-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RK+Pry3uaVuUTA2uaLhkOIMhJhX2H2Kg7H+v5aywKU5vmyqRcLAqH+/nSAKWMW4Y tK2Jh2JcoXCftgN7QakN7w== 0000940180-97-000243.txt : 19970320 0000940180-97-000243.hdr.sgml : 19970320 ACCESSION NUMBER: 0000940180-97-000243 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970424 FILED AS OF DATE: 19970319 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PFIZER INC CENTRAL INDEX KEY: 0000078003 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 135315170 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03619 FILM NUMBER: 97558932 BUSINESS ADDRESS: STREET 1: 235 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125732323 MAIL ADDRESS: STREET 1: 235 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: PFIZER CHARLES & CO INC DATE OF NAME CHANGE: 19710908 DEF 14A 1 DEF 14A SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_]Preliminary Proxy Statement [_]Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)) [X]Definitive Proxy Statement [_]Definitive Additional Materials [_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 PFIZER INC. ----------------------------------------------------- (Name of Registrant as Specified In Its Charter) ----------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X]No fee required. [_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange ActRule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [_]Fee paid previously with preliminary materials. [_]Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: Pfizer Inc 235 East 42nd Street New York, NY 10017-5755 ---------------------------------- [LOGO] Pfizer WILLIAM C. STEERE, JR. Chairman of the Board and Chief Executive Officer March 19, 1997 Dear Fellow Shareholder: You are cordially invited to attend the Annual Meeting of Shareholders of Pfizer Inc. which will be held on Thursday, April 24, 1997 at 10:00 a.m. in the Empire State Ballroom of the Grand Hyatt Hotel, 42nd Street and Lexington Avenue, New York, NY. Directions to the meeting site and a map of the meeting site area can be found at the end of the attached Proxy Statement. This booklet includes the Notice of the Annual Meeting of Shareholders and the Proxy Statement. The Proxy Statement describes the business that will be transacted at the Annual Meeting and also provides important information about the Company and the items to be voted upon that you should consider when you vote your shares. At this year's meeting, among other things, you will be asked to consider and to vote upon the election of four directors. All four nominees currently are directors of the Company. Their diversified experience and backgrounds have enabled them to contribute significantly to the success of the Company. Accordingly, your Board of Directors recommends that you vote FOR all of the nominees. You also will be asked to approve the Board of Director's appointment of KPMG Peat Marwick LLP as the Company's independent auditors for the 1997 fiscal year. Your Board of Directors considers the firm well qualified for this position and therefore recommends that you vote FOR this proposal. In addition, you will be asked to approve an amendment to the Company's Restated Certificate of Incorporation to provide an increase in the number of authorized shares of Pfizer Inc. Common Stock. Your Board of Directors has announced that, barring unusual circumstances, it intends to vote on a two- for-one split of the Common Stock in the form of a stock dividend if this proposal is approved. Accordingly, the Board recommends that you vote FOR this proposal. You also will be asked to approve the Pfizer Inc. Executive Annual Incentive Plan. If approved by shareholders, this Plan will enable the Company to satisfy certain Internal Revenue Code requirements with respect to corporate tax deductibility of compensation paid to certain executive officers. The Board therefore recommends that you vote FOR this proposal. EACH OF THE ITEMS UPON WHICH YOU WILL BE ASKED TO VOTE IS DISCUSSED MORE FULLY IN THE ATTACHED PROXY STATEMENT. WE URGE YOU TO READ THE PROXY STATEMENT COMPLETELY AND CAREFULLY SO THAT YOU CAN VOTE YOUR SHARES ON AN INFORMED BASIS. Your vote is important! We look forward to receiving your executed proxy form and hope that you will be able to join us at the Annual Meeting. Sincerely yours, /s/ William C. Steere, Jr. William C. Steere, Jr. PFIZER INC. 235 EAST 42ND STREET, NEW YORK, NY 10017-5755 NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS APRIL 24, 1997 ---------------- The Annual Meeting of Shareholders of Pfizer Inc., a Delaware corporation (the "Company"), will be held in the Empire State Ballroom of the Grand Hyatt Hotel, 42nd Street and Lexington Avenue, New York, NY. Directions to the meeting site and a map of the meeting site area can be found at the end of the attached Proxy Statement. The Annual Meeting of Shareholders will be held on Thursday, April 24, 1997, at 10:00 a.m., to consider and take action upon the following items: (1) the election of four directors (page 2); (2) a proposal to approve the appointment of KPMG Peat Marwick LLP as independent auditors of the Company for the 1997 fiscal year (page 22); (3) a proposal to amend the Company's Restated Certificate of Incorporation to increase the number of authorized shares of the Company's common stock (page 23); (4) a proposal to approve the Pfizer Inc. Executive Annual Incentive Plan (page 24); and (5) such other business as may properly come before the Annual Meeting, or any adjournment or postponement thereof. Only shareholders of record as of the close of business on February 24, 1997 are entitled to notice of and to vote at the Annual Meeting of Shareholders. Beneficial owners of Company common stock who are not shareholders of record, but instead hold their shares in nominee names, must bring evidence of such ownership (such as a brokerage account statement showing ownership of Company common stock) to be admitted to the Annual Meeting of Shareholders. By order of the Board of Directors, /s/ C. L. Clemente C. L. Clemente Secretary New York, NY March 19, 1997 - ------------------------------------------------------------------------------- IMPORTANT WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS IN PERSON, PLEASE VOTE BY MEANS OF THE ENCLOSED PROXY FORM. WE ASK YOU TO MARK YOUR CHOICES, SIGN, DATE AND RETURN THE PROXY FORM AS SOON AS POSSIBLE IN THE ENCLOSED BUSINESS REPLY ENVELOPE. IF YOU RETURN A SIGNED PROXY FORM WITHOUT MARKING IT, IT WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS. BY PROMPTLY SIGNING AND RETURNING YOUR PROXY FORM YOU WILL ASSIST THE COMPANY BY REDUCING EXPENSES RELATING TO ADDITIONAL PROXY SOLICITATIONS. - ------------------------------------------------------------------------------- PFIZER INC. 235 EAST 42ND STREET, NEW YORK, NY 10017-5755 PROXY STATEMENT March 19, 1997 This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Pfizer Inc. (the "Company") of proxies for use at the Company's Annual Meeting of Shareholders to be held on April 24, 1997 ("Annual Meeting"), or any adjournment or postponement thereof. Holders of record of shares of Company common stock ("Common Stock") at the close of business on February 24, 1997 (the "Record Date") are entitled to vote at the Annual Meeting, and each shareholder will have one vote for each share of Common Stock registered in his or her name. On the Record Date, there were issued and outstanding and entitled to vote at the Annual Meeting 648,061,058 shares of Common Stock. As of the Record Date, to the Company's knowledge, no person owned beneficially five percent or more of the outstanding shares of Common Stock. This Proxy Statement and enclosed proxy form are first being mailed to the Company's shareholders on or about March 19, 1997. QUORUM AND TABULATION OF VOTES The By-laws of the Company (the "By-laws") provide that a majority of the shares of Common Stock issued and outstanding and entitled to vote, present in person or by proxy, shall constitute a quorum at a meeting of shareholders of the Company. Votes at the Annual Meeting will be tabulated by two independent judges of election appointed by the Company. Shares of Common Stock represented by a properly signed and returned proxy are considered as present at the Annual Meeting for purposes of determining a quorum and will be voted as specified by the shareholder. Pursuant to the By-laws, directors of the Company must be elected by a plurality vote. In the event that more than two candidates run for the same office, a plurality vote ensures that the person elected will be the one who receives the greatest number of votes, even if that number does not constitute a majority of the votes cast. Pursuant to the By-laws, all other questions shall be determined by a majority of the votes cast thereon, except as may otherwise be provided in the Restated Certificate of Incorporation of the Company, by the rules of the New York Stock Exchange, or by law. Brokers holding shares of Common Stock for beneficial owners must vote those shares according to the specific instructions they receive from the owners. If specific instructions are not received, however, brokers may vote those shares at their discretion, depending on the type of proposal involved. The rules of the New York Stock Exchange preclude brokers from exercising their voting discretion on certain proposals. Absent specific instructions from the beneficial owner in such a case, the broker may not vote on that proposal. This results in what is known as a "broker non-vote" on such a proposal. When a majority of the shares of Common Stock issued and outstanding is required for approval of a proposal, a "broker non-vote" has the effect of a negative vote. When a majority of the shares of Common Stock present and entitled to vote or a majority of the votes cast is required for the approval of a proposal, a "broker non-vote" has the effect of reducing the number of required affirmative votes. Directors will be elected by a favorable vote of a plurality of the shares of Common Stock cast with respect to the election of directors (Item 1) at the Annual Meeting. Votes "withheld" from director-nominee(s) will not count against the election of such nominee(s). Brokers have discretionary authority to vote on this proposal. Passage of the proposal to approve the appointment of KPMG Peat Marwick LLP (Item 2) requires the approval of a majority of the votes cast on this proposal. Abstentions as to this proposal will not count as votes cast "for" or "against" this proposal and will not be included in calculating the number of votes necessary for approval of this proposal. Brokers have discretionary authority to vote on this proposal. Passage of the proposal to approve an amendment to the Company's Restated Certificate of Incorporation to provide for an increase in the number of authorized shares of the Common Stock (Item 3) requires the approval of a majority of the outstanding Common Stock. Abstentions and broker non-votes as to this proposal will have the same effect as a vote cast "against" this proposal. The New York Stock Exchange determines whether brokers have discretionary authority to vote on a given proposal. Passage of the proposal to approve the Pfizer Inc. Executive Annual Incentive Plan (Item 4) requires the approval of a majority of the votes cast on this proposal. Abstentions and broker non-votes as to this proposal will not count as votes cast "for" or "against" this proposal and will not be included in calculating the number of votes necessary for approval of this proposal. The New York Stock Exchange determines whether brokers have discretionary authority to vote on a given proposal. If a properly signed proxy form is returned to the Company by a shareholder of record and is not marked, it will be voted in accordance with the recommendations of the Board of Directors on all proposals. A shareholder of record may revoke a vote at any time before the Annual Meeting by the submission of a written revocation of the proxy to the Company, by the return of a subsequently-dated proxy form to the Company, or by the shareholder's personal vote at the Annual Meeting. ITEM 1 -- ELECTION OF FOUR DIRECTORS During 1996, the Company's Board of Directors ("Board") met eleven times. All of the Company's directors attended seventy-five percent or more of the meetings of the Board and Board committees on which they served in 1996. The Board is divided into three classes. One class is elected each year for a three-year term. This year the Board has nominated four individuals, all of whom are now directors of the Company, to serve for three-year terms. Biographies of the nominees and the other members of the Board are set forth below. The Board expects that all of the nominees will be available for election. In the event that any nominee should become unavailable, however, the Proxy Committee (as noted on the proxy form) would vote for a nominee or nominees who would be designated by the Board, unless the Board chooses to reduce the number of directors serving on the Board. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE FOUR NOMINEES FOR DIRECTORS. SECURITY OWNERSHIP OF MANAGEMENT As of February 27, 1997, the nominees, other directors, and certain executive officers of the Company who are not directors of the Company, as named in the following table, according to information confirmed by them, owned beneficially, directly or indirectly, the number of shares of Common Stock indicated; held options, exercisable within 60 days after that date, to purchase the number of shares of Common Stock indicated pursuant to the Company's Stock and Incentive Plan; and held the number of units indicated pursuant to the Company's Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors and the Company's Annual Retainer Unit Award Plan. As of such date, no such person beneficially owned more than .04 percent of the outstanding Common Stock; all directors and executive officers as a group owned 1,078,159 shares of Common Stock, and options, exercisable within 60 days after that date, to purchase 1,810,332 shares of Common Stock, which together amounted to less than one percent of the outstanding Common Stock. 2
POSITION, PRINCIPAL AMOUNT OF BENEFICIAL NAME AND AGE AS OF THE OCCUPATION, OWNERSHIP OF SHARES OF APRIL 24, 1997 MEETING BUSINESS EXPERIENCE AND COMMON STOCK,(/1/) DATE DIRECTORSHIPS OPTIONS AND UNITS(/2/) -------------------------- -------------------------- ---------------------- NOMINEES FOR DIRECTORS WHOSE TERMS EXPIRE IN 2000 M. Anthony Burns........54 Chairman of the Board Shares: 3,400 since 1985, Chief Execu- Units: 1,604 tive Officer since 1983, President and Director since 1979, of Ryder Sys- tem, Inc., a provider of transportation and logis- tics services. Director of The Chase Manhattan Bank, The Chase Manhattan Corpo- ration and J. C. Penney [PHOTO] Company, Inc. Member of the Business Council, the Business Roundtable and the Business Roundtable's Policy Committee and Chairman of its Health, Welfare and Retirement In- come Task Force. Director of the Company since 1988. Chair of the Company's Ex- ecutive Compensation Com- mittee and Member of its Executive Committee. George B. Harvey........66 Former Chairman, Presi- Shares: 3,130 dent, and Chief Executive Units: 5,029 Officer (from 1983 through 1996) and Director (from 1980 through 1996) of Pitney Bowes Inc., a pro- vider of mailing and of- fice systems and manage- ment and financial servic- [PHOTO] es. Director of the Massa- chusetts Mutual Life In- surance Company, McGraw- Hill, Inc., and Merrill Lynch & Co., Inc. Director of the Company since 1994. Member of the Company's Executive Compensation Committee. Stanley O. Ikenberry....62 President since 1996 of Shares: 6,553 the American Council on Units: 16,200 Education, an independent nonprofit association ded- icated to ensuring high quality education at col- leges and universities throughout the United States. President, from 1979 through July 1995, of the University of Illi- [PHOTO] nois, a comprehensive pub- lic research university with campuses at Urbana- Champaign and Chicago. Di- rector of Harris Bank and Utilicorp United Inc. Chairman of the Board of the Carnegie Foundation for the Advancement of Teaching. Director of the Company since 1982. Chair of the Company's Audit Committee and Member of its Executive Committee.
- --------------------- (/1/) This table does not include the following number of shares held in the names of family members, as to which beneficial ownership is disclaimed: Dr. Ikenberry -- 3,000. (/2/) As of February 27, 1997, these units are held under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors and the Pfizer Inc. Annual Retainer Unit Award Plan. The value of a director's unit account is measured by the price of the Common Stock. The Plans are further described in this Proxy Statement under the sub- heading "Benefit Plans for Non-Employee Directors." 3
POSITION, PRINCIPAL AMOUNT OF BENEFICIAL NAME AND AGE AS OF THE OCCUPATION, OWNERSHIP OF SHARES OF APRIL 24, 1997 MEETING BUSINESS EXPERIENCE AND COMMON STOCK, OPTIONS DATE DIRECTORSHIPS AND UNITS(/1/) -------------------------- -------------------------- ---------------------- NOMINEES FOR DIRECTORS WHOSE TERMS EXPIRE IN 2000 (continued) Harry P. Kamen..........63 Chairman of the Board and Shares: 300 Chief Executive Officer Units: 1,160 since 1993, and President since 1995, of Metropoli- tan Life Insurance Compa- ny. Director of Bethlehem Steel Corporation, the New England Investment Compa- nies, the New England Life Insurance Company and Banco Santander (Spain). [PHOTO] Member of The Business Council of New York State and The Business Round- table Policy Committee, Treasurer of the New York City Partnership and Trustee of the Conference Board and the Committee for Economic Development. Director of the Company since 1996. Member of the Company's Corporate Gover- nance Committee. DIRECTORS WHOSE TERMS EXPIRE IN 1998 W. Don Cornwell.........49 Chairman of the Board and Shares: 50 Chief Executive Officer of Units: 600 Granite Broadcasting Cor- poration since 1988. Di- rector of the National As- sociation of Broadcasters, Hershey Trust Company and Milton Hershey School and CVS Corporation. Trustee [PHOTO] of Occidental College, the Jacob Javits Foundation, Big Brothers/Sisters of New York, and the New York University Medical Center. Director of the Company since February 1997. Mem- ber of the Company's Audit Committee. Felix G. Rohatyn........68 Managing Director of La- Shares: 11,000 zard Freres & Co. LLC, Units: 15,628 Investment Bankers, since 1960. Director of Crown Cork & Seal Company, Inc. and General Instrument Corporation. Former Chair- [PHOTO] man of the Municipal As- sistance Corporation for the City of New York, serving from 1975 to 1993. Director of the Company since 1971. Member of the Company's Executive Com- mittee and Audit Commit- tee.
- --------------------- (/1/) As of February 27, 1997, these units are held under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors and the Pfizer Inc. Annual Retainer Unit Award Plan. The value of a director's unit account is measured by the price of the Common Stock. The Plans are further described in this Proxy Statement under the sub-heading "Benefit Plans for Non-Employee Directors." 4
POSITION, PRINCIPAL AMOUNT OF BENEFICIAL NAME AND AGE AS OF THE OCCUPATION, OWNERSHIP OF SHARES OF APRIL 24, 1997 MEETING BUSINESS EXPERIENCE AND COMMON STOCK,(/1/) DATE DIRECTORSHIPS OPTIONS AND UNITS(/2/) -------------------------- -------------------------- ---------------------- DIRECTORS WHOSE TERMS EXPIRE IN 1998 (continued) Ruth J. Simmons.........51 President of Smith Col- Shares: 0 lege, since 1995, a pri- Units: 602 vate liberal arts college for women located in Northampton, Massachu- setts. Vice Provost of Princeton University from 1992 to 1995. Provost of Spelman College from 1990 [PHOTO] to 1991. Director of Met- ropolitan Life Insurance Company. Trustee of the Institute for Advanced Study and Member of The Conference Board. Director of the Company since Janu- ary 1997. Member of the Company's Audit Committee. William C. Steere, Jr...60 Chairman of the Board of Shares: 217,016 the Company since 1992. Options: 337,600 Chief Executive Officer of the Company since April 1991. President of the Company from 1991 to 1992. Senior Vice President of the Company from 1989 to 1991. Vice President of the Company from 1983 to 1989, and President -- Pharmaceuticals Group from 1986 through January 1991. Director of the Federal Reserve Bank of New York, [PHOTO] Minerals Technologies Inc. and Texaco Inc. Director of Pharmaceutical Research and Manufacturers of Amer- ica (PhRMA), Memorial Sloan-Kettering Cancer Centers, and the New York University Medical Center. Member of the Business Council and the Business Roundtable. Director of the Company since 1987. Chair of the Company's Ex- ecutive Committee. DIRECTORS WHOSE TERMS EXPIRE IN 1999 Michael S. Brown........55 Distinguished Chair in Shares: 0 Biomedical Sciences from Units: 606 1989 and Regental Profes- sor from 1985 at the Uni- versity of Texas South- western Medical Center at Dallas. Co-recipient of [PHOTO] the Nobel Prize in Physi- ology or Medicine in 1985 and the National Medal of Science in 1988. Member of the National Academy of Sciences. Director of Regeneron Pharmaceuticals, Inc. Director of the Com- pany since 1996. Member of the Company's Corporate Goverance Committee.
- --------------------- (/1/) As of February 27, 1997, includes shares credited under the Savings and Investment Plan to, or deferred under the Performance--Contingent Share Award Program by, employees of the Company included in this table. The Plan and the Program are further described in this Proxy Statement under the heading "Employee Benefit and Long-Term Compensation Plans." (/2/) As of February 27, 1997, these units are held under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors and the Pfizer Inc. Annual Retainer Unit Award Plan. The value of a director's unit account is measured by the price of the Common Stock. The Plans are further described in this Proxy Statement under the sub- heading "Benefit Plans for Non-Employee Directors." 5
POSITION, PRINCIPAL AMOUNT OF BENEFICIAL NAME AND AGE AS OF THE OCCUPATION, OWNERSHIP OF SHARES OF APRIL 24, 1997 MEETING BUSINESS EXPERIENCE AND COMMON STOCK,(/1/) DATE DIRECTORSHIPS OPTIONS AND UNITS(/2/) -------------------------- -------------------------- ---------------------- DIRECTORS WHOSE TERMS EXPIRE IN 1999 (continued) Constance J. Horner.....55 Guest Scholar since 1993 Shares: 3,040 at The Brookings Institu- Units: 1,604 tion, an organization de- voted to nonpartisan re- search, education and pub- lication in economics, government and foreign policy and the social sci- ences. Commissioner, U. S. Commission on Civil Rights since 1993. Served at the White House as Assistant to the President and as Director of Presidential [PHOTO] Personnel from August 1991 to January 1993. Deputy Secretary, U. S. Depart- ment of Health and Human Services from 1989 to 1991. Director of the U. S. Office of Personnel Management from 1985 to 1989. Director of Foster Wheeler Corporation, Ingersoll-Rand Company and The Prudential Insurance Co. of America. Director of the Company since 1993. Chair of the Company's Corporate Governance Com- mittee. Thomas G. Labrecque.....58 President and Chief Oper- Shares: 3,400 ating Officer and a Direc- Units: 1,604 tor of The Chase Manhattan Corporation, a bank hold- ing company, and The Chase Manhattan Bank, since April 1996. Chairman and Chief Executive Officer of The Chase Manhattan Corpo- ration and The Chase Man- hattan Bank, N.A. from 1990 through 1996. Presi- dent of The Chase Manhat- tan Corporation and The Chase Manhattan Bank, N.A. [PHOTO] from 1981 to 1990. Member of the Business Council, the President's Export Council, the Council on Competitiveness and the Trilateral Commission. Member and Past President of The Bankers Roundtable and the International Mon- etary Conference. Director of the Company since 1993. Member of the Company's Executive Compensation Committee. Jean-Paul Valles........60 Chairman of Minerals Tech- Shares: 131,530 nologies Inc. ("MTI"), a Options: 66,000 resource and technology- Units: 7,112 based company that devel- ops, produces and markets specialty mineral, miner- al-based and synthetic mineral products, since 1989. Chief Executive Of- ficer of MTI since 1992. Formerly Vice Chairman of the Company from March to October 1992. Executive [PHOTO] Vice President of the Com- pany from 1991 to 1992. Senior Vice President of the Company from 1989 through 1991. Senior Vice President -- Finance of the Company from 1989 to 1990 and Vice President -- Finance of the Company from 1980 to 1989. Direc- tor of the Company since 1980. Director of the Na- tional Association of Man- ufacturers. Member of the Company's Audit Committee.
- -------------------- (/1/) This table does not include the following number of shares held in the names of family members, as to which beneficial ownership is disclaimed: Dr. Valles -- 23,720. (/2/) As of February 27, 1997, these units are held under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors and the Pfizer Inc. Annual Retainer Unit Award Plan. The value of a director's unit account is measured by the price of the Common Stock. The Plans are further described in this Proxy Statement under the sub- heading "Benefit Plans for Non-Employee Directors." 6
POSITION, PRINCIPAL AMOUNT OF BENEFICIAL NAME AND AGE AS OF THE OCCUPATION, OWNERSHIP OF SHARES OF APRIL 24, 1997 MEETING BUSINESS EXPERIENCE AND COMMON STOCK,(/1/) DATE DIRECTORSHIPS OPTIONS AND UNITS -------------------------- -------------------------- ---------------------- NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS Henry A. McKinnell, Jr..54 Executive Vice President Shares: 49,547 of the Company since 1992 Options: 163,360 and President -- Pfizer Pharmaceuticals Group since January 1, 1997. In addition, Dr. McKinnell has been responsible for the Company's Consumer Health Care Group and Cor- porate Strategic Planning and Policy since 1995. He was also responsible for the Company's Hospital Products Group from 1992 to 1995 and the Company's Corporate Finance Division as the Company's Chief Fi- nancial Officer from 1990 through 1996. Dr. McKin- nell was elected an execu- tive officer of the Com- pany in 1986. Director of Aviall, Inc. and John Wi- ley & Sons, Inc. Robert Neimeth..........61 Executive Vice President Shares: 113,031 of the Company from 1992 Options: 240,778 through 1996;(/2/) Presi- dent of the Company's International Pharmaceuti- cals Group and responsible for the Company's Animal Health Group from 1992 through 1996. Also respon- sible for the Hospital Products Group from 1995 through 1996. Mr. Neimeth served as an executive of- ficer of the Company from 1983 through 1996. John F. Niblack.........58 Executive Vice President Shares: 48,699 of the Company since 1993. Options: 94,094 Responsible for the Company's Central Research Division, Animal Health Group, and Licensing and Development and Quality Control Divisions. Dr. Niblack was elected an ex- ecutive officer of the Company in 1990 when he became Vice President-- Central Research. Paul S. Miller..........57 Senior Vice President; Shares: 48,925 General Counsel of the Options: 75,800 Company since 1992. Mr. Miller was elected an ex- ecutive officer of the Company in 1986 when he became Vice President; General Counsel.
- --------------------- (/1/) As of February 27, 1997, includes shares credited under the Savings and Investment Plan to, or deferred under the Performance--Contingent Share Award Program by, employees of the Company included in this table. The Plan and the Program are further described in this Proxy Statement under the heading "Employee Benefit and Long-Term Compensation Plans." (/2/) Mr. Neimeth retired as an employee and resigned as an officer of the Company as of January 1, 1997. 7 COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth information concerning the compensation during the last three fiscal years of the Company's Chief Executive Officer and its next four most highly compensated executive officers serving at the end of 1996 (hereafter referred to collectively as the "Named Executive Officers") for all services rendered by them to the Company. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION -------------------------------------- ------------------------------------- AWARDS PAYMENTS ---------------------- ------------ OTHER RESTRICTED SECURITIES ANNUAL STOCK UNDERLYING LTIP ALL OTHER NAME AND SALARY BONUS(/1/) COMPENSATION(/2/) AWARDS(/3/) OPTIONS(/4/)PAYOUTS(/5/) COMPENSATION(/6/) RINCIPALPPOSITION YEAR ($) ($) ($) ($) (#) ($) ($) - ------------------ ---- --------- ---------- ----------------- ----------- ---------- ------------ ----------------- W. C. Steere, Jr. ........... 1996 1,190,000 2,300,700 20,747 0 150,000 3,815,000 131,053 Chairman/CEO " " " ........ 1995 1,030,000 2,060,000 24,560 0 150,000 2,036,250 119,015 " " " ........ 1994 1,016,667 1,925,000 20,511 0 78,600 641,000 73,253 - ------------------------------------------------------------------------------- H. McKinnell, Jr.. 1996 704,000 802,600 24,144 0 60,000 1,430,625 57,294 Executive V.P. " " " ........ 1995 608,000 720,000 17,350 0 60,000 733,050 45,373 H. McKinnell, Jr.. 1994 528,333 521,000 23,749 0 26,630 230,760 32,865 Executive V.P. & CFO; Presi- dent--HPG - ------------------------------------------------------------------------------- R. Neimeth...... 1996 645,000 662,300 15,366 0 0 1,201,725 167,366 Executive V.P.; President-- International Pharmaceuticals Group " " " ........ 1995 574,917 626,000 14,970 0 50,000 610,875 41,120 " " " ........ 1994 497,500 449,000 14,141 0 21,490 192,300 29,803 - ------------------------------------------------------------------------------- J. F. Niblack... 1996 640,000 645,500 4,935 0 50,000 1,201,725 50,457 Executive V.P. J.F. Niblack.... 1995 569,833 615,000 4,123 0 50,000 610,875 40,204 Executive V.P.--Research and Development " " " ........ 1994 515,000 432,000 3,701 0 21,450 192,300 29,673 - ------------------------------------------------------------------------------- P. S. Miller.... 1996 540,000 464,100 17,912 0 40,000 858,375 35,834 Senior V.P.; General Counsel " " " ........ 1995 456,250 350,000 12,821 0 35,000 407,250 30,427 " " " ........ 1994 454,167 300,000 4,749 81,250 16,350 128,200 27,240
- -------- (/1/) The amounts shown in this column for 1996 constitute the Annual Incentive Awards made to each officer based on the Board's evaluation of each officer's performance. These awards are discussed in further detail in the Executive Compensation Committee Report on page 11 of this Proxy Statement. (footnotes continued on next page) 8 (footnotes continued from prior page) (/2/) The amounts shown in this column represent tax payments made by the Company on behalf of the Named Executive Officers relating to their use of Company automobiles and for personal financial counseling. These payments in 1996 were as follows: relating to use of the Company automobiles -- Mr. Steere -- $15,830; Dr. McKinnell -- $18,390; Mr. Neimeth -- $10,664; Dr. Niblack -- $0; and Mr. Miller-- $12,727; relating to receipt of personal financial counseling -- Mr. Steere -- $4,917; Dr. McKinnell-- $5,754; Mr. Neimeth-- $4,702; Dr. Niblack -- $4,935; and Mr. Miller -- $5,185. (/3/) The amount shown in this column represents the dollar value on the date of grant (February 17, 1995) of 2,000 restricted shares of the Company's Common Stock awarded as part of Mr. Miller's 1994 compensation. These shares of restricted stock vested in equal portions on February 17, 1996 and February 17, 1997. The market value of the 1,000 shares that vested on February 17, 1997, as of December 31, 1996 using a market value of $83 per share, was $83,000. As part of 1993 compensation, restricted shares of the Company's Common Stock were awarded to each of the Named Executive Officers. All such shares of restricted stock were subject to the following vesting schedule: one-third on February 17, 1995, one-third on February 17, 1996, and one-third on February 17, 1997. The number of shares that vested on February 17, 1997, and the value of those shares as of December 31, 1996 using a market value of $83 per share, were as follows: Mr. Steere-- 6,928 shares, $575,024; Dr. McKinnell -- 1,560 shares, $129,480; Mr. Neimeth -- N/A (see note 6 below); Dr. Niblack -- 866 shares, $71,878; and Mr. Miller -- 866 shares, $71,878. Dividends were paid during the restricted period on all restricted shares. (/4/) The 1994 amounts shown in this column have not been adjusted for the Company's June 1995 two-for-one stock split. (/5/) The 1996 amounts shown in this column represent the dollar market value of shares of the Company's Common Stock on February 20, 1997 (the payment date) earned by the Named Executive Officers pursuant to the Company's Performance-Contingent Share Award Program using the closing sales price of the Company's Common Stock ($95.375) on the New York Stock Exchange on that date. The number of Performance-Contingent Shares awarded to each executive officer was as follows: Mr. Steere -- 40,000; Dr. McKinnell -- 15,000; Mr. Neimeth -- 12,600; Dr. Niblack -- 12,600; and Mr. Miller -- 9,000. This Program is discussed in greater detail in the Executive Compensation Committee Report on page 11 of this Proxy Statement and also under the heading "Employee Benefit and Long-Term Compensation Plans," which begins on page 17. Receipt of these awards was deferred at each executive's election in accordance with the deferral feature of the Performance-Contingent Share Award Program, and such shares are held in trust. (/6/) The amounts shown in this column constitute Company matching funds under the Company's Savings and Investment Plan (a retirement savings plan) and related supplemental plan. These plans are described in this Proxy Statement under the heading "Employee Benefit and Long-Term Compensation Plans," which begins on page 17. In the case of Mr. Neimeth, the 1996 amount also includes $116,468 paid to Mr. Neimeth in consideration of the forfeiture, upon his retirement on January 1, 1997, of 1,214 restricted shares of the Company's Common Stock, awarded as part of his 1993 compensation. For purposes of this cash payment, Mr. Neimeth's restricted shares were valued using the average of the high and low trading price of the Company's Common Stock ($95.9375) on the New York Stock Exchange on February 14, 1997. OPTION GRANTS IN 1996 The following table shows all options to purchase the Company's Common Stock granted to each of the Named Executive Officers of the Company in 1996 and the potential value of such grants at stock price appreciation rates of 0%, 5% and 10%, compounded annually over the maximum ten-year term of the options. Also shown is the potential gain of all outstanding shares of Common Stock held by the Company's shareholders as of December 31, 1996 using the same base price and appreciation rates and compounded over the same ten-year period. The 5% and 10% rates of appreciation are required to be disclosed by the rules of the Securities and Exchange Commission ("SEC") and are not intended to forecast possible future actual appreciation, if any, in the Company's stock prices. The Company did not use an alternative present value formula permitted by the rules of the SEC because, in the Company's view, potential future unknown or volatile factors result in there being no such formula that can determine with reasonable accuracy the present value of such option grants.
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM ($) -------------------------------------------------------------- --------------------------------- PERCENT OF NUMBER OF SECURITIES TOTAL OPTIONS EXERCISE OR UNDERLYING OPTIONS GRANTED TO BASE PRICE NAME GRANTED (#)(/1/) EMPLOYEES IN ($/SH)(/2/) EXPIRATION DATE 0% 5% 10% - ---- -------------------- FISCAL YEAR ----------- --------------- --- -------------- -------------- ------------- W. C. Steere, Jr........ 150,000 1.59 74.50 8/21/06 0 7,027,897 17,810,072 H. McKinnell, Jr........ 60,000 0.64 74.50 8/21/06 0 2,811,159 7,124,029 R. Neimeth.............. N/A N/A N/A N/A N/A N/A N/A J. F. Niblack........... 50,000 0.53 74.50 8/21/06 0 2,342,632 5,936,691 P. S. Miller............ 40,000 0.42 74.50 8/21/06 0 1,874,106 4,749,353 Potential Gain for all Shareholders at Assumed Appreciation Rates 0 30,233,745,773 76,618,247,820
- -------- (/1/) Option grants for Named Executive Officers who received grants in 1996 consisted of Key-Employee Grants that are exercisable as follows: One- fifth each on 8/22/97, 8/22/98, 8/22/99, 8/22/00 and 8/22/01. (/2/) The exercise price for all stock option grants shown in this column is the market price of the Company's Common Stock on the date of the grant. 9 AGGREGATED OPTION EXERCISES IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996 The following table provides information as to options exercised by each of the Named Executive Officers in 1996, and the value of the remaining options held by each such executive officer at year-end, measured using the mean of the high and the low trading price ($83.9375) of the Company's Common Stock on December 31, 1996.
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS HELD AT 12/31/96 AT 12/31/96 ------------------------- ------------------------- VALUE SHARES ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE NAME ON EXERCISE (#) ($) (#) (#) ($) ($) - ---- --------------- --------- ----------- ------------- ----------- ------------- W. C. Steere, Jr........ 127,244 5,944,306 388,536 455,000 18,117,899 14,881,563 H. McKinnell, Jr........ 13,356 737,124 212,608 168,000 11,104,588 5,307,000 R. Neimeth.............. 55,746 3,330,859 169,278 71,500 8,523,461 2,983,281 J. F. Niblack........... 53,326 2,350,489 94,094 141,500 4,148,899 4,503,906 P. S. Miller............ 30,000 1,193,600 90,800 113,000 4,128,500 3,630,938
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1996 The following table provides information concerning the participation of the Named Executive Officers in a long-term compensation plan called the Performance-Contingent Share Award Program pursuant to which they were awarded the right to earn shares of the Company's Common Stock ("Performance- Contingent Shares"). Actual payouts of these Performance-Contingent Shares, if any, will be determined in accordance with a non-discretionary formula which measures the Company's performance over a five-year period using certain performance goals that were determined by the Company's Executive Compensation Committee and approved by the Board. The formula is comprised of two performance criteria -- total shareholder return and growth in earnings per share -- over the performance period relative to the industry peer group ("Peer Group") referred to in the Performance Graph shown on page 16 of this Proxy Statement. To the extent that the Company's performance exceeds the low end of the range of the Peer Group's performance for either or both of the performance criteria, a varying amount of shares up to the maximum will be earned. Details regarding these awards are discussed in the Executive Compensation Committee Report beginning on page 11 of this Proxy Statement.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS ----------------------------- PERFORMANCE PERIOD (OR OTHER PERIOD UNTIL THRESHOLD(/2/) TARGET MAXIMUM NAME NUMBER OF SHARES(/1/) MATURATION OR PAYOUT) (#) (#) (#) - ---- --------------------- ---------------------- -------------- ------ ------- W. C. Steere, Jr........ * 1/1/97-12/31/01 5,000 30,000 50,000 H. McKinnell, Jr........ * 1/1/97-12/31/01 2,500 15,000 25,000 R. Neimeth.............. None N/A N/A N/A N/A J. F. Niblack........... * 1/1/97-12/31/01 2,100 12,600 21,000 P. S. Miller............ * 1/1/97-12/31/01 1,500 9,000 15,000
- ---------------- (/1/) The actual number of Performance-Contingent Shares that will be paid out at the end of the applicable period, if any, is not yet determinable because the shares earned by the Named Executive Officers will be based upon the Company's future performance compared to the future performance of the Peer Group. (/2/) If the minimum performance of the Company in both performance measures is at the low end of the range relative to the Peer Group, then no Performance-Contingent Shares will be earned by the Named Executive Officers. To the extent that the Company's performance exceeds the low end of the range of Peer Group performance, the minimum shares that will be awarded is shown in the "Threshold" column. 10 EXECUTIVE COMPENSATION COMMITTEE REPORT The last section of this report is a glossary containing definitions of the capitalized terms used in this report, unless such terms previously have been defined in this Proxy Statement. OVERVIEW OF COMPENSATION PHILOSOPHY AND PROGRAM The Committee establishes the salaries and other compensation of the executive officers of the Company, including its Chairman and CEO and other Named Executive Officers. The Committee consists entirely of independent directors who are not officers or employees of the Company. The Company's executive compensation program is designed to: . retain executive officers by paying them competitively, motivate them to contribute to the Company's success, and reward them for their performance; . link a substantial part of each executive officer's compensation to the performance of both the Company and the individual executive officer; and . encourage ownership of Company common stock by executive officers. As discussed below, the program consists of, and is intended to balance, three elements--base salaries, Annual Incentive Awards and long-term incentive compensation. Salaries are based on the Committee's evaluation of individual job performance and an assessment of the salaries and total compensation mix paid by the Company's Peer Group to executive officers holding equivalent positions. Annual Incentive Awards are based on an evaluation of both individual and Company performance against quantitative measures. Long-term incentive awards, which consist of stock options and Performance-Contingent Share Awards, are designed to insure that incentive compensation is linked to the long-term performance of the Company and its Common Stock. In addition, the Named Executive Officers and other members of senior management are expected to own a minimum amount of Common Stock under the Company's stock ownership program, which is intended to further tie the interests of management to the interests of shareholders. The ownership requirements were increased in 1996 and coverage under the program was expanded to include additional executives. EVALUATION OF EXECUTIVE PERFORMANCE Except as is otherwise specifically noted in this report, the Committee does not rely solely on predetermined formulae or a limited set of criteria when it evaluates the performance of the Chairman and CEO and the Company's other executive officers, including the Named Executive Officers. Instead, the Committee considers management's overall accomplishments, as well as those of the individual executives, the Company's financial performance, and other criteria discussed below. In 1996 as in 1995, management continued to effectively implement its long-term strategies, which included: improving operating margins, continuing the implementation of reengineering projects and restructuring programs, integrating key acquisitions into its business segments, divesting non-core businesses, maintaining the flow of new product candidates in the Company's research pipeline and augmenting the Company's research and marketing abilities with key external collaborations. The Committee believes that the success of these strategies is evidenced by the Company's strong financial performance from ongoing operations in 1996, the Company's operating margins, the breadth of the Company's current product portfolio which resulted in considerable sales growth in 1996, the acceptance of the Company's products in the current marketplace, and the number of promising product candidates under development by the Company. The Committee also considered management's responses to the changes occurring within the U. S. marketplace for health care products and services. The impact of the evolution to managed care in the health care market continues to be of particular importance to the Company and its shareholders. It is the Committee's opinion that, in this uncertain environment, management continues to develop effectively and implement strategies that position the Company to remain a leader in the health care industry. In addition, Mr. Steere and his senior management team are undertaking significant actions to communicate the Company's position on health care issues to its shareholders, the public and the government. The success of these efforts and their 11 benefits to the Company cannot, of course, be quantifiably measured, but the Committee believes they are vital to the Company's continuing success. TOTAL COMPENSATION Target total compensation levels of Company executives are established with consideration given to an analysis of competitive market total compensation. The total compensation package for each executive is then broken down into the three basic components indicated above and discussed in more detail below. In recent years, the Committee has been directing a shift in the mix of the Company's executive compensation towards incentive compensation, with proportionately lesser emphasis on salaries. This strategy is intended to increase the performance orientation of the Company's executive compensation. Consequently, salary levels of the Company's executives have been increasing more slowly than other elements of their total compensation. The Committee intends to continue this emphasis in 1997. Based on available public data and the analysis of its outside compensation advisors, the total compensation of Mr. Steere and the other Named Executive Officers generally fell in the upper quartile of total compensation paid by the Peer Group to their executives holding equivalent positions, but the Committee believes that position was consistent with the outstanding performance of the Company compared to the Peer Group. SALARY In setting salaries, the Committee did not use a predetermined formula. Instead, the 1996 salaries of the Chairman and CEO and the other executive officers were based on the Committee's evaluation of each officer's individual job performance, an assessment of the Company's performance, and a desire to shift the mix of compensation towards performance-based categories, and took into consideration salaries paid by the Peer Group to executive officers holding equivalent positions. Mr. Steere's salary in 1996 totaled $1,190,000. For 1997, it has been set at 1,316,500 which represents a 10.6% increase from his 1996 salary. The 1996 salaries of the other Named Executive Officers are shown in the "Salary" column of the Summary Compensation Table on page 8 of this Proxy Statement. Due to the retirement of the Company's Vice Chairman at the end of 1995, the management responsibilities of that position were redistributed, and other responsibilities were realigned, among the other Named Executive Officers. As a result, approximately one-half of the increase in aggregate salary from 1995 to 1996 for those individuals represented a promotional adjustment in recognition of those additional responsibilities, with the remainder of the increase in salary representing merit adjustments based on performance. ANNUAL INCENTIVE AWARDS The second element of the executive compensation program is the Annual Incentive Award Program. For Mr. Steere, the Annual Incentive Award can range from 0 percent to 200 percent of his salary, depending upon the Board's evaluation of Mr. Steere's performance. In evaluating his performance, the Committee used the performance indicators referred to above under "Evaluation of Executive Performance" and other confidential qualitative and quantitative performance indicators that were recommended by Mr. Steere, adopted by the Committee and confirmed by the Board in February 1996. After reviewing actual results in 1996 against the performance indicators, the Committee approved, and the Board confirmed, an Annual Incentive Award for 1996 to Mr. Steere of $2,300,700. The 1996 Annual Incentive Awards for other executive officers were based, in part, on the same performance indicators used to determine Mr. Steere's annual award. In addition, the executive officers were required to achieve certain individual goals relating to their positions, plus confidential goals contained in the operating plans of the businesses for which they are responsible, as well as Company performance criteria. The Annual Incentive Awards for 1996 paid to each of the Named Executive Officers are shown in the "Bonus" column of the Summary Compensation Table on page 8 of this Proxy Statement. Included in this Proxy Statement is a proposal to approve a plan which would establish objective criteria for determining the Annual Incentive Awards to qualify them for a deduction under the Internal Revenue Code. 12 LONG-TERM INCENTIVE AWARDS In 1996, Mr. Steere and the other executive officers participated in the Company's long-term incentive compensation program. As discussed below, the program consisted of stock option grants made under the Company's Stock and Incentive Plan, and awards made under the Company's Performance-Contingent Share Award Program. In 1996, in respect of Mr. Neimeth's retirement, the Committee determined to make a cash payment to Mr. Neimeth equal to the value of 1,214 restricted shares of the Company's Common Stock, awarded as part of his 1993 compensation, which he forfeited by reason of his retirement. By his retirement, Mr. Neimeth also gave up additional Common Stock awards made to him in past years under the Company's Performance-Contingent Share Award Program. The number of shares he would have earned from those contingent awards will not be determined until 1998, 1999 and 2000. In respect of his retirement, the Committee has agreed to pay to Mr. Neimeth the pro-rated cash value of those shares after their number has been determined. (a) Stock Options The Committee granted Key-Employee Stock Options to each executive officer in 1996 under the Company's Stock and Incentive Plan. In selecting the size of the Key-Employee Stock Option grants, the Committee reviewed competitive data relating to similar grants made by the Peer Group to executive officers holding comparable positions at those companies, the individual stock ownership of the Company's executive officers and the interrelationship with the 1996 Performance-Contingent Share Awards made to such officers. Based upon this data, Mr. Steere was awarded Key-Employee Stock Options for 150,000 shares of Common Stock and the other Named Executive Officers were awarded the number of Key-Employee Stock Options shown in the table headed "Option Grants in 1996" on page 9 of this Proxy Statement. The Key-Employee Stock Options of the Named Executive Officers and all other executive officers will vest over a five-year period, with 20 percent of the options vesting each year. Key-Employee Stock Options granted to Mr. Steere and the other Named Executive Officers, when combined with the value of the Performance-Contingent Shares that these officers may potentially earn, are targeted by the Committee to fall at the median range of the value of long-term incentives granted by the Peer Group to executive officers holding comparable positions at those companies, assuming that the Company's performance also falls at the median of the Peer Group's performance. If the Company's actual performance exceeds the median performance of the Peer Group, however, the total value of long-term incentive awards (which would include Performance-Contingent Share awards discussed below) will be higher than the median awards made by the Peer Group. Similarly, if the Company's performance falls below the median performance of the Peer Group, the total value of the long-term incentive awards would fall below the median awards of the Peer Group. (b) Performance-Contingent Share Awards The Committee also made awards to Mr. Steere and other executive officers in 1996, including the Named Executive Officers, under the Company's Performance- Contingent Share Award Program (the "Program"). The potential size of each award, including the maximum number of shares of Common Stock that may be earned by each executive officer, was established by the Committee after examining similar awards made by the Peer Group to executive officers holding comparable positions at those companies. Payments pursuant to the awards are determined by using a non-discretionary formula comprised of two performance criteria measured over the applicable performance period: total shareholder return and earnings per share growth over the performance period relative to the performance of the Peer Group. The performance formula weighs each criterion equally. To the extent that the Company's performance exceeds the low end of the range of the performance of the Peer Group in either or both of the performance criteria, a varying amount of shares of Common Stock up to the maximum will be earned. Except for the 1993 Program awards, which provide for shorter performance periods, the performance period for all awards made under the Program is five years. Based on the Company's performance during the 13 1993-96 performance period, Mr. Steere and the other Named Executive Officers earned 89,200 Performance-Contingent Shares under the 1993 Program award formula previously approved by the Committee. The total number of such shares earned by Mr. Steere was 40,000. The total number of shares earned by each of the Named Executive Officers is shown on page 9 of this Proxy Statement in footnote 5 to the "LTIP Payouts" column of the Summary Compensation Table. In connection with the 1996 Program award for Mr. Steere, the number of Performance-Contingent Shares that he may earn at the end of the five-year performance period (1/1/97-12/31/2001) will range from 0 to 50,000. As for the other Named Executive Officers, reflecting their current responsibilities, the number of Performance-Contingent Shares that Dr. McKinnell may earn at the end of the same five-year performance period will range from 0 to 25,000, the number of such shares that Dr. Niblack may earn will range from 0 to 21,000 and the number of shares that Mr. Miller may earn will range from 0 to 15,000. The maximum number of Performance-Contingent Shares that may be earned by Mr. Steere and the other Named Executive Officers under the Program is shown in the table headed "Long-Term Incentive Plan -- Awards in 1996" on page 10 of this Proxy Statement. TAX POLICY In 1993, the Internal Revenue Code ("Code") was amended with respect to the tax deductibility of executive compensation. Under the Code, publicly-held companies such as the Company may not deduct compensation paid to certain executive officers to the extent that such compensation exceeds $1 million in any one year for each such officer. The law, however, includes an exception for "performance-based" compensation, including stock options granted under a stock option plan that has been previously approved by shareholders, provided that such options are not issued below the fair market value of the stock on the date of the grant. The Company's Stock and Incentive Plan meets these requirements so stock options awarded to the Company's executive officers in 1996 are eligible for the performance-based compensation exception to the deduction limitation. Compensation other than stock options, however, must meet other requirements in order to qualify as tax deductible "performance- based" compensation. Under the Code, compensation is deemed "performance-based," and not subject to the $1 million deduction limitation, if it meets the following requirements: (1) it is paid solely on account of the attainment of one or more preestablished objective performance goals; (2) the performance goals under which the compensation is to be paid are established by a committee comprised solely of two or more outside directors who satisfy certain requirements; (3) the committee certifies in writing prior to payment of the compensation that the performance goals and any other material terms of payment were, in fact, satisfied; and (4) the material terms of the performance goals under which the compensation is to be paid has been approved by the affirmative vote of a majority of shares voting at a meeting of the shareholders of the Company. The Performance-Contingent Share Awards granted in 1996 to Mr. Steere and the other executive officers qualify as "performance-based" compensation under the requirements of the Code as set forth above. Accordingly, the eventual payouts of these awards will be fully deductible by the Company. The Annual Incentive Awards granted to the Company's executive officers in 1996 are not eligible for the performance-based exception under the Code because they were awarded based, in part, on certain goals (such as responding to changes occurring within the U. S. health care marketplace) and performance evaluations that would not be deemed solely "objective" as required for deductions by the tax law. As noted above, included in this Proxy Statement is a proposal to approve a plan which would establish objective criteria for determining the Annual Incentive Awards. If approved by shareholders, future Annual Incentive Awards will be deductible. STOCK OWNERSHIP PROGRAM A stock ownership program was adopted by the Board upon this Committee's recommendation in August 1993. Under the guidelines of this program, employee directors (currently Mr. Steere) were expected to own by December 1998 Company Common Stock equal in value to at least three times their annual salaries. The program 14 also extends to the other Named Executive Officers and certain other executive officers who, as of the same time, were expected to own Company Common Stock equal in value to at least two times their annual salaries. All other executive officers were expected to own stock with a value equivalent to their annual salaries. The Committee has determined that, as of the end of 1996, full compliance had already been achieved by all executive officers, except three officers who were recently elected to their positions. These three officers are making good progress toward their goals and are on schedule. The Committee decided to increase the existing guidelines, effective January 1, 1997, and to expand coverage under the program to additional executives who are expected to own a specific amount of stock. Employee directors (Mr. Steere) are now required to own shares equivalent in value to at least five times their annual salary. The other Named Executive Officers and other members of the Corporate Management Committee are expected to own Company Common Stock equal in value to at least four times their annual salary. Other elected officers are expected to own three times their annual salary, and all other participants in the Performance-Contingent Share Award Program are expected to own an amount equal in value to their annual salary. Under the program, "stock ownership" is defined as stock owned by the executive officer directly or through the Company's Savings and Investment Plan or awarded pursuant to the Performance-Contingent Share Award program and subsequently deferred. While the Named Executive Officers and other participants in this program have been given five years to achieve compliance with this program, the Committee monitors the participation of the executive officers and expects that incremental progress will be made each year by each officer during the five-year phase-in period. GLOSSARY Annual Incentive Awards. These awards are annual cash payments which may be awarded by the Committee to executive officers on the basis of both Company performance and individual performance over the prior year. Qualitative and quantitative performance indicators used to serve as the basis for an assessment of the performance of the executive officers are established by the Committee (and approved by the Board in the case of the CEO) at the beginning of the performance period. Committee. The Executive Compensation Committee of the Board of Directors. Key-Employee Stock Options. Stock options granted under the Company's Stock and Incentive Plan to a select group of management employees in the U. S. and overseas who are considered to have a substantial impact on the Company's operations. Named Executive Officers. This refers to the five most highly compensated executive officers of the Company -- Mr. Steere, Drs. McKinnell and Niblack, and Messrs. Neimeth and Miller. Peer Group. This group consists of the eleven health care companies referred to in the Performance Graph that follows this report. Performance-Contingent Shares. These are shares of Pfizer Inc. Common Stock that may be awarded by the Committee to the Named Executive Officers and certain other employees of the Company under the Performance-Contingent Share Award Program. For shares to be issued to any such officer or employee, however, certain preestablished Company performance criteria must be met over a preestablished performance period. This program is described in further detail on page 18 of this Proxy Statement. Stock and Incentive Plan. This refers to the Pfizer Inc. Stock and Incentive Plan which is described in further detail on page 19 of this Proxy Statement. THE EXECUTIVE COMPENSATION COMMITTEE: Mr. Burns (Chair) Mr. Harvey Mr. Labrecque 15 PERFORMANCE GRAPH Set forth below is a graph comparing the total shareholder returns (assuming reinvestment of dividends) of the Company, the Standard & Poor's ("S&P") 500 Composite Stock Index ("S&P 500"), and an industry peer index compiled by the Company that consists of the following companies: Abbott Laboratories, American Home Products Corp., Baxter International Inc., Bristol-Myers Squibb Company, Colgate-Palmolive Co., Johnson & Johnson, Eli Lilly and Company, Merck and Co., Inc., Pharmacia & Upjohn Inc., Schering-Plough Corp., and Warner-Lambert Company (together the "Peer Group"). The Peer Group consolidation was done on a weighted average basis (market capitalization basis, adjusted at the beginning of each year). The graph assumes $100 invested at the per share closing price of the Common Stock on the New York Stock Exchange Composite Tape on December 31, 1991 in the Company and each of the other indices. Cumulative Total Returns* 1991 through 1996 [Line Graph] 1991 1992 1993 1994 1995 1996 - ----------------------------------------------------------------------- Pfizer 100 88.0 86.0 99.2 165.4 221.5 - ----------------------------------------------------------------------- Peer Group 100 84.5 79.1 89.5 140.7 175.5 - ----------------------------------------------------------------------- S&P 500 100 107.6 118.4 120.0 165.1 203.0 - ----------------------------------------------------------------------- * Based on Share Price Appreciation and Assuming Reinvestment of Dividends. 16 EMPLOYEE BENEFIT AND LONG-TERM COMPENSATION PLANS RETIREMENT ANNUITY PLAN The Retirement Annuity Plan (the "Retirement Plan") is a funded, tax qualified, noncontributory defined benefit pension plan that covers certain employees, including the Named Executive Officers. Benefits under the Retirement Plan are based upon the employee's earnings during service with the Company and/or its "Associate Companies" and are payable after retirement generally in the form of an annuity. Earnings covered by the Retirement Plan are base pay, bonus, long-term incentive pay and vested shares of restricted stock. The amount of annual earnings that may be considered in calculating benefits under the Retirement Plan is limited by law. For 1997, the current annual limitation is $160,000. The value of benefits, such as stock options, is not considered earnings for the purposes of the Retirement Plan. Benefits under the Company's Retirement Plan are calculated as an annuity equal to the greater of (i) 1.4 percent of the average earnings for the five highest consecutive calendar years prior to January 1, 1995 multiplied by years of service, or (ii) 1.75 percent of such earnings less 1.5 percent of Primary Social Security benefits multiplied by years of service. Actual earnings are used in benefit calculations for the period after December 31, 1994 under both formulas. The total years of service under these formulas cannot exceed 35 years. Contributions to the Retirement Plan are made entirely by the Company and are paid into a trust fund from which the benefits of participants will be paid. In accordance with the requirements of the Code, the Retirement Plan currently limits pensions paid under the Plan to an annual maximum of $125,000, payable at age 65. The Company also has an unfunded supplemental plan that provides that the Company will pay out of its general assets an amount substantially equal to the difference between the amount that would have been payable under the Retirement Plan, in the absence of legislation limiting pension benefits and earnings that may be considered in calculating pension benefits, and the amount actually payable under the Retirement Plan. In certain circumstances, the Company is obligated to fund trusts established to secure its obligations to make payments under the supplemental plan. PENSION PLAN TABLE The following table shows, for the final compensation and years of service indicated, the annual pension benefit, payable commencing upon retirement at age 65 under the present benefit formula of the Retirement Plan and its related supplemental plan. The estimated retirement benefits have been computed on the assumptions that (i) payments will be made in the form of a 50 percent joint and survivor annuity (and both the Plan member and spouse are age 65), (ii) during the period of employment the employee received annual compensation increases of six percent and (iii) the employee retired as of December 31, 1996.
YEARS OF SERVICE ------------------------------------------------------ REMUNERATION 15 20 25 30 35 - ------------ ---------- ---------- ---------- ---------- ---------- $ 500,000............... $ 91,931 $ 121,663 $ 151,395 $ 181,127 $ 210,859 1,000,000............... 186,840 247,297 307,753 368,210 428,666 1,500,000............... 281,749 372,930 464,111 555,292 646,473 2,000,000............... 376,658 498,563 620,469 742,374 864,279 3,500,000............... 661,385 875,463 1,089,542 1,303,620 1,517,699 5,000,000............... 946,111 1,252,363 1,558,615 1,864,867 2,171,119 6,500,000............... 1,230,838 1,629,263 2,027,688 2,426,113 2,824,538 8,000,000............... 1,515,565 2,006,163 2,496,761 2,987,360 3,477,958 9,500,000............... 1,800,291 2,383,063 2,965,834 3,548,606 4,131,378
17 As of December 31, 1996, the period of service covered by the Retirement Plan and the supplemental plan are, for Mr. Steere -- 35 years; Dr. McKinnell -- 25 years, 10 months; Mr. Neimeth -- 34 years, 4 months; Dr. Niblack --29 years, 1 month; and Mr. Miller -- 25 years, 11 months. Compensation covered by the Retirement Plan and its related supplemental plan for the Named Executive Officers equals the amounts set forth in the 1996 "Salary," "Bonus" and "LTIP Payouts" columns of the Summary Compensation Table and the value of the restricted stock that vested on February 17, 1996 as described in Footnote 3 to that table. The basis upon which benefits are calculated under the Company's Retirement Plan is described in the "Retirement Annuity Plan" section on page 17 of this Proxy Statement. PERFORMANCE-CONTINGENT SHARE AWARD PROGRAM Under the Performance-Contingent Share Award Program, participating employees may be granted an opportunity by the Company's Executive Compensation Committee to earn shares of Common Stock, provided certain performance criteria are met. The performance formula is nondiscretionary and is comprised of two performance criteria -- total shareholder return (including reinvestment of dividends) and growth in earnings per share (as reported) -- measured point-to-point over the applicable performance period relative to the performance of the Peer Group as defined in the "Performance Graph" section of this Proxy Statement. The 200 most highly compensated employees of the Company are eligible to be granted the opportunity by the Executive Compensation Committee to earn Performance-Contingent Shares. Except for awards made in 1993, all awards granted under the Program are based upon a five-year performance period. Awards earned by the Named Executive Officers under this Program for the performance period ended December 31, 1996 are shown in the "LTIP Payouts ($)" column of the Summary Compensation Table on page 8 of this Proxy Statement. SAVINGS AND INVESTMENT PLAN Under the terms of the Savings and Investment Plan (the "Savings Plan"), participating employees may contribute up to 15 percent of regular earnings into their Savings Plan accounts. A participating employee may elect to make after-tax contributions, before-tax contributions, or both after-tax and before-tax contributions. In addition, under the Savings Plan, the Company contributes an amount equal to one dollar for each dollar contributed by participating employees up to the first two percent of their regular earnings and fifty cents for each additional dollar contributed by employees on the next four percent of their regular earnings. The Company's matching contributions are invested solely in the Company's Common Stock. In accordance with the requirements of the Code, the Savings Plan currently limits the additions that can be made to a participating employee's account to $30,000 per year. The term "additions" includes Company matching contributions, before-tax contributions made by the Company at the request of the participating employee under Section 401(k) of the Code, and employee after-tax contributions. Of those additions, the maximum before-tax contribution is limited, for January 1, 1994 through December 31, 1995, to $9,240 per year. Effective January 1, 1996, this limit increased to $9,500 per year. In addition, no more than $160,000 of annual compensation may be taken into account in computing benefits under the Savings Plan, in accordance with the Code. The Company has a supplemental plan to pay out of general assets an amount substantially equal to the difference between the amount that, in the absence of legislation limiting such additions and the $160,000 limitation on earnings, would have been allocated to a participating employee's account as employee before-tax contributions, Company matching contributions and the amount actually allocated under the Savings Plan. Employees affected by these limitations who make limited deferrals of income under this supplemental plan receive credit for such deferrals towards their retirement benefit under the Company's retirement plans. In certain circumstances, the Company is obligated to fund trusts established to secure its obligations to make payments under the supplemental plan. Amounts deferred, if any, under the Savings Plan and the related supplemental plan in 1996 by the Company's Named Executive Officers are included in the "Salary" and "Bonus" columns of the Summary 18 Compensation Table shown on page 8 of this Proxy Statement. Company matching contributions allocated to the Named Executive Officers under the Savings Plan and the related supplemental plan are shown in the "All Other Compensation" column of the Summary Compensation Table on page 8 of this Proxy Statement. STOCK AND INCENTIVE PLAN Pursuant to the Stock and Incentive Plan, Company employees may be granted stock options, stock appreciation rights, stock awards (including restricted stock awards and performance-based stock awards), or performance unit awards, either as a result of a general grant or as a result of an award based on having met certain performance criteria, as determined by the Employee Compensation and Management Development Committee or the Executive Compensation Committee, as applicable. Non-employee directors of the Company are not eligible to participate in this Plan. SEVERANCE AGREEMENTS The Company has entered into severance agreements with certain executive officers, including each of the Named Executive Officers. The agreements continue through September 30, 1997 and provide that they are to be automatically extended in one-year increments unless the Company has given prior notice of termination. These agreements are intended to provide for continuity of management in the event of a change in control of the Company. The agreements provide that covered executive officers could be entitled to certain severance benefits following a change in control of the Company. If, following such a change in control, the executive officer is terminated by the Company for any reason, other than for disability or for cause, or if such executive officer terminates his or her employment for good reason (as defined in the agreements), then the executive officer is entitled to a severance payment that will be 2.99 times the greater of (i) the executive officer's base amount, as defined in the agreements or (ii) the sum of the executive officer's (a) base salary in effect at the time of termination and (b) the higher of the (x) last full-year annual incentive payment or (y) projected annual incentive payment for the year in which termination occurs. The severance payment generally would be made in the form of a lump sum. In addition, in the event of such a termination following a change in control, under the agreements each executive officer would receive a payout of all outstanding Performance-Contingent Share Awards that had been granted prior to the date of termination at the maximum amounts that could have been earned pursuant to the awards, along with all shares earned but deferred in accordance with the deferral feature of the Performance-Contingent Share Award Program. The executive officer would also receive a benefit payable from the Company's general funds calculated using the benefit calculation provisions of the Company's Retirement Annuity Plan and the Company's unfunded Supplemental Retirement Plan with the following additional features: the executive officer would receive credit for an additional three years of service and compensation for purposes of calculating such benefit; the benefit would commence at age 55 (or upon the date of termination, if the executive officer is then over age 55) and for this purpose, three years would be added to the executive officer's age; such benefit would be further determined without any reduction on account of its receipt prior to age 65; and, such benefit would be offset by any amounts otherwise payable under the Company's Retirement Annuity Plan and unfunded Supplemental Retirement Plan. The executive officer would also become vested in all other benefits available to retirees of the Company including, without limitation, retiree medical coverage. All restrictions on restricted stock previously awarded to such executive officer would lapse and all unvested options granted to such executive officer would vest and become exercisable for the remainder of the term of the option. If a change in control occurs, the agreements are effective for a period of four years from the end of the then existing term. Under the severance agreements, a change in control would include any of the following events: (i) any "person", as defined in the Securities Exchange Act of 1934, as amended, acquires 20 percent or more of the Company's voting securities; (ii) a majority of the Company's directors are replaced during a two- year period; or (iii) shareholders approve certain mergers, or a liquidation or sale of the Company's assets. In 19 the event that any payments made in connection with a change in control would be subjected to the excise tax imposed by Section 4999 of the Code, the Company will "gross-up" the executive officer's compensation for all federal, state and local income and excise taxes and any penalties and interest thereon. In certain circumstances, the Company is obligated to fund trusts established to secure its obligations to make payments under the severance agreements in advance of the time payment is due. COMPENSATION OF DIRECTORS AND OTHER MATTERS The non-employee directors of the Company receive an annual cash retainer fee of $26,000 per year. Non-employee directors who serve on one Board committee or more (other than the Executive Committee) receive an additional annual fee of $4,000 for such service. In addition, non-employee directors who chair a Board committee receive an additional $2,000 per year, per committee. Directors who are employees of the Company receive no retainers for Board- related service. The non-employee directors of the Company also receive a fee of $1,500 for attending each Board meeting, committee meeting, the Annual Meeting of Shareholders, for each day of a visit by the Board to a plant or office of the Company or its subsidiaries, and for attending any other business meeting to which the director is invited by the Board or the Executive Committee. Directors who are employees of the Company receive no fees for attending any such meeting. In addition to the annual cash compensation discussed above, on the day of the 1996 Annual Meeting of Shareholders, all non-employee directors of the Company who continued as directors were awarded 600 units under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors and an additional 367 such units under the Pfizer Inc. Annual Retainer Unit Award Plan. Descriptions of both Plans are set forth below. In October of 1995 the Company's Retirement Plan for Non-Employee Directors was terminated. All benefits existing under the Plan at that time which were vested are retained by the directors concerned. BENEFIT PLANS FOR NON-EMPLOYEE DIRECTORS Under the Pfizer Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors (the "Unit Award Plan"), directors who are not employees of the Company or any of its subsidiaries may defer all or a part of their annual cash retainers and meeting fees until they cease to be directors. At the director's election, the fees held in the director's account may be credited either with interest at the rate of return of Fund A (the Fixed Income Fund) of the Pfizer Inc. Savings and Investment Plan, or with units. The units are calculated by dividing the amount of the fee by the closing price of the Common Stock as of the last business day prior to the date that the fee would otherwise be paid. The units in a director's account are increased by the value of any distributions on the Common Stock, allocated in accordance with the number of units in the account. When a director ceases to hold office, the amount held in the director's account is then payable in cash. The amount to be paid is determined by multiplying the number of units in the account by the closing price of the Common Stock as of the last business day prior to the payment date as determined in the Unit Award Plan. Also under the Unit Award Plan, non-employee directors are granted an initial award of 600 units upon first becoming a director. Thereafter, each non-employee director is granted an annual award of 600 such units ("Annual Unit Award") as of the date of the Company's Annual Meeting, provided the director will continue to serve as a director following the meeting. The awards under the Unit Award Plan are made in addition to the directors' annual cash retainers and meeting attendance fees. Such units are not payable until the recipients cease to be directors. 20 Non-employee directors also receive, under the Pfizer Inc. Annual Retainer Unit Award Plan, the share equivalent of their annual retainer fee in similarly restricted units. These awards are in addition to the Annual Unit Awards, the directors' annual cash retainers and meeting attendance fees, and are made annually on the day of the Company's Annual Meeting. The appropriate number of units to be awarded to the non-employee directors is based upon the five-day average of the closing trading price of the Company's Common Stock on the New York Stock Exchange for the first five trading days after April 1 of each year (rounded up to the nearest unit). In certain circumstances, the Company is obligated to fund trusts established to secure its obligations to make payments to its directors under the above benefit plans, programs or agreements in advance of the time payment is due. RELATED TRANSACTIONS During 1996, the Company engaged the services of Lazard Freres & Co. LLC, of which Mr. Rohatyn is a Managing Director. Lazard Freres & Co. LLC acted as a financial advisor in connection with potential acquisitions, divestitures and general corporate matters and as a broker in connection with the purchase and sale of securities. In 1997, the Company plans to retain this firm for such services and similar services. In addition, the Pfizer Retirement Annuity Plan is a limited partner in Corporate Partners, L.P., of which LFCP Corp., a wholly-owned subsidiary of Lazard Freres & Co. LLC, is the general partner. The Company also has other business arrangements with organizations with which certain of the Company's directors are affiliated. However, none of those arrangements are material to either the Company or any of those organizations. The transactions described in this section were entered into by the Company pursuant to arm's length negotiations in the ordinary course of business and on terms that the Company believes to be fair. ADDITIONAL INFORMATION Dr. Ikenberry and Messrs. Rohatyn, Steere and Valles and certain officers and former directors and officers of the Company were named as defendants in a civil suit brought purportedly on behalf of the Company as a shareholder derivative action in the Superior Court of the State of California, County of Orange. The complaint alleges breaches of fiduciary duty and other common law violations in connection with the manufacture and distribution of Shiley heart valves and seeks, among other things, unspecified money damages. Even though it is believed that the suit is without merit, in order to avoid the monetary and other costs of litigation, the Company has entered into an agreement to settle this action by way of a $15 million payment by the Company's insurance carrier to the Company with an attorneys' fee to be paid by the Company out of the proceeds of the settlement to the shareholders' attorneys who brought the case. The settlement is subject to court approval and a fairness hearing is scheduled for April 11, 1997. BOARD COMMITTEES THE EXECUTIVE COMPENSATION COMMITTEE The Executive Compensation Committee consists of Messrs. Burns (Chair), Harvey and Labrecque. None of the directors on this Committee are employees of the Company. The Committee met ten times in 1996. The Executive Compensation Committee is responsible for establishing annual and long-term performance goals for the Company's elected officers. This responsibility includes establishing the compensation and evaluating the performance of the Chairman and Chief Executive Officer and other elected officers of the Company. The Committee's additional functions are to determine and certify the shares awarded under the Performance-Contingent Share Award Program; to grant options and awards under the Stock and Incentive Plan; to advise on the setting of compensation for senior executives whose compensation is not otherwise set by the 21 Committee; to monitor compliance by officers with the Company's program of required stock ownership; and to publish an annual Executive Compensation Committee Report for the shareholders. The Executive Compensation Committee Report is included beginning on page 11 of this Proxy Statement. THE CORPORATE GOVERNANCE COMMITTEE The Corporate Governance Committee consists of Ms. Horner (Chair), Dr. Brown and Mr. Kamen. None of the directors on this Committee are employees of the Company. The Committee met eight times in 1996. The Corporate Governance Committee is responsible for considering and making recommendations to the Board concerning the appropriate size, function, and needs of the Board. This responsibility includes considering and recommending candidates to fill new positions on the Board created by either expansion or vacancies that occur by resignation, retirement, or for any other reason; reviewing candidates recommended by shareholders; conducting inquiries into the backgrounds and qualifications of possible candidates; and recommending the director nominees for approval by the Board and the shareholders. The Committee's additional functions are to consider questions of possible conflicts of interest of Board members and of senior executives of the Company; to monitor and recommend the functions of the various committees of the Board; to recommend members of the committees; to advise on changes in Board compensation; to make recommendations on the structure of Board meetings; and to recommend matters for consideration by the Board. In addition, the Committee considers and reviews the Company's Corporate Governance Principles; establishes director retirement policies; reviews the functions of the senior officers and makes recommendations with respect to any changes; reviews the job performance of officers and other senior executives with the Chairman and Chief Executive Officer; reviews the outside activities of senior executives; and reviews with the Chief Executive Officer the succession plans relating to officer positions. THE AUDIT COMMITTEE The Audit Committee consists of Dr. Ikenberry (Chair), Mr. Cornwell, Mr. Rohatyn, Dr. Simmons and Dr. Valles, none of whom is an employee of the Company. The Committee met six times in 1996. The Audit Committee has the responsibility of recommending the annual appointment of the public accounting firm to be outside auditors for the Company, subject to approval by the Board and the shareholders. The Committee reviews with the outside auditors the scope of the audit, the fees therefor and related matters, receives copies of the annual comments from the outside auditors on accounting procedures and systems of control, and reviews with them any questions, comments or suggestions they may have relating to the internal controls, accounting practices or procedures of the Company or its subsidiaries. It also reviews with management and the outside auditors the annual and quarterly financial statements of the Company and any material changes in accounting principles or practices used in preparing the statements. Additional responsibilities include reviewing the programs of the Company's Internal Audit Department, including procedures for assuring implementation of accepted recommendations made by the outside auditors, and receiving summaries of all audit reports issued by the Internal Audit Department. The Committee also reviews the status of compliance with laws, regulations, and internal procedures, contingent liabilities and risks that may be material to the Company. ITEM 2 -- APPROVAL OF APPOINTMENT OF AUDITORS FOR 1997 The Board, upon the recommendation of its Audit Committee, has appointed KPMG Peat Marwick LLP to serve as the Company's independent auditors for 1997, subject to the approval of the Company's shareholders. The firm and its predecessors have audited the financial records of the Company for many years during which time the practice of rotating the engagement partner has been followed. The Board considers the firm to be well qualified. It is expected that representatives of KPMG Peat Marwick LLP will be present at the Annual Meeting to answer questions. They also will have the opportunity to make a statement if they desire to do so. 22 Total audit fees incurred by the Company for all independent auditors for 1996 were approximately $5,209,000, of which approximately $5,050,000 was attributable to KPMG Peat Marwick LLP. The affirmative vote of a majority of votes cast on this proposal is required for the approval of this proposal. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE YEAR 1997. ITEM 3 -- INCREASE IN AUTHORIZED COMMON STOCK The Board has unanimously adopted a resolution, subject to shareholder approval, amending the Company's Restated Certificate of Incorporation to increase the number of shares of authorized Common Stock, par value $.05 per share, by 1,500,000,000 shares. The Board submits that resolution, which follows, to the shareholders: "Resolved, that the first paragraph of Article FOURTH of the Restated Certificate of Incorporation be amended to read as follows: A. Authorized Shares and Classes of Stock. The total number of shares and classes of stock that the Company shall have authority to issue is three billion twelve million (3,012,000,000) shares, which shall be divided into two classes, as follows: twelve million (12,000,000) shares of Preferred Stock, without par value, and three billion (3,000,000,000) shares of Common Stock of the par value of $.05 per share." If the proposed amendment is adopted by the shareholders, the Company plans to file a Certificate of Amendment to the Restated Certificate of Incorporation to be effective as soon as practicable following the Annual Meeting of Shareholders. On December 31, 1996, of the 1,500,000,000 authorized shares of Common Stock, a total of 645,294,257 shares was outstanding, 43,680,701 shares were held in the Company's treasury, 1,727,882 shares were reserved for issuance on conversion of the Company's 4% Convertible Subordinated Debentures Due 1997, 4,129,479 shares were reserved for issuance under the Shareholder Investment Program, 193,540 shares were reserved for issuance under the Performance- Contingent Share Award Program, 7,000,000 shares were reserved for issuance under the Company's Savings and Investment Plan, 600,000 shares were reserved for issuance under the Company's Pfizer Seiyaku Employee Stock Ownership Plan, 65,400 shares were reserved for issuance under the Company's Restricted Stock Plan for Non-Employee Directors (replaced by the Unit Award Plan) and 60,720,666 shares were reserved for issuance under the Company's Stock and Incentive Plan. The remainder of shares of authorized Common Stock was not issued or subject to reservation. It is the intention of the Board, barring unusual circumstances, to vote on a two-for-one stock split in the form of a stock dividend at its meeting which follows the Annual Meeting of Shareholders if the increase in authorized shares is approved. The additional shares will also be available for future acquisitions of property and of securities of other companies and for other corporate purposes. The additional shares will be available for issuance from time to time without further action by the shareholders and without first offering such shares to the shareholders. Shareholders do not have preemptive rights with respect to the Common Stock. The issuance of Common Stock, or securities convertible into Common Stock, on other than a pro-rata basis would result in the dilution of a present shareholder's interest in the Company. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon is required for the adoption of the proposed amendment. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK. 23 ITEM 4 -- APPROVAL OF THE PFIZER INC. EXECUTIVE ANNUAL INCENTIVE PLAN The Omnibus Budget Reconciliation Act of 1993 (OBRA) imposed a limit on corporate tax deductions for executive compensation in excess of $1 million per year paid by a public company to its CEO or any of the next four highest paid executive officers as listed in the proxy statement. An exception is provided for performance-based compensation, as described in Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Section 162(m) provisions generally require that affected executives' compensation satisfy certain conditions to qualify for the performance-based exclusion from the $1 million deduction cap. The Pfizer Inc. Executive Annual Incentive Plan (the "Plan") is intended to meet these conditions and therefore qualify under Section 162(m) of the Code. The Plan would establish a performance goal providing for the payment of annual incentives to Eligible Employees under the Plan when there is positive "Adjusted Net Income" (as defined in the Plan) for the year for which the incentives are paid. The maximum award payable to an individual is .30% (three tenths of one percent) of Adjusted Net Income for such year. As proposed, the Plan defines "Adjusted Net Income" to mean income before cumulative effect of accounting changes as shown on the audited Consolidated Statement of Income of the Company. However, if income before cumulative effect of accounting changes is not shown on the Statement, then Adjusted Net Income will mean net income as shown on the Statement. The Executive Compensation Committee of the Board of Directors (the "Committee") would have the authority to exercise discretion within the above maximum in determining the amount of individual awards. This limit has been set higher than the level at which awards have been made under the Company's Annual Incentive Plan in the past, and the Committee does not currently expect to significantly increase the level of awards made under this Plan in the future. However, the limit is designed to permit larger awards in the future in the event the Committee should determine that such awards are necessary to appropriately reward significant accomplishments, or to attract or retain the highest quality executives. The primary features of the Plan are summarized below. The summary is qualified in its entirety by reference to the specific provisions of the Plan, the full text of which is set forth as Exhibit 1 to this Proxy Statement. SUMMARY OF THE PLAN The Plan will be administered by the Committee, which is composed of "outside directors" as defined under the Code. The Plan defines an Eligible Employee as a member of the Company's Corporate Management Committee. No awards will be made for any year unless there is positive Adjusted Net Income (as described above) for that year. Following receipt of a report from the Company's independent auditors of such Adjusted Net Income for the year, the Committee shall determine the maximum amount available for individual awards under the Plan for such year and shall certify that all awards granted under the Plan are within the amount limitations described below. The Eligible Employees to whom awards will be made and the amount of their individual awards will be determined by the Committee, taking into consideration the recommendations of the Chairman (for all Eligible Employees other than the Chairman), the employee's contribution to the achievement of the Company's objectives and such other matters as the Committee deems relevant. The maximum award payable to an individual is .30% (three tenths of one percent) of Adjusted Net Income for such year. 24 Awards may be made to Eligible Employees who retired or whose employment terminated during such year or to the designee or estate of any such Eligible Employee who died during such year. All awards will be determined by the Committee and will be paid in cash. The Committee shall have the right to amend the Plan. Any amendment that would (i) change the maximum award that might be determined payable to any Eligible Employee or (ii) materially change the definition of Adjusted Net Income will be subject to shareholder approval. The Committee may also repeal the Plan or discontinue awards on a temporary or permanent basis. Based on the Company's interpretation of existing federal tax law, including the regulations under Section 162(m) of the Code, all awards paid pursuant to the Plan will be deductible by the Company. In each instance, the award will be taxable to the employee in the year received. There are currently ten Eligible Employees who would be eligible for awards under the Plan for 1997. However, no determination has been made as to the amounts of awards that will be granted to specific individuals in the future. (See the Summary Compensation Table for information relating to prior annual incentive awards to Named Executive Officers.) The affirmative vote of a majority of the votes cast on this proposal is required for approval of the Pfizer Inc. Executive Annual Incentive Plan. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE PFIZER INC. EXECUTIVE ANNUAL INCENTIVE PLAN. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16 of the Securities Exchange Act of 1934 ("Section 16") requires that reports of beneficial ownership of Common Stock and changes in such ownership be filed with the SEC by the Company's directors and executive officers. The Company is required to conduct a review and to identify in its proxy statement each director or officer who failed to file any required report under Section 16 on a timely basis. Based upon that review, the Company has determined that all required reports were filed on a timely basis for the 1996 fiscal year. REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS, NOMINATION OF DIRECTORS AND OTHER BUSINESS OF SHAREHOLDERS Under the Company's By-laws, certain procedures are provided which a shareholder must follow to nominate persons for election as directors or to introduce an item of business at an annual meeting of shareholders. These procedures provide that nominations for director nominees and/or an item of business to be introduced at an annual meeting of shareholders must be submitted in writing to the Secretary of the Company at 235 East 42nd Street, New York, NY 10017-5755. The nomination or proposed item of business must be received no later than: (1) 60 days in advance of an annual meeting if it is being held within 30 days preceding the anniversary date of the previous year's meeting, or (2) 90 days in advance of such meeting if it is being held on or after the anniversary date of the previous year's meeting. With respect to any other annual or special meeting, the nomination or item of business must be received by the 10th day following the date of public disclosure of the date of such meeting. The nomination must contain the following information about the nominee: name, age, business and residence addresses; principal occupation or employment; the number of shares of Common Stock held by the nominee; the information that would be required under the rules of the SEC in a proxy statement soliciting proxies for the election of such nominee as a director; and a signed consent of the nominee to serve as a director of the Company, if elected. Notice of a proposed item of business must include a brief description of the substance of, and the reasons for, conducting such business at the annual meeting, the shareholder's name and address, the number of shares of Common Stock held by the shareholder (with supporting documentation where appropriate) and any material interest of the shareholder in such business. 25 The Board is not aware of any matters that are expected to come before the Annual Meeting other than those referred to in this Proxy Statement. If any other matter should come before the Annual Meeting, the persons named in the accompanying proxy intend to vote such proxies in accordance with their best judgment. The chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance with the foregoing procedures. Under the rules of the SEC, shareholder proposals intended to be presented at the Company's 1998 Annual Meeting of Shareholders must be received by the Company at its principal executive offices by November 18, 1997 for inclusion in the proxy statement and form of proxy relating to that meeting. MISCELLANEOUS The cost of soliciting proxies will be borne by the Company. In addition to the solicitation of proxies by the use of the mails, the Company may use telephone, telegraph and personal contact. Such solicitation will be made by regular employees of the Company without additional compensation for such services. The Company has also engaged Morrow & Co., Inc. to assist in the proxy solicitation, and has agreed to pay $25,000 plus expenses for such soliciting services. By order of the Board of Directors, /S/ C. L. Clemente C. L. Clemente Secretary 26 EXHIBIT 1 PFIZER INC. EXECUTIVE ANNUAL INCENTIVE PLAN I PURPOSE The purpose of the Pfizer Inc. Executive Annual Incentive Plan (the "Plan") is to attract and retain highly qualified individuals; to obtain from each the best possible performance; to establish performance goals based on objective criteria; to further underscore the importance of achieving business objectives for the short and long term; and to include in such individual's compensation package an annual incentive component which is tied directly to the achievement of those objectives. Such component is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and would be deductible by the Company. II DEFINITIONS For the purposes of the Plan, the following terms shall have the following meanings: ADJUSTED NET INCOME: Income before cumulative effect of accounting changes as shown on the audited Consolidated Statement of Income of the Company; provided, however, that if income before cumulative effect of accounting changes is not shown on such Statement, then Adjusted Net Income shall mean net income as shown on such Statement. AWARDS: The annual incentive awards made pursuant to the Plan. BOARD OF DIRECTORS: The Board of Directors of Pfizer Inc. COMMITTEE: The Executive Compensation Committee of the Board of Directors or any successor thereto. The Committee shall consist solely of two or more "outside directors" within the meaning of Section 162(m) of the Code. COMPANY: Pfizer Inc. and its subsidiary companies. ELIGIBLE EMPLOYEE: An employee who is a member of the Company's Corporate Management Committee. III EFFECTIVE DATE; TERM The Plan is effective as of January 1, 1997, subject to approval by the affirmative vote of a majority of shares voting at the Company's 1997 Annual Meeting of Shareholders, and shall remain in effect until such time as it shall be terminated by the Committee. IV AMOUNTS AVAILABLE FOR AWARDS Awards with respect to any taxable year of the Company shall not exceed the limitations specified in Section VI of the Plan. V ELIGIBILITY FOR AWARDS The Committee may grant an award to an Eligible Employee if there is positive Adjusted Net Income. The Committee shall give consideration to the contribution made by the Eligible Employee to achievement of the Company's established objectives and such other matters as it shall deem relevant. In the discretion of the Committee, Awards may be made to Eligible Employees who have retired or whose employment has terminated after the beginning of the year for which an Award is made, or to the designee or estate of an Eligible Employee who died during such period. VI DETERMINATION OF AMOUNTS OF AWARDS The Committee has sole authority to determine the amount of any Award. The maximum Award payable to an individual is .30% (three tenths of one percent) of Adjusted Net Income for such year. The Committee has authority to exercise discretion within the above maximum in determining the amount of individual Awards. 27 VII FORM OF AWARDS Awards under the Plan shall be made in cash subject to the limitations set forth in Section VI. VIII PAYMENT OF AWARDS Awards may be made at any time following the end of the Company's taxable year; provided, however, that no Awards shall be made until the Committee receives a report from the Company's independent auditors stating the amount of Adjusted Net Income for the year. The Committee shall certify, in writing, that the amount of any such Award does not exceed the limitation under Section VI. IX SPECIAL AWARDS AND OTHER PLANS Nothing contained in the Plan shall prohibit the Company from establishing other special awards or incentive compensation plans providing for the payment of incentive compensation to employees (including Eligible Employees). X ADMINISTRATION, AMENDMENT AND INTERPRETATION OF THE PLAN The Committee shall administer the Plan. The Committee shall have full power to construe and interpret the Plan, establish and amend rules and regulations for its administration, and perform all other acts relating to the Plan, including the delegation of administrative responsibilities, that it believes reasonable and proper and in conformity with the purposes of the Plan. The Committee shall have the right to amend the Plan from time to time or to repeal it entirely or to direct the discontinuance of Awards either temporarily or permanently; provided, however, that (i) no amendment of the Plan shall operate to annul, without the consent of the Eligible Employee, an Award already made hereunder, and (ii) no amendment of the Plan that changes the maximum Award determined payable to any Eligible Employee, as set forth in Section VI, or materially amends the definition of Adjusted Net Income shall be effective before approval by the affirmative vote of a majority of shares voting at a meeting of the shareholders of the Company. Any decision made, or action taken, by the Committee arising out of or in connection with the interpretation and/or administration of the Plan shall be final, conclusive and binding on all persons affected thereby. XI RIGHTS OF ELIGIBLE EMPLOYEES Neither the Plan, nor the adoption or operation of the Plan, nor any documents describing or referring to the Plan (or any part hereof) shall confer upon any employee any right to continue in the employ of the Company. No individual to whom an Award has been made or any other party shall have any interest in the cash or any other asset of the Company prior to such amount being paid. No right or interest of any Eligible Employee in the Plan shall be assignable or transferable, or subject to any claims of any creditor or subject to any lien. XII MISCELLANEOUS All Awards under the Plan are subject to withholding, where applicable, for federal, state and local taxes. Any provision of the Plan that is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Plan. The Plan and the rights and obligations of the parties to the Plan shall be governed by, and construed and interpreted in accordance with, the law of the State of Delaware (without regard to principles of conflicts of law). 28 [MAP DETAILING MEETING SITE AREA] Pfizer [LOGO] ANNUAL MEETING OF SHAREHOLDERS APRIL 24, 1997 10:00 A.M. MEETING SITE AREA The Grant Hyatt Hotel is serviced by Metro North and by the following subway lines going to Grand Central Terminal: East Side: IRT (Lexington Avenue) Nos. 4, 5 & 6 West Side: IRT (7th Avenue Line) No. 1, 2 & 3 to 42nd Street, then transfer to the No. 7 Flushing Line or the Shuttle (S). [LOGO] RECYLCLED PAPER WITH A MINIMUM OF 10% POST CONSUMER WASTE PFIZER INC. PROXY SOLICITED BY THE BOARD OF DIRECTORS The undersigned hereby appoints Wil- FOR THE ANNUAL MEETING OF liam C. Steere, Jr., Henry A. McKin- SHAREHOLDERS nell, Jr., and C.L. Clemente, and APRIL 24, 1997, 10:00 A.M. each of them, as proxies, each with AT THE GRAND HYATT HOTEL full power of substitution, and 42ND STREET AND LEXINGTON AVENUE hereby authorizes them to represent NEW YORK, NY and to vote, as designated on the re- verse side of this form, all the shares of Common Stock of Pfizer Inc. held of record by the undersigned on February 24, 1997, at the Annual Meeting of Shareholders to be held on April 24, 1997 at 10:00 a.m. at the Grand Hyatt Hotel, 42nd Street and Lexington Avenue, New York, NY, or any adjournment or postponement thereof. IF NO OTHER INDICATION IS MADE ON THE REVERSE SIDE OF THIS FORM, THE PROX- IES SHALL VOTE FOR ITEMS 1, 2, 3 AND 4 AND, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. (continued on reverse side) (continued from other side) PFIZER INC. - -------------------------------------------------------------------------------- The Board of Directors recommends 3. A proposal to approve an a vote "FOR" Items 1, 2, 3 and 4 amendment to the Pfizer Inc. Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock. (Mark ONE box only.) 1. Election of Directors. (Mark [_]FOR [_]AGAINST [_]ABSTAIN ONE box only.) Nominees: M. Anthony Burns, 4. A proposal to approve the George B. Harvey, Pfizer Inc. Executive Annual Stanley O. Ikenberry, and Harry Incentive Plan. (Mark ONE box P. Kamen. only.) [_]FOR [_]AGAINST [_]ABSTAIN IF ACTING AS ATTORNEY, EXECUTOR, [_]FOR all [_]Vote TRUSTEE, OR IN OTHER REPRESENTATIVE nominees, WITHHELD CAPACITY, PLEASE SIGN NAME AND TITLE. except vote from all withheld nominees / /97 from the ________________________________________ following (Signature of Shareholder) Date nominees (if any): / /97 ________________________________________ (Signature, if held jointly) Date ________________________________ Please sign, date, and return this ________________________________ proxy form in the enclosed return envelope. Thank you. 2. A proposal to approve the appointment of KPMG Peat Marwick LLP as independent auditors for 1997. (Mark ONE box only.) [_]FOR [_]AGAINST [_]ABSTAIN -----END PRIVACY-ENHANCED MESSAGE-----