filings.toolsItem 11. Executive Compensation
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Item 11. Executive Compensation
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) describes the compensation, which continues to be closely linked to the Company’s performance objectives, of our Named Executive Officers (“NEOs”) for 2022.
Strong Say-on-Pay Support in 2022
Our shareholders expressed strong support for our compensation programs at our 2022 Annual Meeting, and we received approximately 90.7% approval for our shareholder advisory vote regarding executive compensation. We believe this result is an endorsement of the Company’s compensation philosophy and our focus on a performance-based, shareholder-value-focused business model that is intended to help ensure that Viatris continues to attract and retain high-performing executives. We believe that the say-on-pay support in 2022 is evidence of our responsiveness to shareholder feedback, and we will continue to engage regularly with shareholders for their input.
Conclusion of Certain Legacy Compensation Payouts and Future Commitments
Impact of Legacy Matters on 2022 Compensation. The Summary Compensation Table for 2022 reflects certain legacy retention payments for Messrs. Malik and Mauro relating to their legacy Transition and Succession Agreements with Mylan Inc. that were previously disclosed in the Company’s 2021 and 2022 proxy statements (among other filings). To incentivize Mr. Malik and Mr. Mauro to remain with Viatris in light of their importance to the launch, integration, leadership, and operation of Viatris, as well as development and execution of strategies going forward, and because of their existing Transition and Succession Agreement severance rights, Viatris entered into a retention agreement with each pursuant to which each earned the value of the separation benefit under his respective Transition and Succession Agreement.
Demonstration of Our Commitment. Although it is common among peer companies, we did not provide a cash-based retention award to Mr. Smith, who joined Viatris as CEO in April 2023. In doing so, we believe our Compensation Committee demonstrated its willingness to accept feedback from shareholders in making executive compensation determinations.
Our Continued Performance-Based Approach to Compensation
Viatris has carefully selected its compensation-related performance metrics to align with the strategic priorities that the Company has previously outlined to its shareholders. When it was formed in November 2020, Viatris laid out a clear and deliberate strategy to build a highly diversified company with multiple capabilities spanning numerous geographies and therapeutic areas. Under the leadership of the Board along with management, we established a two-phased roadmap that detailed and emphasized our strategic priorities to deliver value to our shareholders. In Phase 1 of its strategy (2020-2023), the Company has focused on commercial performance and profitability to generate strong cash flows that could be used to return capital to shareholders. Phase 1 also includes a global reshaping initiative designed to stabilize the business, unlock trapped value and provide the financial flexibility to deliver on our vision. Phase 1 has focused on building a strong foundation and setting us up for Phase 2 (2024 and beyond), which is expected to be a period of renewed growth and leadership in our sector.
2022 Pay-for-Performance Pay Mix
Our 2022 compensation program consisted of base salary, performance-based annual incentive awards, and performance-based long-term incentive awards subject to financial metrics and a relative total shareholder return (“TSR”) modifier. There is strong alignment of pay and performance in our program, with approximately 71% of total target compensation delivered in the form of long-term equity and approximately 63% of total target compensation subject to performance conditions.
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Summary of 2022 Incentive Compensation Pay Outcomes
Short-term incentive compensation comprised approximately 17% of 2022 NEO target total compensation. In 2022, our management team’s operational execution resulted in short-term incentive payouts above target. Drivers of our 2022 short-term incentive results included:
| • | Above-target adjusted EBITDA and free cash flow for short-term incentive compensation purposes, driven by the focus and efforts of the Company’s management and the success of the Company’s cash optimization efforts. For more information on and the differences between how adjusted EBITDA and free cash flow are calculated for purposes of the Company’s 2022 short-term incentive compensation and public reporting purposes, see “Elements of 2022 Compensation — 2022 Annual Incentive Compensation Program — Annual Incentive Compensation Payouts for 2022” on page 30. |
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| • | Above-target global product submissions, across broad and therapeutic-area agnostic product categories, driven by the strength of the Company’s development programs and successful acceleration of certain additional submissions. |
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Long-term incentive compensation. Performance-based restricted stock units (“PRSUs”) are subject to a free cash flow metric and relative market performance metric (i.e., relative TSR using the S&P 500 Pharmaceutical Index, which is used as a modifier to determine the final payout percentage) over a three-year time period. Although we believe that Viatris stock is significantly undervalued and this modifier is measured on a three-year time frame, at the relevant stock price as of the close of business (5:00 p.m. Eastern Time) on April 21, 2023, any payouts of PRSUs vesting in 2024 would be automatically reduced by 30%. For more information on and the differences between how free cash flow is calculated for purposes of the Company’s 2022 long-term incentive compensation and public reporting purposes, see “Elements of 2022 Compensation — 2022 Long-Term Incentive Compensation Programs — 2022 Three-Year PRSU Performance Metrics” on pages 31 and 32.
Selected Highlights and Recent Developments
Viatris’ management continues to execute on the strategic priorities outlined to shareholders and led the Company in achieving several notable accomplishments in 2022.
Financial and Operational Performance
In 2022, Viatris delivered another four quarters of consistent, solid operational performance across all segments. The Company:
| • | Reported total revenues of $16.26 billion; U.S. GAAP net earnings of $2.08 billion; adjusted EBITDA of $5.78 billion; U.S. GAAP net cash provided by operating activities of $2.95 billion; and free cash flow of $2.55 billion. |
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| • | Captured an additional approximately $250 million (approximately $750 million since the beginning of 2021) in synergies due to integration efforts. |
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| • | Paid down approximately $3.3 billion of debt, exceeding the 2022 target of approximately $2 billion. |
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| • | Exited substantially all transition services agreements with Pfizer. |
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| • | Increased the quarterly dividend payment to $0.12 per share. |
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| • | Paid approximately $580 million in dividends. Since the beginning of 2021, the Company has returned nearly $1 billion to shareholders through dividend payments. |
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| • | Completed approximately $250 million in share repurchases in January and February 2023 as part of its previously announced $1 billion stock repurchase program that the Board authorized. |
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| • | Completed the Biocon Biologics Transaction; received a $2 billion cash payment, adjusted as set forth in the agreement, and approximately $1 billion of compulsory convertible preferred shares representing a stake of approximately 12.9% (on a fully diluted basis) in Biocon Biologics. |
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| • | Established an eye care division in early 2023 in conjunction with the acquisitions of Oyster Point Pharma and Famy Life Sciences. |
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Science and Regulatory Achievements
The Company has industry-leading science, regulatory and manufacturing capabilities complemented by a strong commitment to quality and an unparalleled geographic footprint to deliver high-quality medicines. This includes more than 3,000 scientists and medical professionals working across 12 development centers globally in multiple technology platforms and therapeutic areas, coupled with in-country regulatory expertise in 55 markets. In 2022, Viatris advanced key development programs across complex injectables, novel products, complex generics, as well as progressing its efforts to establish a Phase III-ready eye care pipeline. The Company:
| • | Announced positive top-line results for the GA Depot Phase III clinical trial with partner Mapi Pharma. |
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| • | Received U.S. Food and Drug Administration (“FDA”) approvals of Fingolimod and Levothyroxine Oral Solution. |
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| • | Expanded first-to-market opportunities of complex injectables with generics of Sandostatin® LAR Depot, Ozempic® and Abilify Maintena®. |
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| • | Initiated Phase III trials for Effexor® Generalized Anxiety Disorder in Japan. |
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| • | Achieved FDA acceptance of the new drug application review for the reversal of mydriasis program and was granted a Prescription Drug User Fee Act date of September 28, 2023. |
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| • | Started enrollment in the first pivotal Phase III trial for presbyopia. |
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| • | Made more than 100 additional submissions globally in 2022. |
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| • | Has 10 products under review with the health authorities in China, including complex products, such as generic Symbicort®. |
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External Recognition
Viatris received a number of external recognitions in 2022, including:
| • | Forbes® annual list of the “World’s Best Employers” for the second year in a row. |
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| • | Top Employers Institute certification as a Top Employer in the United Kingdom and United Arab Emirates and as one of the top 101 employers in China. |
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| • | LMG Life Sciences’ U.S. In-House Legal Team of the Year for Intellectual Property Litigation. |
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| • | Great Place to Work® certification in India. |
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| • | Capital Magazine’s Best Employers in France. |
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| • | HR Asia’s Best Companies to Work for in Asia (Taiwan) ranking. |
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| • | GoodCompany’s Top 40 Best Workplaces to Give Back 2022 in Australia. |
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CSR Accomplishments
Our focus on corporate responsibility is reflected in our values, policies, decisions, and strategies and extends to our expectations of our partners as well. Ultimately, we know we are stronger together, working collaboratively and relentlessly across our Company and with the broader global community, in pursuit of access. In 2022, we sold more than 80 billion doses of medicine across more than 165 countries and territories, reaching about 90% of low- and lower-middle-income countries. We offer more than 250 medicines on the World Health Organization’s (“WHO”) Essential Medicines List to help address priority healthcare needs as defined by the WHO. Further, we have 62 products on the WHO Prequalification List. The Company also:
| • | Had our near-term science-based emissions reduction targets for scope 1, 2 and 3 validated and approved by the Science Based Target initiative (SBTi). The SBTi classified Viatris’ scope 1 and 2 target ambition and has determined that it is in line with a 1.5°C trajectory, a worldwide goal of limiting global warming. |
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| • | Donated for humanitarian needs more than 450 million doses of medicines through our partners around the world. |
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| • | Partnered with Sesame Workshop to launch new emotional health and wellbeing resources for families grappling with effects of COVID-19. |
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| • | Donated $1 million to aid in supporting access to healthcare, food security and water stewardship in communities around the world, through four organizations: Direct Relief, World Central Kitchen, WaterAid and World Food Program USA, the U.S. partner of the United Nations World Food Programme. |
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Hiring of Scott A. Smith as New Chief Executive Officer
On February 24, 2023, the Company appointed Scott A. Smith to serve as the Chief Executive Officer of the Company, effective as of April 1, 2023. Additional details regarding Mr. Smith’s background can be found under the heading “Viatris’ Board of Directors” on page 9.
In connection with his appointment, Mr. Smith entered into an offer letter with the Company providing for an annual base salary of $1.4 million, an annual target bonus opportunity equal to 150% of base
salary (pro-rated for 2023), and eligibility for an annual long-term incentive award with a target of 700% of base salary (800% for 2023). The Board believes that Mr. Smith is best suited to lead the Company’s previously announced Phase 2 (2024 and beyond) strategy and execution and brings experience that positions him to manage the global nature and complexity of a business that we expect to return to growth.
Executive Compensation Philosophy
The Compensation Committee’s and Board’s compensation philosophy for 2022 reflects the Company’s continued focus on a performance-based, shareholder-value-focused business model and is intended to help ensure that Viatris continues to attract and retain high-performing executives given the highly competitive market for executive talent. The compensation program has the following key objectives, among others:
| • | Attract, Motivate, and Retain Highly-Skilled Executives. In order to attract and retain the leaders needed to drive execution of our ambitious goals, we provided market competitive compensation with an emphasis on performance-based, long-term incentives. We designed our compensation program to help ensure that the Company, shareholders, and other stakeholders continue to benefit from the talents of our leadership team and global workforce, while also recruiting new talent on an on-going basis in a highly competitive market for talent. |
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| • | Align with Shareholder Interests. We aligned executive compensation with shareholder interests by linking pay to the Company’s stated strategic priorities, long-term performance, and share price appreciation, including through the use of a relative TSR modifier for PRSUs in our long-term incentive plan and robust share ownership requirements (see “2022 Share Ownership Requirements” on page 34). We believe this linkage helps drive long-term performance and encourages decision making to foster share price appreciation. |
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| • | Drive Company Performance. As described in more detail on pages 23 to 24, our 2022 compensation program was designed with metrics carefully linked to our business strategies and financial goals. If the Company does not meet its short and long-term objectives, executive pay is meaningfully impacted. |
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2022 Performance-Based Compensation Program
2022 Total Target Compensation
The chart below shows the target total direct compensation opportunity for each of our NEOs in 2022.
| NEO | Base Salary | Target Annual Incentive | Target Long-Term Incentive | 2022 Total Target Compensation(1) | ||||||||||||
| Michael Goettler(2) | $1,300,000 | $1,950,000 | $9,100,000 | $12,350,000 | ||||||||||||
| Rajiv Malik | $1,200,000 | $1,500,000 | $7,200,000 | $9,900,000 | ||||||||||||
| Sanjeev Narula | $850,000 | $850,000 | $3,400,000 | $5,100,000 | ||||||||||||
| Anthony Mauro | $800,000 | $920,000 | $3,200,000 | $4,920,000 | ||||||||||||
| Robert J. Coury | $1,800,000 | $2,700,000 | $10,800,000 | $15,300,000 |
| (1) | Total Target Compensation is defined as the sum of base salary, target annual incentive, and target long-term incentive. |
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| (2) | Mr. Goettler ceased to serve as the Company’s Chief Executive Officer and ceased to serve on the Board effective as of April 1, 2023. As noted above, Scott A. Smith became CEO of the Company effective April 1, 2023. |
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Considerations for Setting 2022 Incentive Performance Goals
In setting annual and long-term incentive performance goals, the Compensation Committee considered a broad variety of data, including potential divestitures, industry forecasts, internal projections, demographic
data, advice from outside advisors, benchmarking data against the peer company medians, and the Company’s annual operating plan and strategies. The Compensation Committee also considered the variability and cyclicality of the business, noting that targets may increase or decrease from year-to-year due to factors impacting the business, such as market conditions, the regulatory environment, timing of product approvals, and both immediate and long-term strategic priorities of the business. Although the targets may vary from year-to-year, the Compensation Committee is committed to maintaining high levels of rigor and motivational impact on the executive team and aligning with the Company’s long-term strategy for sustainable business development and its goal of creating value for shareholders. Consistent with our philosophy of driving long-term company performance, the Compensation Committee, with the advice of its independent compensation consultant, will annually consider potential alternative performance metrics that link to our strategy and align with shareholder interests in long-term value creation.
2022 Peer Group
The peer group is used as one of several reference points for determining executive compensation and includes Viatris’ business competitors and companies that Viatris competes with for executive talent. Although the competitive market for our executives is one factor the Compensation Committee considers when making compensation decisions, the Committee does not target the compensation of NEOs within a specific percentile of any set of peer companies and considers peer group and industry data along with many other factors when determining compensation.
Below is the peer group selected by the Compensation Committee for 2022, with the advice of the Committee’s independent compensation consultant. The Committee takes a number of considerations into account when choosing the peer group, including those companies that most compete with the Company for executive talent.
| Abbott Laboratories | Biogen Inc. | Novartis AG | ||
| Abbvie Inc. | Bristol-Myers Squibb Company | Pfizer Inc. | ||
| Amgen Inc. | Eli Lilly and Company | Regeneron Pharmaceuticals, Inc. | ||
| Bausch Health Companies Inc. | Gilead Sciences, Inc. | Sanofi | ||
| Baxter International Inc. | Merck & Co., Inc. | Teva Pharmaceutical Limited |
Elements of 2022 Compensation
Base Salaries
The Compensation Committee considers a variety of factors in deciding base salary, including, among others: individual performance, responsibilities, and expected future performance; Company performance; management structure; marketplace practices (including external benchmarks prepared by an independent compensation consultant); internal pay equity considerations; competitive recruitment for outstanding talent; and the executive’s experience, tenure, and leadership. The Compensation Committee also considers, among other factors, what the marketplace would require in terms of the costs to hire a similarly qualified and experienced individual externally.
As reflected in the table below, in 2022, there were no changes to NEO base salaries with the exception of a 6.25% increase for the CFO to align with changes in market data.
| NEO | 2021 Base Salary | 2022 Base Salary | ||||||
| Michael Goettler | $1,300,000 | $1,300,000 | ||||||
| Rajiv Malik | $1,200,000 | $1,200,000 | ||||||
| Sanjeev Narula | $800,000 | $850,000 | ||||||
| Anthony Mauro | $800,000 | $800,000 | ||||||
| Robert J. Coury | $1,800,000 | $1,800,000 |
2022 Annual Incentive Compensation Program
Annual Incentive Compensation Awards for 2022
Viatris’ annual incentive compensation consists of performance-based annual cash awards that are subject to achievement of metrics that were identified by the Board and Compensation Committee as critical to the successful execution of Viatris’ business strategy and aligned with the continued creation of shareholder value. The metrics are specifically related to the actions and leadership of our executive team and measure their ability to generate shareholder returns, both in the short- and long-term. The Compensation Committee approved annual incentive award grants and corresponding performance targets in the first quarter of 2022.
The Compensation Committee identified the following metrics as important measures of Company performance relating to its stated strategy:
| • | Adjusted EBITDA (40% Weighting): Measures the Company’s profitability and motivates the organization to focus on commercial execution and driving new product revenue, maintaining efficiency of our operations, capturing synergies, and disciplined expense management. |
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| • | Free Cash Flow (40% Weighting): Creates organizational emphasis and focus on cash through improved cash flow conversion, optimized working capital, and overall cash generation which can increase the return to shareholders. |
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| • | Global Regulatory Submissions (20% Weighting): Emphasizes the importance of developing a robust pipeline of molecules that Viatris could manufacture and sell over subsequent years. A robust product pipeline can help Viatris move its products up the value chain and also support sustainability while serving Viatris’ mission of providing access to high quality, affordable medications. In addition, we view this metric as a stepping stone to implementing ESG/sustainability metrics in the future. |
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The setting of annual incentive targets reflected the Company’s expectations regarding incremental research and development expense, incremental cost inflation and expectations regarding exchange rates. Incremental investments were intended to support long-term value creation for shareholders and other stakeholders by, among other things, furthering Viatris’ efforts to move its portfolio and pipeline up the value chain. The Compensation Committee recognized these expectations together would be expected to reduce the adjusted EBITDA compensation metric in 2022.
In addition, an increase in the number of global regulatory submissions was not expected due in part to a continued emphasis on more challenging specialty and complex generic products and Viatris’ focus on submission of products expected to generate greater economic profit.
Individual annual incentive payout targets were established for each NEO, expressed as a percentage of base salary, as noted in the table below. Actual payouts could range from 0% to 200% of each NEO’s annual incentive target based on achievement of performance goals.
| NEO | Target (as % of Base Salary) | Annual Incentive Target | ||||||
| Michael Goettler | 150 | % | $1,950,000 | |||||
| Rajiv Malik | 125 | % | $1,500,000 | |||||
| Sanjeev Narula | 100 | % | $850,000 | |||||
| Anthony Mauro | 115 | % | $920,000 | |||||
| Robert J. Coury | 150 | % | $2,700,000 |
Annual Incentive Compensation Payouts for 2022
In 2022, Viatris achieved the following performance against the Compensation Committee-approved performance goals:
| Metric | Weighting | Threshold | Target | Maximum | Results | |||||
| Adjusted EBITDA* | 40% | $5,700 million | $6,000 million | $6,300 million | $6,200 million | |||||
| Free Cash Flow** | 40% | $2,400 million | $2,700 million | $3,000 million | $3,168 million | |||||
| Global Regulatory Submissions | 20% | 110 | 120 | 130 | 134 |
| * | Adjusted EBITDA is derived from Viatris’ financial statements in the same manner as Viatris’ publicly reported adjusted EBITDA, except that the calculation for the 2022 incentive program utilized budgeted foreign exchange rates and further adjusts for unbudgeted in-process research and development (“IPR&D”) costs and the December 2022 results of the divested biosimilars business. Viatris’ adjusted EBITDA as reported for the twelve months ended December 31, 2022 is reconciled to the most directly comparable U.S. GAAP measure in Appendix A. |
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| ** | Free cash flow is derived from Viatris’ audited financial statements in the same manner as Viatris’ publicly reported free cash flow, except that the calculation for 2022 incentive program utilized budgeted foreign exchange rates and further adjusts for any of the following, as applicable: unplanned litigation gains or losses equal to or greater than $25 million in the aggregate, material changes related to changes in tax laws, unbudgeted IPR&D costs, proceeds from the sale of property, plant and equipment, all impacts of the Biocon Biologics transaction following its consummation including results after closing and transaction related costs, and any incremental transaction costs related to other select assets sales/reshaping initiatives and material acquisition activities. Viatris’ free cash flow as reported for the twelve months ended December 31, 2022 is reconciled to the most directly comparable U.S. GAAP measure in Appendix A. |
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The following table shows the 2022 actual incentive payout for each NEO reflecting Company performance at 186.63% of target.
| NEO | Actual Annual Incentive Award | |||
| Michael Goettler | $ | 3,639,285 | ||
| Rajiv Malik | $ | 2,799,450 | ||
| Sanjeev Narula | $ | 1,586,355 | ||
| Anthony Mauro | $ | 1,716,996 | ||
| Robert J. Coury | $ | 5,039,010 |
2022 Long-Term Incentive Compensation Programs
Long-Term Incentive Compensation Grants for 2022
The Compensation Committee believes that the value of long-term incentives should be directly related to the performance of Viatris’ ordinary shares over several years, as well as other measures associated with the growth, success, and long-term sustainability of Viatris. The Compensation Committee approved annual long-term incentive (“LTI”) award grants in the first quarter of 2022.
In 2022, we increased the percentage of performance-based awards (which are subject to a TSR modifier) from 60% to 65%, with 65% of each NEO’s award in the form of PRSUs and 35% in the form of restricted stock units (“RSUs”). RSUs vest ratably over a three-year period following the grant date, and PRSUs vest as described below. This mix of LTI awards provides NEOs with a combination of incentives and aligns them with the interests of shareholders.
Each NEO’s 2022 LTI award had a targeted value at grant equal to a percentage of the NEO’s base salary. In setting each NEO’s LTI targeted value, the Compensation Committee considered a variety of factors, including, among others, peer group compensation and expectations regarding individual roles and responsibilities.
For 2022, the Compensation Committee approved the following annual LTI award values for our NEOs:
| NEO | PRSUs | RSUs | Total LTI Award | |||||||||
| Michael Goettler | $ | 5,915,000 | $ | 3,185,000 | $9,100,000 | |||||||
| Rajiv Malik | $ | 4,680,000 | $ | 2,520,000 | $7,200,000 | |||||||
| Sanjeev Narula | $ | 2,210,000 | $ | 1,190,000 | $3,400,000 | |||||||
| Anthony Mauro | $ | 2,080,000 | $ | 1,120,000 | $3,200,000 | |||||||
| Robert J. Coury | $ | 7,020,000 | $ | 3,780,000 | $ | 10,800,000 |
2022 Three-Year PRSU Performance Metrics
The 2022 grant of PRSUs was subject to a free cash flow metric and relative market performance metric (i.e., relative TSR using the S&P 500 Pharmaceutical Index, which is used as a modifier to determine the final payout percentage), as described below. The free cash flow metric incentivizes effective use of Viatris’ capital to drive cash flow generation, encouraging behavior that is closely aligned with our efforts to drive a durable and sustainable business. In addition, the relative TSR modifier impacts executive pay based on Viatris’ performance as compared to industry competitors.
As shown in the table below, payouts under the 2022 PRSUs will be determined in two steps. First, in the first quarter of 2025, the outcome of the free cash flow metric will be assessed, resulting in an initial payout percentage of 50% for threshold performance (with 0% payout for below threshold performance) up to 150% for maximum performance, with linear interpolation for achievement between threshold and maximum. Second, the relative TSR metric will be applied as a modifier to the initial payout percentage, decreasing it by 30%, leaving it unaffected, or increasing it by 30%, in order to calculate the final payout percentage.
| Metric | Weighting | Threshold | Target | Maximum | ||||
| Free Cash Flow* | 100% | $6,900 million | $7,900 million | $8,900 million | ||||
| Relative TSR of Peer Group** | Multiplier | At or Below 25th Percentile of Peer Group | Between 25th and 75th Percentiles of Peer Group | At or Above 75th Percentile of Peer Group | ||||
| Payout Opportunity (as % of Target) | 35% | 100% | 195% |
| * | Free cash flow is derived from Viatris’ audited financial statements in the same manner as Viatris’ publicly reported free cash flow, except that the calculation for the 2022 PRSUs utilized budgeted foreign exchange rates and further adjusts for any of the following, as applicable: unplanned litigation gains or losses equal to or greater than $25 million in the aggregate, material changes related to changes in tax laws, unbudgeted IPR&D costs, proceeds from the sale of property, plant and equipment, all impacts of the Biocon Biologics transaction following its consummation including results after closing and transaction related costs, any incremental transaction costs related to other select assets sales/reshaping initiatives and material acquisition activities, all impacts of other select asset sales/reshaping initiatives, all impacts of material acquisition activities and proceeds from the monetization of the Biocon Biologics equity interest. Viatris’ free cash flow as reported for the twelve months ended December 31, 2022 is reconciled to the most directly comparable U.S. GAAP measure in Appendix A. |
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| ** | Relative TSR is calculated by comparing the difference between Viatris’ 30-day trailing average closing ordinary share price at the day before the beginning of the performance period and day before the end of the performance period plus any dividends paid during the performance period against the same metric for each company in the S&P 500 Pharmaceutical Index. |
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Payouts with respect to PRSUs granted in 2022 will be determined in early 2025 following the conclusion of the three-year performance cycle.
Governance and Other Considerations Impacting Viatris Compensation Decisions
The Compensation Committee and Board proactively consider external governance-related developments and trends relating to executive compensation. In setting or approving executive compensation, the Compensation Committee and Board may consider, in addition to any corporate goals and objectives applicable to an individual executive, some or all of the following: recognition of individual performance and contributions; pay for performance; alignment with long-term shareholder interests; advancement of Company strategic goals; maintenance of an appropriate level of fixed and at-risk compensation; remaining competitive with companies within the Company’s peer group; competition for executive talent; internal pay equity; leadership and mentoring skills and contributions; talent management; contributions to establishment or execution of corporate strategy; retention; compliance with applicable law and the Code of Business Conduct and Ethics and Company policy; and/or any other factors determined by the Board or the Compensation Committee to be in the interests of the Company.
The Compensation Committee and Board believe that each company must independently assess which market practices and trends are appropriate for the company at any particular time in the company’s history and remain fully committed to maintaining a strong compensation governance philosophy that is aligned with shareholder interests and best practices. See also page 27.
Commitment to Responsible, Shareholder-Aligned Compensation Governance Practices
The following table summarizes certain specific compensation-related governance practices adopted by the Compensation Committee and Board with respect to 2022 compensation. We note that implementation of many of these practices was responsive to comments from shareholders or otherwise endorsed by shareholders.
| What We Do |
| ✓ Maintain a significant portion of compensation aligned with shareholder interests and tied to share price or financial and operational business performance |
| ✓ Employ metrics for annual and long-term incentives that support both short- and long-term strategies and align with shareholder interests, including a non-financial metric in the annual program tied to important product development initiatives |
| ✓ Base long-term incentives heavily on performance-based metrics and short-term incentives entirely on performance-based metrics |
| ✓ Set rigorous and measurable performance goals and periodically review and discuss our executives’ performance |
| ✓ Use double-trigger vesting for annual long-term incentive awards upon a change in control |
| ✓ Retain independent compensation consultants that report directly to the Compensation Committee |
| ✓ Maintain strong share ownership guidelines |
| ✓ Maintain a robust clawback policy |
| ✓ Engage with shareholders on compensation and governance matters |
| ✓ Consider peer groups and market data in determining compensation |
| ✓ Annual Say-on-Pay Vote |
| What We Don’t Do |
| X New fixed-term NEO employment agreements |
| X Excise tax gross-ups |
| X Supplemental retirement agreements |
| X Exercise positive discretion in determining annual incentive compensation or LTI payouts |
| X Re-pricing of stock options without shareholder approval |
| X Hedging or pledging of shares |
Limited Perquisites
We provide certain limited perquisites to our NEOs, including the following:
| • | Each NEO receives a car allowance or the use of a leased vehicle and payment of certain ancillary expenses. The NEOs are responsible for paying any taxes incurred relating to this perquisite. |
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| • | Our NEOs take an extraordinarily active approach to overseeing and managing Viatris’ global operations, which necessitates and will continue to necessitate a significant amount of U.S. domestic and international travel time due to our diverse business centers, manufacturing and other facilities, and many client and vendor locations around the world. Viatris provides management with access to corporate aircraft to assist in the management of Viatris’ global platform by providing a more efficient and secure traveling environment, including where sensitive business issues may be discussed or reviewed, as well as maximum flexibility to our executives in the conduct of business. For reasons of business efficiency and continued security-related concerns (including personal security, especially given the global nature of Viatris’ business, as well as privacy of business information and communications), we also may from time to time require certain executives to use corporate aircraft for business and personal purposes. |
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| • | Because of continued security-related concerns, we may from time-to-time provide certain NEOs with personal security. |
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401(k) Restoration Plan
The 401(k) Restoration Plan (the “Restoration Plan”) permits employees (including NEOs) who earn compensation in excess of the limits imposed by Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”) to (i) defer a portion of base salary and bonus compensation, (ii) be (for employees other than the NEOs with a Retirement Benefit Agreement) credited with a Company matching contribution in respect of deferrals under the Restoration Plan, and (iii) be credited with Company non-elective contributions (to the extent made by Viatris), in each case, to the extent that participants otherwise would be able to defer or be credited with such amounts, as applicable, under Viatris’ 401(k) plan if not for the limits on contributions and deferrals imposed by the Code. Company matching contributions immediately vest and Company non-elective contributions are subject to an initial three-year vesting period. Upon a change in control (as defined in the Restoration Plan), a participant will become 100% vested in any unvested portion of his or her non-elective contributions. Distributions of such participant’s vested account balance will be made in a lump sum within 60 days following a participant’s separation from service (or such later date as may be required by Section 409A of the Code).
2022 Share Ownership Requirements
Viatris maintains robust share ownership requirements for our NEOs. The requirement is expressed as a multiple of base salary and shown in the table below.
| Position | Ownership Requirement | |||
| Executive Chairman | 6x | |||
| Chief Executive Officer | 6x | |||
| President | 4x | |||
| Other NEOs | 3x |
In addition to the NEOs, the Viatris share ownership policy covers the most senior employees at Viatris to promote an ownership culture and further align the interests of those leaders with those of shareholders. Each covered employee has five years from the date they became subject to the policy to achieve the minimum ownership requirement. Common stock actually owned by the covered employee (including shares of common stock held by the covered employee in the Restoration Plan), as well as restricted shares and unvested RSUs and PRSUs (including corresponding dividend equivalent units (“DEUs”)) count toward compliance with these requirements. All NEOs meet these share ownership requirements or are expected to meet them by the applicable date.
Clawback Policy
The Board has approved a clawback policy relating to incentive compensation programs. The policy provides that Viatris may take action to recoup annual incentive compensation and equity-based incentive compensation gains resulting from specified misconduct that causes Viatris to materially restate its financial statements.
The policy also provides that Viatris may take action to recoup some or all bonus and equity incentive compensation in the event of executive misconduct involving material violations of law or Viatris policy as well as failure to manage or monitor another individual who committed such misconduct, and that the Board or a designated Board committee will disclose the circumstances of any recoupment relating to such misconduct if required by law or regulation or if it determines that disclosure is in the best interests of Viatris and its shareholders.
In addition, Viatris has a number of other policies in effect that govern our executive team’s behavior and that set out clear ethical expectations. Those policies, including our Code of Business Conduct and Ethics, empower Viatris to take a full range of disciplinary responses for any violations, and the Board and the Compensation Committee are not otherwise constrained from seeking to clawback from or deny compensation to any member of the executive team in response to any breach of duties or ethics. The Board considers additional updates to the clawback policy from time to time.
On October 26, 2022, the SEC adopted rules implementing the clawback provisions of the Dodd-Frank Act. The final rules direct the stock exchanges to establish listing standards requiring listed companies to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers and to satisfy related disclosure obligations. We intend to timely amend our clawback policy to reflect these new requirements.
Anti-Hedging and Anti-Pledging Policy
Viatris has a securities trading policy that prohibits directors and Section 16 Officers and their respective designees from trading in hedging instruments or otherwise engaging in any transaction that limits or eliminates, or is designed to limit or eliminate, economic risks associated with the ownership of our securities. Hedging instruments are defined as any prepaid variable forward contracts, equity swaps, collars, exchange funds, insurance contracts, short sales, options, puts, calls or other instruments that hedge or offset, or are designed to hedge or offset, movements in the market value of our securities. For purposes of this policy, our securities include shares and options to purchase shares, and any other type of securities that we may issue, including but not limited to, preferred shares, notes, debentures, and warrants issued by Viatris or any parent, subsidiary, or subsidiary of any parent of Viatris, as well as any derivative financial instruments pertaining to such securities, whether or not issued by us, such as options and forward contracts.
The policy also prohibits Directors and Section 16 Officers and their respective designees from entering into any transaction that involves the holding of our securities in a margin account (other than the “cashless exercise” of stock options) or the pledging of our securities as collateral for loans. The Compensation Committee may approve exceptions to the prohibition on the use of margin accounts or pledging or securities if, among other factors, the Director or Section 16 Officer demonstrates, in advance, that he or she has the continuing financial capacity to repay any underlying loan or potential margin call without resorting to our securities held in such margin account or our pledged securities and is not in possession of any material information about the Company that has not been made widely available to the investing public.
Consideration of Risk in Company Compensation Policies
The Compensation Committee has considered risk management in determining compensation policies and believes that our programs are designed appropriately to encourage outstanding, consistent, sustainable business performance over extended periods of time. Management and the Compensation Committee have considered and discussed the risks inherent in our business and the design of our compensation plans, policies and programs that are intended to drive the achievement of our long-term business objectives while avoiding excessive short-term risk-taking. In addition, we utilize a mix of objective performance measures, so that undue emphasis is not placed on one particular measure, and we employ different types of compensation to provide value over the short-, medium- and long-term. These performance measures are reevaluated annually in light of the evolving risk environment facing our business. When making compensation decisions, we also consider qualitative factors to avoid the consequences that an overly formulaic approach may have on excessive risk-taking by management. At least annually, the Compensation Committee also receives and discusses a report from Meridian Compensation Partners, LLC (“Meridian”), its independent compensation consultant, on risk management in connection with the Company’s compensation program.
The Compensation Committee believes that our compensation policies and practices do not encourage excessive risk and are not reasonably likely to have a material adverse effect on the Company.
Role of the Compensation Committee
The Compensation Committee is comprised solely of independent Directors and oversees the design and implementation of our executive compensation programs. The Compensation Committee reviews and evaluates the performance of our NEOs and determines their compensation and objectives, or, in the case of our Executive Chairman and CEO, recommends compensation and objectives to the independent, non-executive members of the Board. The Compensation Committee monitors compensation trends and
developments periodically and undertakes a comprehensive assessment of our compensation programs at least annually. In fulfilling these responsibilities, the Compensation Committee utilizes the support of independent compensation consulting firms, independent outside counsel, and an internal executive compensation team.
The Compensation Committee has retained Meridian to provide advice and information regarding the design and implementation of Viatris’ executive compensation programs. Meridian also provided information to the Compensation Committee regarding regulatory and other technical developments that may be relevant to our executive compensation programs. In addition, Meridian provided the Compensation Committee with competitive market information, analyses and trends on executive base salary, annual incentives, long-term incentives, benefits and perquisites.
The Compensation Committee also receives advice from outside counsel including, but not limited to, Cravath, Swaine & Moore LLP.
The Compensation Committee performs an annual review of the independence of its outside advisors, consistent with NASDAQ requirements and the Compensation Committee charter.
Tax Deduction Cap on Executive Compensation
Section 162(m) of the Code restricts the deductibility for U.S. federal income tax purposes of the compensation paid to the CEO, CFO, each of the other NEOs who was an executive officer at the end of the applicable fiscal year, and certain other executives to the extent that such compensation for such executive exceeds $1 million. As a result, except to the extent provided in limited transition relief, compensation over $1 million paid to any NEO is no longer deductible under Section 162(m) of the Code. The Board and the Compensation Committee reserve the right to provide compensation to our executives that is not deductible, including, but not limited to, when necessary to comply with contractual commitments, or to maintain the flexibility needed to attract talent, promote retention, or recognize and reward desired performance.
Compensation Committee Report
We have reviewed and discussed the CD&A with management. Based on such review and discussions, we recommended to the Board that the CD&A be included in this Amendment.
Respectfully submitted,
Melina Higgins, Chair
James M. Kilts
Harry A. Korman
Pauline van der Meer Mohr
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee during 2022 was an officer or employee of Viatris, was formerly an officer of Viatris, or had any relationship requiring disclosure by Viatris under Item 404 of Regulation S-K. During 2022, no executive officer of Viatris served on the compensation committee or board of another entity, one of whose executive officers served on the Compensation Committee or the Board of Viatris.
Executive Compensation Tables
2022 Summary Compensation Table
The following summary compensation table sets forth the cash and non-cash compensation paid or granted to or earned by the NEOs. The 2021 and 2022 compensation reflects the first full years of Viatris’ simplified performance-based compensation program. Portions of reported 2020 compensation include one-time transaction-related items and address certain legacy company (Upjohn and Mylan) commitments that are not components of the Viatris 2021 and 2022 compensation program.
| Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Non- qualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | |||||||||||||||||||||||||||
| Michael Goettler Chief Executive Officer | 2022 | 1,300,000 | — | 9,100,001 | — | 3,639,285 | — | 731,984 | 14,771,270 | |||||||||||||||||||||||||||
| 2021 | 1,300,000 | — | 9,100,015 | — | 3,716,115 | — | 663,440 | 14,779,570 | ||||||||||||||||||||||||||||
| 2020 | 871,875 | 1,000,000 | 2,400,000 | — | 951,675 | — | 249,355 | 5,472,905 | ||||||||||||||||||||||||||||
| Sanjeev Narula Chief Financial Officer | 2022 | 840,385 | — | 3,400,006 | — | 1,586,355 | — | 281,660 | 6,108,406 | |||||||||||||||||||||||||||
| 2021 | 800,000 | — | 2,800,011 | — | 1,524,560 | — | 526,114 | 5,650,685 | ||||||||||||||||||||||||||||
| 2020 | 539,183 | 1,000,000 | 425,000 | — | 303,021 | — | 661,719 | 2,928,923 | ||||||||||||||||||||||||||||
| Rajiv Malik President | 2022 | 1,200,000 | 10,950,000 | 7,200,007 | — | 2,799,450 | — | 405,434 | 22,554,891 | |||||||||||||||||||||||||||
| 2021 | 1,200,000 | — | 7,200,017 | — | 2,858,550 | — | 363,683 | 11,622,250 | ||||||||||||||||||||||||||||
| 2020 | 1,155,769 | 2,500,000 | 6,210,015 | 690,001 | 2,358,386 | 336,290 | 851,522 | 14,101,983 | ||||||||||||||||||||||||||||
| Anthony Mauro President, Developed Markets | 2022 | 800,000 | 6,553,800 | 3,200,005 | — | 1,716,996 | — | 317,968 | 12,588,769 | |||||||||||||||||||||||||||
| 2021 | 800,000 | — | 3,200,017 | — | 1,753,244 | — | 296,654 | 6,049,915 | ||||||||||||||||||||||||||||
| 2020 | 800,000 | 1,000,000 | 2,880,022 | 320,005 | 1,501,164 | — | 243,446 | 6,744,637 | ||||||||||||||||||||||||||||
| Robert J. Coury Executive Chairman | 2022 | 1,800,000 | — | 10,800,015 | — | 5,039,010 | — | 859,620 | 18,498,645 | |||||||||||||||||||||||||||
| 2021 | 1,800,000 | — | 10,800,010 | — | 5,145,390 | — | 806,678 | 18,552,078 | ||||||||||||||||||||||||||||
| 2020 | 1,800,000 | 10,000,000 | 12,451,936 | — | 4,405,590 | — | 399,850 | 29,057,376 |
| (1) | Represents the base salary actually paid to the NEO in 2022, 2021 and 2020. The 2020 amount includes the salary paid by Mylan or Upjohn, as applicable, prior to the closing of the Combination, and by Viatris after the closing of the Combination. For Mr. Coury, the amount includes the cash retainer received while serving as Mylan’s non-executive Chairman from January 1, 2020 through April 15, 2020, his base salary for serving as Mylan’s Executive Chairman from April 15, 2020 to the closing of the Combination, and his base salary for serving as Viatris’ Executive Chairman for the remainder of 2020. |
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| (2) | In connection with the Combination in 2020, Messrs. Malik and Mauro were each granted a retention bonus (equal to $10,950,000 and $6,553,800, respectively), which became payable in 2022 upon the two-year anniversary of the Combination, subject to Messrs. Malik’s and Mauro’s continued employment through such date. In connection with the Combination in 2020, Messrs. Goettler and Narula each became entitled to receive a $1 million transaction-related payment previously granted to them by Pfizer. In connection with the Combination in 2020, Mr. Malik and Mr. Mauro received cash awards equal to $2.5 million and $1 million, respectively, in recognition of their significant efforts in connection with integration planning matters related to the Combination in addition to their customary responsibilities. In connection with the Combination in 2020, Mr. Coury received a one-time cash recognition award of $10 million (which recognized and rewarded Mr. Coury for, among other things: the fact that Mr. Coury assumed an executive role with Mylan in April 2020 but did not receive an annual equity grant at that time (which, had it been awarded, would have been valued at approximately $10.8 million); his strategic leadership of Mylan; the unexpected and significantly increased efforts expended by Mr. Coury on company matters since April 2020, including during the COVID-19 pandemic; |
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| his significant leadership in the analysis and negotiation relating to the Combination and integration planning matters with respect to the Combination; and his expected leadership, direction and efforts for the combined company so that shareholders can realize the significant opportunity and benefits that are expected from the Combination). |
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| (3) | Represents the grant date fair value of the long-term incentive awards granted to the NEO in 2022, 2021 and 2020, as applicable. The grant date fair value of PRSUs for 2022 is based on the target value and is as follows: Messrs. Goettler ($5,915,000), Narula ($2,210,003), Malik ($4,680,005), Mauro ($2,080,004) and Coury ($7,020,007). If the maximum achievement of performance goals had been assumed, the grant date fair value of the PRSUs for 2022 would have been as follows: Messrs. Goettler ($11,534,250), Narula ($4,309,506), Malik ($9,126,010), Mauro ($4,056,008) and Coury ($13,689,014). With respect to Messrs. Goettler and Narula’s 2020 award, the grant date fair value represents cash-based awards granted by Pfizer in 2020 prior to the Combination, equal to $2,400,000 and $425,000, respectively. In connection with the Combination, these and certain other Pfizer awards were canceled and forfeited and Messrs. Goettler and Narula were granted Viatris RSUs to replace such forfeited Pfizer awards. With respect to Messrs. Malik and Mauro’s 2020 award, the grant date fair value represents RSUs and PRSUs granted by Mylan in 2020 prior to the Combination. In the case of PRSUs, value is based on the target value as follows: Mr. Malik ($3,450,010) and Mr. Mauro ($1,600,014). In connection with the Combination, PRSUs were converted into an award of Viatris RSUs on a one-for-one basis assuming target level performance and RSUs were also converted into Viatris RSUs on a one-for-one basis. With respect to Mr. Coury, the grant date fair value of stock awards for 2020 represents the 1.6 million PRSUs granted by Viatris in connection with the Combination pursuant to his Value Creation Award, based on the Monte Carlo value equal to $12,451,936. For information regarding assumptions used in determining the expense of such awards, please refer to Note 14 to the Company’s Consolidated Financial Statements contained in the Form 10-K. |
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| (4) | Represents the grant date fair value of the option awards granted by Mylan in 2020 prior to the Combination. In connection with the Combination, these option awards were converted into options to purchase shares of Viatris common stock on a one-for-one basis. |
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| (5) | Represents amounts paid under the Company’s annual short-term incentive plan. For a discussion of this plan, see “2022 Annual Incentive Compensation Program” on pages 29 to 30. |
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| (6) | Represents the aggregate change in present value of Mr. Malik’s accumulated benefit under Mr. Malik’s Retirement Benefit Agreement. Mr. Malik’s Retirement Benefit Agreement was frozen as of the Combination and Mr. Malik no longer accrues additional benefits under the agreement. In computing this amount, we used the same assumptions that were used to determine the expense amounts recognized in our 2020 financial statements. In 2020, the impact of a decrease in the applicable discount rates led to an increase in the present value of accumulated benefits of $336,290 for Mr. Malik. For further information concerning Mr. Malik’s Retirement Benefit Agreement, see the Pension Benefits for 2022 Table on page 44. Messrs. Goettler and Narula participated in pension plans of Pfizer prior to the Combination, and Pfizer retained all liabilities with respect to such plans. |
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| (7) | Amounts shown in this column are detailed in the following chart. |
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| Name | Fiscal Year | Use of Company Provided Automobile ($)(a) | Personal Use of Company Aircraft ($)(b) | Expatriate Benefits ($)(c) | 401(k) and Profit Sharing Plan Matching and Profit Sharing Contribution ($)(d) | Restoration Plan Contribution ($)(e) | Other ($)(f) | Total ($) | ||||||||||||||||||||||||
| Michael Goettler | 2022 | 21,162 | 68,081 | 95,554 | 31,350 | 514,149 | 1,688 | 731,984 | ||||||||||||||||||||||||
| 2021 | 19,451 | 58,797 | 227,481 | 30,300 | 325,762 | 1,649 | 663,440 | |||||||||||||||||||||||||
| 2020 | 2,400 | — | 43,863 | 9,750 | 193,199 | 143 | 249,355 | |||||||||||||||||||||||||
| Sanjeev Narula | 2022 | 19,262 | — | 4,756 | 27,504 | 228,450 | 1,688 | 281,660 | ||||||||||||||||||||||||
| 2021 | 19,200 | — | 336,440 | 26,454 | 139,419 | 4,601 | 526,114 | |||||||||||||||||||||||||
| 2020 | 2,400 | — | 631,856 | 7,231 | 20,089 | 143 | 661,719 | |||||||||||||||||||||||||
| Rajiv Malik | 2022 | 30,998 | 71,273 | — | 37,519 | 262,749 | 2,895 | 405,434 | ||||||||||||||||||||||||
| 2021 | 6,847 | 62,141 | 26,036 | 32,700 | 228,787 | 7,172 | 363,683 | |||||||||||||||||||||||||
| 2020 | 2,204 | 9,482 | 606,221 | 31,222 | 182,052 | 20,341 | 851,522 | |||||||||||||||||||||||||
| Anthony Mauro | 2022 | 19,200 | — | — | 39,666 | 244,857 | 14,245 | 317,968 | ||||||||||||||||||||||||
| 2021 | 19,200 | 9,150 | — | 31,570 | 230,711 | 6,023 | 296,654 | |||||||||||||||||||||||||
| 2020 | 19,200 | — | — | 31,484 | 189,360 | 3,402 | 243,446 | |||||||||||||||||||||||||
| Robert J. Coury | 2022 | 22,680 | 5,926 | — | 32,427 | 726,188 | 72,399 | 859,620 | ||||||||||||||||||||||||
| 2021 | 24,563 | 29,184 | — | 31,377 | 680,312 | 41,242 | 806,678 | |||||||||||||||||||||||||
| 2020 | 25,111 | 30,363 | — | 28,300 | 275,306 | 40,770 | 399,850 |
| (a) | In the case of Messrs. Goettler, Narula, Mauro, and Coury, these costs represent a vehicle allowance and ancillary expenses associated with such vehicle. In the case of Mr. Malik, this number represents the cost of a vehicle (based on lease value), insurance and ancillary expenses associated with such vehicle. |
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| (b) | Amounts disclosed represent the actual aggregate incremental costs associated with the personal use of corporate aircraft. Incremental costs include annual average hourly fuel and maintenance costs, landing and parking fees, customs and handling charges, passenger catering and ground transportation, crew travel expenses, away from home hanger fees, and other trip-related variable costs. Because the aircrafts are used primarily for business travel, incremental costs exclude fixed costs that do not change based on usage, such as pilots’ salaries, aircraft purchase or lease costs, home-base hangar costs, and certain maintenance fees. Aggregate incremental cost as so determined with respect to personal deadhead flights is allocable to the NEO. In certain instances where there are both business and personal passengers, the incremental costs per hour are pro-rated. |
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| (c) | For 2022, amounts disclosed for Messrs. Goettler and Narula include the value of certain one-time, non-recurring expatriate, repatriation and relocation benefits of $95,554 and $4,756, respectively. For 2021, amounts disclosed include for Messrs. Goettler and Narula the value of certain one-time, non-recurring expatriate, repatriation and relocation benefits of $227,481 and $336,440, respectively. For 2020, amounts for Messrs. Goettler and Narula include the value of certain one-time, non-recurring expatriate, repatriation and relocation benefits of $43,863 and $631,856, respectively, paid by Pfizer and/or Viatris in 2020. Repatriation for Messrs. Goettler and Narula occurred on September 30, 2020. For 2021, the amount disclosed for Mr. Malik represents one-time, non-recurring immigration expenses of $26,036. For 2020, the amount disclosed reflects expatriate benefits for Mr. Malik that represent income taxes paid by Mylan in connection with Mr. Malik’s expatriate assignment to the United States from India effective January 1, 2012. Specifically, Mr. Malik was responsible for, and continued to pay taxes equal to those he would have been obligated to pay had he maintained his principal work location and residence in India rather than having transferred, at |
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| Mylan’s request, to the United States, while Mylan generally paid for all additional taxes, including Mr. Malik’s tax obligations on the imputed income associated with Mylan’s payment of taxes on his behalf. This amount for Mr. Malik is net of Mylan’s estimated tax refunds for each year. The estimated refund was $274,822 for 2020. Mr. Malik is no longer eligible for these legacy tax equalization benefits. |
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| (d) | For 2022, amounts for each NEO include a matching contribution for Messrs. Goettler ($10,000), Narula ($6,154), Malik ($16,169), Mauro ($18,316), and Coury ($11,077) and a profit sharing contribution received in March 2023 in respect of fiscal year 2022 to each of Messrs. Goettler, Narula, Malik, Mauro, and Coury ($21,350). For 2021, amounts for each NEO include a matching contribution for Messrs. Goettler ($10,000), Narula ($6,154), Malik ($12,400), Mauro ($11,270), and Coury ($11,077) and a profit sharing contribution received in March 2022 in respect of fiscal year 2021 to each of Messrs. Goettler, Narula, Malik, Mauro, and Coury ($20,300). For 2020, amounts disclosed for each NEO include a matching contribution for Messrs. Narula ($1,231), Malik ($14,122), Mauro ($14,384), and Coury ($11,200) and a profit sharing contribution received in March 2021 in respect of fiscal year 2020 for Messrs. Goettler ($9,750) and Narula ($6,000) and to each of Messrs. Malik, Mauro, and Coury ($17,100). |
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| (e) | For 2022, amounts disclosed include a matching contribution under the Restoration Plan for Messrs. Goettler ($184,371), Narula ($82,254), Mauro ($87,480), and Coury ($261,360), and a profit sharing contribution under the Restoration Plan received in March 2023 in respect of fiscal year 2022 for Messrs. Goettler ($329,778), Narula ($144,196), Malik ($262,749), Mauro ($157,377), and Coury ($464,827). For 2021, amounts disclosed include a matching contribution under the Restoration Plan for Messrs. Goettler ($188,445), Narula ($80,782), Mauro ($89,930), and Coury ($266,221), and a profit sharing contribution under the Restoration Plan received in March 2022 in respect of fiscal year 2021 for Messrs. Goettler ($137,315), Narula ($58,637), Malik ($228,787), Mauro ($140,781), and Coury ($414,091). Last year’s proxy statement reported that Mr. Goettler received Restoration Plan contributions totaling $215,784; the updated value for 2021 is reflected above, with corresponding adjustments to the total amount of All Other Compensation for such year. For 2020, amounts disclosed include, for Messrs. Goettler, Mauro and Coury a matching contribution under the Restoration Plan of $36,467, $130,584, and $215,857, respectively, and a profit sharing contribution under the Restoration Plan received in March 2021 in respect of fiscal year 2020 for each of Messrs. Malik, Mauro, and Coury equal to $182,052, $58,776, and $59,449, respectively. Amounts disclosed for Messrs. Goettler and Narula include Retirement Savings Contributions under Pfizer’s plans in the amount of $156,732 and $20,089, respectively. |
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| (f) | For 2022, amounts disclosed represent health insurance for Messrs. Malik and Coury ($30,699); certain personal security services for Mr. Coury ($38,447); international travel assistance premiums for each of the NEOs; events for Mr. Mauro ($10,788); tax preparation services related to U.K. tax returns for Messrs. Mauro and Coury; and long-term disability premiums for Messrs. Goettler, Narula, Malik, Mauro and Coury. For 2021, amounts disclosed represent health insurance for Messrs. Malik and Coury ($11,601); certain personal security services for Mr. Coury ($29,233); international travel assistance premiums for each of the NEOs; events for Messrs. Narula, Malik, and Mauro; tax preparation services related to U.K. tax returns for Messrs. Malik and Mauro; and long-term disability premiums for Messrs. Goettler, Narula, Malik, and Mauro. For 2020, amounts disclosed represent health insurance for Messrs. Malik and Coury ($29,102); certain personal security services for Messrs. Malik and Coury; events for Mr. Malik; tax preparation services related to U.K. tax returns for Messrs. Mauro and Coury; long-term disability premiums for Messrs. Goettler, Narula, Malik, Mauro, and Coury; and international travel assistance premiums for Messrs. Malik, Mauro, and Coury. |
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Grants of Plan-Based Awards for 2022
The following table summarizes grants of plan-based awards made to each NEO during 2022.
| Estimated Future Payments Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payments Under Equity Incentive Plan Awards(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||
| Michael Goettler | 975,000 | 1,950,000 | 3,900,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | 202,966 | 579,902 | 1,130,809 | — | — | — | 5,915,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | — | — | — | 312,255 | — | — | 3,185,001 | |||||||||||||||||||||||||||||||||||||||||||||
| Sanjeev Narula | 425,000 | 850,000 | 1,700,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | 75,834 | 216,667 | 422,501 | — | — | — | 2,210,003 | |||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | — | — | — | 116,667 | — | — | 1,190,003 | |||||||||||||||||||||||||||||||||||||||||||||
| Rajiv Malik | 750,000 | 1,500,000 | 3,000,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | 160,589 | 458,824 | 894,707 | — | — | — | 4,680,005 | |||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | — | — | — | 247,059 | — | — | 2,520,002 | |||||||||||||||||||||||||||||||||||||||||||||
| Anthony Mauro | 460,000 | 920,000 | 1,840,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | 71,373 | 203,922 | 397,648 | — | — | — | 2,080,004 | |||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | — | — | — | 109,804 | — | — | 1,120,001 | |||||||||||||||||||||||||||||||||||||||||||||
| Robert J. Coury | 1,350,000 | 2,700,000 | 5,400,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | 240,883 | 688,236 | 1,342,061 | — | — | — | 7,020,007 | |||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2022 | 3/4/2022 | — | — | — | — | — | — | 370,589 | — | — | 3,780,008 |
| (1) | The performance goals under the annual incentive compensation program applicable to the NEOs during 2022 are described above in the CD&A. For a discussion of these awards, see “2022 Annual Incentive Compensation Program” on pages 29 to 30 of this Amendment. |
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| (2) | Consists of PRSUs awarded under the Viatris 2020 Stock Plan. The vesting terms applicable to these awards are described above in the CD&A and below following the Outstanding Equity Awards at the End of 2022 table. |
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| (3) | Consists of RSUs awarded under the Viatris 2020 Stock Plan. The vesting terms applicable to these awards are described above in the CD&A and below following the Outstanding Equity Awards at the End of 2022 table. |
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| (4) | Represents the grant date fair value of the specific award granted to the NEO. For information regarding assumptions used in determining such value, please refer to Note 14 to the Company’s Consolidated Financial Statements contained in the Form 10-K. |
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Outstanding Equity Awards at the End of 2022
The following table sets forth information concerning all of the outstanding LTI awards held by each NEO as of December 31, 2022.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | ||||||||||||||||||||||||||||||||
| Michael Goettler | — | — | — | — | 128,728 | (3) | 1,432,740 | — | — | |||||||||||||||||||||||||||||||
| — | — | — | — | 183,245 | (4) | 2,039,514 | 409,962 | (6) | 4,562,877 | |||||||||||||||||||||||||||||||
| — | — | — | — | 323,480 | (5) | 3,600,327 | 600,748 | (7) | 6,686,325 | |||||||||||||||||||||||||||||||
| Sanjeev Narula | — | — | — | — | 22,796 | (3) | 253,719 | — | — | |||||||||||||||||||||||||||||||
| — | — | — | — | 56,383 | (4) | 627,546 | 126,142 | (6) | 1,403,960 | |||||||||||||||||||||||||||||||
| — | — | — | — | 120,861 | (5) | 1,345,181 | 224,456 | (7) | 2,498,195 | |||||||||||||||||||||||||||||||
| Rajiv Malik | 34,389 | — | 55.84 | 3/5/2024 | — | — | — | — | ||||||||||||||||||||||||||||||||
| 41,637 | — | 50.66 | 11/17/2025 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 50,168 | — | 46.27 | 2/17/2026 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 65,574 | — | 45.18 | 3/3/2027 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 71,600 | — | 40.97 | 3/2/2028 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 60,053 | — | 27.45 | 3/1/2029 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 56,581 | 28,290 | 17.48 | 3/2/2030 | — | — | — | — | |||||||||||||||||||||||||||||||||
| — | — | — | — | 52,632 | (8) | 585,794 | — | — | ||||||||||||||||||||||||||||||||
| — | — | — | — | 197,369 | (9) | 2,196,717 | — | — | ||||||||||||||||||||||||||||||||
| — | — | — | — | 144,985 | (4) | 1,613,686 | 324,365 | (6) | 3,610,182 | |||||||||||||||||||||||||||||||
| — | — | — | — | 255,940 | (5) | 2,848,612 | 475,318 | (7) | 5,290,289 | |||||||||||||||||||||||||||||||
| Anthony Mauro | 3,236 | — | 30.90 | 3/6/2023 | — | — | — | — | ||||||||||||||||||||||||||||||||
| 12,009 | — | 55.84 | 3/5/2024 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 16,265 | — | 50.66 | 11/17/2025 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 27,314 | — | 46.27 | 2/17/2026 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 29,275 | — | 45.18 | 3/3/2027 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 29,833 | — | 40.97 | 3/2/2028 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 27,851 | — | 27.45 | 3/1/2029 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 26,241 | 13,120 | 17.48 | 3/2/2030 | — | — | — | — | |||||||||||||||||||||||||||||||||
| — | — | — | — | 24,409 | (8) | 271,672 | — | — | ||||||||||||||||||||||||||||||||
| — | — | — | — | 91,534 | (9) | 1,018,773 | — | — | ||||||||||||||||||||||||||||||||
| — | — | — | — | 64,438 | (4) | 717,198 | 144,163 | (6) | 1,604,534 | |||||||||||||||||||||||||||||||
| — | — | — | — | 113,751 | (5) | 1,266,050 | 211,253 | (7) | 2,351,246 | |||||||||||||||||||||||||||||||
| Robert J. Coury | 3,236 | — | 30.90 | 3/6/2023 | — | — | — | — | ||||||||||||||||||||||||||||||||
| 58,952 | — | 55.84 | 3/5/2024 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 63,235 | — | 50.66 | 11/17/2025 | — | — | — | — | |||||||||||||||||||||||||||||||||
| 82,776 | — | 46.27 | 2/17/2026 | — | — | 1,600,000 | (10) | 17,808,000 | ||||||||||||||||||||||||||||||||
| — | — | — | — | 217,477 | (4) | 2,420,523 | 486,547 | (6) | 5,415,268 | |||||||||||||||||||||||||||||||
| — | — | — | — | 383,910 | (5) | 4,272,923 | 712,976 | (7) | 7,935,423 |
| (1) | Vesting dates applicable to unvested stock options are as follows, in each case, generally subject to continued employment with Viatris: on March 2, 2022, the unvested options at the $17.48 exercise price for Messrs. Malik and Mauro vested. Subject to applicable employment agreement provisions, following termination of |
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| employment, vested stock options will generally remain exercisable for 30 days following termination, except that (i) in the case of termination because of disability, 100% of options become vested and vested options will remain exercisable for two years following termination; (ii) in the case of a termination due to a reduction in force, vested options will remain exercisable for one year following termination; (iii) in the case of death, including within two years following termination because of disability, or, in the case of options granted prior to January 1, 2017, retirement, 100% of options become vested and vested options will remain exercisable for the remainder of the original term; and (iv) in the case of an involuntary termination without cause or a voluntary resignation for good reason that occurs within two years following a change in control, 100% of options become vested (double- trigger awards) and remain exercisable for the remainder of the original term. |
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| (2) | The market value of RSUs and PRSUs was calculated using the closing price of the Company’s shares as of December 31, 2022, $11.13. |
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| (3) | In connection with the Combination, Viatris granted Make-Whole RSU awards to Messrs. Goettler and Narula to replace the Pfizer equity awards forfeited by such NEOs. These Make-Whole RSU awards have the same vesting schedule as the original Pfizer awards and will cliff-vest on the third anniversary of the original grant date. The 128,728 Make-Whole RSUs held by Mr. Goettler, and the 22,796 Make-Whole RSUs held by Mr. Narula vested on February 27, 2023. Amounts include all accrued and unvested whole share DEUs that vest only to the extent and at the same time the underlying award on which they are issued vest. In accordance with their terms, all of these awards would have vested upon an involuntary termination without cause or a voluntary resignation for good reason that occurs within two years following a change in control (double-trigger awards) or upon the executive’s death or disability. For any other termination reason, these RSUs will be forfeited. |
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| (4) | Of the 183,245 RSUs held by Mr. Goettler, 91,623 vested on March 2, 2023 and the remaining unvested RSUs were forfeited in connection with Mr. Goettler’s separation from Viatris on April 1, 2023; of the 56,383 RSUs held by Mr. Narula, 28,192 vested on March 2, 2023 and 28,191 will vest on March 2, 2024; of the 144,985 RSUs held by Mr. Malik, 72,493 vested on March 2, 2023 and 72,492 will vest on March 2, 2024; of the 64,438 RSUs held by Mr. Mauro, 32,220 vested on March 2, 2023 and 32,218 will vest on March 2, 2024; of the 217,477 RSUs held by Mr. Coury, 108,739 vested on March 2, 2023 and 108,738 will vest on March 2, 2024. Amounts include all accrued and unvested whole share DEUs that vest only to the extent and at the same time the underlying award on which they are issued vest. |
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| (5) | Of the 323,480 RSUs held by Mr. Goettler, 107,827 vested on March 4, 2023 and the remaining unvested RSUs were forfeited in connection with Mr. Goettler’s separation from Viatris on April 1, 2023; of the 120,861 RSUs held by Mr. Narula, 40,287 vested on March 4, 2023 and 40,287 will vest on each of March 4, 2024 and March 4, 2025; of the 255,940 RSUs held by Mr. Malik, 85,314 vested on March 4, 2023 and 85,313 will vest on each of March 4, 2024 and March 4, 2025; of the 113,751 RSUs held by Mr. Mauro, 37,917 vested on March 4, 2023 and 37,917 will vest on each of March 4, 2024 and March 4, 2025; of the 383,910 RSUs held by Mr. Coury, 127,970 vested on March 4, 2023 and 127,970 will vest on each of March 4, 2024 and March 4, 2025. Amounts include all accrued and unvested whole share DEUs that vest only to the extent and at the same time the underlying award on which they are issued vest. |
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| (6) | The PRSUs will vest on March 2, 2024, subject to attainment of performance goals. Amounts include all accrued and unvested whole share DEUs that vest only to the extent and at the same time the underlying award on which they are issued vest. |
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| (7) | The PRSUs will vest on March 4, 2025, subject to attainment of performance goals. Amounts include all accrued and unvested whole share DEUs that vest only to the extent and at the same time the underlying award on which they are issued vest. |
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| (8) | The 52,632 RSUs held by Mr. Malik, and 24,409 RSUs held by Mr. Mauro vested on March 2, 2023. In accordance with their terms, all of these awards would have vested upon an involuntary termination without |
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| cause or a voluntary resignation for good reason that occurs within two years following a change in control (double-trigger awards) or upon the executive’s death or disability. |
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| (9) | The 197,369 RSUs held by Mr. Malik, and 91,534 RSUs held by Mr. Mauro vested on March 2, 2023 which represents 100% of their original target PRSUs. In accordance with their terms, all of these awards would have vested upon an involuntary termination without cause or a voluntary resignation for good reason that occurs within two years following a change in control (double-trigger awards) or upon the executive’s death or disability. |
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| (10) | The PRSUs were granted on November 23, 2020 and are divided into five separate vesting tranches requiring share price appreciation and shareholder returns (including dividends and other distributions) of 25%, 50%, 75%, 100% and 150% from the date of grant through December 30, 2025. In the case of the first three tranches, the PRSUs are subject to a retention requirement through the first anniversary of achieving the shareholder return goal, and in the case of the final two tranches, the PRSUs are subject to a retention requirement through the term of the award. The PRSUs would vest and be settled in full upon termination of employment without cause, resignation for good reason, disability, or death. |
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Option Exercises and Stock Vested for 2022
The option awards and stock awards reflected in the table below were exercised or became vested for the NEOs during 2022.
| Option Awards | Stock Awards | |||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||
| Michael Goettler | — | — | 142,825 | 1,526,030 | ||||||||||||||||
| Sanjeev Narula | — | — | 26,751 | 280,350 | ||||||||||||||||
| Rajiv Malik | — | — | 280,617 | 2,940,866 | ||||||||||||||||
| Anthony Mauro | — | — | 128,813 | 1,349,960 | ||||||||||||||||
| Robert J. Coury | — | — | 103,179 | 1,081,316 |
Pension Benefits for 2022
The following table summarizes Mr. Malik’s benefits as of December 31, 2022 under The Executive Plan for Rajiv Malik (the “Executive Plan”) and Mr. Malik’s Retirement Benefit Agreement (the “Malik RBA”). The Malik RBA was frozen in November 2020. Mr. Malik will not accrue any additional benefits pursuant to the agreement. The Executive Plan is a deferred compensation plan to which the Company no longer contributes, though the value of the benefit may change depending on the performance of investments. The Company does not sponsor any other defined benefit pension programs covering the NEOs.
| Name | Plan Name(1) | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($)(2) | Payments During Last Fiscal Year ($) | ||||||||||
| Michael Goettler | N/A | N/A | — | — | ||||||||||
| Sanjeev Narula | N/A | N/A | — | — | ||||||||||
| Rajiv Malik | The Executive Plan for Rajiv Malik(3) | N/A | 433,475 | — | ||||||||||
| Rajiv Malik | Retirement Benefit Agreement(4) | 16 | 5,342,449 | — | ||||||||||
| Anthony Mauro | N/A | N/A | — | — | ||||||||||
| Robert J. Coury | N/A | N/A | — | — |
| (1) | Messrs. Goettler, Narula, Mauro and Coury are not party to a defined benefit pension arrangement. |
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| (2) | See pages 33 and 37 of this Amendment for further information on the value of the accumulated pension benefit. |
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| (3) | This is a deferred compensation plan established for the benefit of Mr. Malik. The Company is no longer contributing to this plan. |
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| (4) | The Malik RBA has been frozen. Mr. Malik no longer accrues any additional benefits under the agreement. |
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Nonqualified Deferred Compensation
The following table sets forth information relating to the Restoration Plan for 2022.
| Name | Aggregate Balance at Last FYE ($) | Executive Contributions in Last FY ($) | Company Profit Sharing and Match Contributions in Last FY ($) | Aggregate Earnings (Loss) in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at FYE ($) | ||||||||||||||||||
| Michael Goettler | 166,659 | 188,445 | 325,761 | (69,356 | ) | — | 611,509 | |||||||||||||||||
| Sanjeev Narula | 52,988 | 82,398 | 141,034 | (23,400 | ) | — | 253,020 | |||||||||||||||||
| Rajiv Malik | 1,020,325 | — | 224,509 | (208,190 | ) | — | 1,036,644 | |||||||||||||||||
| Anthony Mauro | 2,868,785 | 89,930 | 229,330 | (110,605 | ) | — | 3,077,440 | |||||||||||||||||
| Robert J. Coury | 655,993 | 265,616 | 678,309 | (175,915 | ) | — | 1,424,003 |
Estimated Payments in Connection with a Termination of Employment or Change in Control
The following discussion summarizes the potential payments and benefits that would have been payable to each of the NEOs upon a termination of employment on December 31, 2022 by Viatris without “cause”, by the NEO for “good reason” (each as defined in the applicable agreement), due to the NEO’s death or disability or as a result of a CIC Termination. A “CIC Termination” occurs if an NEO’s employment is terminated other than for cause or if he terminates employment for good reason, in each case, within two years following the occurrence of a change in control. The amounts discussed below exclude (i) 401(k) retirement plan contributions and distributions that are generally available to all salaried employees, (ii) payments pursuant to vested Restoration Plan balances and vested rights under Retirement Benefit Agreements, (iii) payments pursuant to awards scheduled to vest on or before December 31, 2022 by their terms, (iv) any amounts that may be due at the time of an event in respect of accrued and unpaid salary, bonuses, or vacation, and (v) the value of each NEO’s annual bonus for the 2022 completed fiscal year as the year was complete as of December 31, 2022. These are estimates only and actual amounts payable upon such terminations may be different and will only be determined upon the actual occurrence of any such event.
Michael Goettler
Mr. Goettler was entitled to severance payments and benefits upon certain terminations of employment pursuant to an agreement with Viatris and his equity award agreements with Viatris.
Termination Without Cause Absent a Change in Control. If Mr. Goettler’s employment was terminated on December 31, 2022 by Viatris without cause, he would have been entitled to a payment equal to two and a half times the sum of his base salary and his target annual bonus in effect at the time of such termination, payable in equal installments. The estimated value of such payments and benefits, assuming a December 31, 2022 termination, would have been $8,125,000.
Termination Due to Death or Disability Absent a Change in Control. If Mr. Goettler’s employment was terminated on December 31, 2022 due to death or disability, he would have been entitled to full vesting of his unvested equity awards with any PRSUs vesting based on target performance. The estimated values of such equity vesting, assuming a December 31, 2022 termination, would have been $18,321,767. Mr. Goettler is not entitled to cash severance payments in connection with a termination of employment due to death or disability.
Termination in Connection with a Change in Control. If Mr. Goettler incurred a CIC Termination on December 31, 2022, in addition to the payments and benefits provided for above, he would have been entitled to full vesting of his unvested equity awards with any PRSUs vesting based on target performance. The estimated values of such equity vesting, assuming a December 31, 2022 CIC Termination, would have been $18,321,767.
Sanjeev Narula
Mr. Narula is entitled to severance payments and benefits upon certain terminations of employment pursuant to the Mylan N.V. Severance Plan and Global Guidelines (which was assumed by Viatris) (the “Severance Plan”) and his equity award agreements with Viatris.
Termination Without Cause Absent a Change in Control. If Mr. Narula’s employment was terminated on December 31, 2022 by Viatris without cause, he would have been entitled to twelve (12) months of base salary continuation and twelve (12) months of continued health and other benefits. The estimated value of such payments, assuming a December 31, 2022 termination, would have been $913,508.
Termination Due to Death or Disability Absent a Change in Control. If Mr. Narula’s employment was terminated on December 31, 2022 due to death or disability, he would have been entitled to full vesting of his unvested equity awards with any PRSUs vesting based on target performance. The estimated values of such equity vesting, assuming a December 31, 2022 termination, would have been $6,128,595. Mr. Narula is not entitled to cash severance payments in connection with a termination of employment due to death or disability.
Termination in Connection with a Change in Control. If Mr. Narula incurred a CIC Termination on December 31, 2022, he would have been entitled to (1) a payment equal to two times the sum of his base salary and his target annual bonus in effect at the time of such termination, payable in equal installments, (2) twenty-four (24) months of continued health and other benefits, and (3) full vesting of his unvested equity awards with any PRSUs vesting based on target performance. The estimated values of such payments and benefits, assuming a December 31, 2022 CIC Termination, would have been (i) $3,489,367, in respect of cash severance and other benefits and (ii) $6,128,595, in respect of the vesting of his equity awards.
Rajiv Malik
Mr. Malik is entitled to severance payments and benefits upon certain terminations of employment pursuant to the Severance Plan and his equity award agreements with Viatris.
Termination Without Cause Absent a Change in Control. If Mr. Malik’s employment was terminated on December 31, 2022 by Viatris without cause, he would have been entitled to twelve (12) months of base salary continuation and twelve (12) months of continued health and other benefits. The estimated value of such payments, assuming a December 31, 2022 termination, would have been $1,263,508. Mr. Malik is also entitled to participate in the Company’s Supplemental Health Insurance Plan for certain retired executives following a termination of employment.
Termination Due to Death or Disability Absent a Change in Control. If Mr. Malik’s employment was terminated on December 31, 2022 due to death or disability, he would have been entitled to full vesting of his unvested equity awards with any PRSUs vesting based on target performance. The estimated values of such equity vesting, assuming a December 31, 2022 termination, would have been $16,145,271. Mr. Malik is not entitled to cash severance payments in connection with a termination of employment due to death or disability.
Termination in Connection with a Change in Control. If Mr. Malik incurred a CIC Termination on December 31, 2022, he would have been entitled to (1) a payment equal to two times the sum of his base salary and his target annual bonus in effect at the time of such termination, payable in equal installments, (2) twenty-four (24) months of continued health and other benefits, and (3) full vesting of his unvested equity awards with any PRSUs vesting based on target performance. The estimated values of such payments and benefits, assuming a December 31, 2022 CIC Termination, would have been (i) $5,489,367, in respect of cash severance and other benefits and (ii) $16,145,271, in respect of the vesting of his equity awards.
Anthony Mauro
Mr. Mauro is entitled to severance payments and benefits upon certain terminations of employment pursuant to the Severance Plan and his equity award agreements with Viatris.
Termination Without Cause Absent a Change in Control. If Mr. Mauro’s employment was terminated on December 31, 2022 by Viatris without cause, he would have been entitled to twelve (12) months of base salary continuation and twelve (12) months of continued health and other benefits. The estimated value of such payments, assuming a December 31, 2022 termination, would have been $864,150.
Termination Due to Death or Disability Absent a Change in Control. If Mr. Mauro’s employment was terminated on December 31, 2022 due to death or disability, he would have been entitled to full vesting of his unvested equity awards with any PRSUs vesting based on target performance. The estimated values of such equity vesting, assuming a December 31, 2022 termination, would have been $7,229,457. Mr. Mauro is not entitled to cash severance payments in connection with a termination of employment due to death or disability.
Termination in Connection with a Change in Control. If Mr. Mauro incurred a CIC Termination on December 31, 2022, he would have been entitled to (1) a payment equal to two times the sum of his base salary and his target annual bonus in effect at the time of such termination, payable in equal installments, (2) twenty-four (24) months of continued health and other benefits, and (3) full vesting of his unvested equity awards with any PRSUs vesting based on target performance. The estimated values of such payments and benefits, assuming a December 31, 2022 CIC Termination, would have been (i) $3,530,715, in respect of cash severance and other benefits and (ii) $7,229,457, in respect of the vesting of his equity awards.
Robert J. Coury
Mr. Coury is entitled to severance payments and benefits upon certain terminations of employment pursuant to his Executive Employment Agreement and his equity award agreements with Viatris.
Resignation for Good Reason, Termination Without Cause or Termination Due to Death or Disability. If Mr. Coury’s employment was terminated on December 31, 2022 by Viatris without cause, upon resignation for good reason, due to his death or disability (in each case, as defined in the Executive Employment Agreement) or in connection with a change in control, he would have been entitled to (1) a lump sum payment equal to three times the sum of his base salary and target or highest bonus paid, (2) three years of
continued health and other benefits, and (3) full vesting of his RSUs and PRSUs (including his Value Creation Incentive Award and with any PRSUs vesting based on target performance). Mr. Coury is also entitled to participate in the Company’s Supplemental Health Insurance Plan for certain retired executives following a termination of employment. The estimated values of such payments and benefits, assuming a December 31, 2022 termination, would have been (i) $20,981,368, in respect of cash severance and other benefits, and (ii) $39,148,128, in respect of the vesting of his RSUs and PRSUs. These amounts would not be enhanced if these events occurred following a change in control of Viatris.
CEO Pay Ratio
Pursuant to Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our global employee population and the annual total compensation of our CEO for 2022, Michael Goettler. Under Instruction 2 to Item 402(u), the median-paid employee may be identified once every three years if there is no significant impact to the pay ratio disclosure. We identified our median-paid employee in 2021. In 2022, such employee received a promotion. In light of the prior median employee’s promotion during 2022 and the resulting compensation adjustment which would impact the pay ratio, a new employee representing the median-paid employee has been selected for this Amendment.
The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Regulation S-K Item 402(u). The ratio of Mr. Goettler’s annual total compensation for 2022, as reported in the Summary Compensation Table on page 37 in this Amendment, to the median employee annual total compensation determined on the same basis was 424:1. For 2022, the annual total compensation along with the value of employer provided benefits of our median employee was $34,858 and $14,787,272 for the CEO.
To identify our median employee, we prepared a list of Viatris employees throughout the world as of December 31, 2022. We chose base salary as our consistently applied compensation measure. We then calculated an annual base salary for each employee, annualizing pay for those employees who commenced work during 2022 and for any employees who were on leave for a portion of 2022. For hourly employees, we used a reasonable estimate of hours worked to determine annual base pay. We determined that as of December 31, 2022, our total number of U.S. employees was approximately 4,150 and our total number of non-U.S. employees was approximately 34,150. No employees were excluded from the employee population.
Our median employee is located in India, which reflects the true global nature of our organization and the fact that we are a diversified company within our peer group whose employees participate in all aspects of bringing our products to market, from R&D to manufacturing. This diversification should be considered by readers who would compare our CEO Pay Ratio to those within our peer or industry group and reflects differences in pay demographics among those groups. Pay ratios may not be comparable because of different employee populations, geographic distribution of employees, and compensation practices and companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios
Non-Employee Director Compensation for 2022
The following table sets forth information concerning the compensation earned by Viatris’ non-employee directors (each a “Non-Employee Director” and, together, the “Non-Employee Directors”) for 2022. Directors who are employees of Viatris (Messrs. Coury, Goettler, and Malik) receive no compensation for their Board service. A discussion of the elements of Non-Employee Director compensation follows the table.
| Name | Fees Earned or Paid in Cash ($) | RSUs ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||
| W. Don Cornwell | 150,000 | 200,002 | 20,000 | 370,002 | ||||||||||||
| JoEllen Lyons Dillon | 200,000 | 200,002 | — | 400,002 | ||||||||||||
| Neil Dimick | 200,000 | 200,002 | — | 400,002 | ||||||||||||
| Elisha W. Finney(1) | — | — | — | — | ||||||||||||
| Melina Higgins | 225,000 | 200,002 | 20,000 | 445,002 | ||||||||||||
| James Kilts | 150,000 | 200,002 | 20,000 | 370,002 | ||||||||||||
| Harry A. Korman | 175,000 | 200,002 | — | 375,002 | ||||||||||||
| Richard Mark | 150,000 | 200,002 | 15,000 | 365,002 | ||||||||||||
| Mark W. Parrish | 250,000 | 200,002 | — | 450,002 | ||||||||||||
| Ian Read | 175,000 | 200,002 | — | 375,002 | ||||||||||||
| Scott A. Smith(1) | — | — | — | — | ||||||||||||
| Pauline van der Meer Mohr(2) | 150,000 | 200,002 | — | 350,002 |
| (1) | On December 29, 2022 Messrs. Dimick and Read retired from the Board and Ms. Finney and Mr. Smith were appointed to the Board. Ms. Finney and Mr. Smith did not receive compensation for their Board service in 2022 because their service did not begin until December 29, 2022. |
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| (2) | Fees earned by Ms. van der Meer Mohr were paid in Euros. Such amounts were converted into Euros using the monthly conversion rate in effect when each payment was made. |
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| (3) | Represents the grant date fair value of the specific award granted to the Non-Employee Director. RSU awards granted in 2022 vested on March 4, 2023. For information regarding assumptions used in determining the amounts reflected in the table above, please refer to Note 14 to the Company’s Consolidated Financial Statements contained in the Form 10-K. The number of unvested RSUs held by each of the Non-Employee Directors, as of December 31, 2022, were as follows: Mr. Cornwell; 20,313, Ms. Dillon, 20,313; Mr. Dimick, 0; Ms. Finney, 0; Ms. Higgins, 20,313; Mr. Kilts, 20,313; Mr. Korman, 20,313; Mr. Mark, 20,313; Mr. Parrish, 20,313; Mr. Read, 0; Mr. Smith, 0; and Ms. van der Meer Mohr, 20,313. Amounts include all accrued and unvested whole share DEUs that vest only to the extent and at the same time the underlying award on which they are issued vest. The aggregate number of shares subject to stock options held by the Non-Employee Directors, as of December 31, 2022, were as follows: Ms. Dillon, 24,780; Mr. Dimick, 24,780; Ms. Higgins, 31,403; Mr. Korman, 26,504; Mr. Mark, 12,260; Mr. Parrish, 24,780; and Ms. van der Meer Mohr, 13,949. |
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| (4) | The amounts represent charitable contributions made in 2022 under our matching gift program. |
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In addition to the above, as previously disclosed, legacy Mylan directors were eligible to receive tax-equalization payments for incremental tax liabilities, if any, incurred as a result of attendance at Mylan Board meetings held outside the U.S. prior to the Combination. In 2022, these legacy Mylan directors received a one-time payment for such tax-equalization benefit with respect to years prior to the Combination (2015 to 2020). Messrs. Dimick, Korman, Mark and Parrish received $99,049, $94,245, $79,431, and $173,339, respectively, and Mses. Dillon and Higgins received $362,700 and $300,533, respectively. This benefit has now been finalized and concluded.
Viatris’ compensation philosophy for Non-Employee Directors is designed to attract and retain Directors with the experience necessary to represent the Company and oversee executive management. On an annual basis, the Compensation Committee considers market data for our Compensation Peer Group and input received from the Compensation Committee’s consultant regarding market practices for Director compensation. Any changes to Director compensation are approved by the Compensation Committee and the independent Directors.
Director Compensation Structure for 2023
In March 2023, the Compensation Committee and the independent Directors approved the following Non-Employee Director compensation structure effective as of January 2023, unchanged from 2022:
| Element of Compensation | Amount | |||
| Board Member Retainer | $ | 150,000 | ||
| Committee Chair Fee | $25,000 | |||
| Executive Committee Member Fee | $25,000 | |||
| Lead Independent Director Compensation | $50,000 | |||
| Annual Equity Grant Value (RSUs) | $ | 200,000 |
Non-Employee Directors are also eligible to receive matching charitable contributions under the Company’s Director Matching Gift Program. Under this program, to the extent Non-Employee Directors choose to make charitable contributions to qualifying charitable organizations, the Company matches those contributions dollar-for-dollar up to an annual limit of $20,000 per person per calendar year.
Non-Employee Director Share Ownership Guidelines
Effective January 1, 2021, the Board adopted revised share ownership guidelines for Non-Employee Directors, requiring each to hold common stock valued at five times the amount of their annual cash retainer, excluding any cash retainer paid for committee service. Each Non-Employee Director has five years from his or her start date to attain compliance. These guidelines further demonstrate alignment of Viatris Directors’ interests with shareholders’ interests for the duration of their Board service. Common stock actually owned by the Non-Employee Director as well as restricted shares and unvested RSUs (including corresponding DEUs) count toward compliance with these requirements.
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