SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
ABBOTT LABORATORIES
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/X/ 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: $125.00
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2) Form, Schedule or Registration Statement No.: PRE 14A
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3) Filing Party: ABBOTT LABORATORIES
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4) Date Filed: February 15, 1994
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[PHOTO--a description of this photo
appears on the following page and
also in appendix in the
EDGAR version]
ABBOTT LABORATORIES
Notice of
Annual Meeting
of Shareholders
and
Proxy Statement
1994
[LOGO]
ABBOTT LABORATORIES
ONE ABBOTT PARK ROAD
ABBOTT PARK, ILLINOIS 60064-3500 U.S.A.
COVER:
USING HYTRIN-R-, ABBOTT'S ONCE-A-DAY ALPHA BLOCKER, TO TREAT THE SYMPTOMS OF
BENIGN PROSTATIC HYPERPLASIA (BPH) HAS ALLOWED FRANK SMOCZYNSKI TO RETURN TO AN
ACTIVE LIFESTYLE. FRANK, AN ENTREPRENEUR AND AVID OUTDOORSMAN FROM ST. CHARLES,
ILL., IS SHOWN ENJOYING A QUIET MOMENT OF FLY FISHING IN THE MISSOURI OZARKS.
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Your Vote
Is Important
Please sign and promptly return your
proxy in the enclosed envelope.
Notice of Annual Meeting
of Shareholders
The Annual Meeting of the Shareholders of Abbott Laboratories will be held at
the corporation's headquarters, One Abbott Park Road, at the intersection of
Route 137 and Waukegan Road, Lake County, Illinois, on Friday, April 29, 1994 at
9:00 a.m. for the following purposes:
(1) To elect thirteen directors to hold office during the
year following the Annual Meeting or until their successors are elected (Item
No. 1 on Proxy Card);
(2) To ratify the appointment of Arthur Andersen & Co.
as auditors of the corporation (Item No. 2 on Proxy Card);
(3) To amend the corporation's Articles of
Incorporation to limit certain liabilities of directors and to amend the
indemnification provisions for directors, officers and employees to the extent
permitted by Illinois law (Item No. 3 on Proxy Card); and
(4) To transact such other business as may properly
come before the meeting, including consideration of the shareholder proposals on
pharmaceutical pricing and infant formula, if such proposals are presented at
the meeting.
The board of directors recommends that you vote FOR Items 1, 2 and 3 on the
proxy card. The board of directors OPPOSES both shareholder proposals and
recommends that you vote AGAINST Item Nos. 4 and 5 on proxy card.
The close of business March 2, 1994 has been fixed as the record date for
determining the shareholders entitled to receive notice of, and to vote at, the
Annual Meeting.
Admission to the meeting will be by admission card only. If you plan to attend,
please request an admission card by checking the appropriate box on the proxy
card, and an admission card will be sent to you.
By order of the board of directors.
LAEL F. JOHNSON
SECRETARY
March 4, 1994
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ABBOTT LABORATORIES
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the board of directors for use
at the Annual Meeting of Shareholders. The meeting will be held on April 29,
1994 at the corporation's headquarters, One Abbott Park Road, at the
intersection of Route 137 and Waukegan Road, Lake County, Illinois. The
corporation will bear the cost of making solicitations from its shareholders and
may enlist the help of banks and brokerage firms in soliciting proxies from
their customers. The corporation will reimburse these institutions for
out-of-pocket expenses. Proxies may also be solicited by mail or in person by
directors, officers, or employees of the corporation and its subsidiaries. The
corporation has also retained Georgeson & Company Inc. to aid in the
solicitation of proxies, at an estimated cost of $10,000 plus reimbursement for
reasonable out-of-pocket expenses.
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VOTING SECURITIES AND RECORD DATE
Shareholders of record at the close of business on March 2, 1994 will be
entitled to notice of, and to vote at, the Annual Meeting. As of January 31,
1994, the corporation had 819,811,254 outstanding common shares, which are the
only outstanding voting securities.
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VOTING OF PROXIES
A shareholder may vote in person, by a duly executed proxy, or through an
authorized representative. The bylaws provide that a shareholder may authorize
no more than three persons as proxies to attend and vote at the meeting. Proxies
may be revoked at any time prior to the meeting. This may be done by written
notice delivered to the secretary of the corporation, or by signing and
delivering a proxy with a later date.
All shareholders have cumulative voting rights in the election of directors and
one vote per share on all other matters. Cumulative voting allows a shareholder
to multiply the number of shares owned by the number of directors to be elected
and to cast the total for one nominee or distribute the votes among the nominees
as the shareholder desires. Nominees who receive the greatest number of votes
will be elected.
Unless authority is withheld in accordance with instructions on the proxy, the
persons named in the proxy will vote the shares covered by proxies they receive
to elect the 13 nominees hereinafter named. These shares may be voted
cumulatively so that one or more of the nominees may receive fewer votes than
the other nominees (or no votes at all). Should a nominee become unavailable to
serve, the shares will be voted for a substitute designated by the board of
directors, or for fewer than 13 nominees if, in the judgment of the proxy
holders, such action is necessary or desirable.
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1
Where a shareholder has specified a choice for or against ratification of Arthur
Andersen & Co. as auditors, the amendment of the Articles of Incorporation, or
either or both of the shareholder proposals, or has abstained on these matters,
the shares represented by the proxy will be voted as specified. Where no choice
has been specified, the proxy will be voted FOR ratification of Arthur Andersen
& Co. as auditors, FOR the amendment of the Articles of Incorporation, and
AGAINST both shareholder proposals. A proxy may indicate that all or a portion
of the shares represented by such proxy are not being voted with respect to a
particular matter. This could occur, for example, when a broker or bank is not
permitted to vote stock held in street name on certain matters in the absence of
instructions from the beneficial owner of the stock. These "non-voted shares"
will be considered shares not present and entitled to vote on such matter,
although such shares may be considered present and entitled to vote for other
purposes and will count for purposes of determining the presence of a quorum.
Non-voted shares will not affect the determination of the outcome of the vote on
any matter to be decided at the meeting.
The affirmative vote by the holders of two-thirds of the outstanding common
shares entitled to vote at the meeting is required for adoption of the proposal
to amend the Articles of Incorporation. With respect to all other matters, a
favorable vote of a majority of the shares represented at the meeting and
entitled to vote on these matters are required for approval. Abstentions and
withheld votes have the effect of votes against all of these matters.
The board of directors is not aware of any other issue to be brought before the
meeting. If other matters are properly brought before the meeting, the
accompanying proxy will be voted in accordance with the judgment of the proxy
holders.
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INFORMATION CONCERNING SECURITY OWNERSHIP
On January 31, 1994, the Abbott Laboratories Stock Retirement Trust, c/o Abbott
Laboratories, One Abbott Park Road, Abbott Park, Illinois 60064-3500, held
64,548,391 common shares (approximately 7.9 percent of the outstanding common
shares) of the corporation. These shares were held for the individual accounts
of approximately 35,148 employees and other plan participants who participate in
the Abbott Laboratories Stock Retirement Plan. The trustees of the Stock
Retirement Trust are G. P. Coughlan, T. C. Freyman, and E. M. Walvoord, officers
of the corporation. The trustees share voting power with respect to the shares
owned by the Trust. The trustees must solicit and follow voting instructions
from the participants if the trustees determine that a matter to be voted on at
a shareholder meeting could materially affect the interests of participants. The
individual participants have investment power over these shares, as provided by
the terms of the Trust. The Trust Agreement is of unlimited duration.
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COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors, which held six meetings in 1993, has four committees
established in the corporation's bylaws: the executive committee, audit
committee, compensation committee, and nominations committee.
The executive committee, whose members are D. L. Burnham, chairman, H. L.
Fuller, W. D. Smithburg, J. R. Walter, and W. L. Weiss, held one meeting in
1993. This committee may exercise all the authority of the board in the
management of the corporation except for matters expressly reserved by law for
board action.
The audit committee, whose members are J. R. Walter, chairman, K. F. Austen, H.
L. Fuller, The Lord Hayhoe PC, A. F. Jacobson, and W. L. Weiss, held two
meetings in 1993. This committee provides advice and assistance regarding
accounting, auditing, and financial reporting practices of the corporation. Each
year, it recommends to the board a firm of independent public accountants to
serve as auditors. The audit committee reviews with such auditors the scope and
results of their audit, fees for services, and independence in servicing the
corporation. The committee also meets with the corporation's internal auditors
to evaluate the effectiveness of the work they perform.
The compensation committee, whose members are W. D. Smithburg, chairman, H. L.
Fuller, A. F. Jacobson, D. A. Jones, B. Powell, Jr., A. B. Rand, W. A. Reynolds,
and J. R. Walter, held five meetings in 1993. This committee is responsible for
setting and administering the policies and programs that govern both annual
compensation and stock ownership programs.
The nominations committee, whose members are W. A. Reynolds, chairman, K. F.
Austen, D. A. Jones, B. Powell, Jr., A. B. Rand, W. D. Smithburg, and W. L.
Weiss, held two meetings in 1993. This committee develops general criteria
regarding the qualifications and selection of board members and officers, and
recommends candidates for such positions to the board of directors. A
shareholder may recommend persons as potential nominees for director or directly
nominate persons for director by complying with the procedures on pages 15 and
16.
The average attendance of all directors at board and committee meetings in 1993
was 97 percent.
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INFORMATION CONCERNING NOMINEES FOR DIRECTORS
(ITEM NO. 1 ON PROXY CARD)
Thirteen directors are to be elected to hold office until the next Annual
Meeting or until their successors are elected. All of the nominees are currently
serving as directors.
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2
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NOMINEES FOR ELECTION AS DIRECTORS
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K. FRANK AUSTEN, M.D. AGE 65 DIRECTOR SINCE 1983
PROFESSOR OF MEDICINE, HARVARD MEDICAL SCHOOL, BOSTON, MASSACHUSETTS
DR. AUSTEN IS CHAIRMAN OF THE DEPARTMENT OF RHEUMATOLOGY AND IMMUNOLOGY AT
BRIGHAM AND WOMEN'S HOSPITAL IN BOSTON, IN ADDITION TO SERVING AS PROFESSOR OF
MEDICINE ON THE FACULTY OF HARVARD MEDICAL SCHOOL. DR. AUSTEN IS A DIRECTOR OF
HUMANA INC. AND APPLIED IMMUNE SCIENCES, INC., AND A MEMBER OF THE NATIONAL
ACADEMY OF SCIENCES AND OF THE AMERICAN ACADEMY OF ARTS AND SCIENCES. HE HAS
SERVED AS PRESIDENT OF THE AMERICAN ASSOCIATION OF IMMUNOLOGISTS, THE AMERICAN
ACADEMY OF ALLERGY AND IMMUNOLOGY, AND THE ASSOCIATION OF AMERICAN PHYSICIANS.
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DUANE L. BURNHAM AGE 52 DIRECTOR SINCE 1985
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, ABBOTT LABORATORIES
MR. BURNHAM JOINED ABBOTT IN 1982. HE WAS ELECTED VICE CHAIRMAN IN 1986, CHIEF
EXECUTIVE OFFICER IN 1989, AND CHAIRMAN OF THE BOARD IN 1990. MR. BURNHAM
RECEIVED BOTH HIS UNDERGRADUATE AND M.B.A. DEGREES FROM THE UNIVERSITY OF
MINNESOTA. HE SERVES AS A DIRECTOR OF SARA LEE CORPORATION, THE FEDERAL RESERVE
BANK OF CHICAGO, EVANSTON (ILLINOIS) HOSPITAL, THE LYRIC OPERA OF CHICAGO, AND
THE HEALTHCARE LEADERSHIP COUNCIL; AS A TRUSTEE OF NORTHWESTERN UNIVERSITY AND
THE MUSEUM OF SCIENCE AND INDUSTRY; AS A MEMBER OF THE BUSINESS ROUNDTABLE; AND
AS CHAIRMAN OF THE EMERGENCY COMMITTEE FOR AMERICAN TRADE.
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H. LAURANCE FULLER AGE 55 DIRECTOR SINCE 1988
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMOCO CORPORATION, CHICAGO,
ILLINOIS (INTEGRATED PETROLEUM AND CHEMICALS COMPANY)
MR. FULLER WAS ELECTED PRESIDENT OF AMOCO CORPORATION IN 1983, AND CHAIRMAN,
PRESIDENT, AND CHIEF EXECUTIVE OFFICER IN 1991. HE IS A MEMBER OF AMOCO
CORPORATION'S EXECUTIVE COMMITTEE AND HAS BEEN A DIRECTOR OF AMOCO SINCE 1981,
WHEN HE BECAME EXECUTIVE VICE PRESIDENT. FROM 1978 UNTIL 1981, MR. FULLER WAS
PRESIDENT OF AMOCO OIL COMPANY, WHICH IS RESPONSIBLE FOR AMOCO CORPORATION'S
PETROLEUM REFINING, MARKETING, AND TRANSPORTATION OPERATIONS. HE IS A DIRECTOR OF
THE CHASE MANHATTAN CORPORATION AND THE CHASE MANHATTAN BANK, N.A., THE AMERICAN
PETROLEUM INSTITUTE, AND THE REHABILITATION INSTITUTE OF CHICAGO; AND A TRUSTEE
OF THE ORCHESTRAL ASSOCIATION AND NORTHWESTERN UNIVERSITY.
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THE LORD HAYHOE PC AGE 68 DIRECTOR SINCE 1989
BRITISH MEMBER OF PARLIAMENT, LONDON, UNITED KINGDOM
BERNARD HAYHOE IS A BRITISH CITIZEN. CREATED A LIFE PEER IN AUGUST 1992 AND NOW A
MEMBER OF THE HOUSE OF LORDS, HE WAS AN ELECTED MEMBER OF THE U.K. HOUSE OF
COMMONS 1970-92. HE WAS APPOINTED A PRIVY COUNCILLOR IN 1985. HE SERVED IN THE
BRITISH GOVERNMENT AS MINISTER OF HEALTH, TREASURY MINISTER OF STATE, CIVIL
SERVICE MINISTER, AND ARMY MINISTER DURING THE YEARS 1979 TO 1986. LORD HAYHOE IS
A FELLOW OF THE INSTITUTION OF MECHANICAL ENGINEERS AND AN HONORARY FELLOW OF
BIRKBECK COLLEGE, LONDON, AND A DIRECTOR OF THE PORTMAN BUILDING SOCIETY. HE
BECAME CHAIRMAN OF THE GUYS AND ST. THOMAS' HOSPITAL, LONDON IN APRIL, 1993.
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THOMAS R. HODGSON AGE 52 DIRECTOR SINCE 1985
PRESIDENT AND CHIEF OPERATING OFFICER, ABBOTT LABORATORIES
MR. HODGSON JOINED ABBOTT IN 1972. HE WAS ELECTED EXECUTIVE VICE PRESIDENT IN 1985, AND
PRESIDENT AND CHIEF OPERATING OFFICER IN 1990. MR. HODGSON HAS A B.S. DEGREE FROM PURDUE
UNIVERSITY, AN M.S.E. DEGREE IN CHEMICAL ENGINEERING FROM THE UNIVERSITY OF MICHIGAN, AN
M.B.A. DEGREE FROM HARVARD BUSINESS SCHOOL, AND WAS AWARDED AN HONORARY DOCTORATE OF
ENGINEERING FROM PURDUE UNIVERSITY. HE SERVES AS TRUSTEE OF RUSH-PRESBYTERIAN-ST. LUKE'S
MEDICAL CENTER AND ON THE COLLEGE OF ENGINEERING NATIONAL ADVISORY BOARD AT THE UNIVERSITY
OF MICHIGAN.
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ALLEN F. JACOBSON AGE 67 DIRECTOR SINCE 1993
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER, MINNESOTA MINING & MANUFACTURING COMPANY,
ST. PAUL, MINNESOTA (MANUFACTURER OF INDUSTRIAL, IMAGING AND HEALTH CARE PRODUCTS)
MR. JACOBSON SERVES AS A DIRECTOR OF MINNESOTA MINING & MANUFACTURING COMPANY; HE SERVED
AS CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER FROM 1986 TO 1991. MR. JACOBSON ALSO
SERVES AS A DIRECTOR OF SARA LEE CORPORATION, ALLIANT TECHSYSTEMS, DELUXE CORPORATION,
MOBIL CORPORATION, NORTHERN STATES POWER COMPANY, POTLATCH CORPORATION, PRUDENTIAL
INSURANCE COMPANY, SILICON GRAPHICS, INC., US WEST, INC., AND VALMONT INDUSTRIES, INC.; AS
CHAIRMAN OF THE UNITED STATES COUNCIL FOR INTERNATIONAL BUSINESS AND THE NATIONAL ACADEMY
OF ENGINEERING.
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DAVID A. JONES AGE 62 DIRECTOR SINCE 1982
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, HUMANA INC., LOUISVILLE, KENTUCKY (HEALTH PLAN
BUSINESS)
MR. JONES IS CO-FOUNDER OF HUMANA INC. AND HAS BEEN CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SINCE ITS ORGANIZATION IN 1961. HE RECEIVED A B.S. DEGREE FROM THE UNIVERSITY OF
LOUISVILLE AND A J.D. DEGREE FROM YALE UNIVERSITY.
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BOONE POWELL, JR. AGE 57 DIRECTOR SINCE 1985
PRESIDENT AND CHIEF EXECUTIVE OFFICER, BAYLOR HEALTH CARE SYSTEM AND BAYLOR UNIVERSITY
MEDICAL CENTER, AND VICE PRESIDENT, BAYLOR UNIVERSITY, DALLAS, TEXAS
MR. POWELL HAS BEEN ASSOCIATED WITH BAYLOR UNIVERSITY MEDICAL CENTER SINCE 1980 WHEN HE
WAS NAMED PRESIDENT AND CHIEF EXECUTIVE OFFICER. PRIOR TO JOINING BAYLOR, HE WAS PRESIDENT
OF HENDRICK MEDICAL CENTER IN ABILENE, TEXAS. MR. POWELL SERVES AS AN ACTIVE MEMBER OF
VOLUNTARY HOSPITALS OF AMERICA. HE IS A DIRECTOR OF COMERICA BANK-TEXAS AND THE INFIRMARY
HEALTH SYSTEM OF MOBILE, ALABAMA, AND A FELLOW OF THE AMERICAN COLLEGE OF HEALTH CARE
EXECUTIVES. MR. POWELL IS A GRADUATE OF BAYLOR UNIVERSITY. HE RECEIVED A MASTER'S DEGREE
IN HOSPITAL ADMINISTRATION FROM THE UNIVERSITY OF CALIFORNIA AND HAS BEEN AWARDED FOUR
HONORARY DOCTORATE DEGREES.
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ADDISON BARRY RAND AGE 49 DIRECTOR SINCE 1992
EXECUTIVE VICE PRESIDENT, XEROX CORPORATION, STAMFORD, CONNECTICUT (DOCUMENT PROCESSING,
INSURANCE AND FINANCIAL SERVICES COMPANY)
MR. RAND JOINED XEROX CORPORATION IN 1968. HE WAS ELECTED A CORPORATE OFFICER IN 1985,
NAMED PRESIDENT OF THE COMPANY'S U.S. MARKETING GROUP IN 1986, AND APPOINTED TO HIS
PRESENT POSITION IN 1992. MR. RAND EARNED A BACHELOR'S DEGREE FROM AMERICAN UNIVERSITY AND
MASTER'S DEGREES IN BUSINESS ADMINISTRATION AND MANAGEMENT SCIENCES FROM STANFORD
UNIVERSITY. HE HAS ALSO BEEN AWARDED SEVERAL HONORARY DOCTORATE DEGREES. MR. RAND SERVES
AS A DIRECTOR OF AMERITECH CORPORATION, HONEYWELL, INC., THE U.S. CHAMBER OF COMMERCE, AND
THE COLLEGE RETIREMENT EQUITIES FUND (CREF). HE IS ALSO A MEMBER OF THE BOARD OF OVERSEERS
OF THE ROCHESTER PHILHARMONIC ORCHESTRA, AND A MEMBER OF THE STANFORD UNIVERSITY GRADUATE
SCHOOL OF BUSINESS ADVISORY COUNCIL. IN 1993 HE WAS ELECTED TO THE NATIONAL SALES HALL OF
FAME.
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W. ANN REYNOLDS, PH.D. AGE 56 DIRECTOR SINCE 1980
CHANCELLOR, THE CITY UNIVERSITY OF NEW YORK, NEW YORK, NEW YORK
DR. REYNOLDS WAS APPOINTED CHANCELLOR OF THE CITY UNIVERSITY OF NEW YORK IN 1990, AFTER
SERVING AS CHANCELLOR OF THE CALIFORNIA STATE UNIVERSITY SINCE 1982. PRIOR TO THAT, DR.
REYNOLDS SERVED AS CHIEF ACADEMIC OFFICER OF OHIO STATE UNIVERSITY AND ASSOCIATE VICE
CHANCELLOR FOR RESEARCH AND DEAN OF THE GRADUATE COLLEGE OF THE UNIVERSITY OF ILLINOIS
MEDICAL CENTER. SHE ALSO HELD APPOINTMENTS AS PROFESSOR OF ANATOMY, RESEARCH PROFESSOR OF
OBSTETRICS AND GYNECOLOGY, AND ACTING ASSOCIATE DEAN FOR ACADEMIC AFFAIRS AT THE
UNIVERSITY OF ILLINOIS COLLEGE OF MEDICINE. DR. REYNOLDS IS A GRADUATE OF EMPORIA STATE
UNIVERSITY (KANSAS) AND HOLDS M.S. AND PH.D. DEGREES IN ZOOLOGY FROM THE UNIVERSITY OF
IOWA. SHE IS ALSO A DIRECTOR OF AMERICAN ELECTRIC POWER COMPANY, HUMANA INC., MAYTAG
CORPORATION, AND OWENS-CORNING FIBERGLASS CORP..
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WILLIAM D. SMITHBURG AGE 55 DIRECTOR SINCE 1982
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, THE QUAKER OATS COMPANY, CHICAGO, ILLINOIS
(DIVERSIFIED FOOD MANUFACTURER AND MARKETER)
MR. SMITHBURG JOINED QUAKER OATS IN 1966 AND BECAME PRESIDENT OF THE FOODS DIVISION IN
1975. HE WAS ELECTED EXECUTIVE VICE PRESIDENT, U.S. GROCERY PRODUCTS IN 1976, PRESIDENT
AND CHIEF EXECUTIVE OFFICER IN 1981, AND CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN 1983, AND
ALSO SERVED AS PRESIDENT FROM NOVEMBER 1990 TO JANUARY 1993. MR. SMITHBURG WAS ELECTED TO
THE QUAKER BOARD IN 1978 AND SERVES ON ITS EXECUTIVE COMMITTEE. HE IS ALSO A DIRECTOR OF
NORTHERN TRUST CORPORATION, CORNING INCORPORATED, AND PRIME CAPITAL CORP. HE IS A MEMBER
OF THE BOARD OF TRUSTEES OF NORTHWESTERN UNIVERSITY AND A DIRECTOR OF NORTHWESTERN
MEMORIAL CORPORATION. MR. SMITHBURG EARNED A B.S. DEGREE FROM DEPAUL UNIVERSITY AND AN
M.B.A. DEGREE FROM NORTHWESTERN UNIVERSITY.
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JOHN R. WALTER AGE 47 DIRECTOR SINCE 1990
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, R.R. DONNELLEY & SONS COMPANY, CHICAGO, ILLINOIS
(PRINTING COMPANY)
MR. WALTER JOINED R.R. DONNELLEY & SONS COMPANY IN 1969 AND WAS NAMED GROUP PRESIDENT IN
1985 AND EXECUTIVE VICE PRESIDENT IN 1986. HE WAS ELECTED PRESIDENT IN 1987 AND CHAIRMAN
OF THE BOARD AND CHIEF EXECUTIVE OFFICER IN 1989. MR. WALTER WAS ELECTED TO THE DONNELLEY
BOARD IN 1987 AND IS CHAIRMAN OF ITS EXECUTIVE COMMITTEE. HE HOLDS A BACHELOR'S DEGREE
FROM MIAMI UNIVERSITY OF OHIO. MR. WALTER SERVES AS A DIRECTOR OF DAYTON HUDSON
CORPORATION, DEERE & COMPANY, EVANSTON (ILLINOIS) HOSPITAL, AND AS A TRUSTEE OF THE
ORCHESTRAL ASSOCIATION AND NORTHWESTERN UNIVERSITY.
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WILLIAM L. WEISS AGE 64 DIRECTOR SINCE 1984
CHAIRMAN OF THE BOARD, AMERITECH CORPORATION, CHICAGO, ILLINOIS (TELECOMMUNICATIONS
COMPANY)
IN 1983, MR. WEISS BECAME CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF AMERITECH CORPORATION
AND SERVED IN THAT CAPACITY UNTIL JANUARY 1994 WHEN HE WAS NAMED CHAIRMAN OF THE BOARD.
PRIOR TO THAT, HE WAS CHAIRMAN AND CHIEF EXECUTIVE OFFICER (1982-83) AND PRESIDENT AND
CHIEF EXECUTIVE OFFICER (1981-82) OF ILLINOIS BELL TELEPHONE COMPANY. PREVIOUSLY, HE WAS
PRESIDENT OF INDIANA BELL TELEPHONE COMPANY (1978-81) AND SERVED IN VARIOUS OTHER
CAPACITIES WITH THE BELL SYSTEM. MR. WEISS IS A DIRECTOR OF AMERITECH CORPORATION, THE
QUAKER OATS COMPANY, AND MERRILL LYNCH & CO., INC. HE IS ALSO A TRUSTEE OF NORTHWESTERN
UNIVERSITY, THE ORCHESTRAL ASSOCIATION, THE LYRIC OPERA OF CHICAGO, AND THE MUSEUM OF
SCIENCE AND INDUSTRY.
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6
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EXECUTIVE COMPENSATION
Report of the Compensation Committee
The compensation committee of the board of directors is composed entirely of
directors who have never been employees of the corporation. The committee is
responsible for setting and administering the policies and programs that govern
both annual compensation and stock ownership programs.
The foundation of the executive compensation program is based on principles
designed to align compensation with the corporation's business strategy, values
and management initiatives. The program:
- Integrates compensation programs with both the corporation's annual and
long-term strategic planning and measurement processes.
- Supports a performance-oriented environment that rewards actual
performance that is related to both goals and performance of the
corporation as compared to that of industry performance levels.
- Helps attract and retain key executives critical to the long-term success
of the corporation.
The key components of the compensation program are base salary, annual incentive
award, and equity participation. These components are administered with the goal
of providing total compensation that is competitive in the marketplace,
recognizes meaningful differences in individual performance and offers the
opportunity to earn above average rewards when merited by individual and
corporate performance.
The marketplace is defined by comparing the corporation to a group of major
corporations with similar characteristics including industry and technology
emphasis. These companies include the majority of companies in the Standard and
Poor's Healthcare Composite Index. A select group of non-healthcare companies
chosen for size and performance comparability to the corporation is used as a
secondary source of comparison.
Using compensation survey data from the comparison groups, a target for total
compensation and each of its elements, base, incentive, and equity-based
compensation is established. The intent is to deliver total compensation that
will be in the upper range of pay practices of peer companies when merited by
the corporation's performance. To achieve this objective, a substantial portion
of executive pay is delivered through performance-related variable compensation
programs which are based upon achievement of the corporation's goals. Each year
the committee reviews the elements of executive compensation to ensure that the
total compensation program, and each of its elements, meets the overall
objectives discussed above.
In 1993, total compensation was paid to executives based on individual
performance and on the extent to which the business plans for their areas of
responsibility were achieved or exceeded. On balance, performance goals were
substantially met or exceeded and therefore compensation was paid accordingly.
Base compensation was determined by an assessment of each executive's
performance, current salary in relation to the salary range designated for the
job, experience, and potential for advancement as well as by the performance of
the corporation. While many aspects of performance can be measured in financial
terms, the committee also evaluated the success of the management team in areas
of performance that cannot be measured by traditional accounting tools,
including the development and execution of strategic plans, the development of
management and employees, and the exercise of leadership within the industry and
in the communities that Abbott serves.
The Abbott Management Incentive Plan is designed to reward executives when the
corporation achieves certain financial objectives and when each executive's area
of responsibility meets its predetermined goals. These goals include financial
elements such as profitability, total sales, and earnings per share and
non-financial elements such as the achievement of selected strategic goals and
the successful development of human resources. Among these goals the committee
gives particular weight to the achievement of overall profitability and earnings
per share targets as documented in the corporation's business plans.
The corporation has provided forms of equity participation as a key part of its
total program for motivating and rewarding executives and managers for many
years. Grants of stock options and restricted stock have provided an important
part of the equity link to shareholders. Through these vehicles, the corporation
has encouraged its executives to obtain and hold the corporation's stock.
Targeted award ranges for stock options and restricted stock opportunities are
determined taking into account competitive marketplace practice. Actual
individual awards are determined based on the established competitive target and
individual performance. The committee considers the amounts of options and
- --------------------------------------------------------------------------------
7
restricted stock previously granted and the aggregate size of current awards in
deciding to award additional options and restricted stock.
The committee believes that equity participation helps create a long-term
partnership between management/ owners and other shareholders. The policy of
granting stock options on a regular basis and encouraging stock ownership has
played a strong part in retaining an excellent team of executives and managers.
As reflected in the corporation's financial statements, Abbott's performance in
1993 included 7.1% growth in sales, and 15.0% growth in earnings per share. This
performance is in the upper range of performance level among peer companies. In
light of this performance and competitive evaluation, the committee determined
to grant Mr. Burnham, the corporation's Chairman and Chief Executive Officer, a
2.8% increase in base salary, a 6.2% increase in bonus, a restricted stock award
and stock option grants.
Preliminary regulations interpreting The Omnibus Budget Reconciliation Act of
1993 were issued in late December, 1993. The committee intends during 1994 to
review the impact of this act on the corporation's executive remuneration once
final regulations are issued.
COMPENSATION COMMITTEE
W. D. Smithburg, chairman, H. L. Fuller, A. F. Jacobson, D. A. Jones, B. Powell,
Jr., A. B. Rand, W. A. Reynolds, and J. R. Walter.
- --------------------------------------------------------------------------------
Summary Compensation Table
The following table summarizes compensation earned in 1993, 1992 and 1991 by the
Chief Executive Officer and the four other most highly paid executive officers
(the "named officers") in 1993.
Annual Compensation Long-term Compensation
-------------------------------- ----------------------
Other Restricted
Annual Stock All Other
Name and Salary Compen- Award(s) Options/ Compen-
Principal Position Year ($)(1) Bonus ($) sation ($) ($)(2) SARs (#) sation ($)(5)
- ---------------------------------------------------------------------------------------------------------------
Duane L. Burnham 1993 $772,615 $725,000 $ 192,449 $787,500(3) 195,000 $ 24,306
Chairman of the Board, 1992 761,535 682,500 64,592 823,125(4) 120,000 6,078
Chief Executive Officer and
Director 1991 690,422 650,000 100,095 0 100,002 5,951
- ---------------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 1993 554,146 605,000 62,036 472,500(3) 130,002 17,857
President, 1992 512,063 550,000 31,303 548,750(4) 70,008 6,226
Chief Operating Officer and
Director 1991 454,528 500,000 38,046 0 60,000 6,097
- ---------------------------------------------------------------------------------------------------------------
Paul N. Clark 1993 332,692 362,500 7,552 0 0 8,722
Senior Vice President, 1992 330,252 340,000 6,369 329,250(4) 84,024 6,048
Pharmaceutical Operations 1991 302,635 310,000 35 0 30,000 5,922
- ---------------------------------------------------------------------------------------------------------------
Gary P. Coughlan 1993 395,385 360,000 27,627 0 0 12,220
Senior Vice President, Finance 1992 393,525 330,000 13,255 329,250(4) 81,324 5,959
and Chief Financial Officer 1991 362,088 300,000 13,642 0 30,000 0
- ---------------------------------------------------------------------------------------------------------------
David A. Thompson 1993 342,692 385,000 45,629 0 0 11,274
Senior Vice President, 1992 340,608 385,000 18,436 329,250(4) 84,024 6,345
Diagnostic Operations 1991 312,608 350,000 19,303 0 30,000 6,213
- ---------------------------------------------------------------------------------------------------------------
TABLE FOOTNOTES
(1) The 1993 and 1991 amounts reflect 26 two-week pay periods. The 1992 amounts
reflect 27 two-week pay periods.
(2) The number and value of restricted shares held as of December 31, 1993 were
as follows: D. L. Burnham - 78,000/$2,310,750; T. R. Hodgson -
43,600/$1,291,650; P. N. Clark - 16,000/$474,000; G. P. Coughlan -
28,800/$853,200; and D. A. Thompson - 16,000/$474,000. The officers receive
all dividends paid on these shares.
(3) The number of shares covered by these awards are 30,000 for Mr. Burnham and
18,000 for Mr. Hodgson. These awards vest in three equal installments on
January 10, 1994, 1995 and 1996.
(4) The number of shares covered by these awards and the number of shares
vested, respectively, are as follows: D. L. Burnham - 30,000 and 6,000; T.
R. Hodgson - 20,000 and 4,000; P. N. Clark - 12,000 and 2,400; G. P.
Coughlan - 12,000 and 2,400; and D. A. Thompson - 12,000 and 2,400. The
remaining shares covered by the awards vest five years from the date of
grant.
(5) Employer contributions made to the Stock Retirement Plan and employer
contributions made or accrued with respect to the 401(k) Supplemental Plan.
- --------------------------------------------------------------------------------
8
- --------------------------------------------------------------------------------
Stock Options
The following tables summarize the named officers' stock option activity during
1993.
Option/SAR Grants in Last Fiscal Year
Individual Grants
- --------------------------------------------------------------------------------------------------------
% of Total Options/
Number of Securities SARs Granted to Exercise or
Underlying Options/ Employees in Fiscal Base Price Expiration
Name SARs Granted (#)(1) Year ($/Sh.) Date (2)
- --------------------------------------------------------------------------------------------------------
Duane L. Burnham 150,000 11.0% $ 25.32 04/16/03
45,000 3.3 26.26 09/10/03
- --------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 90,000 6.6 25.32 04/16/03
40,002 2.9 26.26 09/10/03
- --------------------------------------------------------------------------------------------------------
Paul N. Clark 0 0.0 N/A N/A
- --------------------------------------------------------------------------------------------------------
Gary P. Coughlan 0 0.0 N/A N/A
- --------------------------------------------------------------------------------------------------------
David A. Thompson 0 0.0 N/A N/A
- --------------------------------------------------------------------------------------------------------
Gain for all Shareholders at Assumed Rates for Appreciation (4):
- --------------------------------------------------------------------------------------------------------
Potential Realizeable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term (3):
--------------------------------
Name 5% ($) 10% ($)
- ---------------------------------------------------------------------
Duane L. Burnham $2,388,543 $6,053,032
743,165 1,883,325
- ------------------------------
Thomas R. Hodgson 1,433,126 3,631,819
660,624 1,674,150
- ------------------------------
Paul N. Clark N/A N/A
- ------------------------------
Gary P. Coughlan N/A N/A
- ------------------------------
David A. Thompson N/A N/A
- ------------------------------
Gain for all Shareholders at
Assumed Rates for Appreciation (4): 15,298,478,946 38,769,315,121
- --------------------------------------------------------------------------------
TABLE FOOTNOTES
(1) Limited stock appreciation rights have been granted in tandem with these
options.
(2) One-third of the shares covered by these options are exercisable after one
year; two-thirds after two years; and all after three years.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates required by the SEC and,
therefore, are not intended to forecast possible future appreciation, if
any, of the stock price.
(4) Amounts were determined using total shares outstanding at December 31, 1993
of 821,129,684 and December 31, 1993 closing market price of $29.625 per
share.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-end Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Value Fiscal Year-end (#) Fiscal Year-end ($)
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------
Duane L. Burnham 0 $ 0 153,336/328,334 $1,221,858/986,824
- ------------------------------------------------------------------------------------------------------
Thomas R. Hodgson 8,860 160,853 61,670/208,342 293,047/638,282
- ------------------------------------------------------------------------------------------------------
Paul N. Clark 0 0 138,724/80,020 1,850,176/45,925
- ------------------------------------------------------------------------------------------------------
Gary P. Coughlan 0 0 83,556/77,770 714,297/45,925
- ------------------------------------------------------------------------------------------------------
David A. Thompson 0 0 215,372/80,020 3,287,516/45,925
- ------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annuity Retirement Plan
The corporation and certain subsidiaries maintain a defined benefit pension plan
known as the Abbott Laboratories Annuity Retirement Plan covering most employees
in the United States, age 21 or older. Pension benefits are generally based on
service and eligible earnings for the 60 consecutive months within the final 120
months of employment for which eligible earnings were highest. Pension benefits
are offset for Social Security benefits.
The following table shows the estimated annual benefits payable to employees
upon normal retirement. The amounts shown are computed on a straight life
annuity basis and include Social Security off-sets and supplemental benefits
under a nonqualified supplemental pension plan. The supplemental pension plan
provides benefits not available under the Annuity Retirement Plan. The
compensation considered in determining the pensions payable to the named
officers is the compensation shown in the "Salary" and "Bonus" columns of the
Summary Compensation Table on page 8.
- --------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
Pension Plan Table
Years of Service
- ------------- -----------------------------------------------------
Remuneration 15 20 25 30 35
- ------------- -----------------------------------------------------
$ 700,000 $ 234,546 $ 312,728 $ 364,660 $ 385,092 $ 384,524
900,000 302,046 402,728 469,660 496,092 495,524
1,100,000 369,546 492,728 574,660 607,092 606,524
1,300,000 437,046 582,728 679,660 718,092 717,524
1,500,000 504,546 672,728 784,660 829,092 828,524
1,700,000 572,046 762,728 889,660 940,092 939,524
1,900,000 639,546 852,728 994,660 1,051,092 1,050,524
- ------------- -----------------------------------------------------
The table above covers the aggregate pension accrued under both the Annuity
Retirement Plan and the supplemental pension plan. Pensions accrued under the
Annuity Retirement Plan are funded through a trust known as the Abbott
Laboratories Annuity Retirement Trust, established on behalf of all participants
in that plan. Pensions accrued under the nonqualified supplemental pension plan
with present values exceeding $100,000 are funded through individual trusts
established on behalf of the participants in that plan. During 1993, the
following amounts, less applicable tax withholdings, were deposited in such
individual trusts established on behalf of the named officers: D. L. Burnham,
$1,279,254; T. R. Hodgson, $1,119,675; P. N. Clark, $51,271; and D. A. Thompson,
$446,871. As of December 31, 1993, the years of service credited under the Plan
for the named officers were as follows: D. L. Burnham - 11; T. R. Hodgson - 21;
P. N. Clark - 9; G. P. Coughlan - 3; and D. A. Thompson - 22.
- --------------------------------------------------------------------------------
Compensation of Directors
Employees of the corporation are not compensated for serving on the board or on
board committees. Non-employee directors are compensated under the Abbott
Laboratories Non-Employee Directors' Fee Plan in the amounts of $4,167 for each
month of service as director and $667 for each month of service as chairman of a
board committee ($1,600 for each month of service as chairman of the executive
committee).
Fees earned under this Plan are paid in cash to the director, or deferred (as a
non-funded obligation of the corporation or paid into a secular trust
established by the director) until payments commence (generally at age 65 or
upon retirement from the board of directors). If the fees are deferred, the
director may elect to have the fees credited to a stock equivalent account under
which the fees accrue the same return they would have earned if invested in
common shares of the corporation. Interest is accrued annually on deferred fees
not credited to a stock equivalent account.
Under the Plan, the corporation may grant a director who retires from the board
a retirement benefit, and such benefit will be payable to the surviving spouse
of any director who dies while serving as a director. The retirement benefit
consists of payment of an amount equal to the monthly director's fee in effect
on the date the director retires (or, for a director who dies, the fee in effect
on the date of death) for a period equal to his or her service on the board to a
maximum of 120 months. In return for the retirement benefit, the director agrees
to provide consulting services to the board.
In 1993, each non-employee director was granted a restricted stock award of 790
shares. The shares are nontransferable prior to termination, retirement from the
board, death, or a change in control of the corporation. The non-employee
directors are entitled to vote the shares and receive all dividends paid on the
shares.
K. F. Austen, a non-employee director, performed services during 1993 for the
corporation under a consulting agreement. The consulting agreement provides that
the fees he earns under the agreement may receive the same treatment as fees
earned under the Abbott Laboratories Non-Employee Directors' Fee Plan. Dr.
Austen served as Chairman of the corporation's Scientific Advisory Council until
March 31, 1993 and provided consultation in the areas of research and
development, new technology and immunopharmacology throughout 1993. In 1993, Dr.
Austen received $50,000 for his consulting services.
- --------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation
The persons who served as members of the compensation committee of the
corporation's board of directors during 1993 are named on page 2, "Committees of
the Board of Directors."
- --------------------------------------------------------------------------------
10
- --------------------------------------------------------------------------------
Performance Graph
The following graph compares the change in the corporation's cumulative total
shareholder return on its common shares with the Standard and Poor's 500 Stock
Index and the Standard and Poor's Healthcare Composite Index.
[GRAPHIC]
filed under cover of Form SE on February 15, 1994
on or about March 4, 1994
- --------------------------------------------------------------------------------
Security Ownership of Officers and Directors
The table below reflects the numbers of common shares beneficially owned by the
directors, the named officers, and all directors and executive officers of the
corporation as a group as of January 31, 1994. It also reflects the number of
equivalent stock units held by non-employee directors under the Abbott
Laboratories Non-Employee Directors' Fee Plan described on page 10 and by K. F.
Austen under the consulting agreement described on page 10.
- ---------------------------------------------------------------------
SHARES BENEFICIALLY
OWNED, EXCLUDING EQUIVALENT
NAME OPTIONS (1)(2) STOCK UNITS
- ---------------------------------------------------------------------
K. Frank Austen, M.D. 9,128 1,914
- ---------------------------------------------------------------------
Duane L. Burnham 438,029 0
- ---------------------------------------------------------------------
Paul N. Clark 102,205 0
- ---------------------------------------------------------------------
Gary P. Coughlan 74,916(3) 0
- ---------------------------------------------------------------------
H. Laurance Fuller 13,196 11,594
- ---------------------------------------------------------------------
The Lord Hayhoe PC 5,396 0
- ---------------------------------------------------------------------
Thomas R. Hodgson 393,906 0
- ---------------------------------------------------------------------
Allen F. Jacobson 2,790 1,132
- ---------------------------------------------------------------------
David A. Jones 118,192 35,529
- ---------------------------------------------------------------
- ---------------------------------------------------------------------
SHARES BENEFICIALLY
OWNED, EXCLUDING EQUIVALENT
NAME OPTIONS (1)(2) STOCK UNITS
- ---------------------------------------------------------------------
Boone Powell, Jr. 9,528 20,069
- ---------------------------------------------------------------------
Addison Barry Rand 3,130 0
- ---------------------------------------------------------------------
W. Ann Reynolds, Ph.D. 11,765 20,413
- ---------------------------------------------------------------------
William D. Smithburg 16,786 33,324
- ---------------------------------------------------------------------
David A. Thompson 110,988(3) 0
- ---------------------------------------------------------------------
John R. Walter 5,628 7,100
- ---------------------------------------------------------------------
William L. Weiss 20,728 4,339
- ---------------------------------------------------------------------
All directors and executive
officers as a group (32
persons) (3)(4) 2,436,639 135,414
- ---------------------------------------------------------------
TABLE FOOTNOTES
(1) The number of unexercised option shares which were exercisable within 60
days after January 31, 1994 were: D. L. Burnham, 153,336; T. R. Hodgson,
61,670; P. N. Clark, 138,724; G. P. Coughlan, 83,556; D. A. Thompson,
215,372; and all executive officers as a group (21 persons), 1,852,522.
(2) The table includes the shares held in the named officers' accounts in the
Abbott Laboratories Stock Retirement Trust. Each officer has shared voting
power and sole investment power with respect to the shares held in his
account. As of January 31, 1994 the number of shares held in each named
officer's account were: D. L. Burnham, 4,550; T. R. Hodgson, 24,750; P. N.
Clark, 2,657; G. P. Coughlan, 2,755; and D. A. Thompson, 32,644.
(3) G. P. Coughlan is a trustee of the Abbott Laboratories Stock Retirement
Trust and has shared voting power with respect to all of the common shares
owned by that trust. He is also a director of the Abbott Laboratories Fund
and has shared voting and investment power with respect to all of the common
shares owned by the fund. D. A. Thompson is a director of the Clara Abbott
Foundation and has shared voting and investment power with respect to all of
the common shares owned by the foundation. The table does not include these
shares. As of January 31, 1994 the Abbott Laboratories Stock Retirement
Trust owned 64,548,391 shares (7.9%) of the outstanding shares of the
corporation; the Abbott Laboratories Fund owned 1,085,640 shares (.1%) of
the outstanding shares of the corporation; and the Clara Abbott Foundation
owned 2,851,986 shares (.3%) of the outstanding shares of the corporation.
(4) Excluding the shares held by G. P. Coughlan in his capacity as a trustee of
the Abbott Laboratories Stock Retirement Trust and the shares held by the
Abbott Laboratories Fund and the Clara Abbott
- --------------------------------------------------------------------------------
11
Foundation, the directors and executive officers as a group together own
less than one percent of the outstanding shares of the corporation. (see
footnote 3)
- ---------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The corporation believes that during 1993 its officers and directors complied
with all filing requirements under Section 16(a) of the Securities Exchange Act
of 1934 except as described below. Thomas R. Hodgson, an officer of the
corporation, filed late Initial Statements of Beneficial Ownership of Securities
for two trusts of which he is the trustee (reporting the trusts' ownership of
1,440 shares and 960 shares, respectively). A third party gave these shares to
these two trusts. The gift of these 960 shares to one of these two trusts was
also reported late by Mr. Hodgson on his Annual Statement of Beneficial
Ownership of Securities. Gary R. Byers, an officer of the corporation, corrected
an error made on his Initial Statement of Beneficial Ownership of Securities
form by increasing by 68 shares the number of shares shown as owned on that
Initial Statement of Beneficial Ownership of Securities form.
- --------------------------------------------------
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS (ITEM NO. 2 ON PROXY CARD)
The bylaws of the corporation provide that, upon the recommendation of the audit
committee, the board of directors shall appoint annually a firm of independent
public accountants to serve as auditors, and that such appointment shall be
submitted for ratification by the shareholders at the Annual Meeting. The board
has appointed Arthur Andersen & Co. to act as auditors for the current year.
This firm has served as auditors of the corporation since 1963. The board of
directors recommends a vote FOR ratification of the selection of Arthur Andersen
& Co. as independent public accountants for 1994.
Representatives of Arthur Andersen & Co. are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement if they
desire to do so. They will also be available to respond to appropriate
questions.
- --------------------------------------------------
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING LIABILITY AND INDEMNIFICATION
(ITEM NO. 3 ON PROXY CARD)
In 1993 the Illinois legislature adopted an amendment to the Illinois Business
Corporation Act (the "Illinois Act") that is similar to amendments adopted to
the Delaware General Corporation Law in 1986. This amendment to the Illinois Act
allows the limitation of personal liability of directors to the corporation and
its shareholders for monetary damages in certain circumstances, and makes
changes in the procedure for directors, officers and employees of the
corporation to obtain indemnification from the corporation.
The board of directors recommends that the corporation's Articles of
Incorporation be amended to (a) limit the personal liability of directors to the
corporation and its shareholders for monetary damages, as permitted by the
amendment to the Illinois Act, and (b) change the procedure with respect to
advancement and repayment of litigation expenses of persons covered under the
indemnification provisions of the Articles of Incorporation. Article R-VI of the
Articles of Incorporation, as it is proposed to be amended, is set forth in full
in Exhibit A attached hereto.
LIMITATION OF LIABILITY
Consistent with the 1993 amendment to the Illinois Act, the proposed amendment
to Article R-VI provides that directors will not be personally liable to the
corporation or its shareholders for monetary damages except in the case of: (a)
breach of the director's duty of loyalty to the corporation or its shareholders,
(b) acts or omissions not in good faith or involving intentional misconduct or
knowing violation of the law, (c) illegal payment of dividends and certain
illegal acts in connection with a dissolution of the corporation, or (d) any
transaction in which the director derived an improper personal benefit. The
effect of the proposed amendment to Article R-VI is to absolve directors from
monetary liability to the corporation or its shareholders for breach of the duty
of care, even if the breach involved gross negligence.
The proposed amendment to Article R-VI does not limit the liability of directors
for acts or omissions occurring before its adoption. The amendment applies only
to the monetary liability of directors arising from a breach of their fiduciary
duty to the corporation or its shareholders in connection with their acts or
omissions as a director and not to liability arising in other capacities such as
an officer. The amendment does not limit the director's liability to parties
other than the corporation or its shareholders or liabilities under any other
law, including the federal securities laws, or the ability of the corporation
and its shareholders to seek equitable relief for a breach of fiduciary duty.
Adoption of the proposed amendment will make the corporation's standard for
director's liability consistent with the prevailing standard for director
liability and the standard applicable to most other publicly-held corporations.
The board of directors also believes that the limitation of personal liability
as provided in the
- --------------------------------------------------------------------------------
12
amendment will enhance the director's decision-making process by encouraging
entrepreneurial decisions which may be in the best interests of the corporation.
- --------------------------------------------------------------------------------
13
CHANGES IN INDEMNIFICATION PROCEDURE
The proposed amendment to Article R-VI also makes certain changes in the
procedure for obtaining indemnification from the corporation.
Consistent with the 1993 amendment to the Illinois Act, the amendment provides
for advancement of litigation expenses without prior approval of the board of
directors, but upon receipt of an undertaking by the person receiving the
advance to repay the amount of the advance if it shall ultimately be determined
that he or she is not entitled to indemnification.
Under prior law, a corporation could advance litigation expenses to the person
entitled to indemnification prior to ultimate disposition of the case, provided
the board of directors approved each such advance and the person entitled to
indemnification submitted an undertaking agreeing to repay the advance unless
that person proved that he or she was entitled to indemnification. The amendment
to the Illinois Act dispensed with the requirement of prior approval of each
advance and shifted the burden to the corporation to prove that the person
receiving the advance was not entitled to indemnification.
Since the corporation's present directors and officers will benefit from the
added protection of the amendment, they have a personal interest in its
adoption. The changes made to the procedure with respect to advancement and
repayment of litigation expenses will apply to proceedings commenced before or
after adoption of the amendment, including a pending shareholder derivative
action relating to alleged improper marketing practices with respect to the
corporation's infant formula products in which all present directors (other than
Allen F. Jacobson) and Lael F. Johnson, an officer, of the corporation have been
made defendants. As of January 31, 1994 the corporation has advanced litigation
expenses aggregating $12,414 on behalf of such directors and officer in
connection with such action.
VOTE REQUIRED
An affirmative vote by the holders of two-thirds of the outstanding common
shares entitled to vote at the meeting is required for adoption of this proposal
to amend the Articles of Incorporation.
The board of directors recommends that you vote FOR this proposal.
- --------------------------------------------------
SHAREHOLDER PROPOSALS
Two shareholder proposals have been received. The corporation is advised that
the proposals will be presented for action at the Annual Meeting. The proposed
resolutions and statement made in support thereof are presented below. The names
and addresses of the shareholders submitting these proposals will be furnished
by the corporation to any person requesting such information. The board of
directors recommends that you vote AGAINST both proposals.
- --------------------------------------------------
SHAREHOLDER PROPOSAL ON PHARMACEUTICAL PRICING (ITEM NO. 4 ON PROXY CARD)
WHEREAS:
We believe all U.S. citizens and corporate entities are being called to
sacrifice and to do their part in bringing about a more just and equitable
health care system.
During the 1980s, prescription drug prices increased at almost three times the
rate of general inflation in the United States.
The burden of these cost increases has been borne by individual consumers such
as the elderly and the underinsured in the retail market as well as increased
costs for the institutional health care facilities.
The drug companies have been criticized by citizens, organizations, and U.S.
government agencies as being unjust in the reaping of "excessive profits at the
expense of millions of U.S. citizens".
The price of drugs is consistently higher in the U.S. retail market than in
other industrialized countries.
The drug companies have argued that the higher prices in the U. S. are necessary
to recoup research and development costs. While all persons who receive these
drugs benefit from the research and development, U.S. consumers bear the burden
of these costs.
Pharmaceutical companies' recent efforts to limit overall price increases to
inflation have failed to significantly benefit retail consumers due to
discounted prices offered to volume purchasers such as HMOs and large purchasing
groups.
We believe U.S. citizens want reasonable limits on pharmaceutical prices.
RESOLVED: The shareholders request the Board to create and implement a policy of
price restraint of pharmaceutical products for both the average individual
consumer and the institutional purchasers utilizing a combination of approaches
to keep drug prices to a reasonable level.
The Board will report to shareholders on positive changes in policies and
pricing procedures for our pharmaceutical products by September, 1994.
- --------------------------------------------------------------------------------
14
- --------------------------------------------------
PROPONENTS' STATEMENT IN SUPPORT OF SHAREHOLDER PROPOSAL ON PHARMACEUTICAL
PRICING
In creating this policy the Board should consider a formula whereby the
individual price on each of the top five prescription drugs for the retail
market based on dollar volume in the U.S. for our company be no higher than 10%
of the average price for each of the five drugs in the top five markets of these
same drugs in the industrialized world. If the price differential is more than
10% for any one of the drugs, that a voluntary cap be immediately placed on the
price of said drug in the U.S. until the differential is within the 10%.
Drug pricing has been a controversial topic for the last few years. Now that we
are facing major reforms in our health care system in the U.S. it seems most
appropriate that all pharmaceutical companies take their share of the
responsibility in this reform effort.
- --------------------------------------------------
BOARD OF DIRECTORS STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL ON
PHARMACEUTICAL PRICING (ITEM NO. 4 ON PROXY CARD)
Your Board of Directors opposes the shareholders' proposal and recommends that
you vote AGAINST it.
As a global health care company operating in over one hundred geographic markets
with a diverse mix of businesses, Abbott supports the goal of improving the
access of people worldwide to a high quality of health care while reducing the
rate of growth of health care costs.
Abbott has established itself as a leader in the global health care industry by
consistently introducing innovative products that improve the quality of health
care for patients, offer user efficiencies and reduce the cost of patient
therapy.
The Company has priced its products responsibly and adjusted prices in response
to changing market conditions. In 1993, the Company's net prices for its
products (including pharmaceuticals) increased .9 percent.
We do not believe that it is in the best interests of Abbott shareholders to
adopt rigid pricing structures for any specific geographic location, any
specific category of products, or any class of customer.
Pricing decisions for all products developed, manufactured and sold by Abbott
must be flexible in order to respond to market dynamics in product and
geographic market segments, and to assure the Company's continued ability to
invest in research and development across our product lines. It is from this
investment that innovation will be reaped to allow the best chance for the
United States and other countries to accomplish the difficult goals of expanding
access, increasing quality and reducing the rate of growth of health care costs.
Your Board of Directors recommends that you vote AGAINST the proposal.
- --------------------------------------------------
SHAREHOLDER PROPOSAL ON INFANT FORMULA (ITEM NO. 5 ON PROXY CARD)
WHEREAS - the misuse of infant formula is a serious health problem. When formula
is mixed with impure water or inadequate amounts of formula are used in
preparation, infants often become sick and many die. In fact UNICEF's Director,
James Grant has estimated that over one million babies lives could be saved
annually if their mothers breastfed instead of bottlefed. Thus, it is vitally
important that infant formula companies do not engage in marketing or promotion
practices which undermine breast-feeding and promote formula instead. We are
pleased that our company has stated publicly that it endorses breast-feeding as
the superior form of infant nutrition and is committed to the principle that its
marketing practices do not discourage breast-feeding.
Hiroshi Nakajima, M. D., Ph.D., Director-General of the World Health
Organization (WHO) and James P. Grant, Executive Director of UNICEF urge that
infant formula companies, "within the context of legal instruments and
requirements within countries, comply with the principles of the International
Code (of Marketing for Breast-Milk Substitutes) in all countries to the fullest
extent possible."
Dr. Nakajima and Mr. Grant further state that "adherence to the International
Code of Marketing of Breast-Milk Substitutes in its entirety in all countries is
a minimum requirement and only one of several important actions required in
order to protect healthy practices in respect of infant and young child
feeding."
However, Abbott Ross has still not ended its practice of providing free supplies
of formula to hospitals as a marketing tool to encourage that hospital to buy
Ross formula unless forbidden to do so by government regulation. This is a clear
Code violation. In addition, Abbott continues to face other complaints that it
internationally violates the Code.
Our company also faces domestic controversy re. infant formula price fixing and
paid $140 million in settlement of a court case, and faces other cases that
could be very costly.
THEREFORE be it resolved that the shareholders request the Board of Directors to
endorse and
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15
implement, within any country's legal context, the International Code of
Marketing for Breast-Milk Substitutes wherever it sells infant formula.
- --------------------------------------------------
PROPONENTS' STATEMENT IN SUPPORT OF SHAREHOLDER PROPOSAL ON INFANT FORMULA
Adopted by the World Health Assembly in 1981 to protect infant health from
inappropriate commercial pressures, the WHO/UNICEF Code is a reasonable standard
and minimum requirement for infant formula industry behavior.
Addressing the "universality of the Code," Dr. Hiroshi Nakajima, M.D.,
Director-General of the World Health Organization (WHO), says there is no label
such as developed or developing when it comes to promoting breast-feeding. He
says the Code has "universal relevance."
"Breast is best" means the preferred feeding for infants in all countries. There
should be no national boundaries for the best nutrition and healthiest babies.
We want Abbott to commit to following the Code wherever it does business.
We ask you to support this resolution requesting that company policy be
consistent with internationally agreed upon health care practices and the aim of
the Code "to promote and protect breast-feeding."
- --------------------------------------------------
BOARD OF DIRECTORS STATEMENT IN OPPOSITION TO SHAREHOLDER PROPOSAL ON INFANT
FORMULA
(ITEM NO. 5 ON PROXY CARD)
Your Board of Directors opposes the shareholder proposal, and recommends that
you vote AGAINST the proposal.
The WHO Code of Marketing of Breastmilk Substitutes was adopted in May, 1981 by
the World Health Assembly as a "resolution and not as a regulation." Governments
are urged to give effect to the Code according to the "social and legislative
framework" of member nations. (Article 11.1) The application of the Code varies
widely from country to country. The United States government voted against the
Code in 1981.
Abbott supports the Aims and Principles of the WHO Code,
". . . to contribute to the provision and adequate nutrition for infants, by
the protection and promotion of breast-feeding, and by ensuring the proper
use of breast-milk substitutes, when these are necessary, on the basis of
adequate information and through appropriate marketing and distribution."
(Article 1)
In 1983, Abbott agreed to follow the WHO Code in its entirety in DEVELOPING
COUNTRIES.
A series of WHO resolutions subsequent to 1981 clarified the intent of the World
Health Assembly that free and low cost formulas for institutions (Article 6.6)
should be provided through "normal procurement channels." Abbott has instructed
its international field management to eliminate free and low cost supplies to
institutions whenever government legislation has been passed, whenever a
hospital or group of hospitals request elimination of free supplies, or whenever
common business practice in a local area follows that pattern.
We believe that the promotion of our infant formula products to hospitals is
appropriate. Hospitals are obliged to instruct mothers of newborns in proper
feeding techniques at discharge whether the infant is breastfed or bottlefed,
including a branded name when appropriate.
Furthermore, breastfeeding in the United States has been INCREASING
significantly for the past three years in all demographic groups, and hospitals
specifically.
Your Board of Directors recommends that you vote AGAINST the proposal.
- --------------------------------------------------
DATE FOR RECEIPT OF 1995 SHAREHOLDER PROPOSALS
Shareholder proposals for presentation at the 1995 Annual Meeting must be
received by the corporation no later than November 16, 1994 to be considered for
inclusion in the proxy statement and proxy for the 1995 meeting.
- --------------------------------------------------
PROCEDURE FOR RECOMMENDATION AND NOMINATION OF DIRECTORS AND TRANSACTION OF
BUSINESS AT ANNUAL MEETINGS
A shareholder may recommend persons as potential nominees for director by
submitting the names of such persons in writing to the chairman of the
nominations committee or the secretary of the corporation. Recommendations
should be accompanied by a statement of qualifications and confirmation of the
person's willingness to serve.
A shareholder may directly nominate persons for director only by complying with
the following procedure: the shareholder must submit the names of such persons
in writing to the secretary of the corporation not earlier
- --------------------------------------------------------------------------------
16
than the October 1 nor later than the February 15 prior to the date of the
Annual Meeting. The nominations must be accompanied by a statement setting forth
the name, age, business address, residence address, principal occupation,
qualifications, and number of shares of the corporation owned by the nominee and
the name, record address, and number of shares of the corporation owned by the
shareholder making the nomination.
A shareholder may properly bring business before the Annual Meeting of
Shareholders only by complying with the following procedure: the shareholder
must submit to the secretary of the corporation, not earlier than the October 1
nor later than the February 15 prior to the date of the Annual Meeting, a
written statement describing the business to be discussed, the reasons for
conducting such business at the Annual Meeting, the name, record address, and
number of shares of the corporation owned by the shareholder making the
submission, and a description of any material interest of the shareholder in
such business.
- --------------------------------------------------
GENERAL
It is important that proxies be returned promptly. Shareholders are urged,
regardless of the number of shares owned, to sign and return their proxy card in
the enclosed business reply envelope.
The Annual Meeting will be held at the corporation's headquarters, One Abbott
Park Road, located at the intersection of Route 137 and Waukegan Road, Lake
County, Illinois. Admission to the meeting will be by admission card only. If
you plan to attend the meeting, please complete and return the reservation form.
An admission card will be sent to you.
By order of the board of directors.
LAEL F. JOHNSON
SECRETARY
- --------------------------------------------------------------------------------
EXHIBIT A
- --------------------------------------------------------------------------------
ARTICLE R-VI
1. A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 8.65 of the Illinois Business Corporation
Act, or (iv) for any transaction from which the director derived an improper
personal benefit; provided that the foregoing provision shall not eliminate or
limit the liability of a director for any act or omission occurring before the
date this provision became effective.
2. Any person who was or is a party, or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation, or who is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, shall, in the case of persons who are or were directors or
officers of the corporation, and may, as to such other persons, be indemnified
(and the corporation shall, in the case of persons who are or were directors or
officers of the corporation, and may, as to such other persons, advance expenses
incurred in defending such actions, suits or proceedings) to the fullest extent
now or hereafter permitted by law.
3. The foregoing right of indemnification and advancement of expenses shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise.
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17
[LOGO]
ABBOTT LABORATORIES
ONE ABBOTT PARK ROAD
ABBOTT PARK, ILLINOIS 60064-3500 U.S.A.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
MEETING DATE
APRIL 29, 1994
YOUR VOTE IS IMPORTANT!
Please sign and promptly return your
proxy in the enclosed envelope.
Appendix to Abbott Laboratories 1994 Proxy Statement
On the cover page of the printed document will be a photograph of Frank
Smoczynski enjoying a quiet moment of fly fishing in the Missouri
Ozarks.
On pages 3 through 6 of the printed document, a photograph of each of the
members of the Abbott Laboratories Board of Directors will appear alongside
his or her name.
PROXY
ABBOTT LABORATORIES
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking previous proxies, acknowledges receipt of the
Notice and Proxy Statement dated March 4, 1994 in connection with the Annual
Meeting of Shareholders of Abbott Laboratories to be held at 9:00 a.m. on
April 29, 1994 at the corporation's headquarters, and hereby appoints
DUANE L. BURNHAM and LAEL F. JOHNSON, or either of them, proxy for the
undersigned, with power of substitution, to represent and vote all shares
of the undersigned upon all matters properly coming before the Annual Meeting
or any adjournments thereof.
INSTRUCTIONS: If you wish to vote in accordance with the Board of
Directors' recommendations, just sign on the reverse side. You need not mark
any boxes.
SEE REVERSE
SIDE
(Important - Please sign and date on other side.)
/x/ Please mark
votes as in
this example.
The Board of Directors recommends that you vote FOR items 1,2 and 3.
1. Election of 13 Directors.
Nominees: K.F. Austen, D.L. Burnham, H.L. Fuller, B.J. Hayhoe, T.R. Hodgson,
A.F. Jacobson, D.A. Jones, B. Powell, Jr., A.B. Rand, W.A. Reynolds, W.D.
Smithburg, J.R. Walter, and W.L. Weiss.
For Withheld
/ / / /
FOR, except vote withheld from the following nominee(s):
________________________________________________________
MARK HERE
TO REQUEST / /
AN ADMISSION
CARD
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE BELOW
2. Ratification of Arthur Andersen & Co. as auditors.
For Against Abstain
/ / / / / /
3. Amendment of the Articles of Incorporation.
For Against Abstain
/ / / / / /
The Board of Directors recommends
that you vote AGAINST items 4 and 5.
4. Shareholder Proposal 1 - Pharmaceutical Pricing.
For Against Abstain
/ / / / / /
5. Shareholder Proposal 2 - Infant Formula.
For Against Abstain
/ / / / / /
Each joint tenant should sign; executors, administrators, trustees, etc. should
give full title and, where more than one is named, a majority should sign.
Please read other side before signing.
Signature(s): Date
------------------------------------ -------------------------
Signature(s): Date
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