspen Institute.

 

 

LOGO

 

  

 

Huimin Wang, M.D., age 61. Dr. Wang has been Corporate Vice President, Japan, Asia and Pacific since 2010. From 2004 to 2010, he served as Corporate Vice President, Japan and Intercontinental Regions and was Corporate Vice President, Japan from 2000 to 2004. Previously, he served in a number of roles with Baxter Healthcare Corporation, including Senior Manager of Strategy Development, Director of Product/Therapy for the Renal Division in Japan, President of Medical Systems and Devices in Japan, and was a representative director of Baxter Limited, a Japan corporation, through September 2002. Before joining Baxter, Dr. Wang was a senior associate with Booz, Allen & Hamilton in Chicago, Vice President of Integrated Strategies, a consulting and venture management firm he co-founded, and an associate with McKinsey & Company. Dr. Wang is a Visiting Associate Professor of anesthesiology at Keio University.

 

 

LOGO

 

  

 

Larry L. Wood, age 52. Mr. Wood has been Corporate Vice President, Transcatheter Heart Valves since 2007, and is responsible for Edwards’ key initiatives in transcatheter heart valve replacement around the globe, including research and development, operations, marketing, commercial clinical and regulatory initiatives. Most recently prior to his current role, from March 2004 to February 2007, he served as Vice President and General Manager, Percutaneous Valve Interventions. Mr. Wood has more than 30 years of experience in the medical technology industry at both Edwards and Baxter Healthcare Corporation in positions including manufacturing management, regulatory affairs and strategic and clinical marketing, primarily for the surgical heart valve therapy business.

 

 

 

24      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes and provides disclosure about the objectives and policies underlying our executive compensation programs.

Executive Summary

Edwards is the global leader in patient-focused medical innovations for structural heart disease, as well as critical care and surgical monitoring. Driven by a passion to help patients, we collaborate with the world’s leading clinicians and researchers to address unmet healthcare needs, working to improve patient outcomes and enhance lives.

Pay-for-Performance Philosophy .     The Compensation Committee strives to create a pay-for-performance culture and strongly believes that executive compensation should be tied not only to performance but also directly to the successful implementation of our corporate strategy.

We embrace a corporate strategy that puts patients first and creates value with therapies that transform care. We execute our strategy by focusing on the right thing for patients, identifying unmet clinical needs and developing breakthrough therapies, doing so in a way that establishes trusted relationships with our stakeholders. As a direct result of our strategy, we have introduced new therapies such as transcatheter aortic valve replacement, rapid-deployment surgical heart valves and noninvasive advanced hemodynamic monitoring, all while achieving our stated financial and operating objectives, and strengthening our leadership positions. Managing our business well in a challenging, highly regulated, dynamic environment requires talented and energetic leaders who champion our strategy and deliver on our commitments.

Our executive compensation programs are designed to emphasize performance-based compensation, reward financial performance and the implementation of our corporate strategy, and align the financial interests of our executives with those of our stockholders.

EDWARDS’ CORPORATE STRATEGY INFORMS PAY DESIGN

 

 

LOGO

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      25


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

Long-term incentive awards are designed to align the financial interests of our executives with those of stockholders. Awards granted to our NEOs in 2017 included stock options, PBRSUs and time-based RSUs. The value of stock options is dependent upon stock price appreciation after the date of grant of the award, reinforcing the performance-based nature of these awards. Edwards continues to believe the use of stock options is appropriate and essential to retain executive talent and reinforce our long-term growth strategy, as a company focused on exceptional revenue growth, strong profitability, and long-term stockholder returns. The payout of PBRSUs is based on relative TSR over a three-year period compared to a pre-selected peer group. Since RSUs are paid out in shares of Edwards’ stock, their value is also directly linked to stock price.

Edwards’ 2017 NEOs are as follows:

 

 

NEO NAMES AND POSITIONS

 

 

Michael A. Mussallem

    Chairman and Chief Executive Officer

 

 

Scott B. Ullem

    Corporate Vice President, Chief Financial Officer

 

 

Donald E. Bobo

    Corporate Vice President, Strategy and Corporate Development

 

 

Catherine M. Szyman

    Corporate Vice President, Critical Care

 

 

Larry L. Wood

    Corporate Vice President, Transcatheter Heart Valves

 

2017 Financial and Operating Performance.      Overall, we achieved outstanding financial results and operating performance in 2017, exceeding our goals for sales growth, net income growth and free cash flow. We also made important progress on future advancements for patients.

Strong sales growth of 16% was driven by:

 

 

Clinician and patient preferences for our innovative transcatheter valve therapies, including the best-in-class Edwards SAPIEN 3 transcatheter heart valve;

 

 

Continued adoption of our newest surgical valve therapy systems, Edwards INTUITY Elite and INSPIRIS RESILIA; and

 

 

Broad use of our critical care technologies, including the recently launched HemoSphere next-generation advanced monitoring platform.

Additionally, we continued to invest aggressively in our technology pipeline and infrastructure, growing research and development investments by 25% to advance our transformational transcatheter structural heart programs.

 

 

26      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

Stock Performance .     One indicator of our pay-for-performance culture is the relationship of our NEOs’ total direct compensation to total stockholder return. Over the past five years, on average, 88% of the CEO’s total direct compensation has been performance-based, and 73% is tied to the performance of Edwards’ stock. As a general indicator, the Compensation Committee considers how Edwards’ cumulative total return to stockholders compares to both the S&P 500 Index and the S&P Healthcare Equipment Select Industry Index (the “SPHESI”). The table below illustrates our Company’s 5-year cumulative total stockholder return on common stock with the cumulative total returns of the S&P 500 Index and the SPHESI.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*

 

LOGO

 

  *

$100 invested on December 31, 2012 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

 

2017 Annual Incentive Plan Outcomes and Long-Term Incentives .     The three measures used to evaluate financial achievement under our annual cash incentive plan were revenue growth, net income and free cash flow, all computed on a non-GAAP basis. Our financial results in 2017 surpassed the cash incentive plan targets of achievement for all three of these measures by significant margins, and resulted in financial performance at 175% of target under the cash incentive plan. In addition, our overall achievement of KODs for 2017 was 122%. Accordingly, our cash incentive plan for corporate employees funded at 175% of target. Final incentive amounts for the NEOs for 2017 also took into account each employee’s individual performance, as more fully described below under “Elements of Compensation—Annual Cash Incentive Payment.”

The PBRSUs awarded to NEOs in 2014 that vested in 2017 were based on Edwards’ TSR over a three-year performance period relative to the TSR of the SPHESI subset for that same period. The payout of these PBRSUs tracked the strong performance of our stock after the three-year period and paid out at 175% of target, as more fully described under “Elements of Compensation—Determination as to 2014 PBRSU Awards.”

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      27


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

Compensation Program Highlights .     The Compensation Committee believes that its executive compensation and benefits philosophy and objectives have resulted in programs that align executives with stockholder interests.

 

 

 

LOGO

WHAT WE DO

 

 

  

 

 

 

Pay-for-Performance. Approximately 89% of the total direct compensation of our CEO, and an average of 78% of the total direct compensation of our other NEOs, was performance-based in 2017.

 

   

 

  

 

 

 

Linkage Between Performance Measures and Strategic Imperatives. Performance measures for incentive compensation are linked to our Strategic Imperatives through achievement of KODs and are designed to create long-term stockholder value and hold executives accountable for their individual and Edwards’ performance.

 

   

 

  

 

 

 

Performance -Based Equity. Our PBRSUs vest based on our relative TSR over a three-year period.

 

   

 

  

 

 

 

Minimum Three -Year Vesting. Equity compensation is structured to vest over a minimum period of three years, subject to limited exceptions.

 

   

 

  

 

 

 

Robust Executive Stock Ownership Guidelines with Holding Period Requirements. Executives are required to hold Edwards’ stock with a value not less than six-times salary for our CEO and three-times salary for each other NEO. Fifty percent of net shares received as equity compensation must be retained until the guideline has been met.

 

   

 

  

 

 

 

CEO Stock Ownership. Our CEO far exceeds his six-times salary ownership guideline and has continued to increase his ownership of Edwards’ stock each year.

 

   

 

  

 

 

 

Modest Perquisites. We provide modest perquisites and have a business rationale for the perquisites that we do provide.

 

   

 

  

 

 

 

“Double Trigger” in the Event of a Change in Control. Severance benefits are paid, and equity compensation awarded starting in May 2015 accelerates in connection with a severance, only upon a “double trigger” in connection with a change in control (meaning a termination of the executive’s employment is required, in addition to the occurrence of a change in control, in order for the benefits to be triggered).

 

   

 

  

 

 

 

Use of Tally Sheets. The Compensation Committee annually reviews summaries of prior and potential future compensation levels (referred to as “tally sheets”) when making compensation decisions.

 

   

 

  

 

 

 

“Clawback” Policy. We maintain a recoupment policy for performance-based compensation .

 

   

 

  

 

 

 

Independent Compensation Consultant. The Compensation Committee engages an independent compensation consulting firm that provides us with no other services.

 

   

 

 

LOGO

WHAT WE DON’T DO

 

 

 

 

 

No excise tax gross -ups for executive officers.

 

   

 

 

 

 

No repricing or buyout of underwater stock options.

 

   

 

 

 

 

No pledging of Edwards’ securities by directors, executives, employees with a title of “vice president” or above, and “insiders” under our insider trading policy.

 

   

 

 

 

 

No hedging of Edwards’ securities by directors, executives, employees with a title of “vice president” or above, and “insiders” under our insider trading policy.

 

   

Consideration of Say-on-Pay Vote Results.     At our 2017 annual meeting, our stockholders cast an advisory vote on the compensation of our NEOs (a “say-on-pay” vote). Approximately 95% of the votes cast on this proposal voted in favor of our NEO compensation. We believe this vote reflects stockholders’ continued strong support of compensation programs for our NEOs. The Compensation Committee will continue to consider the results of say-on-pay votes when making future compensation decisions for the NEOs.

Compensation Philosophy and Objectives for NEOs.     Our compensation programs are designed to attract, retain, motivate and engage executives with superior leadership and management capabilities to enhance stockholder value. Within this overall philosophy, our objectives are to:

 

 

offer programs that place a higher emphasis on performance-based compensation than fixed compensation;

 

 

28      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

 

 

align the financial interests of executives with those of our stockholders; and

 

 

provide compensation that is competitive.

We strongly believe that a significant amount of compensation for the NEOs should be composed of short- and long-term incentives, or at-risk pay, to focus the executives on near-term goals and strategic initiatives. The amount of such short- and long-term incentive compensation is dependent on achievement of our annual goals, individual performance, and long-term increases in the value of our stock. The target total direct compensation for each NEO consists of (i) base salary, (ii) Incentive Pay Objective (as defined under “Elements of Compensation—Annual Cash Incentive Payment” below), and (iii) long-term incentive awards (presented using their grant-date fair values).

The charts below illustrate the percentage weighting of each compensation vehicle that comprise the 2017 target total direct compensation for the CEO and the average for the other NEOs.

 

LOGO    LOGO

Compensation Process.     The Compensation Committee is responsible for discussing, evaluating and approving the compensation of the CEO and the other NEOs, including the specific objectives and target performance levels to be included in our executive compensation plans. The CEO and other members of the executive leadership team develop our Strategic Imperatives, as well as the KODs that measure our achievement of these imperatives. The Board reviews and approves the Strategic Imperatives and KODs at the start of every year. The CEO provides input to the Compensation Committee after year-end regarding achievement of our Strategic Imperatives and KODs and the way results were achieved. In addition, the CEO and the Corporate Vice President of Human Resources provide recommendations to the Compensation Committee regarding compensation of the NEOs (other than the CEO). The Compensation Committee then determines the compensation of the CEO and reviews and approves the compensation of the other NEOs.

The CEO and the Corporate Vice President of Human Resources are invited to, and regularly attend, Compensation Committee meetings as non-voting guests. The Compensation Committee regularly meets in executive session without participation by the CEO or other management representatives. Meetings of the Compensation Committee may only be called by members of the Compensation Committee. In addition, our CEO and Corporate Vice President of Human Resources meet with the Compensation Consultant in preparation for Compensation Committee meetings, and the Compensation Consultant also regularly attends Compensation Committee meetings and participates in executive sessions with the Compensation Committee.

Independent Compensation Consultant.     The Compensation Consultant, Semler Brossy Consulting Group, has been retained by and reports to the Compensation Committee and provides executive and director compensation consulting services to the Compensation Committee.

Semler Brossy’s responsibilities for fiscal 2017 generally included:

 

 

Annual and periodic reviews of executive total compensation relative to peers;

 

 

Annual and periodic reviews of Director total compensation;

 

 

Responses to proxy advisory firms around Say-on-Pay and other compensation matters;

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      29


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

 

Presentations on specialized areas, including 280G calculations, officer tally sheets, and plan summaries;

 

 

Reports to the Committee on market trends and best practices in compensation; and

 

 

Attendance and participation in all Committee meetings and stockholder consultations, as requested.

The Compensation Consultant does not provide any other services to the Board or the Company. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to the NYSE rules and determined that the Compensation Consultant is independent, and free of conflicts of interest with us or any of our directors or executive officers.

Use of Competitive Data.     We generally position each NEO’s target total direct compensation to approximate the median for comparable positions at competitive peer companies. However, in determining the appropriate positioning level of each NEO’s target total direct compensation and each component of compensation for an NEO, the Compensation Committee also takes into account its assessment of the Company’s or business unit’s general performance, as applicable for each executive, and the executive’s tenure, experience, level of individual performance and potential to contribute to our future growth. Accordingly, an NEO’s actual compensation may be higher or lower than the median for the position based on the Compensation Committee’s assessment of these other factors. If the Compensation Committee determines that changes are appropriate, it has the flexibility to make adjustments for one or more executives.

Consistent with our philosophy of emphasizing pay for performance, annual cash incentive payments are designed to be above Incentive Pay Objectives when we exceed our goals and below the Incentive Pay Objectives when we do not achieve our goals. In the event threshold levels of performance are not attained, no annual incentive payment is earned.

For purposes of establishing the value of equity awards, stock options are valued as of the grant date using the Black-Scholes valuation model. RSUs and, commencing in 2015, PBRSUs, are valued at the fair market value of the underlying shares on the grant date. Except as otherwise noted above or described below, the Compensation Committee’s executive compensation determinations are subjective and the result of the Compensation Committee’s business judgment, which is informed by the experiences of the members of the Compensation Committee as well as the input from the Compensation Consultant and peer group data provided by the Compensation Consultant. In order to establish competitive compensation market data for the NEOs, the Compensation Consultant uses public proxy information from companies primarily in the medical technology industry. These peer companies are chosen based on the Compensation Committee’s assessment of their market capitalization, revenue, business focus, complexity, geographic location and the extent to which the Compensation Committee believes they compete with us for executive talent (the “Comparator Group”). The composition of the Comparator Group is reviewed periodically to monitor the appropriateness of the profiles of the companies included so that the group continues to reflect our competitive market and provides statistical reliability. The review of the Comparator Group for pay decisions in 2017 was conducted in July 2016. For 2017, the Comparator Group consisted of the following companies:

 

 

Edwards’ 2017 Comparator Group

 

   

 

Abbott Laboratories

 

  

 

Integra Lifesciences Holdings Corporation

 

 

 

Agilent Technologies, Inc.

 

  

 

Intuitive Surgical, Inc.

 

 

 

Alexion Pharmaceuticals, Inc.

 

  

 

Medtronic Plc

 

 

 

Becton, Dickinson and Company

 

  

 

PerkinElmer, Inc.

 

 

 

Boston Scientific Corporation

 

  

 

ResMed Inc.

 

 

 

C. R. Bard, Inc.

 

  

 

St. Jude Medical, Inc.*

 

 

 

The Cooper Companies, Inc.

 

  

 

Stryker Corporation

 

 

 

DENTSPLY SIRONA, Inc.

 

  

 

Teleflex, Inc.

 

 

 

Hologic, Inc.

 

  

 

Varian Medical Systems, Inc.

 

 

 

IDEXX Laboratories, Inc.

 

  

 

Waters Corporation

 

 

 

Illumina, Inc.

 

  

 

Zimmer Biomet Holdings, Inc.

 

   
*

Acquired by Abbott Laboratories subsequent to when the Compensation Committee determined the Comparator Group.

After evaluating a series of qualitative and quantitative factors among other publicly traded U.S. companies in our industry, including scale, talent, business, and operational characteristics and overlap among peers, the Compensation Committee

 

 

30      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

added Abbott Laboratories, Agilent Technologies, Inc, Alexion Pharmaceuticals, Inc., IDEXX Laboratories, Inc., Medtronic Plc, Teleflex, Inc. and Waters Corporation to the comparator group used to make 2017 executive compensation decisions.

As of July 1, 2016, Edwards ranked at the 58th percentile of this group in terms of market capitalization. Compensation data are generally regressed for market capitalization to ensure that the data are not distorted by larger companies. Regression analysis is a commonly used technique to size-adjust data, which allows for more statistically valid comparisons. The key measure used in our regression model is market capitalization. Based on this measure, the regression formula correlates and adjusts the raw data for base salary, total cash compensation and total direct compensation to predict those items based on the market capitalization for each of the Comparator Group companies.

Although data from the Comparator Group are the primary data input for compensation decisions for the NEOs, consideration is given to compensation data for companies in the high technology, life sciences and medical technology industries reported in the following nationally recognized surveys: Aon Hewitt’s U.S. Total Compensation Measurement Executive Survey and Radford Compensation Surveys. The survey data are considered generally, without focusing on any one particular group or subset of companies included in the data (other than the Comparator Group identified above). The Compensation Committee believes it is appropriate to refer to these additional data because we compete with these types of companies for executive talent.

When compared to similar positions at our 2017 Comparator Group companies, target total direct compensation and the elements of compensation (base salary, annual cash incentive, and long-term incentive award value) approximated or were below the median for all of the NEOs.

Elements of Compensation.     The compensation package for each NEO consists primarily of (a) base salary; (b) an annual cash incentive payment based on attainment of pre-established financial measures, operating goals, and individual performance; and (c) long-term stock-based incentive awards. Each of these three components of compensation is intended to promote one or more of our objectives of designing executive compensation that is performance-based, is competitive, and aligns the interests of the executives with our stockholders as further described in the Elements of Compensation Summary chart below.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      31


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

Elements of Compensation Summary

 

 

Element of Compensation

 

  

 

Why We Pay this Element

 

 

 

Compensation Committee’s Evaluation Criteria

 

Base Salary

  

   Provides fixed compensation component payable in cash

 

   Provides a certain level of security and continuity from year to year

 

   Helps attract and retain qualified executives

 

   In addition to competitive data, the executive’s responsibilities, tenure, prior experience and expertise, individual performance, future potential and internal equity are considered

Annual Cash Incentive Payment

(see “Annual Cash Incentive Payment” section below)

  

   Provides variable compensation component payable in cash to motivate and reward executives for performance against annually established corporate financial measures, operating and strategic goals and individual objectives

 

   Recognizes executives based on their individual contributions

 

   Is performance-based and not guaranteed

 

   Incentive plan funding is determined by multiplying:

 

    

 

Financial Measurement Achievement

(based on revenue growth, net income and free cash flow targets set at the beginning of the year)

 

    

 

X

 

    

 

KOD Achievement

(based on strategic, corporate and business unit objectives determined at the beginning of the year)

 

    

 

X

 

    

 

Individual Performance Objective Achievement

(determined at the beginning of the year)

 

    

Up to a maximum of 200% of pre-established Incentive Pay Objective

    

Long-Term Incentive Awards

 

  55% Stock Options

 

  20% RSUs

 

  25% PBRSUs

  

  Aligning executives’ interests directly with those of stockholders; provides executives with an incentive to manage the Company from the perspective of an owner

 

   Stock options tie executive pay directly to stockholder value creation over the long term, promote executive retention, and are consistent with our focus on top-line growth, innovation and our longer-term investment horizon and product pipeline

 

   RSUs promote stability and retention of our executives over the long term

 

   PBRSUs are measured against relative TSR, which links compensation to our performance over a three-year period against the performance of other companies

 

   Since RSUs and PBRSUs are paid in shares of Edwards stock, these awards also further link executives’ interests with those of our stockholders

 

   Retains qualified employees

 

   Is performance- or stock price-based and not guaranteed

 

 

   The size and composition of long-term incentive awards are determined annually by the Compensation Committee taking into account competitive total direct compensation pay positioning guidelines using market reference data from the Comparator Group, along with the individual executive’s level of responsibilities, ability to contribute to and influence our long-term results, and individual performance

 

 

32      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

 

Element of Compensation

 

  

 

Why We Pay this Element

 

  

 

Compensation Committee’s Evaluation Criteria

 

Benefits

  

   Provides a safety net to protect against financial catastrophes that can result from illness, disability or death

 

  A benefit program that is competitive with companies with which we compete for executive talent supports recruitment and retention of executives

  

   Executives are eligible to participate in benefit programs on terms as are generally offered to other Company employees

Perquisites

  

   Assists in attracting and retaining executives by enhancing the competitiveness of the executive’s compensation in a relatively inexpensive way

 

   Enables executives to perform their responsibilities efficiently, maximize their working time and minimize distractions

 

  

   Modest perquisites consistent with market practices

Base Salary. The Compensation Committee generally reviews each NEO’s base salary in February and any approved changes are effective with the first pay period in April. The base salary for the CEO is established in a similar manner and is described more fully under “Employment and Post-Termination Agreements” below. Base salaries paid to the NEOs increased between 2.0% and 5.5% in 2017 over the level in effect in 2016 to help maintain market competitiveness and based on the Compensation Committee’s assessment of internal roles and contributions.

Annual Cash Incentive Payment.     All of the NEOs and many other management and non-management-level salaried employees (approximately 3,517 employees) participated in the 2017 Edwards Incentive Plan (the “Incentive Plan”).

The Compensation Committee utilizes the Incentive Pay Objective so that the total cash compensation (base salary plus incentive payment for expected performance) for the NEOs will be at approximately the median of the Comparator Group. The Compensation Committee establishes for each NEO the amount of incentive payment that will be earned for expected performance, referred to as the “Incentive Pay Objective.”

The Compensation Committee then considers performance results to determine the actual cash incentive payments. In applying its discretion, the Compensation Committee may reduce, but may not increase, the cash incentive payment. Consequently, a reduction from the maximum amount is not necessarily a negative reflection on performance.

The accompanying “Grants of Plan-Based Awards in Fiscal Year 2017” table reports the maximum amounts payable and the Incentive Pay Objective (called the “Target” in the table) established for each NEO.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      33


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

The 2017 Incentive Plan for the NEOs was structured to preserve the tax deductibility of payments under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code (the “Code”). See “Tax and Accounting Implications—Policy Regarding Section 162(m)” below. As such, the Incentive Plan for NEOs in 2017 provided that achievement at the threshold of any one of three Company financial measures (revenue growth, net income and free cash flow) would result in initial funding for the Incentive Plan being set at the maximum level. Then, the Compensation Committee applied its discretion in a two-step process to determine the final annual cash incentive payments for the NEOs. Each of these two steps is discussed below:

 

(1)

Incentive Plan Funding

The Compensation Committee, after consultation with management, sets annual incentive performance goals each year for achievement of financial measures and KODs. Financial measures are non-GAAP calculations generally on the same basis as contained in our financial guidance, subject to further adjustment to account for material developments during the year. In February 2017, the Compensation Committee initially established the financial measures at the threshold, target and maximum levels set forth in the chart below.

Incentive Plan funding is determined after results of achievement of the predetermined financial measures and KODs are known.

The following illustration shows how the Incentive Plan is funded.

 

 

 

 

Financial

Measure

Achievement (%)

 

 

 

 

 X   

 

 

 

Key Operating

Driver

Achievement (%)

 

 

 

 

 =   

 

 

 

 

Actual

Incentive Plan

Funding (%)

 

 

 

Initially, the Board assesses the percentage of achievement of pre-established Company financial measures. No funding is earned if actual performance associated with at least one of the financial goals does not exceed the pre-established minimum threshold. All three thresholds were exceeded in 2017. Achievement of the maximum level specified for each financial goal would result in funding for this measure at 175%.

For 2017, our financial goals, and the corresponding weightings, were as follows: revenue growth (50% weighting); net income (30% weighting); and free cash flow (20% weighting). The following table sets forth the target level for each goal as well as the level of achievement required to reach the various levels of financial measure achievement. Interpolation is applied for results between the levels shown in the chart.

Based on the performance levels in the chart below, our financial measures funded at 175%.

2017 Company Financial Performance Measures*

 

     Percentage of Financial Measure Achievement
    

Minimum
(25%)

 

 

Target
(100%)

 

 

Maximum
(175%)

 

 

Actual
(175%)

 

 

 

Revenue Growth – 50% Weight

 

    

 

 

 

 

8.5

 

 

 

   

 

 

 

 

11.5

 

 

 

   

 

 

 

 

15.5

 

 

 

   

 

 

 

 

15.7

 

 

 

 

Net Income ($M) – 30% Weight

 

    

 

$

 

 

679

 

 

 

 

   

 

$

 

 

709

 

 

 

 

   

 

$

 

 

751

 

 

 

 

   

 

$

 

 

771

 

 

 

 

 

Free Cash Flow ($M) 20% Weight

 

    

 

$

 

 

564

 

 

 

 

   

 

$

 

 

614

 

 

 

 

   

 

$

 

 

664

 

 

 

 

   

 

$

 

 

691

 

 

 

 

 

*

Net Income used in setting and determining compensation is not calculated in accordance with GAAP and reflects adjustments for items such as litigation and a related not-for-profit contribution, tax, acquisition and investment-related gains and expenses, amortization expenses, foreign exchange fluctuations, the positive impact of transcatheter heart valve stocking sales in Germany, and the negative impact of de-stocking. Free Cash Flow is also a non-GAAP financial measure that is defined as cash flows from operating activities less capital expenditures, on a non-GAAP basis, excluding the impact of the receipt of a litigation payment, the amount of an escrow deposit related to the purchase of a building, tax benefits from stock-based compensation, litigation expenses, and a facility acquisition.

 

 

34      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

The financial measure achievement is multiplied by the level of achievement of pre-established Key Operating Drivers, or KODs. The Board establishes KODs each year to address specific business initiatives derived from our Strategic Imperatives and operating plans. The KODs address specific tangible and measurable progress toward our Strategic Imperatives, and focus the executive team on the areas and strategic initiatives most important to our future success. We have established a range of performance for each KOD with the expectation that the target range should be achievable with the expected level of performance. Performance within the expected range results in a multiplier of 100%. Performance below the range is considered sub-optimal and will result in a discount to the financial measure. Performance above the range is considered extraordinary and results in a multiplier above 100%. The aggregate KOD multiplier may not exceed 150%.

In 2017, there were four KODs:

 

 

Lead and accelerate the adoption of transcatheter therapy for aortic valve patients

 

 

Lead in emerging structural heart therapies

 

 

Extend leadership for heart valve and critical care patients

 

 

Business excellence

After evaluating actual achievement of 56 different metrics and milestones underlying these KODs, the Board determined in its judgment that overall KOD performance for 2017 was 122%.

Based on the formula above, combining financial performance of 175% with KOD performance of 122%, the Compensation Committee arrived at an actual calculated Incentive Plan funding of 214%. However, because the Incentive Plan funding is capped at 175%, the 2017 funding for corporate level officers and employees was 175%.

 

(2)

Individual Performance

Individual performance objectives for the CEO are established collaboratively by the CEO and the Compensation Committee, and the individual performance objectives for the other NEOs are established collaboratively by the CEO and each such executive. The Compensation Committee believes each executive has an appropriate number of meaningful individual performance objectives. The goal in choosing the individual performance objectives is to create goals, the attainment of which is designed to implement our strategic and operating plans, with a focus on the achievement of the financial measures and operational goals within each executive’s individual area of responsibility.

These objectives are considered in the aggregate to determine an overall performance assessment for each NEO for the purposes of determining compensation. Although some of the individual performance objectives are expressed in qualitative terms that require subjective evaluation, objectives also include several quantitative measures. However, the assessment of the overall performance for each NEO involves a subjective process. The CEO reviews the performance of each NEO (other than the CEO) with the Compensation Committee and recommends a performance assessment for each executive. The Compensation Committee assesses the CEO’s performance. The Compensation Committee then exercises subjective judgment, reviewing the individual performance objectives, the overall performance of the individual executive against all of his or her individual objectives, taken together, and the executive’s performance relative to the environment and to other executives. There is no formal weighting of the individual performance objectives. Individual performance may impact an executive’s cash incentive payment, subject to an overall cap on incentive payments of 200% of the Incentive Pay Objective.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      35


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

The individual performance objectives for the CEO and the other NEOs and the factors considered by the Compensation Committee for 2017 are described below.

 

 

 

NEO

 

  

 

 

2017 Performance Objectives and Factors Considered by the Compensation Committee

 

   

Mr. Mussallem

  

  Develop and execute corporate strategy; achieve Company financial goals and KODs; increase stockholder value; drive innovation and product leadership; attract and retain talented employees; promote a culture of ethical business practices and social responsibility; and provide leadership as Board Chairman.

 

 
  

  The Compensation Committee found that Mr. Mussallem broadly achieved all of his objectives, noting that Edwards’ financial results demonstrated impressive growth, and that he had overseen important therapy innovations and infrastructure-related strategic initiatives intended to drive longer term growth and success. The Company attained extraordinary global employee engagement continuing to fortify our patient-focused culture. Overall, Mr. Mussallem delivered above-expectation financial results highlighted by strong profitability while continuing to invest aggressively in our technology pipeline and future initiatives.

 

 
Mr. Ullem   

  Ensure the Company’s financial reporting maintains the highest integrity; drive to achieve 2017 KODs and financial goals; maintain a high standard of investor relations; optimize the Company’s capital structure; enhance stockholder returns; execute company-wide Information Technology initiatives; and attract, develop and retain talented employees.

 

 
  

  The Compensation Committee noted that Mr. Ullem demonstrated strong overall performance in the role of Chief Financial Officer. Specifically, he led the continued development of solid financial planning and issuance of timely and accurate financial reports, continued to build investor confidence, deployed several global information technology enhancements to strengthen Edwards’ infrastructure, and focused on global talent development.

 

 

Mr. Bobo

  

  Develop and evolve Edwards’ corporate strategy, establish and execute business development goals as well as provide leadership to the Transcatheter Mitral and Tricuspid Therapies initiative and Healthcare Solutions; attract, develop and retain talented employees; and promote a culture of patient focus, innovation, operational excellence and quality compliance.

 

 
  

  The Compensation Committee noted Mr. Bobo’s leadership in the evolution of our innovation-driven strategy, the successful execution of several business development initiatives including the acquisitions of Valtech Cardio and Harpoon Medical, and leadership of our Transcatheter Mitral and Tricuspid Therapies initiative.

 

 
Ms. Szyman   

  Develop, evolve and execute the strategy for the Critical Care and Vascular businesses to strengthen the core capability; consistently deliver sales growth and achieve the financial goals for the Critical Care and Vascular businesses; drive innovation and 2017 product development KODs; attract, develop and retain talented employees; and promote a culture of patient focus, innovation, operational excellence and quality compliance.

 

 
  

  The Compensation Committee noted that Ms. Szyman delivered impressive near-term results while continuing to focus on ensuring investment to execute the longer—term Critical Care strategy, achieved FDA clearance for the Hemosphere advanced monitoring platform, explored new complementary technologies, product enhancements and technology to augment patient access to therapy, and focused on global talent development.

 

 

Mr. Wood

  

  Develop, evolve and execute the strategy for the Transcatheter Heart Valve business to strengthen our leadership position; consistently deliver sales growth and achieve the financial goals for the Transcatheter Heart Valve business; drive innovation and 2017 product development KODs; attract, develop and retain talented employees; and promote a culture of patient focus, innovation, operational excellence and quality compliance.

 

 
    

  The Compensation Committee noted that under Mr. Wood’s leadership, impressive Transcatheter Heart Valve financial results were delivered across all regions driven by continued therapy adoption, exceptional performance of the Edwards Sapien 3 valve. His team also advanced programs to significantly expand indications for the therapy. Additionally, compelling data from the PARTNER II trial was presented that demonstrated excellent economic value to the healthcare system.

 

   

 

 

36      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

Committee Review Process.     The Compensation Committee generally meets each February to review and approve annual incentive payments for the prior year and to set incentive performance targets for the current year. The Compensation Committee may adjust the incentive payment levels based on financial measure achievement, KOD achievement, individual performance, and TSR. In February 2018, after reviewing the Company’s 2017 performance versus financial and operational goals, TSR performance, and business unit performance, the Compensation Committee awarded incentive payments to the NEOs that ranged from 186% to 187% of the Incentive Pay Objectives for the NEOs. The amount awarded to each NEO for 2017 is reported in the accompanying “Summary Compensation” table. The incentive payments were paid in March 2018.

Long-Term Incentive Awards.     The mix of long-term incentive awards granted to our NEOs in 2017 included stock options, PBRSUs and RSUs. The Compensation Committee views stock options as performance-based equity compensation, tying our executives’ pay directly to stockholder value creation over the long term because the value of our common stock must increase after the date of grant of the options in order for the options to have any value. Having a seven-year time horizon, stock options also promote the retention of our executives and are consistent with our focus on top-line growth, innovation and our longer-term investment horizon and product pipeline. PBRSU awards measure relative TSR, which the Compensation Committee believes is a straightforward and objective metric for our stockholders to evaluate our performance against the performance of other companies and to align with stockholder interests. As the RSU awards have value regardless of stock price performance, they help promote the stability and retention of a strong executive team over the longer term (vesting schedules generally require continuous service over multiple years, as described below).

Of the total 2017 long-term incentive award granted to each of our NEOs, the values of stock options were weighted 55%, PBRSUs were weighted 25%, and time-based RSUs were weighted 20% (based on the grant-date fair value of the awards). We believe measuring a combination of absolute TSR (through stock options), relative TSR (through PBRSUs), and providing stock-denominated time-based vesting RSUs, results in a balance between these incentives that appropriately aligns our executives’ pay with stockholder value and promotes the stability and retention of the executive team. Given the different risk and reward characteristics of these three types of awards and our executive compensation philosophy, the Compensation Committee believes that the equity awards granted to executives should comprise a greater proportion of stock options and PBRSUs relative to RSUs.

Stock options granted to Mr. Ullem, Ms. Szyman and Mr. Wood vest annually over four years and have a seven-year term. Stock options granted to Mr. Mussallem and Mr. Bobo vest monthly over 36 months, consistent with the vesting standards established by the Company for its stock option grants to executives who are retirement-eligible, and have a seven-year term. Stock options granted during 2017 have an exercise price equal to the closing price on the day of the regular Board meeting held on the next day following Compensation Committee approval.

PBRSUs awarded in 2017 are based on relative TSR performance as measured for the performance period beginning April 30, 2017 and ending April 30, 2020. The percentage of the target PBRSU awards that will vest at the end of the three-year performance period depends on the percentage by which our TSR exceeds or falls short of the median TSR (calculated assuming dividend reinvestment) of the SPHESI Subset (as defined below). The chart below illustrates the maximum, target and threshold performance levels and the PBRSU payout at each level.

 

 

   2017 PBRSU

   Performance

   Levels

 

  

TSR vs Median of

SPHESI Subset

 

 

  Payout as a  

  Percentage of  

  Target Award  

 

 

  Maximum

 

  

 

                                                 +7.5% points from median

 

   

 

 

 

 

175

 

 

%

 

 

  Target

 

  

 

                                                 Median

 

   

 

 

 

 

100

 

 

%

 

 

  Threshold

 

  

 

                                                 -7.5% points from median

 

   

 

 

 

 

25

 

 

%

 

 

  No Payout

 

  

 

                                                 More than -7.5% points from median

 

   

 

 

 

 

0

 

 

%

 

The maximum and threshold performance levels applicable to the awards were set at levels that the Compensation Committee believed were consistent with the historical 75 th  and 25 th  percentile levels, respectively, for the TSRs of the SPHESI Subset. The “SPHESI Subset” is a subset of 26 companies in the S&P Healthcare Equipment Select Industry Index that are also on the S&P 500 Index and S&P 400 Midcap Index.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      37


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

RSUs granted to the NEOs become vested as to 50% of the total number of units subject to the award on each of the third and fourth anniversaries of the award date, subject to continued employment of the award recipient through the applicable vesting date.

At the Compensation Committee meeting immediately preceding the stockholder meeting in May of each year, the Compensation Committee generally determines the size of the long-term incentive award for each NEO. In keeping with our commitment to provide a total compensation package that emphasizes at-risk components of pay, long-term incentives for 2017 comprised, on average, 67% of the value of the NEO’s total direct compensation package.

For 2017, the CEO evaluated each NEO’s performance (other than his own), as discussed previously (see “Compensation Process” above), and established specific recommendations for the Compensation Committee’s consideration. Accordingly, the Compensation Committee established awards for the NEOs (other than the CEO) based on these recommendations and the Committee’s assessment of the factors noted above for each executive. The Compensation Committee evaluated the CEO’s performance using the same criteria as discussed above in “Compensation Process” to establish the appropriate award for the CEO. Equity awards are granted under the Long-Term Stock Program, which was last approved by the stockholders in May 2017. The equity awards granted to the NEOs for 2017 are set forth in the accompanying “Grants of Plan – Based Awards in Fiscal Year 2017” table below.

Value of Equity Awarded in 2017.     Under applicable accounting rules, the grant-date fair value of the PBRSUs awarded to our NEOs (at the “target” level of performance) is calculated using a Monte Carlo simulation pricing model. The PBRSUs are included as compensation for our NEOs in the “Summary Compensation Table” based on this valuation methodology. For information on the assumptions used in this fair value computation, refer to Note 13 of the “Notes to Consolidated Financial Statements” in the 2017 Annual Report.

The value of the PBRSUs awarded to our NEOs using this model in each of 2013 and 2014 differed from the Company’s stock price on the grant date, either positively or negatively, by approximately 30% as a result of applying the Monte Carlo simulation. As a result, the number of PBRSUs awarded to our executives has varied significantly year over year. Beginning in 2015, the Compensation Committee decided to calculate the number of PBRSUs to be awarded to executives using the stock price on the grant date, rather than by applying the Monte Carlo simulation model, in order to simplify the process and to provide more consistent award sizing (based on the number of shares subject to the awards) from year to year. The Monte Carlo simulation model will continue to be applied, as required under applicable accounting rules, for purposes of valuing these awards in our financial disclosures and in presenting the grant-date fair value of these awards in the “Summary Compensation Table.”

The following chart shows the values of the PBRSU awards approved by the Compensation Committee in 2017 that were used to determine the number of shares subject to the awards (based on the $110.25 closing price per share of our common stock on the grant date for PBRSUs, calculated at the “target” level of performance and without taking the Monte Carlo simulation model into account), as well as the accounting grant-date fair value of the PBRSUs we are required to use under applicable SEC rules to report in the “Summary Compensation Table” (calculated as noted in the footnotes to the “Summary Compensation Table,” and including the impact of the Monte Carlo simulation model).

 

    

 

2017 PBRSU Awards

 

   Name

 

  

Value
Based on
May 11, 2017
Stock Price

 

    

Value Required

to be Included

in Summary

Compensation

Table

 

 

 

  Mr. Mussallem

 

  

 

 

 

 

$1,650,994

 

 

 

 

  

 

 

 

 

$2,071,342

 

 

 

 

 

  Mr. Ullem

 

  

 

 

 

 

416,194

 

 

 

 

  

 

 

 

 

522,158

 

 

 

 

 

  Mr. Bobo

 

  

 

 

 

 

399,656

 

 

 

 

  

 

 

 

 

501,410

 

 

 

 

 

  Ms. Szyman

 

  

 

 

 

 

374,850

 

 

 

 

  

 

 

 

 

470,288

 

 

 

 

 

  Mr. Wood

 

  

 

 

 

 

399,656

 

 

 

 

  

 

 

 

 

501,410

 

 

 

 

 

 

38      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

The grant-date fair value of all the long-term incentive awards granted by the Company to the NEOs in 2017 is included in the “Grants of Plan-Based Awards in Fiscal Year 2017” table below.

Determination as to 2014 PBRSU Awards.     In May 2014, the Compensation Committee granted awards of PBRSUs to certain of our executives. For these awards to vest, Edwards’ TSR had to reach the 25th percentile relative to that of the other companies that were listed in the SPHESI Subset on the grant date and were still publicly traded on April 30, 2017, the last day of the three-year performance period. Edwards’ percentile ranking compared to the threshold, target, and maximum percentile ranks of the SPHESI Subset as of April 30, 2017, as well as the 3-year TSRs relative to each level are as follows:

 

 

2014 PBRSU

Performance

Levels

 

  

Rank of SPHESI
Subset

 

  

 

TSR Over

Three-Year

Period

 

   

 

Payout as a

Percentage of

Target Award

 

 

 

Maximum

 

  

 

75 th  Percentile

 

  

 

 

 

 

26

 

 

 

 

 

 

 

 

175

 

 

 

 

Target

 

  

 

50 th  Percentile

 

  

 

 

 

 

19

 

 

 

 

 

 

 

 

100

 

 

 

 

Threshold

 

  

 

25 th  Percentile

 

  

 

 

 

 

12

 

 

 

 

 

 

 

 

25

 

 

 

 

Edwards

 

  

 

95 th  Percentile

 

  

 

 

 

 

37

 

 

 

 

 

 

 

 

175

 

 

 

The Compensation Committee determined that as of April 30, 2017 our relative TSR was at the 95 th  percentile, higher than the maximum level and, accordingly, 175% of the target award for each executive vested. Amounts realized by our NEOs attributable to these awards can be found in the “Option Exercises and Stock Vested in Fiscal Year 2017” table below.

Stock Ownership Guidelines and Holding Requirement.     Under our guidelines, executives are expected to own shares of Edwards’ stock as follows:

 

 

CEO

 

  

 

Other NEOs

 

 

6 times base salary

 

  

 

3 times base salary

 

 

All of the NEOs are in compliance with the

ownership guidelines.

 

Stock ownership guidelines were established to create additional owner commitment and to emphasize stockholder value creation. Expected ownership levels are adjusted as the executives’ annual base salaries change. Executives who have not met the guidelines must hold 50% of the net shares of our common stock acquired in connection with the exercise of stock options and the vesting of restricted stock and RSU awards (after satisfaction of applicable taxes and, in the case of options, payment of the exercise price) until the guidelines are met. In the event an executive achieved the guideline but was unable to maintain the ownership level due to a decline in the price of our common stock, the 50% holding requirement is reinstated.

Prohibition on Pledging and Hedging.     We have adopted a policy prohibiting directors, the executive leadership team, employees with a title of “vice president” or above and employees designated as “insiders” under our insider trading policy from (1) holding the Company’s securities in a margin account or otherwise pledging the Company’s securities as collateral for a loan, and (2) hedging the Company’s securities, including entering into short sales, options, puts, calls and sales against the box, as well as derivative transactions including swaps, forwards, futures, collars and exchange funds. To our knowledge, none of our NEOs has engaged in hedging or pledging with respect to our common stock.

Market Timing of Equity Awards.     We do not have any program, plan or practice to time equity grants in coordination with the release of material information. Annual equity awards for the NEOs are generally approved at the Compensation Committee meeting in May of each year and awarded on the date of the Board meeting immediately following that Committee Meeting. Any other equity awards to the NEOs, including grants to new hires, are generally made on the date of the next regularly scheduled Board meeting.

Benefits and Perquisites.     The NEOs are eligible to participate in employee benefit programs generally offered to other of our employees employed in the same jurisdiction as the NEO including, for all NEOs employed in the United States, the Edwards Lifesciences Corporation 401(k) Savings and Investment Plan (“401(k)”), which provides for a Company matching contribution. We match contributions dollar for dollar up to the first 3% of cash compensation, and 50% on the next 2%. In addition, we provide certain other perquisites to our NEOs that are not generally available to our employees.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      39


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

The Compensation Committee conducts an annual review of the competitiveness of our perquisite program, including its individual components and levels, against the perquisite programs of companies in the Comparator Group. As a result of these reviews, the Compensation Committee may make adjustments from time to time in the benefits and perquisites provided as it determines to be appropriate.

We believe that providing perquisites enhances the competitiveness of the executive’s compensation in a relatively inexpensive way. These perquisites are described below and reported in the “Summary Compensation Table.”

Our perquisite program for the NEOs includes the following:

Car Allowance.     An annual car allowance is paid as follows: $13,200 for the CEO, and $10,800 for the other NEOs. It is intended to cover expenses related to the lease, purchase, insurance and maintenance of a vehicle, and mileage for business use. The car allowance is provided in recognition of the need to have executives visit customers, business partners and other stakeholders in order to fulfill their job responsibilities.

Executive Physical Examination.     The Company paid up to $3,649 for each annual executive physical examination received by an NEO. This benefit encourages the proactive management of the executive’s health, helping best position the executive team to be able to address the ongoing and day-to-day issues we face.

Perquisite Allowance.     NEOs receive a fixed annual allowance for certain expenses. The CEO receives $40,000 (plus two club memberships that are being used for corporate business purposes, at a combined cost of $10,260 in 2017), and the other NEOs each receive $20,000. This benefit recognizes the diverse nature of expenses that have a business nexus that may be incurred by our executives. The allowance may also be used to cover certain personal financial, estate and tax planning costs, as we believe that it is appropriate for the executives to have professional assistance in managing their total compensation, permitting them to focus their full attention on growing and managing our business.

Deferred Compensation.     We have adopted a deferred compensation plan for the NEOs and certain other management employees to enable them to save for retirement by deferring their income and the associated tax to a future date or termination of employment. Under the Executive Deferred Compensation Plan (the “EDCP”), return on compensation deferred by participants is based on investment alternatives selected by the participant. We believe that the EDCP is comparable to similar plans offered by companies in the Comparator Group.

The amounts deferred and accrued under the EDCP for the NEOs are reported below in the “Summary Compensation Table” and the “Nonqualified Deferred Compensation Plans” table.

Employment and Post-Termination Agreements.     We have entered into an employment agreement with the CEO, as well as change-in-control severance agreements (the “change-in-control severance agreements”) with the CEO and our other NEOs as discussed below. Mr. Bobo, Mr. Ullem, Ms. Szyman and Mr. Wood are eligible to participate in a general severance plan for eligible employees to receive severance benefits upon an involuntary termination of employment due to the elimination of their position or a reduction in workforce.

Chief Executive Officer Employment Agreement.     We entered into an amended and restated employment agreement with Mr. Mussallem on March 9, 2009, which was approved by the Compensation Committee and provides for, among other things, his appointment as Chief Executive Officer, an annual base salary, bonus and long-term incentive awards as determined by the Board, and, in certain circumstances, severance payments upon termination of employment.

Mr. Mussallem’s base salary is reviewed and may be adjusted annually based on the Compensation Committee’s review of the Comparator Group data in consultation with the Compensation Consultant, and Mr. Mussallem’s performance. The Compensation Committee followed the same philosophy and programs described above for executives in determining 2017 compensation for Mr. Mussallem. In addition, the Compensation Committee reviewed a tally sheet, which affixed a dollar amount to all components of Mr. Mussallem’s compensation, including current compensation, equity awards and benefits.

The Compensation Committee believes, after reviewing Mr. Mussallem’s total direct compensation, individual performance, and contribution to our financial results during 2017, that Mr. Mussallem’s total compensation and each component thereof were in line with our compensation philosophy and objectives.

If Mr. Mussallem’s employment is involuntarily terminated by us without “cause,” as defined in the employment agreement, we are required to pay certain severance benefits, provided he is not receiving the severance benefits under

 

 

40      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

his change-in-control severance agreement. The material terms of the severance arrangement are described in the section “Potential Payments upon Termination or Change in Control” below.

Change-in-Control Severance Agreements.     We have entered into agreements with the NEOs pursuant to which such individuals will be provided certain payments and benefits in the event of termination of employment following a change in control of the Company. We believe that these agreements enhance the likelihood of retaining the services of the executives in the event we were to become an acquisition target and allow the NEOs to continue to focus their attention on our business operations, stockholder value and the attainment of long-term and short-term objectives without undue concern over their employment or financial situations. The material terms of the agreements are described in the section “Potential Payments upon Termination or Change in Control,” below.

We believe that the level of severance payments is fair and reasonable based on the value we would derive from the services provided by the executives with change-in-control severance agreements prior to, and following, a change in control.

Tax Implications – Policy Regarding Section 162(m).     Federal income tax law generally prohibits a publicly-held company from deducting compensation paid to a current or former NEO that exceeds $1 million during the tax year. Certain awards granted by the Company before November 2, 2017 that were based upon attaining pre-established performance measures set by the Committee, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit. There can be no assurance that any compensation the Committee intended to be deductible will in fact be deductible. Although the potential deductibility of compensation is one of the factors the Committee notes when designing the Company’s executive compensation program, the Committee has the flexibility to take any compensation-related actions it determines are in the best interests of the Company and its stockholders, including awarding compensation that will not be deductible for tax purposes.

The Compensation Committee recognizes the importance of preserving our ability to design compensation programs to attract and retain skilled and qualified individuals in a highly competitive market. The Compensation Committee will continue to design salary, annual incentive bonuses and long-term incentive compensation in a manner that the Compensation Committee believes prudent or necessary to hire and retain our NEOs, and may approve compensation arrangements for our executive officers from time to time that do not satisfy the requirements of Section 162(m) (such as base salaries and our time-based vesting RSUs) when it believes that these other considerations outweigh the benefit of the tax deductibility of the compensation.

2018 Compensation Decisions.     At its February 2018 meeting, the Compensation Committee approved average base salary increases of approximately 3.5 % for the NEOs to maintain market competitiveness. The Compensation Committee also approved other base salary increases to recognize performance for other executives. In addition, the Compensation Committee established the Incentive Pay Objectives and the maximum bonus for each NEO, and established the Company’s 2018 financial measures and operational goals under the Incentive Plan.

COMPENSATION AND GOVERNANCE COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” disclosure with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in the Proxy Statement distributed in connection with the Annual Meeting.

The Compensation and Governance Committee:

William J. Link, Ph.D. (Chair)

Steven R. Loranger

Martha H. Marsh

Nicholas J. Valeriani

This report shall not be deemed soliciting material or to be filed with the SEC, or incorporated by reference in any document so filed, whether made before or after the date hereof, except to the extent we specifically request that it be treated as soliciting material or it is specifically incorporated by reference therein.

 

 

LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement      41


Table of Contents

 

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

EXECUTIVE COMPENSATION

The “Summary Compensation Table” quantifies the value of the different forms of compensation earned by or awarded to our NEOs for 2017. The primary elements of each NEO’s total compensation reported in the table are base salary, annual bonus and long-term equity incentives consisting of stock options, PBRSUs and RSUs. NEOs also received the other benefits listed in the “All Other Compensation” column of the “Summary Compensation Table,” as further described in the footnotes to the table.

The “Summary Compensation Table” should be read in conjunction with the tables and narrative descriptions that follow. A description of the material terms of each NEO’s base salary and annual bonus is provided immediately following the “Summary Compensation Table.” The “Grants of Plan-Based Awards in Fiscal Year 2017” table, and the accompanying description of the material terms of the stock options, PBRSUs, and RSUs granted in 2017, provides information regarding the long-term equity incentives awarded to NEOs in 2017. The “Outstanding Equity Awards at 2017 Fiscal Year-End” and “Option Exercises and Stock Vested in Fiscal Year 2017” tables provide further information on the NEOs’ potential realizable value and actual value realized with respect to their equity awards.

Summary Compensation Table

The following table sets forth a summary, for the years indicated, of the compensation of the principal executive officer, the principal financial officer and our three other most highly compensated executive officers whose total compensation for 2017 was in excess of $100,000 and who were serving as executive officers at the end of 2017. No other executive officers that would have otherwise been includable in the table on the basis of total compensation for 2017 have been excluded by reason of their termination of employment or change in executive status during that year.

 

  Name and

  Principal Position

  Year   Salary
$
(1)
  Bonus
$
(2)
  Stock
Awards
$
(3)
  Option
Awards
$
(3)
  Non-Equity
Incentive Plan
Compensation
$
(4)
  All Other
Compensation
$
(5)
  Total
$

 

Mr. Mussallem

   

 

 

 

2017

 

   

 

$

 

995,385

 

   

 

 

 

 

   

 

$

 

3,391,586

 

   

 

$

 

3,631,053

 

   

 

$

 

2,597,000

 

   

 

$

 

183,294

 

   

 

$

 

10,798,318

 

Chairman of the Board and Chief Executive Officer

 

      2016       976,731             2,943,863       3,409,180       2,228,226       176,099       9,734,099
     

 

2015

 

 

     

 

941,731

 

 

     

 

 

 

     

 

2,674,188

 

 

     

 

3,161,339

 

 

     

 

2,074,800

 

 

     

 

178,142

 

 

     

 

9,030,200

 

 

 

Mr. Ullem

   

 

 

 

2017

 

   

 

 

 

569,826

 

   

 

 

 

 

   

 

 

 

855,664

 

   

 

 

 

914,598

 

   

 

 

 

800,400

 

   

 

 

 

44,082

 

   

 

 

 

3,184,570

 

Corporate Vice President, Chief Financial Officer

 

      2016       555,309             735,371       851,213       706,040       57,821       2,905,754
     

 

2015

 

 

     

 

539,074

 

 

     

 

 

 

     

 

675,278

 

 

     

 

796,272

 

 

     

 

721,000

 

 

     

 

70,593

 

 

     

 

2,802,217

 

 

 

Mr. Bobo

   

 

 

 

2017

 

   

 

 

 

573,506

 

   

 

 

 

2,000

 

   

 

 

 

821,135

 

   

 

 

 

881,474

 

   

 

 

 

802,473

 

   

 

 

 

68,501

 

   

 

 

 

3,149,089

 

Corporate Vice President

      2016       557,668       4,200       735,371       851,213       654,444       55,017       2,857,913
     

 

2015

 

 

     

 

526,296

 

 

     

 

4,200

 

 

     

 

675,278

 

 

     

 

796,272

 

 

     

 

689,325

 

 

     

 

61,130

 

 

     

 

2,752,501

 

 

 

Ms. Szyman

   

 

 

 

2017

 

   

 

 

 

526,885

 

   

 

 

 

 

   

 

 

 

770,719

 

   

 

 

 

825,202

 

   

 

 

 

742,540

 

   

 

 

 

52,030

 

   

 

 

 

2,917,376

 

Corporate Vice President

      2016       513,461             687,878       797,419       667,244       176,615       2,842,617
     

 

2015

 

 

     

 

501,923

 

 

     

 

300,000

 

 

     

 

2,667,945

 

 

     

 

1,438,048

 

 

     

 

608,825

 

 

     

 

220,966

 

 

     

 

5,737,707

 

 

 

Mr. Wood

   

 

 

 

2017

 

   

 

 

 

550,506

 

   

 

 

 

2,000

 

   

 

 

 

821,135

 

   

 

 

 

880,215

 

   

 

 

 

780,318

 

   

 

 

 

87,602

 

   

 

 

 

3,121,776

 

Corporate Vice President

      2016       526,002             712,945       825,898       753,660       83,869       2,902,374
     

 

2015

 

 

     

 

517,787

 

 

     

 

2,000

 

 

     

 

651,620

 

 

     

 

771,051

 

 

     

 

750,000

 

 

     

 

81,920

 

 

     

 

2,774,378

 

 

 

(1)

Amounts shown for 2017 include amounts that were deferred into the EDCP as follows: Mr. Mussallem – $118,144; Mr. Ullem – $0; Mr. Bobo – $26,039; Ms. Szyman – $0; and Mr. Wood – $41,367. The EDCP is more fully described in the section following the “Nonqualified Deferred Compensation Plans” table below.

 

(2)

Amounts shown for Messrs. Bobo and Wood include awards received through our Innovation Rewards Program which compensates active employee inventors for their patent contributions to our Company.

 

(3)

The amounts reported in these columns reflect the aggregate grant-date fair value of the stock awards and option awards during the applicable year. These values have been determined under the principles used to calculate the grant-date fair value of equity awards for purposes of our financial statements in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. For a discussion of the assumptions and methodologies used to value the awards reported in these columns, please see the discussion of stock awards and option awards contained in Note 13 of the “Notes to Consolidated Financial Statements” in the 2017 Annual Report.

 

 

42      LOGO     Edwards Lifesciences Corporation     |     2018 Proxy Statement


Table of Contents

 

 

  EXECUTIVE COMPENSATION AND OTHER INFORMATION  

 

 

    

The table below sets forth the grant-date fair value determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 for the PBRSUs awarded in fiscal 2017, 2016, and 2015 based upon the probable outcome of the performance-related vesting conditions as of the grant date (we judged the “target” level of performance to be the probable outcome as of the grant date of the awards), and the grant-date fair value of these awards determined on that basis but assuming that the maximum level of performance was achieved.

 

  Name    Year   

Probable Outcome of

Performance Conditions

Grant-Date Fair Value

($)

  

Maximum Outcome of

Performance Conditions

Grant-Date Fair Value

($)

    

Mr. Mussallem

       2017      $ 2,071,342      $ 3,624,849    
       2016        1,703,181        2,980,566    
       2015        1,525,260        2,669,205    

Mr. Ullem

       2017        522,158        913,777    
       2016        426,521        746,411    
       2015        384,782        673,368    

Mr. Bobo

       2017        501,410        877,468    
       2016        426,521        746,411    
       2015        384,782        673,368    

Ms. Szyman

       2017        470,288        823,004    
       2016        397,506        695,635    
       2015        370,916        649,102    

Mr. Wood

       2017        501,410        877,468    
       2016        412,013        721,023    
         2015        370,916        649,102          

 

(4)

Amounts shown in this column for 2017 were earned under the Incentive Plan based on achievement of performance criteria for 2017, as described in the “Compensation Discussion and Analysis” above. Amounts shown for Mr. Bobo include $200,618 deferred into the EDCP. Amounts earned but not deferred were paid to the executives for 2017 performance.

 

(5)

The “All Other Compensation” column includes the following amounts paid to the NEOs for the year ended December 31, 2017. The amounts disclosed are the actual costs to us of providing these benefits.

 

  Type of Compensation   Mr. Mussallem   Mr. Ullem   Mr. Bobo   Ms. Szyman   Mr. Wood     

 

401(k) Company Match

 

   

 

$

 

 

10,800

 

 

 

   

 

$

 

 

10,800

 

 

 

   

 

$

 

 

10,800

 

 

 

   

 

$

 

 

10,800

 

 

 

   

 

$

 

 

10,800

 

 

 

   

 

EDCP Company Contribution

 

   

 

 

 

 

118,144

 

 

 

   

 

 

 

 

 

 

 

   

 

 

 

 

26,039

 

 

 

   

 

 

 

 

 

 

 

   

 

 

 

 

41,367

 

 

 

   

 

Car Allowance or Company Car Lease Payments

 

     

 

13,200

 

 

     

 

10,800

 

 

     

 

10,800

 

 

     

 

10,800

 

 

     

 

10,800

 

 

   

 

Officer Perquisites Flexible Allowance (includes, among other things, financial planning expenses, airline club dues, club membership dues, home office supplies, personal travel expenses)

 

     

 

40,000

 

 

     

 

20,000

 

 

     

 

20,000

 

 

     

 

20,000

 

 

     

 

20,000