UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant |
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Filed by a Party other than the Registrant |
CHECK THE APPROPRIATE BOX: |
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under §240.14a-12
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(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 ALL BOXES THAT APPLY):
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No fee required
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Fee paid previously with preliminary materials
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
OUR MISSION |
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Alleviate pain and improve the quality of life for people around the world. |
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GUIDING PRINCIPLES |
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● Respect and show gratitude for the contributions and diverse perspectives of others. |
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● Commit to the highest standards of patient safety, quality and integrity. |
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● Focus our resources in areas where we will make a difference. |
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● Ensure the company’s return is equivalent to the value we provide our customers and patients. |
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● Give back to our communities and people in need. |
COMMITMENT TO DIVERSITY, EQUITY AND INCLUSION Consistent with our Guiding Principles, in 2023 we continued our commitment to community groups, business platforms and other organizations united to driving meaningful change and sustained social justice. In that spirit, we advanced several change initiatives, including continued investment in Movement is Life, Inc., a nonprofit multidisciplinary coalition seeking to eliminate racial, ethnic and gender disparities in muscle and joint health. Additionally, to further the commitment of closing health care disparities outlined in our Diversity, Equity and Inclusion strategy, we established a new Health Equity Platform in 2023 to increase access to quality care within underserved communities while leveraging innovation to improve patient outcomes in the orthopedic industry and beyond. The Zimmer Biomet Foundation, Inc., in partnership with our employee resource groups, has identified multiple non-profit organizations that represent and support the diverse populations in and around the communities where Zimmer Biomet operates. Our efforts have led to achieving recognition among the Forbes America’s Best Large Employers, and Newsweek America’s Greatest Workplaces for Diversity, and we were recognized as a Human Rights Campaign Equality 100 Leader in LGBTQ+ Workplace Inclusion. |
SHAREHOLDER ENGAGEMENT AND ENVIRONMENTAL, SOCIAL AND GOVERNANCE PRIORITIES We proactively engage with our shareholders, conducting ongoing discussions and sharing information, including the comprehensive disclosures featured in our annual Sustainability Report. In 2023, we reached out to institutional shareholders representing approximately 63% of our outstanding shares and engaged in discussions on a variety of subjects, including shareholder feedback relating to our executive compensation, Board of Directors and executive succession planning, and product safety and quality matters, which are discussed further in the Compensation Discussion and Analysis section of this proxy statement. We also discussed various environmental, social and governance (“ESG”) topics that were of interest to shareholders. Please look for more information on our ESG priorities in our next Sustainability Report, which we expect to release this spring. |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS The statements included in this proxy statement, including in the “Letter from Our President and Chief Executive Officer,” “Letter from Our Chairman to our Shareholders,” and in the section entitled “Executive Compensation – Compensation Discussion and Analysis – Executive Summary,” regarding future financial performance, results of operations, expectations, plans, strategies, goals, priorities and other statements that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are based upon current beliefs, expectations and assumptions and are subject to significant risks, uncertainties and changes in circumstances that could cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks, uncertainties and changes in circumstances that could cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). Readers of this proxy statement are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
March 27, 2024
letter from our Chairman TO OUR SHAREHOLDERS:
Dear Fellow Shareholders,
On behalf of my fellow directors, I want to thank you for your interest in Zimmer Biomet. Your investments make it possible for Zimmer Biomet to deliver innovative products and solutions to achieve our corporate mission to “alleviate pain and improve the quality of life for people around the world.”
Shareholders will be voting on four matters at our 2024 annual meeting – election of directors, ratification of the appointment of PricewaterhouseCoopers LLP, approval, on an advisory basis, of the compensation of our named executive officers and approval of the amended Employee Stock Purchase Plan. I encourage you to read the pages that follow and ask for your support on these matters.
This letter highlights some of the actions we have taken as a Board of Directors over the past year to move Zimmer Biomet forward and represent your interests as shareholders.
Innovation to Improve Lives
Zimmer Biomet continued to innovate and advance our mission in 2023. We are extremely proud of the company’s recent accomplishments, including:
Chief Executive Officer Succession
In August 2023, we, your independent directors, performed one of the most critical functions of a Board of Directors: we oversaw a CEO succession. After leading a meaningful five-year transformation of Zimmer Biomet, Bryan Hanson, our previous Chairman, President and CEO, resigned to take on another position. The Board led a rigorous and comprehensive process to identify and appoint a new President and CEO. We unanimously determined that Ivan Tornos, then serving as Chief Operating Officer of Zimmer Biomet, was the preferred candidate based on a variety of considerations, including his critical role in the company’s strategic transformation, turnaround and continuing positive business momentum.
The Board engaged and consulted with a reputable executive search firm to identify qualified external candidates, who were then fully evaluated along with Mr. Tornos. We ultimately concluded that Ivan was a highly qualified and well-prepared candidate both for the
President and CEO position and for the role as a member of the Board, meeting the Board’s rigorous expectations and selection criteria for such roles. Importantly, this appointment was the result of the company’s and the Board’s ongoing focus on and attention to leadership development and executive succession planning. The COO role and Ivan’s broad and extensive global responsibilities were previously created and designed in part to fully prepare, groom, equip and qualify him as a strong and natural succession candidate. I’m pleased to report that the succession planning and CEO transition processes were successful and we are excited to continue to work closely with Ivan as he leads Zimmer Biomet forward, delivering new innovation, accelerating growth and driving long-term shareholder value.
Experienced Leaders with a Commitment to Diversity
We continue to focus on building and maintaining a diverse Board skill set as we expect the highest standards of integrity and fiduciary responsibility and prioritize the interests of Zimmer Biomet stakeholders.
We are pleased to have recently added another exceptional director who complements our skills, experiences and attributes:
Executive Compensation Alignment with Shareholder Interests
As described in the following pages, in 2023 our Compensation and Management Development Committee implemented important shareholder feedback to more closely align our executive compensation with our shareholders’ input. Our shareholder engagement continues to provide us valuable insights to better align executive compensation with your feedback.
The Board is focused on driving robust corporate performance and total shareholder return, while encouraging critical leadership retention and enhancing employee engagement. Our strategy is reflected in all of our incentive structures and we are pleased with the significant progress Zimmer Biomet has made over the past year.
We remain committed to serving your interests in 2024 and beyond, and are confident in the future of Zimmer Biomet.
On behalf of the entire Board of Directors, thank you for your continued support of Zimmer Biomet.
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Sincerely, |
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Christopher Begley Chairman of the Board Zimmer Biomet Holdings, Inc. 345 East Main Street Warsaw, Indiana 46580 |
March 27, 2024
letter from our president and chief executive officer:
Dear Fellow Shareholders:
I am very proud of the meaningful progress and growth driven by the Zimmer Biomet team in 2023. It was a year of significant achievements, all aimed toward serving our customers and creating shareholder value, and ultimately guided by our Mission to “alleviate pain and improve the quality of life for people around the world.”
In the letter to shareholders included in our 2023 Annual Report, I discuss key milestones in the year just completed, as well as key initiatives that will continue to guide us in the months and years ahead.
We remain committed to delivering on our near- and long-term corporate strategy and on the innovation and execution necessary to achieve it. Thank you for your continuing support of Zimmer Biomet.
Annual Meeting Matters
On behalf of the Board of Directors, it is my pleasure to invite you to attend the 2024 annual meeting of shareholders on May 10, 2024 at 8:00 a.m. Eastern Time. This year’s annual meeting will be conducted virtually, via webcast.
You will be able to attend the annual meeting online by visiting www.virtualshareholdermeeting.com/ZBH2024. You will be able to vote your shares electronically during the meeting by logging in using the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the voting instruction form accompanying the proxy materials.
We continue to embrace the latest technology to provide expanded access, improved communication and cost savings for our shareholders and the company. As we’ve learned, hosting a virtual meeting enables increased shareholder participation from locations around the world. In addition, the online format allows us to communicate more effectively via a pre-meeting forum that you can enter by visiting www.proxyvote.com with your control number. We encourage you to log on and ask any questions you may have, which we will try to answer during the meeting. We recommend that you log in a few minutes before the meeting on May 10, 2024 to ensure you are logged in when the meeting starts.
The following Notice of Annual Meeting of Shareholders outlines the business to be conducted at the meeting. Only shareholders of record at the close of business on March 11, 2024 will be entitled to notice of and to vote at the meeting. Further details about how to attend the meeting online and the business to be conducted at the meeting are included in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement.
We are again providing access to our proxy materials online under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we are mailing to many of our shareholders a Notice of Internet Availability instead of a paper copy of this proxy statement and our 2023 Annual Report. This electronic process gives shareholders fast, convenient access to the materials, reduces the impact on the environment and reduces our printing and mailing costs. The Notice of Internet Availability contains instructions on how to access documents online. It also contains instructions on how shareholders can receive a paper copy of our materials, including this proxy statement, our 2023 Annual Report and a form of proxy card or voting instruction form.
Your vote is important. Regardless of whether you plan to attend the virtual annual meeting, we hope you vote as soon as possible. You may vote by proxy online or by phone, or, if you received paper copies of the proxy materials by mail, you may also vote by mail by following the instructions on the proxy card or voting instruction form. Additionally, if you attend the virtual annual meeting, you may vote your shares during the meeting via the Internet even if you previously voted your proxy. Voting online or by phone, by written proxy or by voting instruction form ensures your representation at the annual meeting regardless of whether or not you attend the virtual meeting.
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Sincerely, |
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Ivan Tornos President and Chief Executive Officer Zimmer Biomet Holdings, Inc. 345 East Main Street Warsaw, Indiana 46580 |
TABLE OF CONTENTS |
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41 |
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41 |
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46 |
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2-4 |
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48 |
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50 |
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52 |
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5-24 |
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58 |
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60 |
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62 |
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12 |
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62 |
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Board's Role in Executive Succession Planning and Development |
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66 |
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14 |
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69 70 |
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14 |
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70 |
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15 |
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71 |
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15 |
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74 |
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75 |
Equity Compensation Plan Information
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16 |
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17 17 |
77-81 |
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Stock Trading Policy and Prohibition on Pledging and Hedging |
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77 |
Proposal 4 – Approval of the Amended Employee Stock Purchase Plan |
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19 |
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22 |
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82-83 |
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25-27 |
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82 |
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Proposal 2 — Ratification of the Appointment of the Independent Registered Public Accounting Firm |
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25 26 |
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Audit Committee Pre-Approval of Services of Independent Registered Public Accounting Firm |
84-88 |
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27 27 |
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28-76 |
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88 88 |
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28 |
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88 |
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29 29 |
A1-A2 |
A-1 |
Appendix A — Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures |
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36 37 |
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39 |
B1-B7 |
B-1 |
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ZIMMER BIOMET HOLDINGS, INC.
345 East Main Street
Warsaw, Indiana 46580
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF ZIMMER BIOMET HOLDINGS, INC.
To Be Held May 10, 2024 |
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TIME AND DATE |
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8 a.m. Eastern Time on Friday, May 10, 2024 |
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PLACE This year’s meeting will be held virtually via webcast at www.virtualshareholdermeeting.com/ZBH2024. |
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Your Vote Is Important. Even if you plan to attend the virtual annual meeting, we urge you to review the proxy statement and vote your shares as soon as possible. |
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ITEMS OF BUSINESS |
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VOTE IN ADVANCE OF THE MEETING: |
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• Elect 10 directors to serve until the 2025 annual meeting of shareholders • Ratify the appointment of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for 2024 • Approve, on a non-binding advisory basis, named executive officer compensation (“Say on Pay”) • Approve the amended Employee Stock Purchase Plan • Transact such other business as may properly come before the meeting and any postponement(s) or adjournment(s) thereof
RECORD DATE March 11, 2024
By Order of the Board of Directors
Chad F. Phipps Senior Vice President, General Counsel and Secretary March 27, 2024 |
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INTERNET |
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Visit www.proxyvote.com |
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TELEPHONE |
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Call 1-800-690-6903 |
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Mark, sign, date and promptly mail your proxy card or voting instruction form |
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VOTE ONLINE DURING THE MEETING: |
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INTERNET |
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Vote through the virtual meeting platform during the meeting |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held on May 10, 2024: |
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This Notice of Annual Meeting, the Proxy Statement and the 2023 Annual Report are available at www.proxyvote.com. |
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Zimmer Biomet 1
Proxy Statement SUMMARY
PROXY STATEMENT SUMMARY
We are providing this proxy statement in connection with the solicitation of proxies by our Board of Directors for use at our 2024 annual meeting of shareholders to be held on Friday, May 10, 2024. The Notice of Annual Meeting of Shareholders and related proxy materials, or a Notice of Internet Availability, were first sent to shareholders on or about March 27, 2024. This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information you should consider, and we urge you to read the entire proxy statement, as well as our 2023 Annual Report, before voting.
voting matters and board recommendations
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Voting Matter |
Board Vote |
See |
Proposal 1 |
Election of directors |
✓ FOR |
5 |
Proposal 2 |
Ratification of the appointment of PwC as our independent registered public accounting firm for 2024 |
✓ FOR |
25 |
Proposal 3 |
Advisory vote to approve named executive officer compensation |
✓ FOR |
28 |
Proposal 4 |
Approval of the amended Employee Stock Purchase Plan |
✓ FOR |
77 |
Proposal 1 – Election of Directors |
Our Board recommends a vote FOR each nominee |
Our Director Nominees
The following table provides summary information about each of the 10 director nominees. Each director is elected annually by a majority of votes cast.
Name |
Age |
Director |
Independent |
Other |
Committee Memberships |
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A |
C&MD |
CG |
QR&T |
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Christopher B. Begley + Retired Executive Chairman & CEO, Hospira, Inc. |
71 |
2012 |
✓ |
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✓ |
✓ |
Betsy J. Bernard Retired President, AT&T Corp. |
68 |
2009 |
✓ |
— |
✓ |
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Chair |
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Michael J. Farrell Chair and CEO, ResMed Inc. |
51 |
2014 |
✓ |
1 |
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Chair |
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✓ |
Robert A. Hagemann Retired Senior VP & CFO, Quest Diagnostics Incorporated |
67 |
2008 |
✓ |
2 |
Chair |
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✓ |
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Arthur J. Higgins Operating Advisor to Abu Dhabi Investment Authority |
68 |
2007 |
✓ |
1 |
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✓ |
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✓ |
Maria Teresa Hilado Retired Executive VP & CFO, Allergan plc |
59 |
2018 |
✓ |
1 |
✓ |
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✓ |
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Syed Jafry Retired SVP & President, Regions, Thermo Fisher Scientific Inc. |
60 |
2018 |
✓ |
— |
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✓ |
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✓ |
Sreelakshmi Kolli EVP, Chief Product and Digital Officer, Align Technology, Inc. |
49 |
2021 |
✓ |
1 |
✓ |
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Chair |
Louis A. Shapiro Senior Advisor, General Atlantic Retired President & CEO, Hospital for Special Surgery |
64 |
2024 |
✓ |
— |
✓ |
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✓ |
Ivan Tornos President & CEO, Zimmer Biomet Holdings, Inc. |
48 |
2023 |
x |
1 |
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+: Chairman of the Board
A: Audit |
C&MD: Compensation & Management Development |
CG: Corporate Governance |
QR&T: Quality, Regulatory & Technology |
Zimmer Biomet 2
Proxy Statement SUMMARY
Race, ethnicity, gender and LGBTQ+ status are self-reported by directors in their annual directors’ and officers’ questionnaires. Diversity, equity and inclusion data is not standardized and director responses are not required.
Corporate Governance Strengths
Board Composition |
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Board Oversight and Stock Ownership |
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✓ |
Diverse Board with effective mix of skills, experiences and perspectives |
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✓ |
Robust Board and executive succession planning and risk oversight |
✓ |
Active Board refreshment and average Board tenure of 8.4 years |
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Rigorous stock ownership guidelines for directors and executives |
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Effective annual Board and Board committee evaluation process |
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✓ |
Directors and executives prohibited from hedging and pledging our stock under our insider trading policy |
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Majority voting and director resignation policy in uncontested director elections |
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Independent director equity-based compensation not paid out until cessation of service |
Board Structure and Independence |
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Shareholder Rights and Accountability |
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✓ |
100% independent director nominees, except CEO |
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✓ |
Annual election of all directors |
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Independent Chairman of the Board |
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✓ |
Proxy access right for shareholders |
✓ |
100% independent Board committees |
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✓ |
Single class voting structure (one share, one vote) |
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Independent directors regularly meet without management present |
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X |
No supermajority voting requirements |
✓ |
Robust Code of Business Conduct and Ethics applicable to directors, officers and employees |
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✓ |
Charter permits shareholders to call a special meeting |
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X |
No poison pill |
Zimmer Biomet 3
Proxy Statement SUMMARY
Proposal 2 – Ratification of the Appointment of PwC |
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Our Board recommends a vote FOR this proposal |
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PwC’s report contained in our 2023 Annual Report is unqualified |
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Audit and audit-related fees represent 94% of total fees paid to PwC for 2023 |
Proposal 3 – Advisory Vote to Approve Named Executive Officer Compensation |
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Our Board recommends a vote FOR this proposal |
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Executive Compensation Best Practices |
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What We Do |
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✓ |
Pay for performance |
✓ |
Require robust stock ownership guidelines |
✓ |
Require termination of employment in connection with a change in control for accelerated equity vesting (double trigger) |
✓ |
Require non-competition agreement for equity award eligibility |
✓ |
Require shares received upon equity award vesting to be retained in accordance with stock ownership guidelines |
✓ |
Subject executives’ cash and equity-based incentives to clawback, including in the event of: - an accounting restatement due to material noncompliance with financial reporting requirements under the securities laws (as to performance-based cash bonuses and equity-based incentives) - certain violations of our Code of Business Conduct and Ethics or other conduct deemed detrimental to the interests of the company (as to equity-based incentives) |
What We Don’t Do |
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Offer employment contracts to our executives, except as required in non-U.S. jurisdictions |
x |
Pay dividends or accrue dividend equivalents on unearned performance-based equity awards |
x |
Provide excise tax gross-ups in new change in control severance agreements (since 2009) |
x |
Allow hedging or pledging of company securities |
x |
Reprice or exchange underwater stock options without shareholder approval |
Proposal 4 – Approval of the Amended Employee Stock Purchase Plan |
Our Board recommends a vote FOR this proposal |
● Amendments would increase the number of shares available for awards by 10,000,000 shares |
Zimmer Biomet 4
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Every day, the Zimmer Biomet team works towards our mission of alleviating pain and improving quality of life for people around the world. We are committed to effective corporate governance, adhere to world-class integrity and ethical business practices and strive for the highest standards of patient safety and quality in our products and services.
Our business is managed under the direction of our Board of Directors. The Board has responsibility for establishing broad corporate policies and for our overall performance.
Proposal 1 – Election of Directors |
Based upon the recommendation of the Corporate Governance Committee, the Board has nominated 10 directors for election at the annual meeting to hold office until the 2025 annual meeting and the election of their successors. All of the nominees currently are serving as our directors. Each nominee agreed to be named in this proxy statement and to serve if elected. All of the nominees are expected to attend the 2024 annual meeting.
Each of the director nominees was elected as a director at our 2023 annual meeting, other than Mr. Shapiro and Mr. Tornos. Mr. Shapiro was appointed as a director by our Board of Directors, effective as of January 5, 2024, was identified by Mr. Tornos based on their prior working relationship, and was assessed by the Board's third-party search firm, RSR Partners. Mr. Tornos was appointed as a director by our Board of Directors on August 22, 2023, as discussed elsewhere in this proxy statement.
Michael W. Michelson, a member of the Board since 2015, whose term expires at the annual meeting, is not eligible for nomination by the Board for election as a director at the annual meeting due to the Board’s mandatory retirement policy. The Board wishes to express its sincere gratitude to Mr. Michelson for his many significant contributions and years of dedicated service to Zimmer Biomet and our shareholders. The Board has taken action to reduce its size to 10 members effective upon the expiration of Mr. Michelson’s term as a director. Proxies cannot be voted for a greater number of persons than 10, which is the number of nominees named in this proxy statement. Unless otherwise instructed, the persons named as proxies will vote all proxies received for the election of each of the nominees. Our Board recommends a vote FOR each nominee for director.
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Zimmer Biomet 5
CORPORATE GOVERNANCE
DIRECTOR NOMINEES
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Chairman of the Board of the company since August 2023; served as Lead Independent Director of the company from May 2021 to August 2023. Executive Chairman of the Board of Hospira, Inc. from May 2007 until his retirement in January 2012. Mr. Begley also served as Chief Executive Officer from April 30, 2004, when Hospira was spun off from Abbott Laboratories, to March 2011. Prior to that, Mr. Begley served in various positions with Abbott between 1986 and 2004, most recently as Senior Vice President of Abbott’s Hospital Products division. He earned a bachelor’s degree from Western Illinois University and an MBA from Northern Illinois University.
Other Public Board Memberships • Past director and Non-Executive Chairman of Hanger, Inc. (until October 2022) • Past director and Non-Executive Chairman of Adtalem Global Education Inc. (formerly known as DeVry Education Group Inc.) (until November 2017) Other Relevant Experience • Past director of the Advanced Medical Technology Association (“AdvaMed”), the medical device industry’s trade association
Skills and Qualifications
Christopher B. Begley’s past experience as the Chairman and CEO of Hospira, Inc., a leading provider of injectable drugs and infusion technologies, and previously as the senior vice president of two Abbott divisions, has provided him with extensive management experience at two multinational, publicly traded healthcare companies. In these senior leadership roles, Mr. Begley gained in-depth knowledge of the healthcare industry and strategies for developing and marketing products in this highly regulated area. He also gained significant experience in strategic planning, risk management and financial management. Mr. Begley served for more than 15 years as a director of other public companies, including service as chairman of the board. |
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President of AT&T Corp. from October 2002 until her retirement in December 2003. From April 2001 to October 2002, Ms. Bernard was Chief Executive Officer of AT&T Consumer. Prior to joining AT&T, Ms. Bernard held senior executive positions with Qwest Communications International Inc., US WEST, Inc., AVIRNEX Communications Group and Pacific Bell. Ms. Bernard received a B.A. degree from St. Lawrence University, an MBA from Fairleigh Dickenson University and an M.S. in management from Stanford University’s Sloan Fellowship Program.
Other Public Board Memberships • Past director of Principal Financial Group, Inc. (until June 2020) • Past director of SITO Mobile, Ltd. (until June 2017) Other Relevant Experience • Director of LEAP Guarantee
Skills and Qualifications
Betsy J. Bernard’s past experience in senior executive roles with leading global telecommunications companies, including her service as President of AT&T Corp., has provided her with expertise in financial management, brand management, marketing, enterprise sales, customer care, operations, product management, electronic commerce, executive compensation, strategic planning and mergers and acquisitions. Ms. Bernard’s experience has led our Board to determine that she is an “audit committee financial expert” as that term is defined in SEC rules. She has served for more than 20 years as a director of other public companies, including service as chairman of the board and lead independent director, and she has experience chairing the nominating and governance committees of several public company boards, including ours. |
Zimmer Biomet 6
CORPORATE GOVERNANCE
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Chief Executive Officer of ResMed Inc. since March 2013 and Chairman of ResMed Inc. since January 2023. Prior to his appointment as Chief Executive Officer, Mr. Farrell served as President, Americas for ResMed from 2011 to 2013. He was previously Senior Vice President of the global business unit for sleep apnea therapeutic and diagnostic devices from 2007 to 2011, and before that he held various senior roles in marketing and business development. Before joining ResMed in September 2000, Mr. Farrell worked in management consulting, biotechnology, chemicals and metals manufacturing at Arthur D. Little, Sanofi Genzyme, Dow Chemical and BHP. Mr. Farrell holds a bachelor of engineering, with first-class honors, from the University of New South Wales, a master of science in chemical engineering from the Massachusetts Institute of Technology and an MBA from the MIT Sloan School of Management.
Other Public Board Memberships • ResMed Inc. Other Relevant Experience • Director of AdvaMed
Skills and Qualifications
Michael J. Farrell’s service as Chairman and CEO of ResMed Inc., a global leader in the development, manufacturing, distribution and marketing of medical products for the diagnosis, treatment and management of respiratory disorders, provides him with significant experience leading a highly regulated, global medical device company. Mr. Farrell is spearheading the company’s expansion into emerging markets and its investments in connected health and digital health, major growth initiatives for ResMed that fit well with our own plans for global growth. In his prior roles, Mr. Farrell led ResMed’s M&A and alliance creation activities, as well as the marketing function. In addition, during his tenure with ResMed, Mr. Farrell has gained domestic and international P&L experience, first as head of the company’s major global business unit, and then as President, Americas. Mr. Farrell’s experience has given him a strong understanding of key aspects of leading a highly regulated, global healthcare company such as ours, including financial management, business integration, strategic planning, operations, technology assessment and management, product innovation, new product launches and international expansion. |
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Senior Vice President and Chief Financial Officer of Quest Diagnostics Incorporated until his retirement in July 2013. Mr. Hagemann joined Corning Life Sciences, Inc., a subsidiary of Quest Diagnostics’ former parent company, Corning Incorporated, in 1992, and held roles of increasing responsibility before being appointed Chief Financial Officer of Quest Diagnostics in 1998. Prior to joining Corning, Mr. Hagemann held senior financial positions at Prime Hospitality, Inc. and Crompton & Knowles, Inc. He was also previously employed by Arthur Young & Co., a predecessor company to Ernst & Young. Mr. Hagemann holds a B.S. in accounting from Rider University and an MBA from Seton Hall University.
Other Public Board Memberships • Graphic Packaging Holding Company • Ryder System, Inc.
Skills and Qualifications
Robert A. Hagemann’s past experience as the CFO of Quest Diagnostics Incorporated, a leading provider of diagnostic testing information services, has given him financial management expertise, as well as significant experience in strategic planning, business development, business integration, operations, talent management and information technology. His experience as an executive in the healthcare industry and his financial acumen enable him to evaluate and understand the impact of business decisions on our financial statements and capital structure. Mr. Hagemann’s experience has led our Board to determine that he is an “audit committee financial expert” as that term is defined in SEC rules. He also serves, and has served for approximately ten years, as a director of other public companies. |
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Operating Advisor to the Abu Dhabi Investment Authority since June 2021, and Deputy Chairman of the Board of UNION therapeutics A/S since July 2021. Previously, Consultant, Blackstone Healthcare Partners of The Blackstone Group from June 2010 until June 2021. Mr. Higgins served as non-executive chairman of the board of Assertio Holdings, Inc., successor issuer to Assertio Therapeutics, Inc., from May 2020 until December 2020. Prior to that, he served as President, Chief Executive Officer and a member of the board of directors of Assertio Therapeutics, Inc. from March 2017 until its merger with Zyla Life Sciences in May 2020. Previously, Mr. Higgins served as Chairman of the Board of Management of Bayer HealthCare AG from January 2006 to May 2010 and Chairman of the Bayer HealthCare Executive Committee from July 2004 to May 2010. Prior to joining Bayer HealthCare in 2004, Mr. Higgins served as Chairman, President and Chief Executive Officer of Enzon Pharmaceuticals, Inc. from 2001 to 2004. Prior to that, Mr. Higgins spent 14 years with Abbott Laboratories, most recently as President of the Pharmaceutical Products Division from 1998 to 2001. He graduated from Strathclyde University, Scotland and holds a B.S. in biochemistry.
Other Public Board Memberships • Ecolab Inc. • Past director of Assertio Holdings, Inc. (until December 2020) • Past director of Assertio Therapeutics, Inc. (until May 2020) • Past director of Endo International plc (until March 2017)
Skills and Qualifications
Arthur J. Higgins has extensive senior leadership experience in the global healthcare market. Through leadership positions with large healthcare developers and manufacturers in both the U.S. and Europe, he has gained deep knowledge of the healthcare market and the strategies for developing and marketing products in this highly regulated area. His knowledge and industry background allow him to provide valuable insight to our business. In addition, his perspective gained from years of operating global businesses and his background in working with high growth companies provide him experiences from which to draw to advise us on strategies for sustainable growth. Through his past executive positions, he has also gained significant exposure to enterprise risk management as well as quality and operating risk management necessary in a highly regulated industry such as healthcare.
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Executive Vice President and Chief Financial Officer of Allergan plc, a global pharmaceutical company, from December 2014 until her retirement in February 2018. Prior to joining Allergan, Ms. Hilado served as Senior Vice President, Finance and Treasurer of PepsiCo Inc. from 2009 until 2014. She previously served as Vice President and Treasurer for Schering-Plough Corp. from 2008 to 2009 and spent more than 17 years with General Motors Co. in leadership roles of increasing responsibility, including Assistant Treasurer from 2006 to 2008 and Chief Financial Officer, GMAC Commercial Finance LLC from 2001 to 2005. She began her career with Far East Bank and Trust Co. in Manila, Philippines. Ms. Hilado earned a Bachelor’s degree in Management Engineering from Ateneo de Manila University in the Philippines and an MBA from the University of Virginia Darden School of Business.
Other Public Board Memberships • Campbell Soup Company • Past director of H.B. Fuller Company (until December 2021) • Past director of PPD, Inc. (until December 2021) Other Relevant Experience • Director, Galderma SA • Director, Curia Global, Inc. • Director, Simtra (Baxter Pharmaceutical LLC)
Skills and Qualifications
Maria Teresa (Tessa) Hilado has more than three decades of demonstrated financial expertise in leading roles at several large, global corporations, including her past experience as CFO of Allergan plc, a global pharmaceutical company. She has extensive experience in global finance, treasury, tax, mergers and acquisitions, business development and investor relations, as well as experience in the healthcare, consumer packaged goods and automotive industries. Ms. Hilado’s experience has led our Board to determine that she is an “audit committee financial expert” as that term is defined in SEC rules. She has also served as a director of other public companies.
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Retired Senior Vice President and President, Regions of Thermo Fisher Scientific Inc. from September 2017 through his retirement in March 2022. Mr. Jafry was responsible for all business geographies outside the U.S. He joined Thermo Fisher Scientific in March 2005 and served in numerous roles of increasing responsibility prior to being appointed to his last position. Mr. Jafry started his career at Glaxo Pharmaceuticals in London. Prior to joining Thermo Fisher Scientific, he served for 18 years at General Electric, where he held commercial, product management and general management roles in the U.S., Netherlands, Switzerland and China, most recently serving as President of GE Sensing Asia. He joined the board of directors of GTCR, LLC, a private equity firm, in 2022. Mr. Jafry holds a Bachelor’s degree in Mechanical Engineering from Lahore University in Pakistan, a Master’s degree in Mechanical Engineering from the University of Massachusetts and a Master’s certificate in Marketing and Management from Harvard University Extension School.
Other Relevant Experience • Director, GTCR, LLC
Skills and Qualifications
Syed Jafry has more than three decades of global operations and management experience in executive roles at several large, global organizations, including as Senior Vice President and President, Regions of Thermo Fisher Scientific Inc., a world leader in serving science, supporting customers in pharmaceuticals, biotech, healthcare and other industries. Mr. Jafry’s experience has given him a strong understanding of key aspects of leading a global, highly regulated business such as ours, including expansion into emerging markets, financial management, strategic planning, operations, product innovation, new product launches and business integration. His knowledge and industry background allow him to provide valuable insight to our business. |
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Executive Vice President, Chief Product and Digital Officer of Align Technology, Inc., a global medical device company (“Align”), since December 2023. Ms. Kolli is responsible for Align's product lifecycle, from product ideation and innovation, to engineering, product launch and product performance. This includes leading the product and engineering teams and defining the technology strategy and development of product software, consumer, customer, manufacturing and enterprise applications enabling the Align Digital Platform. Ms. Kolli has led Align’s global business transformation initiative aimed at delivering platforms and technology to support customer experience and simplified business processes across the company. She joined Align in June 2003 and has held positions of increasing responsibility, leading and transforming business operations and engineering. She was promoted to Vice President, Information Technology in December 2012, to Senior Vice President, Global Information Technology in February 2018, to Senior Vice President – Chief Digital Officer in April 2020, and to Executive Vice President, Chief Digital Officer, in February 2022. Prior to joining Align, Ms. Kolli held technical lead positions with Citadon and Accenture. She is a member of the board of directors of Intuitive Surgical, Inc. Ms. Kolli earned an M.S. degree in Computer Applications at the National Institute of Technology in Trichy, India and is a graduate of the Stanford Executive Program offered by the Stanford Graduate School of Business in California.
Other Public Board Memberships • Intuitive Surgical, Inc.
Skills and Qualifications
Sreelakshmi Kolli’s service as Executive Vice President and Chief Product and Digital Officer of Align Technology, Inc., a publicly traded company that designs, manufactures and offers the Invisalign® clear aligner system, intraoral scanners and services, and exocad CAD/CAM software, has provided her with significant experience in a highly regulated global medical device company. In her senior leadership roles, Ms. Kolli has gained deep knowledge of digital and emerging technologies, operations, strategic planning, marketing, product innovation, financial management and data privacy trends. Her knowledge and industry background allow her to provide valuable insight to our business as we expand our portfolio of integrated digital and robotic technologies that leverage data, machine learning and artificial intelligence. |
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Senior Advisor, General Atlantic since October 2023. President and Chief Executive Officer of the Hospital for Special Surgery (“HSS”), a leading academic medical center focused on musculoskeletal health, from October 2006 until his retirement in October 2023. Prior to joining HSS, Mr. Shapiro worked at Geisinger Health System from 2002 to 2006, serving in roles with increasing leadership scope and ultimately advancing to Executive Vice President and Chief Operating Officer of the Clinical Enterprise. He served as a senior healthcare expert and consultant at McKinsey & Co. from 1999 to 2002 and held positions in other hospitals and health systems from 1983 through 1999. Mr. Shapiro has a Bachelor of Science degree in psychology from the University of Pittsburgh and a Master’s degree in health administration from the University of Pittsburgh Graduate School of Public Health. Mr. Shapiro also has extensive healthcare and nonprofit board service, including serving as a founding member of the board of directors of RightMove Health, as President of Medical Indemnify Assurance Company, and as the board chairman of the Greater New York Hospital Association.
Other Relevant Experience • Director, Jewish Healthcare Foundation • Chairman of the Board of Directors, PT Solutions Physical Therapy • Venture Chair, Redesign Health
Skills and Qualifications
Louis Shapiro led all strategic and operational aspects of HSS for over 17 years, leading its transformation from a boutique New York provider to a musculoskeletal healthcare system with more than 20 locations in four states that treats nearly 200,000 patients annually from all 50 states and more than 80 countries. Mr. Shapiro’s expertise spans from strategic innovation and service line development to technology integration, employee engagement and patient experience. He has served for more than 15 years as a director of not-for-profit and healthcare organizations, including service as Chairman of the Board.
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President and Chief Executive Officer of the company and member of the company's Board of Directors since August 2023. Previously, Mr. Tornos served as the Chief Operating Officer of the company since March 2021, as the company’s Group President, Global Businesses and the Americas from December 2019 until March 2021, and as Group President, Orthopedics from joining the company in November 2018 until December 2019. Prior to joining the company, Mr. Tornos served as Worldwide President of the Global Urology, Medical and Critical Care Divisions of Becton, Dickinson and Company (“BD”) (and previously, C. R. Bard, Inc. (“Bard”)) from June 2017 until October 2018. From June 2017 until BD’s acquisition of Bard in December 2017, Mr. Tornos also continued to serve as President, EMEA of Bard, a position to which he was appointed in September 2013. Mr. Tornos joined Bard in August 2011 and, prior to his appointment as President, EMEA, served as Vice President and General Manager with leadership responsibility for Bard’s business in Southern Europe, Central Europe and the Emerging Markets Region of the Middle East and Africa. Before joining Bard, Mr. Tornos served as Vice President and General Manager of the Americas Pharmaceutical and Medical/Imaging Segments of Covidien International from April 2009 to August 2011. Before that, he served as International Vice President, Business Development and Strategy with Baxter International Inc. from July 2008 to April 2009 and, prior to that, Mr. Tornos spent 11 years with Johnson & Johnson in positions of increasing responsibility.
Other Public Board Memberships • PHC Holdings Corporation
Skills and Qualifications Ivan Tornos' service as our President and CEO, his prior service as our Chief Operating Officer, our Group President, Global Businesses and the Americas, and our Group President, Orthopedics, together with his past service as Worldwide President of the Global Urology, Medical and Critical Care Divisions of BD and Bard, have given him extensive experience in the medical device industry delivering transformative growth and leadership for large, highly regulated global enterprises. Mr. Tornos has significant experience in financial management, strategic planning, mergers and acquisitions, business integration, risk management and in dealing with the many regulatory aspects of our business. His deep knowledge and understanding of the medical device industry in general, and our global businesses in particular, enable him to provide crucial insight to our Board into strategic, management and operational matters. Mr. Tornos provides an essential link between management and the Board on management’s business perspectives. |
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OUR BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE FRAMEWORK
DIRECTOR CRITERIA, QUALIFICATIONS AND
EXPERIENCE
We are a global leader in musculoskeletal healthcare. We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; craniomaxillofacial and thoracic products; surgical products; and a suite of integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence. We have operations in more than 25 countries around the world and sell products in more than 100 countries. We operate in markets characterized by rapidly evolving technologies, complex regulatory requirements and significant competition.
The Corporate Governance Committee is responsible for reviewing and assessing with the Board, on an annual basis, the experience, qualifications, attributes and skills sought of Board members in the context of our business and the then-current membership of the Board. The director skills matrix below identifies some of the key skills and experiences the Board has identified as being important to its responsibilities and reflects how the directors nominees, individually and in the aggregate, reflect these skills.
2024 Director Nominees |
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Sitting CEO of Medical Device Company |
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Sitting CEO or Global Business Head |
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Prior CEO or Global Business Head |
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Operations Experience |
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Healthcare Industry Experience |
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Medical Device Industry Experience |
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International Expertise |
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FDA Experience |
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R&D Experience |
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Government / Regulatory Affairs / Health Economics Experience |
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Financial Expertise |
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Digital Technology Expertise |
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Demographics |
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Gender |
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Race, ethnicity, gender and LGBTQ+ status are self-reported by directors in their annual directors’ and officers’ questionnaires. Diversity, equity and inclusion data is not standardized and director responses are not required.
A mark indicates a specific area of focus or expertise that the director brings to our Board. The matrix above does not encompass all of the knowledge, skills and experience of our directors, and the fact that a particular knowledge, skill or experience is not listed does not mean that a director does not possess it. In addition, the absence of a particular knowledge, skill or experience with respect to any of our directors does not mean the director in question is unable to contribute to the decision-making process in that area.
The Corporate Governance Committee looks for current and potential directors collectively to have a mix of experience, skills and qualifications, including those identified in the matrix. In evaluating director candidates and considering incumbent directors for
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nomination to the Board, the committee considers a variety of factors. These include each candidate’s experiences, skills and qualifications, character and integrity, reputation for working constructively in a collegial environment and availability to devote sufficient time to Board matters. Diversity of background and diversity of gender, race, ethnicity, national origin, disability status and age are also relevant factors in the selection process. The committee also considers whether a candidate can meet the independence standards for directors and members of key committees under applicable stock exchange and SEC rules. With respect to incumbent directors, the committee considers the director’s past performance on the Board and contributions to the committees on which he or she serves.
While the Board has not formally adopted a policy regarding director diversity, the committee actively considers diversity in director recruitment and nomination. In conducting its most recent search for new directors, the Board utilized a process that required the final pool of candidates to include potential directors who would increase the Board’s ethnic and/or gender diversity. We anticipate utilizing a similar process in future searches for Board candidates. The Board believes that the diversity of the current Board members, including as to gender, race, ethnicity, national origin, international work experience, disability status and age, provides significant benefits to the Board and to the company. In response to feedback from shareholders, above we provide enhanced disclosure regarding our Board’s skills and diversity.
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BOARD LEADERSHIP STRUCTURE |
One of the key responsibilities of the Board is to have a leadership structure that allows it to provide effective oversight of management and maximize the contributions of its members. Our Board believes that it is important that it retain flexibility to make the determination as to whether the interests of the company and our shareholders are best served by having the same individual serve as both CEO and Chairman or whether the roles should be separated based on the circumstances at any given time, and our Corporate Governance Guidelines and Restated Bylaws provide this flexibility. Under our Corporate Governance Guidelines, the Board appoints a Lead Independent Director when the CEO and Chairman roles are combined. At different times in the past, the Board has used both approaches, selecting the approach which it believes best serves the interests of the company and our shareholders at that time.
Currently, the Board is led by a non-executive Chairman of the Board selected from among the independent directors. The non-executive Chairman leads the meetings and activities of the Board, while our CEO leads the management, operations and employees of the company and is responsible for executing the company’s strategy. The Board adopted this leadership structure in August 2023 when Mr. Tornos became CEO. At that time, the Board appointed Mr. Begley, who had served as the Lead Independent Director since May 2021, as Chairman. The Board currently believes that this leadership structure allows the Board to function efficiently and effectively and that it continues to be appropriate. However, the Board evaluates its leadership structure on an ongoing basis and is not opposed in concept to combining these roles in the future.
The Chairman provides leadership to the Board and works with the Board to define its structure and activities in the fulfillment of its responsibilities. In discharging his or her duties, the non-executive Chairman will:
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BOARD’S ROLE IN RISK OVERSIGHT |
Our Board of Directors oversees the risk management processes that have been designed and are implemented by our executives to determine whether those processes are consistent with our strategy and risk appetite, are functioning as intended, and that necessary steps are taken to foster a culture that recognizes and appropriately escalates and addresses risk-taking beyond our determined risk appetite. The Board executes its oversight responsibility for risk management directly and through its committees.
The Audit Committee is specifically tasked with overseeing our compliance with legal and regulatory requirements, including oversight of our Corporate Compliance Program, discussing our risk assessment and risk management processes with management, and receiving information on certain material legal and regulatory matters, including litigation, as well as on information technology, data privacy, business continuity and cybersecurity-related matters. Our Vice President, Internal Audit Services, who reports directly to the committee, coordinates our global risk assessment process. We use this process to identify, assess and prioritize internal and external risks, to develop processes for responding to, mitigating and monitoring risks and to inform the development of our internal audit plan, our annual operating plan and our long-term strategic plan. We also maintain an internal risk committee made up of members of senior management that has responsibility for overseeing the execution of enterprise risk management activities.
The Audit Committee receives detailed reports regarding our enterprise risk assessment process and its meeting agendas include discussions of individual risk areas throughout the year. Members of our management who have responsibility for designing and implementing our risk management processes regularly meet with the committee. The committee discusses our major financial risk exposures with our CFO and Chief Accounting Officer. The committee receives regular reports from our Chief Compliance Officer on our Corporate Compliance Program, which is designed to address risks related to, among other matters, anti-corruption and anti-kickback laws in the countries where we do business. The committee receives regular reports from our Chief Information Officer and our Chief Information Security Officer regarding cybersecurity risks and threats. The committee also receives reports from our General Counsel, Global Privacy Officer and other persons who are involved in our risk management processes.
The Board’s other committees oversee risks associated with their respective areas of responsibility. For example, the Compensation and Management Development Committee oversees risks relating to our executive compensation programs and practices. In addition, in conjunction with the full Board, the Compensation and Management Development Committee oversees risks relating to human capital management. The Corporate Governance Committee oversees risks relating to environmental, social and governance matters. The Quality, Regulatory and Technology Committee oversees risks relating to our compliance with laws and regulations enforced by the U.S. Food and Drug Administration (“FDA”) and comparable foreign government regulators, including product quality and safety. The Board receives detailed regular reports from members of our executive leadership team and other personnel that include discussions of the risks and exposures involved with their respective areas of responsibility. Further, the Board is routinely informed of developments that could affect our risk profile or other aspects of our business. Primary areas of risk oversight for the full Board include, but are not limited to, general commercial risks in the musculoskeletal healthcare industry, such as competition, pricing pressures and the reimbursement landscape; risks associated with our strategic plan and annual operating plan; risks related to our capital structure; and risks pertaining to mergers, acquisitions, divestitures and other complex transactions.
BOARD’S ROLE IN Executive Succession Planning and Development |
The Board and its Compensation and Management Development Committee oversee executive succession planning for the company as part of building a high-performing, diverse and inclusive workforce. On an annual basis, the Board and committee evaluate the company's leadership team succession planning. Additionally, other Board committees receive annual talent review updates from relevant management teams, such as the Audit Committee receiving the Finance and Internal Audit teams’ talent reviews, and the Quality, Regulatory and Technology Committee receiving the Quality Affairs and Regulatory Affairs teams’ talent reviews. Additionally, Board members interact with internal succession candidates through candidates' participation in Board and committee meetings and other contacts, and high-potential individuals are often positioned to interact more frequently with our Board and its committees as part of our succession planning processes. During 2022, we introduced Global Leadership Competencies, behaviors that are informed by our culture promises, support our mission and enable successful outcomes aligned to our strategic pillars to help build a pipeline of talent who can fill future leadership roles.
The annual Board and committee review of leadership team succession planning represents the culmination of an ongoing process in which each member of the President and CEO's leadership team, in collaboration with our Human Resources Department, develops detailed succession plans designed to ensure the continuing strength and success of each function. These detailed succession plans identify high-performing internal and external candidates for leadership roles and are intended to develop and enhance well-rounded and experienced leaders. Among other factors, our executive succession planning processes:
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We seek to continually improve our executive succession planning programs. For example, the executive leadership changes we undertook in August and September 2023 demonstrated successful operation of these processes, as well as provided valuable experience to inform further enhancements.
POLICIES ON CORPORATE GOVERNANCE |
We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving shareholders well and maintaining our integrity in the marketplace. Our Board has adopted Corporate Governance Guidelines, which, in conjunction with our Restated Certificate of Incorporation, Restated Bylaws, Board committee charters and key Board policies, form the framework for our governance. Our Board regularly reviews corporate governance developments and modifies its Corporate Governance Guidelines, committee charters and key policies as warranted.
The current versions of the following documents are available in the Investor Relations/Corporate Governance section of our website, www.zimmerbiomet.com:
If we make any substantive amendments to the finance code of ethics or grant any waiver, including any implicit waiver, from a provision of the code to our CEO, CFO, or Chief Accounting Officer/Corporate Controller, we will disclose the nature of that amendment or waiver in the Investor Relations section of our website.
LIMIT ON OTHER DIRECTORSHIPS |
Under our Corporate Governance Guidelines, our non-employee directors who are not executive officers of other public companies are limited to serving on a total of four public company boards, including ours, and our non-employee directors who serve as executive officers of other public companies are limited to serving on a total of three public company boards, including their own company’s board and our Board. Further, our Audit Committee members are limited to serving on a total of three public company audit committees, including ours.
Our Board is aware that certain of our investors, in recognition of the increased time required of boards of directors, have policies to limit directors who are CEOs of public companies to a total of two public company boards. While our Board recognizes that directors who are employed full-time, whether as executives of public companies or in other positions, naturally have greater demands placed on their time than directors who have retired from full-time employment, our Board has chosen not to adopt the more restrictive two-board limit for our non-employee directors who serve as public company executives so that our Board has more flexibility to assess the potential impact of directors’ additional commitments as they arise.
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BOARD SELF-EVALUATION PROCESS |
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Preparation Review self-evaluation process and prepare questionnaires/assessments |
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Pursuant to New York Stock Exchange requirements, the Board’s Corporate Governance Guidelines and the charters of each of the Board’s committees, the Board and each of its committees are required to conduct self-evaluations of their performance. The Board recognizes that a robust and constructive evaluation process is an essential component of good corporate governance. These self-evaluations, which are conducted annually, are intended to facilitate a candid assessment and discussion by the Board and each committee of its effectiveness as a group in fulfilling its responsibilities, evaluating its performance and identifying areas for improvement. The Chair of the Corporate Governance Committee oversees the annual self-evaluation process. Each director is expected to participate and provide feedback on a range of topics, including: Board and committee agendas; meetings; practices and dynamics; Board refreshment; committee structure, membership and leadership; the flow of information to and from the Board and its committees; management succession planning; and shareholder engagement. Director feedback is solicited on an individual basis through written questionnaires and group discussions. From time to time, the Board retains a third party experienced in corporate governance matters to act as a facilitator for the self-evaluation process, including preparing and reviewing the written questionnaires/assessments and conducting individual director interviews. The Chair of the Corporate Governance Committee, along with the third-party facilitator (when one is retained), reviews the feedback from the self-evaluation process and makes recommendations for areas with respect to which the Board and its committees should consider improvements. These areas are further discussed at a meeting led by the Chair of the Corporate Governance Committee and the third-party facilitator (when one is retained) at which all Board members are present. At the conclusion of this meeting, the Chair of the Corporate Governance Committee, working with the senior management team, develops action plans for any items that require follow-up. |
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Analyze Feedback Review feedback and make recommendations for improvement |
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Review Findings Meeting to discuss findings with the entire Board |
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Follow-Up Plans of action developed with senior management for any items that require follow-up |
DIRECTOR INDEPENDENCE |
The Board’s Corporate Governance Guidelines, which are available on our website at www.zimmerbiomet.com, include criteria adopted by the Board to assist it in making determinations regarding the independence of its members. The criteria are consistent with the New York Stock Exchange listing standards regarding director independence. To be considered independent, the Board must determine that a director has no material relationship, directly or indirectly, with us. In assessing independence, the Corporate Governance Committee and the Board consider a wide range of relevant facts and circumstances. The Board has determined that each of our non-employee directors, Christopher Begley, Betsy Bernard, Michael Farrell, Robert Hagemann, Arthur Higgins, Maria Teresa Hilado, Syed Jafry, Sreelakshmi Kolli, Michael Michelson and Louis Shapiro, meets these standards and is independent. The remaining director, Ivan Tornos, is our CEO and is not independent.
In making its determination with respect to Mr. Shapiro, the Board considered his position as former President and Chief Executive Officer of the Hospital for Special Surgery ("HSS"). From January 1, 2023 through October 31, 2023, HSS purchased approximately $12 million in products from us, but the amount HSS purchased represented only seven tenths of one percent (0.7%) of HSS's reported revenue in 2022. After reviewing the terms of these transactions, the Board determined that Mr. Shapiro does not have a direct or indirect material interest in the transactions, that Mr. Shapiro does not have a material relationship, directly or indirectly, with us and that our business relationship with HSS does not diminish the ability of Mr. Shapiro to exercise his independent judgment on issues affecting our business.
MAJORITY VOTE STANDARD FOR ELECTION OF DIRECTORS |
Our Restated Bylaws require directors to be elected by the majority of the votes cast with respect to that director in uncontested elections (the number of shares voted “for” a director must exceed the number of votes cast “against” that director). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of
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CORPORATE GOVERNANCE
directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors.
If a nominee who is serving as a director is not elected at the annual meeting, under Delaware law the director would continue to serve on the Board as a “holdover director.” However, under our Restated Bylaws, any director who fails to be elected must tender his or her resignation to the Board. The Corporate Governance Committee would then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Corporate Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in the Board’s decision. Furthermore, pursuant to an amendment to our Corporate Governance Guidelines that the Board adopted to secure the withdrawal of a shareholder proposal received for the 2024 annual meeting, our Corporate Governance Guidelines provide that, if an incumbent director fails to be elected in an uncontested election, and regardless of the Board's decision with respect to the related tendered resignation, the Board will not nominate such person to be a candidate for election as a director at the next annual shareholder meeting. For further information about our engagement with the shareholder proponent, the adoption of the amendment to the Corporate Governance Guidelines, and the subsequent withdrawal of the shareholder proposal, please see below in the Compensation Discussion and Analysis section of this proxy statement.
If a nominee who was not already serving as a director is not elected at the annual meeting, under Delaware law that nominee would not become a director and would not serve on the Board as a “holdover director.” All nominees for election as directors at the 2024 annual meeting are currently serving on the Board.
NOMINATIONS FOR DIRECTORS |
The Corporate Governance Committee screens candidates and recommends candidates for nomination to the full Board. In seeking and evaluating director candidates, the committee considers individuals in accordance with the criteria described above under “Director Criteria, Qualifications and Experience.” Director candidates may be recommended by Board members, a third-party search firm or shareholders.
The committee considers candidates proposed by shareholders and evaluates them using the same criteria as for other candidates. A shareholder who wishes to recommend a director candidate for consideration by the committee should send such recommendation to our Corporate Secretary at Zimmer Biomet Holdings, Inc., 345 East Main Street, Warsaw, Indiana 46580, who will then forward it to the committee. Any such recommendation should include a description of the candidate’s qualifications for board service, the candidate’s written consent to be considered for nomination and to serve if nominated and elected, and addresses and telephone numbers for contacting the shareholder and the candidate for more information.
A shareholder who wishes to nominate an individual as a candidate for election, rather than recommend the individual to the committee as a nominee, but does not intend to have the candidate included in our proxy materials, must comply with the advance notice requirements set forth in our Restated Bylaws. (See “What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2025 annual meeting of shareholders? – Notice Requirements for Other Director Nominees or Shareholder Proposals to Be Brought Before the 2025 Annual Meeting of Shareholders” on page 87 for more information.) In addition, in 2019, our Board adopted “proxy access,” which permits eligible shareholders to nominate and include in our proxy materials director nominees if certain requirements are met. (See “What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2025 annual meeting of shareholders? – Requirements for Director Nominees to Be Considered for Inclusion in our Proxy Materials (“Proxy Access”)” on page 87 for more information.) Further, shareholders who intend to solicit proxies in support of director nominees other than our nominees must comply with Rule 14a-19 under the Exchange Act. (See “What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2025 annual meeting of shareholders? – Notice Requirements under Universal Proxy Rules” on page 87 for more information.)
COMMUNICATIONS WITH DIRECTORS |
Shareholders or other interested parties may contact our directors by writing to them either individually or as a group or partial group (such as all independent directors), c/o Corporate Secretary, Zimmer Biomet Holdings, Inc., 345 East Main Street, Warsaw, Indiana 46580. If you wish your communication to be treated confidentially, please write the word “CONFIDENTIAL” prominently on the envelope and address it to the director by name so that it can be forwarded without being opened. Communications addressed to multiple recipients, such as to “Board of Directors,” “Audit Committee,” “Independent Directors,” etc., will necessarily have to be opened and copied by the Office of the Corporate Secretary in order to forward them, and hence cannot be treated confidentially.
Zimmer Biomet 16
CORPORATE GOVERNANCE
BOARD MEETINGS, ATTENDANCE AND EXECUTIVE SESSIONS |
The Board meets on a regularly scheduled basis during the year to review significant developments affecting us and to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetings. Members of senior management regularly attend meetings of the Board and its committees to report on and discuss their areas of responsibility. Directors are expected to attend Board meetings, meetings of committees on which they serve and shareholder meetings. Directors are expected to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. During 2023, the Board held six meetings and the standing committees of the Board held a total of 23 meetings. All directors attended 75% or more of the meetings of the Board and committees on which they served. All current directors then standing for election attended the 2023 annual meeting of shareholders.
Each regularly scheduled Board meeting normally begins with a session between the CEO and the independent directors. This provides a platform for discussions outside the presence of the non-Board management attendees, as well as an opportunity for the independent directors to go into executive session (without the CEO) if requested by any director. The independent directors may meet in executive session, without the CEO, at any time, and are scheduled for such independent executive sessions at each regularly scheduled Board meeting. Currently, Mr. Begley, in his capacity as non-executive Chairman, also presides at these executive sessions.
On an annual basis, each director and executive officer is obligated to complete a director and officer questionnaire which requires disclosure of any transactions with us in which the director or executive officer, or any member of his or her immediate family, has an interest. Under our Audit Committee’s charter, which is available on our website at www.zimmerbiomet.com, our Audit Committee must review and approve all related person transactions in which any executive officer, director, director nominee or more than 5% shareholder of the company, or any of their immediate family members, has a direct or indirect material interest. The Audit Committee may not approve a related person transaction unless (1) it is in or not inconsistent with our best interests and (2) where applicable, the terms of such transaction are at least as favorable to us as could be obtained from an unrelated third party.
Under our Code of Business Conduct and Ethics, which is available on our website at www.zimmerbiomet.com, and related policies and procedures, actual or potential conflicts of interest involving any other employee must be disclosed to and resolved by our Human Resources Department, in consultation with our Compliance Office.
In February 2018, we entered into an aircraft time sharing agreement with Bryan Hanson, our former Chairman, President and Chief Executive Officer. Both the Audit Committee and the Compensation and Management Development Committee of our Board authorized entry into the agreement. Under the agreement, Mr. Hanson was permitted to reimburse us for the incremental costs of his personal use of corporate aircraft, consistent with Federal Aviation Administration regulations. Mr. Hanson was permitted personal use of corporate aircraft up to a maximum incremental cost to us of $190,000 in 2023. The agreement was intended to cover any personal use in excess of the annual limit. The aircraft time sharing agreement was terminated upon the termination of Mr. Hanson's employment in August 2023.
Al Hanson, Jr., a Regional Sales Director in Restorative Therapies for our Sports Medicine business, is the brother of Bryan Hanson, our former Chairman, President and Chief Executive Officer. In 2023, Mr. Al Hanson received approximately $200,100 in total compensation, consisting of his salary, bonus and other benefits. The amounts paid to Mr. Al Hanson were commensurate with those paid to employees in similar positions and responsibility levels.
Stock Trading Policy and prohibition on Pledging and Hedging |
Our Stock Trading Policy prohibits all members of our Board, all executive officers, all employees at or above a director level and certain other designated employees (as well as such individuals’ family members, others living in their home and any entities that such individuals influence or control) from the following:
Zimmer Biomet 17
CORPORATE GOVERNANCE
The prohibition on hedging included in our Stock Trading Policy does not preclude covered persons from engaging in general portfolio diversification or investing in broad-based index funds.
Zimmer Biomet 18
CORPORATE GOVERNANCE
|
COMMITTEES OF THE BOARD |
Our Restated Bylaws provide that the Board may delegate certain of its responsibilities to committees. During 2023, the Board had four standing committees: an Audit Committee; a Compensation and Management Development Committee; a Corporate Governance Committee; and a Quality, Regulatory and Technology Committee. Each of the standing committees is composed entirely of independent directors. In addition, the members of the Audit Committee and the Compensation and Management Development Committee meet the heightened standards of independence required by SEC rules and New York Stock Exchange listing standards.
The table below shows the current membership of each standing Board committee and the number of meetings held during 2023.
STANDING COMMITTEE ASSIGNMENTS
Director |
Audit Committee |
Compensation and |
Corporate |
Quality, and Technology |
Christopher B. Begley |
|
|
✓ |
✓ |
Betsy J. Bernard |
✓ |
|
Chair |
|
Michael J. Farrell |
|
Chair |
|
✓ |
Robert A. Hagemann |
Chair |
|
✓ |
|
Arthur J. Higgins |
|
✓ |
|
✓ |
Maria Teresa Hilado |
✓ |
|
✓ |
|
Syed Jafry |
|
✓ |
|
✓ |
Sreelakshmi Kolli |
✓ |
|
|
Chair |
Michael W. Michelson |
|
✓ |
|
✓ |
Louis A. Shapiro |
✓ |
|
|
✓ |
Ivan Tornos |
|
|
|
|
2023 Meetings |
9 |
5 |
5 |
4 |
|
|
|
|
|
|
Audit Committee Robert A. Hagemann, Chair |
|
Other Committee Members: Betsy J. Bernard Maria Teresa Hilado Sreelakshmi Kolli Louis A. Shapiro |
|
|
|
The Audit Committee is directly responsible for the appointment, retention, compensation and oversight of our independent registered public accounting firm, including the review and approval of audit fees. The principal functions of the Audit Committee include:
The Board of Directors has determined that Mses. Bernard and Hilado and Mr. Hagemann qualify as “audit committee financial experts” as defined by SEC rules. Shareholders should understand that this designation is an SEC disclosure requirement related to these directors’ experience and understanding with respect to certain accounting and auditing matters. The designation does not impose upon these directors any duties, obligations or liabilities that are greater than those that are generally imposed on them as members of the Audit Committee and the Board, and their designation as audit committee financial experts pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or the Board.
Zimmer Biomet 19
CORPORATE GOVERNANCE
See also the “Audit Committee Matters” section of this proxy statement for additional information about the Audit Committee’s responsibilities and actions and the Audit Committee Report.
The report of the Audit Committee appears on page 27.
|
|
|
|
|
|
Compensation and Management Development Committee Michael J. Farrell, Chair |
|
Other Committee Members: Arthur J. Higgins Syed Jafry Michael W. Michelson |
|
|
|
The Compensation and Management Development Committee has overall responsibility for approving and evaluating our executive compensation plans, policies and programs. The duties of the Compensation and Management Development Committee include:
None of the members of the Compensation and Management Development Committee during 2023 or as of the date of this proxy statement is or has been our officer or employee or had any relationship requiring disclosure under Item 404 of Regulation S-K of the Exchange Act. None of our executive officers served on the compensation committee or board of any company that employed any member of the Compensation and Management Development Committee or the Board or otherwise under circumstances requiring disclosure under Item 404 of Regulation S-K.
The report of the Compensation and Management Development Committee appears on page 54.
|
Compensation Risk Assessment |
At the request of the Compensation and Management Development Committee, the committee’s compensation consultant conducts an in-depth qualitative review of the potential risks associated with our executive compensation program each year. The components of our executive compensation program are part of our global compensation structure, and the majority of the compensation policies or practices that apply to other levels of our employees or to any of our subsidiaries or divisions are included in our executive compensation program. For 2023, Semler Brossy Consulting Group, LLC (“Semler Brossy”), the committee’s current independent compensation consultant, found that our executive compensation program is in alignment with current market practices, contains an appropriate balance of risk versus rewards and incorporates appropriate risk mitigating factors. Semler Brossy found no design features in our executive compensation practices that pose a significant concern from the perspective of motivating senior officers to knowingly expose us to excessive enterprise risk. We believe that our compensation policies and practices do not encourage excessive risk-taking and are not reasonably likely to have a material adverse effect on us.
Zimmer Biomet 20
CORPORATE GOVERNANCE
|
|
|
|
|
|
Corporate Governance Committee Betsy J. Bernard, Chair |
|
Other Committee Members: Christopher B. Begley Robert A. Hagemann Maria Teresa Hilado |
|
|
|
The Corporate Governance Committee oversees the Board’s corporate governance policies and practices and assists the Board in its oversight with respect to matters that involve our image, reputation and standing as a responsible corporate citizen. In its oversight of corporate governance policies and practices, the Corporate Governance Committee’s duties include:
In assisting the Board in its oversight with respect to matters that involve our image, reputation and standing as a responsible corporate citizen, the Corporate Governance Committee reviews and considers, among other items, the following from time to time as it deems appropriate:
|
|
|
|
|
|
Quality, Regulatory and Technology Committee Sreelakshmi Kolli, Chair |
|
Other Committee Members: Christopher B. Begley Michael J. Farrell Arthur J. Higgins Syed Jafry Michael W. Michelson Louis A. Shapiro |
|
|
|
The Quality, Regulatory and Technology (“QR&T”) Committee assists the Board in its oversight of product quality and safety and our research, innovation and technology initiatives in the context of our overall corporate strategy, goals and objectives. In its oversight of risk management, the QR&T Committee reviews and considers, among other items, the following:
In overseeing our research, innovation and technology initiatives, the QR&T Committee reviews and considers, among other items, the following as it deems appropriate:
Zimmer Biomet 21
CORPORATE GOVERNANCE
|
COMPENSATION OF NON-EMPLOYEE DIRECTORS |
The Board believes that providing competitive compensation is necessary to attract and retain qualified non-employee directors. The key components of director compensation include annual retainers, committee chair annual fees and equity-based awards. It is the Board’s practice to provide a mix of cash and equity-based compensation to more closely align the interests of directors with our shareholders.
The following table sets forth information regarding the compensation we paid to our non-employee directors for 2023. Messrs. Hanson and Tornos are not included in this table because they received no additional compensation for their service as directors.
2023 Director Compensation Table
Name |
|
Fees Earned or Paid in Cash(1) |
|
|
Stock Awards(2) |
|
|
All Other Compensation(3) |
|
|
Total |
|
||||
(a) |
|
(b) |
|
|
(c) |
|
|
(g) |
|
|
(h) |
|
||||
Christopher B. Begley |
|
|
195,000 |
|
|
|
198,365 |
|
|
|
16,017 |
|
|
|
409,382 |
|
Betsy J. Bernard |
|
|
125,000 |
|
|
|
198,365 |
|
|
|
16,893 |
|
|
|
340,258 |
|
Michael J. Farrell |
|
|
132,500 |
|
|
|
198,365 |
|
|
|
11,653 |
|
|
|
342,518 |
|
Robert A. Hagemann |
|
|
135,000 |
|
|
|
198,365 |
|
|
|
24,830 |
|
|
|
358,195 |
|
Arthur J. Higgins |
|
|
120,000 |
|
|
|
198,365 |
|
|
|
29,383 |
|
|
|
347,748 |
|
Maria Teresa Hilado |
|
|
110,000 |
|
|
|
198,365 |
|
|
|
6,074 |
|
|
|
314,439 |
|
Syed Jafry |
|
|
110,000 |
|
|
|
253,365 |
|
|
|
4,157 |
|
|
|
367,522 |
|
Sreelakshmi Kolli |
|
|
121,250 |
|
|
|
258,990 |
|
|
|
2,106 |
|
|
|
382,346 |
|
Michael W. Michelson |
|
|
110,000 |
|
|
|
198,365 |
|
|
|
10,474 |
|
|
|
318,839 |
|
Zimmer Biomet 22
CORPORATE GOVERNANCE
The following table sets forth the grant date fair value of annual grants of restricted stock units ("RSU") and DSUs awarded to each director elected or reelected at the 2023 annual meeting of shareholders and the grant date fair value of DSUs granted during 2023 pursuant to the mandatory deferral provisions of the Deferred Compensation Plan for Non-Employee Directors.
2023 STOCK AWARDS
Name |
|
RSUs |
|
|
DSUs |
|
|
DSUs |
|
|
Total |
|
||||
Christopher B. Begley |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
— |
|
|
|
198,365 |
|
Betsy J. Bernard |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
— |
|
|
|
198,365 |
|
Michael J. Farrell |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
— |
|
|
|
198,365 |
|
Robert A. Hagemann |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
— |
|
|
|
198,365 |
|
Arthur J. Higgins |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
— |
|
|
|
198,365 |
|
Maria Teresa Hilado |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
— |
|
|
|
198,365 |
|
Syed Jafry |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
55,000 |
|
|
|
253,365 |
|
Sreelakshmi Kolli |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
60,625 |
|
|
|
258,990 |
|
Michael W. Michelson |
|
|
130,000 |
|
|
|
68,365 |
|
|
|
— |
|
|
|
198,365 |
|
|
Retainers |
We pay non-employee directors quarterly, on the last day of March, June, September and December. During 2023, we paid non-employee directors an annual retainer of $110,000 subject to mandatory deferral requirements as described below. We paid our Lead Independent Director an additional retainer at an annual rate of $40,000 and our non-executive Chairman of the Board an additional retainer at an annual rate of $130,000, each prorated based on quarters during which Mr. Begley served in each applicable role in 2023. We paid our Audit Committee chair an additional annual retainer of $25,000, we paid our Compensation and Management Development Committee chair an additional annual retainer of $20,000, and we paid each of the chairs of our other standing Board committees additional annual retainers of $15,000. Accordingly, we paid the following amounts during 2023:
|
|
March 31 |
|
June 30 |
|
September 30 |
|
December 31 |
|
Total |
Non-executive Chairman annual retainer |
|
— |
|
— |
|
32,500 |
|
32,500 |
|
65,000 |
Lead Independent Director annual retainer |
|
10,000 |
|
10,000 |
|
— |
|
— |
|
20,000 |
Director annual retainer |
|
27,500 |
|
27,500 |
|
27,500 |
|
27,500 |
|
110,000 |
Audit Committee chair annual retainer |
|
6,250 |
|
6,250 |
|
6,250 |
|
6,250 |
|
25,000 |
Compensation and Management Development Committee chair annual retainer |
|
5,000 |
|
5,000 |
|
5,000 |
|
5,000 |
|
20,000 |
Other standing committee chair annual retainer |
|
3,750 |
|
3,750 |
|
3,750 |
|
3,750 |
|
15,000 |
Directors who commence service on the Board, as a standing committee chair, as Lead Independent Director or as non-executive Chairman are paid applicable quarterly fees beginning with the quarter during which they commence such service. Similarly, directors who terminate service on the Board, as a standing committee chair, as Lead Independent Director or as non-executive Chairman are paid applicable quarterly fees through the quarter during which such service terminated.
Zimmer Biomet 23
CORPORATE GOVERNANCE
|
Equity-Based Compensation and Mandatory Deferrals |
We awarded each non-employee director who was elected or reelected at the 2023 annual meeting of shareholders 500 DSUs as of the date of the annual meeting with an initial value based on the average high and low price of our common stock on that date. We require that these annual DSU awards be credited to a deferred compensation account under the provisions of the Deferred Compensation Plan for Non-Employee Directors. DSUs represent an unfunded, unsecured right to receive shares of our common stock or the equivalent value in cash, and the value of DSUs varies directly with the price of our common stock. We also require that 50% of a director’s annual retainer be deferred and credited to his or her deferred compensation account in the form of DSUs with a value equal to six times the director's annual fees.
Non-employee directors may elect to defer receipt of compensation in excess of their mandatory deferral and annual DSU award. Elective deferrals are credited to the director’s deferred compensation account in the form of either treasury units, dollar units or DSUs with an initial value equal to the amount of fees deferred. The value of treasury units and dollar units does not change after the date of deferral. Amounts deferred as treasury units are credited with interest at a rate based on the six-month U.S. Treasury bill discount rate for the preceding year. Amounts deferred as dollar units are credited with interest at a rate based on the rate of return of our invested cash during the preceding year. When we pay cash dividends on our common stock, amounts deferred as DSUs are credited with additional DSUs equal to the number of shares of our common stock that could have been purchased if we paid cash dividends on the DSUs held in directors’ deferred compensation accounts and such cash was reinvested in our common stock. These additional DSUs are subject to mandatory deferral.
All treasury units, dollar units and DSUs are immediately vested and payable following termination of the non-employee director’s service on the Board. We settle annual DSU awards and mandatory deferral DSUs in shares of our common stock. We pay the value of treasury units, dollar units and elective deferral DSUs in cash. Non-employee directors may elect to receive the cash payment in a lump sum or in not more than ten annual installments.
During 2023, we also awarded each non-employee director RSUs as of the date of the annual meeting of shareholders with an initial value of $130,000 based on the average high and low price of our common stock on that date. These awards were made under the Stock Plan for Non-Employee Directors. The RSUs vested immediately and are subject to mandatory deferral until May 12, 2026, or, if later, the director’s retirement or other termination of service from the Board. We will settle the RSUs in shares of our common stock.
|
Insurance, Expense Reimbursement and Director Education |
We provide non-employee directors with travel accident insurance and reimburse reasonable expenses they incur for transportation, meals and lodging when on Zimmer Biomet business. We also reimburse non-employee directors for reasonable out-of-pocket expenses, including tuition costs incurred in attending director education programs.
Zimmer Biomet 24
AUDIT COMMITTEE MATTERS
AUDIT COMMITTEE MATTERS
|
Proposal 2 – Ratification of the Appointment of the Independent Registered Public Accounting Firm |
The Audit Committee is directly responsible for the appointment, retention, compensation and oversight of our independent registered public accounting firm, including the review and approval of audit fees. The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) to serve as our independent registered public accounting firm for 2024. We are asking shareholders to ratify this appointment as a matter of policy. If shareholders do not ratify the selection of PwC, the Audit Committee will consider any information submitted by shareholders in connection with the selection of the independent registered public accounting firm for the next year. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee believes such a change would be in our best interest and the best interest of our shareholders. PwC has served as our independent registered public accounting firm continuously since 2000. In accordance with SEC rules, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide audit services to us. For lead and concurring review audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of our lead audit partner pursuant to this rotation policy involves discussions among PwC, management and the full Audit Committee, as well as interviews by the Chair of the Audit Committee and our CFO of candidates recommended by PwC. In addition, in order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of our independent registered public accounting firm, which consideration includes evaluating audit firm rotation standards applicable outside of the U.S. and shareholder feedback regarding audit firm rotation. In determining whether to reappoint PwC to serve as our independent registered public accounting firm, the Audit Committee annually considers several factors, including: • PwC’s independence and objectivity; • PwC’s capabilities considering the complexity of our global operations, including the skills and experience of the lead audit partner; • PwC’s historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee and management’s views of PwC’s overall performance; • data related to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) inspection reports on PwC; • PwC’s knowledge of and familiarity with our business and industry and our accounting policies and practices; and • the appropriateness of PwC’s fees, taking into account the size and level of complexity of our organization and the resources necessary to perform the audit. The members of the Audit Committee and the Board believe that the continued retention of PwC to serve as our independent registered public accounting firm is in our best interest and in the best interest of our shareholders. Representatives of PwC attended all meetings of the Audit Committee in 2023. We expect that a representative of PwC will be present at the annual meeting. This representative will have an opportunity to make a statement and will be available to respond to appropriate questions. Our Board recommends a vote FOR ratification of the appointment of PwC as our independent registered public accounting firm for 2024. |
RESPONSIBILITIES OF THE AUDIT COMMITTEE
The Audit Committee is responsible for overseeing the integrity of our financial statements, the qualifications, performance and independence of the independent registered public accounting firm, the performance of our internal audit function and compliance with certain legal and regulatory requirements, including oversight of our Corporate Compliance Program. The committee is directly responsible for the appointment, retention, compensation and oversight of our independent registered public accounting firm.
Management is responsible for the financial reporting process, including the system of internal control, for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States and for management’s report on internal control over financial reporting.
Zimmer Biomet 25
AUDIT COMMITTEE MATTERS
The independent registered public accounting firm is responsible for auditing the consolidated financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States as well as rendering an opinion on the company’s internal control over financial reporting.
The committee’s responsibility is to oversee and review the financial reporting process and to review and discuss management’s report on internal control over financial reporting. Committee members are not, however, professionally engaged in the practice of accounting or auditing and do not provide any expert or other special assurance as to such financial statements concerning compliance with laws, regulations or accounting principles generally accepted in the United States or as to the independence of the independent registered public accounting firm. The committee relies, without independent verification, on the information provided to it and on the representations made by management and the independent registered public accounting firm.
See also “CORPORATE GOVERNANCE – Committees of the Board – Audit Committee” on page 19 for additional information about the Audit Committee’s functions and composition.
ACTIVITIES OF THE AUDIT COMMITTEE IN 2023 |
The committee held nine meetings during 2023. The meetings were designed, among other things, to facilitate and encourage communication among the committee, management, our internal auditor and PwC. At these meetings, the committee:
|
AUDIT COMMITTEE PRE-APPROVAL OF SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The Audit Committee has adopted a policy for pre-approval of audit and permitted non-audit services by our independent registered public accounting firm. The Audit Committee will consider annually and, if appropriate, pre-approve the provision of audit and permitted non-audit services. The Audit Committee will also consider on a case-by-case basis and, if appropriate, pre-approve specific services that are not otherwise pre-approved. Any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the Chair of the Audit Committee between regular meetings. The Audit Committee Chair has the delegated authority to pre-approve such services up to a specified fee amount. These pre-approval decisions are reported to the full Audit Committee at its next scheduled meeting.
Zimmer Biomet 26
AUDIT COMMITTEE MATTERS
|
|
AUDIT AND NON-AUDIT FEES |
The following table shows the fees that we paid or accrued for audit and other services provided by PwC for the years 2023 and 2022. All of the services described in the following fee table were approved in conformity with the Audit Committee’s pre-approval process described above.
|
|
(000’s) |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Audit Fees(1) |
|
$ |
9,740 |
|
|
$ |
9,410 |
|
Audit-Related Fees(2) |
|
|
640 |
|
|
|
927 |
|
Tax Fees(3) |
|
|
691 |
|
|
|
731 |
|
All Other Fees(4) |
|
|
2 |
|
|
|
24 |
|
Total Fees |
|
$ |
11,073 |
|
|
$ |
11,092 |
|
|
AUDIT COMMITTEE REPORT |
The Audit Committee has reviewed and discussed with management and PwC the audited financial statements for the year ended December 31, 2023, and PwC’s evaluation of the company’s internal control over financial reporting. The committee has discussed with PwC the matters that are required to be discussed by the applicable requirements of the PCAOB and the SEC. PwC has provided the committee the written disclosures and the letter required by applicable requirements of the PCAOB regarding PwC’s communications with the committee concerning independence, and the committee has discussed with PwC that firm’s independence. The committee has concluded that PwC’s provision of audit and non-audit services to the company and its affiliates is compatible with PwC’s independence.
Based on the reviews and discussions described above, and subject to the limitations on the committee’s role and responsibilities as described in this proxy statement and in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors, and the Board approved, that the audited consolidated financial statements for the year ended December 31, 2023 be included in our Annual Report on Form 10-K for filing with the SEC.
Audit Committee
Robert A. Hagemann, Chair
Betsy J. Bernard
Maria Teresa Hilado
Sreelakshmi Kolli
Louis A. Shapiro
Zimmer Biomet 27
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
|
Proposal 3 – Advisory Vote to Approve Named Executive Officer Compensation |
|
The Board of Directors is committed to excellence in corporate governance and recognizes the interest our shareholders have expressed with respect to our executive compensation program. As a part of this commitment, and in accordance with Section 14A of the Exchange Act, our shareholders are being asked to approve, on a non-binding, advisory basis, the compensation of our named executive officers (“NEOs”) as reported in this proxy statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our executive compensation program for our NEOs for 2023. A detailed description of our executive compensation program is available in the Compensation Discussion and Analysis section of this proxy statement (“CD&A”). Our Board and Compensation and Management Development Committee believe that our executive compensation program is tied to performance, aligns with shareholder interests and merits shareholder support. Accordingly, the Board recommends that shareholders vote in favor of the following resolution: “RESOLVED, that the shareholders of Zimmer Biomet Holdings, Inc. approve, on an advisory basis, the compensation of the company’s named executive officers as disclosed in this proxy statement pursuant to the SEC’s executive compensation disclosure rules, including the CD&A, the compensation tables and narrative disclosures.” Although this vote is non-binding, the Board and the Compensation and Management Development Committee value the views of our shareholders and will review the voting results. Through out shareholder outreach program, we take steps to understand shareholder concerns that influence the vote and consider them in making future decisions about executive compensation. We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote at our 2025 annual meeting of shareholders. Our Board recommends a vote FOR the advisory resolution approving executive compensation.
|
Zimmer Biomet 28
EXECUTIVE COMPENSATION
|
COMPENSATION DISCUSSION AND ANALYSIS |
|
EXECUTIVE SUMMARY |
|
2023 NEOs |
This CD&A describes the compensation of the following NEOs for 2023:
NEO |
Title |
Ivan Tornos(1) |
President and Chief Executive Officer |
Suketu Upadhyay |
Chief Financial Officer and Executive Vice President – Finance, Operations and Supply Chain |
Sang Yi |
Group President, Asia Pacific (“APAC”) |
Wilfred van Zuilen |
Group President, Europe, Middle East and Africa ("EMEA") |
Chad Phipps |
Senior Vice President, General Counsel & Secretary |
Bryan Hanson(2) |
Former Chairman, President and Chief Executive Officer |
|
2023 Senior Leadership Changes; Related Compensation Decisions |
In August 2023, our Chairman of the Board, President and CEO, Bryan Hanson, resigned from those positions, and the Board appointed Ivan Tornos to be our President and CEO. Mr. Tornos has been with the company since November 2018, most recently serving as Chief Operating Officer ("COO") prior to being appointed President and CEO.
The Board and its Compensation and Management Development Committee (the “committee” in this CD&A and the executive compensation tables and narrative discussion that follow) oversee executive succession planning for the company. On an annual basis, the Board and the committee evaluate the company's leadership team succession planning. Succession planning and development for the President and CEO is an important component of these activities. As part of the Board’s focus on and attention to leadership development and executive succession planning, the COO role and Mr. Tornos’ broad and extensive global responsibilities were previously created and designed in part to fully prepare, groom, equip and qualify Mr. Tornos as a strong and natural succession candidate for the role of President and CEO and as a member of the Board.
Upon learning of Mr. Hanson’s potential resignation, the Board implemented contingency processes to ensure that, if Mr. Hanson were to leave the company, the CEO transition would be successful for the company and its shareholders. The Corporate Governance Committee of the Board led this review. The Board engaged and consulted with a reputable executive search firm to identify possible qualified external candidates who may be available and have an interest in being considered for the company’s CEO position. The executive search firm provided several possible external CEO candidates, which the Board evaluated along with Mr. Tornos. The Board unanimously determined that Mr. Tornos was the preferred President and CEO candidate based on a variety of considerations, including his critical role in the company’s strategic transformation, turnaround and continuing positive business momentum. The Board further felt that Mr. Tornos’ CEO succession preparedness plan had been effective, leaving him qualified and equipped to lead, drive and expand upon the execution of the company’s existing strategies and business plans. The Board concluded that Mr. Tornos was a highly qualified and well-prepared candidate both for the President and CEO position and for the role as a member of the Board, meeting the Board’s rigorous expectations and selection criteria for such roles. The Board also believed that it was in the company’s best interest to prioritize continuity and stability and to minimize business disruption and uncertainty with the forthcoming leadership transition. The Board further believed that the appointment of Mr. Tornos as President and CEO would help to fulfill this important objective, as his leadership and contributions in his COO capacity meaningfully advanced the company's interests.
Additionally, in connection with Mr. Tornos' appointment to President and CEO, our Chief Financial Officer, Suketu Upadhyay, was appointed to the newly-created position of Chief Financial Officer and Executive Vice President – Finance, Operations and Supply Chain in August 2023.
In September 2023, the company promoted Wilfred van Zuilen from President, EMEA to Group President, EMEA, and promoted Mark Bezjak from President, North America, to President, Americas.
Zimmer Biomet 29
EXECUTIVE COMPENSATION
Further information about executive succession planning is set forth above, under "Board's Role in Executive Succession Planning and Development."
Summary of Compensation Related to Senior Leadership Changes
Following is a summary of the compensation changes that the committee made in connection with the CEO transition and related senior leadership promotions and retention considerations. Further information regarding the compensation changes and decisions summarized below are provided later in this CD&A. No compensation changes were made in connection with the promotion of Mr. van Zuilen, but his promotion was factored into the committee's 2024 compensation decisions.
|
|
Mr. Tornos |
|
Mr. Upadhyay |
|
Mr. Yi |
|
Base Salary |
|
$1,200,000 |
|
$850,000 |
|
* |
|
2023 Bonus Percentage |
|
150% |
|
* |
|
* |
|
Additional 2023 Long-Term Incentive Awards |
|
$3,500,000 |
(1) |
$5,000,000 |
(2) |
$250,000 |
(3) |
2024 Long-Term Incentive Awards |
|
$11,750,000 |
|
$4,000,000 |
|
** |
|
Personal Use of Corporate Aircraft |
|
$190,000/ Year |
|
$50,000/ Year |
|
* |
|
* No change.
** Determined by the committee in connection with annual grants to executive officers in early 2024.
Compensation Decisions Related to 2023 CEO Transition
In connection with Mr. Tornos' appointment as President and CEO and to transition his compensation to his new level, the committee approved his compensation arrangements as set forth in his offer letter and described in further detail later in the CD&A. In determining the compensation package for Mr. Tornos as President and CEO, the committee consulted with its independent compensation advisor, Semler Brossy Consulting Group, LLC (“Semler Brossy”), to develop an appropriate compensation package for Mr. Tornos and considered various factors including the nature of his responsibilities as President and CEO, the company's compensation philosophy, Mr. Hanson's compensation as approved by the committee in March 2023, peer group company compensation, shareholder feedback regarding executive compensation matters and other factors.
Mr. Tornos’ initial annual base salary as President and CEO is $1,200,000, and he continues to participate in our Executive Performance Incentive Plan (the “EPIP”), with his target annual bonus opportunity for 2023 increased from 110% of his base salary to 150% of his base salary, with any payouts to be prorated to reflect the portion of the year during which he served as COO and the portion of the year he served as President and CEO.
In recognition of Mr. Tornos’ expanded role and responsibilities in connection with assuming the role of President and CEO, he received the following transitional equity awards under the company’s 2009 Stock Incentive Plan, as amended (the “2009 Plan”), each with a grant date of September 1, 2023: (i) RSUs with a grant date fair value of approximately $1,750,000 that will vest ratably on March 6, 2024, March 6, 2025 and March 6, 2026 (i.e., on the same schedule as the executive officers’ 2023 annual RSU grants); and (ii) PRSUs with a grant date fair value of approximately $1,750,000, having substantially identical performance measures, vesting date and other terms as the annual award of PRSUs granted by the committee in March 2023. The total value of the transition equity awards reflects the value of a market-aligned CEO annual grant, prorated for the time Mr. Tornos served as CEO during 2023. The committee noted that the total equity value Mr. Tornos received as annual awards in 2023 (including his annual award as the COO and the CEO transition award) is well below the value of annual equity awards that peer company CEOs received in 2023 because the value of Mr. Tornos' awards reflected only the portion of the year for which he served as our President and CEO.
In addition, for the annual equity grant in 2024, the committee determined that Mr. Tornos would receive a grant of long-term incentive equity awards having an estimated grant date fair value of approximately $11,750,000. Thereafter, Mr. Tornos will be eligible for grants under the 2009 Plan at the discretion of the committee. Additionally, Mr. Tornos is entitled to personal use of the company’s aircraft up to a maximum incremental cost to the company of $190,000 per calendar year, increased from his prior authorization of up to $35,000
Zimmer Biomet 30
EXECUTIVE COMPENSATION
per calendar year, plus an overage cushion for of up to 20% (or $7,000) for unforeseen circumstances (which overage cushion no longer applies).
The offer letter provides that Mr. Tornos continues to participate in the company’s Restated Executive Severance Plan, but at the President and CEO level of benefits, which provides that in the event that Mr. Tornos’ employment is involuntary terminated without cause, he would be entitled to severance benefits of two times the sum of his base salary and target annual bonus, as well as a cash payment equal to 24 months of COBRA premiums (medical and dental) based on his coverage in effect immediately prior to his separation. Mr. Tornos also entered into a new “double-trigger” change in control severance agreement with benefits at the President and CEO level.
Compensation Decisions Related to Mr. Upadhyay's Promotion
Effective August 22, 2023, the Board appointed Mr. Upadhyay to the newly-created position of Chief Financial Officer and Executive Vice President – Finance, Operations and Supply Chain. This new position was created because, upon Mr. Tornos' promotion to the role of President and CEO, Mr. Upadhyay assumed responsibility from Mr. Tornos for the company's global operations, supply chain, pricing, and information technology functions. Prior to these new responsibilities, Mr. Upadhyay was previously responsible for approximately 800 team members; his new position gave him responsibility for an additional 8,500 team members around the world. The Board promoted Mr. Upadhyay because it believed he was best positioned to deliver on the company's continuing transformation and cost containment efforts, unifying key aspects of financial and operational management. The Board further credited Mr. Upadhyay's performance track record, his reputation among the company's shareholders, and the importance of ensuring leadership stability in connection with the President and CEO transition.
In light of the substantial increase in Mr. Upadhyay's responsibilities, the importance of ensuring his continuing leadership and other factors, the committee approved changes to certain aspects of Mr. Upadhyay’s compensation arrangements. The committee determined to: (i) increase Mr. Upadhyay’s annual base salary to $850,000, effective August 22, 2023; (ii) increase the amount of Mr. Upadhyay’s permitted personal use of the company’s aircraft up to a maximum incremental cost to the company of $50,000 per calendar year from $35,000 per calendar year, plus an overage cushion for of up to 20% (or $7,000) for unforeseen circumstances (which overage cushion no longer applies); (iii) provide a promotion-related award of PRSUs, on September 1, 2023, with a grant date fair value of approximately $5,000,000, which will vest if and to the extent that certain financial and organizational goals are achieved over two separate one-year performance periods (October 1, 2023 to September 30, 2024 and October 1, 2024 to September 30, 2025); and (iv) for the annual awards in 2024, provide a grant of equity awards having a grant date fair value of approximately $4,000,000.
Compensation Decisions Related to Mr. Yi
In consideration of the strategic importance of the company's operations in APAC and of ensuring continuity and stability in its leadership in the region, and, after factoring in shareholder feedback and our corresponding commitments following the 2022 Say on Pay vote, the committee determined to provide Mr. Yi with a retention grant of PRSUs on September 1, 2023, with a grant date fair value of approximately $250,000, having substantially identical performance measures, vesting date and other terms as the annual award of PRSUs granted by the committee in March 2023. Specifically as it relates to the shareholder feedback and our corresponding commitments following the 2022 Say on Pay vote, one of the commitments that the committee made was to eliminate one-time time-based equity grants to executive officers, except for new hires or for performance-based retention grants. The grant to Mr. Yi was fully a performance-based equity award and, as noted, the committee considered various continuity and stability factors as part of their decision to grant the PRSUs to Mr. Yi.
Zimmer Biomet 31
EXECUTIVE COMPENSATION
|
Shareholder Engagement and Response to the 2023 Say on Pay Vote |
The committee has historically taken into consideration the results of our non-binding advisory votes on executive compensation (commonly referred to as “Say on Pay”) when making future decisions regarding the structure and implementation of our executive compensation program. For the past several years, at the Board’s request, and with committee involvement and Board oversight, we have engaged in shareholder outreach to hear feedback directly from shareholders about our executive compensation program and other governance matters. At our 2023 annual meeting of shareholders, approximately 90% of votes cast were voted in favor of our Say on Pay proposal. This result represented a significant increase from 2022, when the Say on Pay proposal received the support of approximately 54% of votes cast.
Shareholder Outreach and Engagement
We value the perspectives of our shareholders and believe that shareholder engagement leads to enhanced governance and compensation practices. We use our engagement program to learn the perspectives of our shareholders and other stakeholders, to address questions and concerns and to provide perspective on our policies and practices. We view our annual Say on Pay votes as an important foundation for hearing our shareholders’ perspectives. We maintain a multi-phased shareholder outreach program, which we continue to enhance and evolve. Our program involves frequent shareholder engagement meetings, focused around our annual meeting and during the fall and winter, to better understand our shareholders’ concerns underlying the voting results of our annual Say on Pay proposals and to gather insights to inform the committee and Board regarding emerging issues as they make compensation decisions for the following year.
Zimmer Biomet 32
EXECUTIVE COMPENSATION
Following the 2023 annual meeting, we reached out to over 35 of our largest shareholders representing approximately 63% of our outstanding shares (based on share ownership data as of December 31, 2023) to invite them to meet with us. As a result of that outreach, we met with institutional shareholders representing approximately 56% of those shares we invited. The balance of the shareholders we invited either declined our invitation (seven firms representing approximately 17% of the shares of the holders we invited) or did not respond. Based on their feedback and the replies we received, some of the shareholders that declined the opportunity to engage indicated that they did so because they did not have concerns with the design of our executive compensation program. Our team involved in these subsequent shareholder outreach efforts included our SVP, Chief Communications & Administration Officer, our VP, Total Rewards, and our VP, Associate General Counsel & Assistant Secretary. Additionally, Christopher Begley, our independent Chairman of the Board, and Michael Farrell, our independent committee chairman, separately participated in meetings with shareholders representing approximately 66% of the shares of the holders with which we met – and approximately 23% of all outstanding shares. As was the case following the earlier meetings, the collective feedback received was then reported to and discussed with the committee and, where applicable, the Corporate Governance Committee and the Board.
|
||
Fall and Winter 2023 Shareholder Outreach(1) |
||
Percentage of All Shares |
Percentage of Shares of Those Invited |
Percentage of Shares of Those Met |
|
|
|
|
|
|
During these discussions, we invited shareholder feedback on compensation matters and on possible actions the committee could take to implement such feedback. We discussed the selection and appointment of our new President and CEO, as well as Board and executive succession planning; provided an overview of our executive compensation program; discussed the progress and results of our quality and safety program; reviewed ESG matters; discussed our merger and acquisition philosophy; and reviewed various aspects of our historical business performance. In addition, the discussions often addressed a variety of other topics, including climate and environmental sustainability initiatives; diversity, equity and inclusion (“DEI”) and human capital management topics; supply chain matters; audit firm rotation; Board leadership structures; cybersecurity; team member engagement; our continuing business transformation; disclosure enhancements; and the continuing evolution of the medical technology market. In our discussions with shareholders following the appointment of Mr. Tornos as our President and CEO and the associated changes within our executive leadership team, shareholder discussions further addressed executive succession planning, the appointments and compensation of leadership team members, and Board composition.
The committee factored the collective shareholder feedback and considerations relating to both the 2022 and 2023 Say on Pay votes into its final review of 2023 executive performance and 2024 executive compensation actions.
Further, in late 2023 we received a shareholder proposal related to amending our Corporate Governance Guidelines to provide that, with respect to directors who received less than a majority vote in an uncontested election, to bar the Board from nominating such person as a candidate to stand for election in the year after such person received less than a majority vote in an uncontested election. After consideration by our Corporate Governance Committee, and at the direction of the Board, management engaged with the shareholder proponent to develop an appropriate amendment to the Corporate Governance Guidelines. The Board subsequently adopted the proposed amendment, and the shareholder proponent withdrew the proposal, in February 2024.
Shareholder Feedback – What We Heard and What We Did
The committee values the opportunity to hear directly from our shareholders, and the committee and the Board thank our shareholders for their continuing engagement and feedback. With regard to executive compensation in particular, while the views and opinions of various shareholders differ, one key element of the recent shareholder feedback was a desire to obtain a better understanding of how the committee considered and made decisions concerning the executive compensation actions associated with the CEO and leadership transition in August 2023, including as they related to our executive compensation and succession planning processes overall. Please see above under “—2023 Senior Leadership Changes; Related Compensation Decisions” for additional information regarding the committee’s considerations and actions taken in connection with the executive transitions in 2023, and under “BOARD’S ROLE IN Executive Succession Planning and Development” for additional information regarding our executive succession planning
Zimmer Biomet 33
EXECUTIVE COMPENSATION
program as a whole. Additionally, a majority of the institutional shareholders with which we engaged indicated general support for our core executive compensation program.
During 2023 (as previously disclosed) and in early 2024, the committee and Board of Directors took substantive action on a variety of matters in response to shareholder feedback. Key ongoing commitments included:
Shareholder Feedback |
Actions Taken in Response |
|
|
Equity Practices |
|
• Do not convert PRSUs into time-based RSUs • Do not increase the payout level of PRSUs • Do not make one-time time-based equity grants to executive officers |
• The committee confirmed that it will not convert PRSUs into time-based RSUs in the future. • The committee confirmed that it will not increase the payout levels above the realized level of PRSUs in the future. • The committee committed to eliminate one-time equity grants to executive officers, except for new hires or for performance-based retention grants. |
|
|
Incentive Compensation |
|
• Disclose annual cash incentive and PRSU performance measures • Reduce overlapping performance measures between annual cash incentives and PRSUs |
• The committee committed to disclosing annual cash incentive and PRSU targets at such time that disclosures would not create competitive harm. • Starting in 2023, committee reduced the overlap in performance measures between the annual cash incentive and PRSUs to a permissible level of overlap as determined by a leading proxy advisory firm. |
Other Factors |
|
• Disclose EEO-1 data • Include one or more incentive plan goals with measurable ESG objectives • Provide additional disclosure of director skills and attributes • Adjust peer group selection to more comparable market capitalization • Amend our Corporate Governance Guidelines to provide that, with respect to directors who received less than a majority vote in an uncontested election, to bar the Board from nominating such person as a candidate to stand for election in the following year |
• The company began to disclose its EEO-1 report in its 2023 Sustainability Report. • Our primary ESG measure is the ESG global quality bonus modifier component of the annual cash incentive plan. See page 44 for more information. • We have provided additional disclosure of director skills and experiences in this proxy statement. • The committee’s changes to our peer group used for 2023 and 2024 compensation determinations are consistent with this feedback. • The Board implemented the requested Corporate Governance Guideline amendment in February 2024.
|
The committee also made certain commitments which have since been satisfied, such as enhanced disclosure of the committee's considerations relating to compensation actions taken in connection with the ZimVie Inc. ("ZimVie") spinoff in 2022, which were disclosed in our 2023 Proxy Statement.
|
Our 2023 Results and Executive Compensation |
In 2023, we continued to recover from the effects of the COVID-19 global pandemic. We experienced fewer disruptions to elective surgical procedures from the pandemic in 2023 as compared to 2022. In addition, improvements in our supply chain, recovery from patients who deferred surgical procedures related to the pandemic, new product introductions and commercial execution drove improved financial results. Our transformation agenda also continued throughout 2023 as we achieved highlights including:
Zimmer Biomet 34
EXECUTIVE COMPENSATION
Summary of Cash Payouts for 2023
The below table sets forth our NEOs’ 2023 annual incentive plan payouts, as a percentage of the target opportunity and in terms of dollar amount. Additional details are provided later in this CD&A.
|
|
2023 |
|
|||
NEO |
|
(%) |
|
($) |
|
|
Ivan Tornos(1) |
|
130.2 |
|
|
1,603,022 |
|
Suketu Upadhyay(2) |
|
131.5 |
|
|
1,054,435 |
|
Sang Yi(3) |
|
119.7 |
|
|
633,166 |
|
Wilfred van Zuilen(4) |
|
148.0 |
|
|
745,102 |
|
Chad Phipps(5) |
|
131.5 |
|
|
634,764 |
|
The committee selected three financial measures by which to assess 2023 performance for purposes of the awards under the annual cash incentive plan. These measures were selected to provide a balanced set of performance targets that focus on growth, profitability and operating efficiency, which we believe best drive total shareholder return.
Zimmer Biomet 35
EXECUTIVE COMPENSATION
|
|
KEY EXECUTIVE COMPENSATION PROGRAM PRACTICES |
The committee has designed our executive compensation program and practices to align executives’ financial interests with those of our shareholders. Following is a description of key program features and practices that illustrate this alignment:
✓ |
Pay for performance. A significant percentage of our NEOs’ target total direct compensation opportunity is at-risk and variable with performance, including stock price performance. While Mr. Tornos was in a transition year in 2023, 53% of his total compensation at time of award was at risk and 90.4% of his total compensation at time of award was variable with performance, including stock price performance. |
|
X
X |
No repricing or exchange of underwater stock options. Our equity incentive plans prohibit repricing or exchange of underwater stock options without shareholder approval.
No employment contracts. We employ our NEOs on an “at will” basis with no employment contracts, other than as required by non-U.S. jurisdictions. |
|
|
|
|
|
✓ |
Emphasis on long-term equity incentives. We emphasize alignment between the interests of our NEOs and shareholders by significantly weighting NEOs’ compensation toward long-term equity awards. |
|
X |
No dividends or dividend equivalents paid or accrued on unearned performance-based equity awards. We do not pay or accrue dividends until shares have been earned and issued. |
|
|
|
|
|
✓ |
Clawback of incentive compensation. Incentive compensation to executive officers under cash and equity incentive plans are subject to clawback in the event of financial restatements, in compliance with NYSE listing standards. In addition, if an employee engages in conduct deemed detrimental to the interests of the company, including the breach of restrictive covenants or the violation of our Code of Business Conduct and Ethics or other policies, procedures or standards, their equity awards are subject to clawback. |
|
✓ |
Maximum payout caps. We place caps on maximum payouts under our annual cash incentive plan and our performance-based equity awards. |
|
✓ |
Double trigger change in control benefits. We require a double trigger for change in control severance benefits and equity awards; that is, cash severance will not be paid, and the vesting of equity awards will not be accelerated, except in the event of a qualifying termination of employment in connection with a change in control. |
||
|
|
|
|
|
✓ |
Non-competition agreement required for equity award eligibility. To the extent permitted by applicable law, we require all employees to sign a non-competition agreement as a condition of receiving an equity award. The award is subject to clawback if the agreement is breached. |
|
X |
No excise tax gross-ups in post-2009 agreements. We have no gross-up provisions in change in control severance agreements entered into after July 2009. Accordingly, we have only one agreement with gross-up provisions in place. |
|
|
|
|
|
✓ |
Robust stock ownership guidelines. We require executives to hold equity with a value equal to a multiple of six times salary for our CEO and three times salary for each other NEO. 100% of net after-tax shares received upon vesting or exercise of awards must be retained until an executive meets the required ownership level. |
|
✓ |
Limited perquisites. We do not provide significant perquisites to our NEOs. For efficiency and security reasons, Messrs. Tornos and Upadhyay are permitted limited personal use of our corporate aircraft. |
|
|
|
|
|
X |
Policy prohibiting hedging, pledging and short sales. We prohibit directors, officers and certain other employees from engaging in short sales of our stock, trading in instruments designed to hedge against price declines in our stock, holding our stock in margin accounts or pledging our stock as collateral for loans or other obligations. |
|
✓ |
Annual shareholder “Say on Pay” vote and ongoing shareholder engagement. We engage with shareholders throughout the year and solicit feedback regarding our compensation practices. |
|
|
|
✓ |
Independent advisor to the committee. The committee regularly consults with an independent compensation consultant. |
Zimmer Biomet 36
EXECUTIVE COMPENSATION
|
|
COMPENSATION PHILOSOPHY AND ELEMENTS |
Our Executive Compensation Philosophy |
Our executive compensation program is designed to achieve the following fundamental objectives:
To accomplish these objectives, the committee annually reviews and approves our executive compensation program components and target compensation levels, as well as specific performance metrics and targets, payout ranges and actual payouts.
For the NEOs, the committee establishes target compensation consistent, to the extent possible, with comparable positions in our peer group. Our practice is to target total direct compensation (including base salary, target annual cash incentive opportunities and target long-term equity-based incentives) at market competitive levels. Target compensation for individual executives may vary based on a variety of factors, such as experience and time in the position, the nature of the executive’s responsibilities, criticality of the role and difficulty of replacement, internal equity, retention concerns, individual performance and expected future contributions, readiness for promotion to a higher level, and, in the case of externally-recruited executives, compensation earned at a prior employer.
Specific consideration is given to the weighting of fixed and at-risk components of pay relative to the peer group. The committee seeks to provide a total pay opportunity that is competitive with our closest peer group and industry competitors, but which also places a greater emphasis on at-risk equity-based compensation. The committee also considers executive pay in the context of year-over-year pay trends, whether historical payouts accurately reflect the committee’s assessment of the executive’s contribution and whether executive pay provides sufficient retentive value.
Elements of Executive Compensation |
The following table describes the elements of target direct compensation for 2023. Our compensation program uses a mix of fixed and variable compensation elements and provides alignment with both short- and long-term business goals through annual incentive and long-term incentive (“LTI”) opportunities. We also offer retirement plans and benefits that are generally available to all employees, and we provide a limited range of perquisites.
|
|
Element and Key Characteristics |
Objectives |
|
|
Base Salary |
|
• Only fixed compensation component; payable in cash • Reviewed annually and adjusted when appropriate • Initial 2023 NEO increases: 3.4% – 4.0%; Mr. Tornos' base salary was further increased by 39.8% above his initial 2023 base salary upon his promotion to President and CEO, and Mr. Upadhyay's base salary was further increased by 8.2% above his initial 2023 base salary upon his promotion to Chief Financial Officer and Executive Vice President – Finance, Operations and Supply Chain |
• Provide a base level of competitive cash compensation • Attract and retain executive talent • Recognize increased responsibilities through promotional increases |
|
|
Annual Cash Incentive Opportunity |
|
• Variable compensation component payable in cash based on performance against established goals and assessment of individual performance • Target awards are based on a percentage of base salary • Tied to company financial results and individual objectives to drive total company performance in 2023 • Payouts for 2023 could range between 0% and 200% of target • 2023 NEO payouts: 130.2% of target for Mr. Tornos; 131.5% of target for Mr. Upadhyay; 119.7% of target for Mr. Yi; 148.0% of target for Mr. van Zuilen; and 131.5% of target for Mr. Phipps. Mr. Tornos' 2023 payout was prorated to reflect the portion of the year in which he was COO and had a 110% bonus opportunity, and the portion of the year in which he was President and CEO and had a 150% bonus opportunity |
• Motivate and reward executives for achievement of key financial measures and individual objectives • Drive specific behaviors that foster short-term and long-term growth and profitability • Individual operational and strategic goals • Recognize individual performance related to employee engagement, DEI, quality and other measures • Subject to upward or downward adjustment based on our ESG global quality modifier |
Zimmer Biomet 37
EXECUTIVE COMPENSATION
|
|
Element and Key Characteristics |
Objectives |
Annual LTI Award: RSUs (50% of annual equity award) |
|
• RSUs vest ratably over three years • Additional transition-related RSU grant with the same vesting dates as the March 2023 annual grants was made to Mr. Tornos in connection with his appointment as President and CEO to bridge the gap to his new compensation level • Aligns to market practice |
• Motivate NEOs to drive the long-term performance of the company; value is tied directly to stock price performance after the date of grant • Align NEOs’ interests with long-term shareholder value; shares received upon vesting are subject to retention requirements under stock ownership guidelines • Attract and retain executive talent |
|
|
Annual LTI Award: PRSUs (50% of annual equity award) |
|
• Three-year performance period for 2023 awards: • 25% based on revenue growth CAGR • 37.5% based on adjusted EPS growth CAGR • 37.5% based on relative TSR • The cumulative total payout over the three-year performance period may not exceed 200% of target • No opportunities for interim payouts • Additional transition-related PRSU grant with the same performance and vesting terms as the March 2023 annual grants was made to Mr. Tornos in connection with his appointment to President and CEO to bridge the gap to his new compensation level |
• Motivate achievement of multi-year performance objectives that enhance shareholder value • Align NEOs’ interests with long-term shareholder value; earned PRSUs are settled in shares of common stock that are subject to retention requirements under stock ownership guidelines • Attract and retain executive talent |
Promotion-Related PRSU Award to Mr. Upadhyay |
|
• PRSU award that will be earned and vest if and to the extent that certain financial and organizational goals are achieved over two performance periods of October 1, 2023 to September 30, 2024 and October 1, 2024 to September 30, 2025 |
• Recognizes Mr. Upadhyay’s broader scope of responsibilities, overseeing the company’s global operations, supply chain, pricing and IT functions, in addition to his continued role as the Chief Financial Officer • Performance-based structure rewards Mr. Upadhyay for delivering meaningful financial and operational results to the company and its shareholders and more closely aligns Mr. Upadhyay's interests with those of our shareholders • Provides additional retention benefit with respect to Mr. Upadhyay |
PRSU Award to Mr. Yi |
|
• PRSU award was made to Mr. Yi with the same performance and vesting terms as the March 2023 annual grants |
• Performance-based award structure provides additional retention benefit and more closely aligns Mr. Yi's interests with those of our shareholders |
Executive Compensation Changes for 2024
Throughout the COVID-19 pandemic and its aftermath through 2023, the committee took a variety of actions to address the risks and uncertainties for our business and team members caused by the COVID-19 pandemic and its related disruptions. These actions included, for example, temporarily reducing (and subsequently reinstating) the base salaries of our then-current NEOs in response to uncertainty at the start of the pandemic; with respect to our annual performance incentive plan, widening the performance measure achievement ranges, reducing the relative weight of the free cash flow performance metric and adopting varying payout caps tied to our performance in various performance measures; capping the maximum payout under the 2022 PRSUs at 150% and adopting different performance measures for our PRSUs beginning in 2022. However, in 2023, the committee laid a foundation for a return to more typical historical practice, which it continued in its early 2024 compensation actions.
As previously disclosed, in December 2022, after undertaking a search for a new independent compensation consultant to provide a fresh perspective on our executive compensation practices, the committee engaged Semler Brossy as its new independent compensation consultant. Throughout 2023, Semler Brossy reviewed our executive compensation practices generally to ensure our compensation program is aligned with market best practices.
Zimmer Biomet 38
EXECUTIVE COMPENSATION
After considering the feedback we received from our continuing shareholder outreach and from Semler Brossy, the committee determined to maintain the core components of our compensation program for 2024, but made certain changes. These changes include:
Dimension |
Change for 2024 |
Change Weights of Annual Cash Incentive Performance Measures |
• Change the weighting of our three performance measures to 40% (from 45%) constant currency revenue, 40% (from 45%) adjusted operating profit and 20% (from 10%) free cash flow to reflect a greater emphasis on free cash flow generation |
Treatment of LTI Awards Upon Disability |
• Starting with equity awards made in 2024, accelerate the vesting of such awards if a recipient experiences a termination in service due to disability • Change conforms to common peer group practices |
Amend Change in Control Severance Agreements
|
• Amend our change in control severance agreements to replace the excise tax cutback from limiting payouts to less than the amount which would subject such payments and benefits to excise taxes, with a new limit on payouts that is either (i) an amount that does not trigger excise taxes, or (ii) the full payment, whichever results in the better net after-tax result for the executive • Change conforms to common peer group practices |
Base Salary Foreign Exchange Rate Lock for Mr. Yi |
• Lock in the USD - HKD exchange rate for Mr. Yi's salary at the exchange rate on April 1, 2024 |
|
COMPENSATION MIX |
Our NEOs’ total direct compensation is heavily weighted toward variable compensation elements, meaning actual amounts earned will vary as a result of company and individual performance, as well as business unit or geographic results where applicable. We emphasize performance-based compensation that appropriately rewards executives for delivering results that meet or exceed multiple pre-established goals over one-, two- and three-year periods, with metrics and targets selected because they are directly linked to our strategic goals. In addition, our long-term incentive program rewards absolute stock price growth as well as constant currency revenue growth, adjusted earnings per share growth and relative TSR.
As executives assume greater responsibilities, more of their pay is contingent on company performance. With respect to 2023, including compensation received upon his promotion to President and CEO, 90.4% of Mr. Tornos' target total direct compensation at the time of each grant was variable and tied to our annual and long-term performance, including stock price performance as to both his PRSUs and RSUs. The committee assesses each NEO’s target total direct compensation opportunity annually to facilitate alignment with the objectives of our compensation program and market practice.
2023 Target Total Direct Compensation(1) |
|||||||||
NEO |
|
Base |
|
Annual |
|
PRSUs(3)(4) |
|
RSUs(4)(5) |
|
Ivan Tornos(2) |
|
9.6% |
|
16.0% |
|
37.2% |
|
37.2% |
|
Suketu Upadhyay(2) |
|
7.8% |
|
10.3% |
|
65.4% |
|
16.5% |
|
Sang Yi(2) |
|
18.8% |
|
19.5% |
|
34.7% |
|
27.0% |
|
Wilfred van Zuilen |
|
21.2% |
|
25.0% |
|
26.9% |
|
26.9% |
|
Chad Phipps |
|
21.6% |
|
22.8% |
|
27.8% |
|
27.8% |
|
Zimmer Biomet 39
EXECUTIVE COMPENSATION
Zimmer Biomet 40
EXECUTIVE COMPENSATION
|
BASE SALARY |
Base salary increases for our global employee population, including NEOs, are generally effective in April of each year. In March 2023, the committee approved NEOs’ base salaries for 2023, taking into consideration each NEO’s 2022 performance, our 2023 employee merit increase guidelines, market data based on peer group benchmarking, internal equity, retention and certain other factors.
In connection with Mr. Tornos’ appointment as President and CEO in August 2023, the committee increased his annualized base salary from $858,220 to $1,200,000. In recognition of Mr. Upadhyay’s broader scope of responsibilities for overseeing the company’s global operations, supply chain functions, pricing functions and information technology functions, in addition to his continued role as Chief Financial Officer, the committee determined to increase Mr. Upadhyay’s annual base salary from $785,840 to $850,000 in August 2023. The committee considered the base salary changes made in August 2023 as transitional to reflect the change in Messrs. Tornos' and Upadhyay's positions. The factors the committee considered in determining the amount of the base salary increase for each of Messrs. Tornos and Upadhyay are set forth above under "—2023 Senior Leadership Changes; Related Compensation Decisions."
After considering the factors identified above for all of the NEOs in March 2023, and the factors related to Messrs. Tornos and Upadhyay in August 2023, the committee approved base salaries for 2023 that represent year-over-year increases as follows:
NEO |
|
2022 Base Salary ($) |
|
2023 Base Salary ($) |
|
Percentage |
Ivan Tornos |
|
830,000 |
|
1,200,000 |
(1) |
44.6% |
Suketu Upadhyay |
|
760,000 |
|
850,000 |
(2) |
11.8% |
Sang Yi(3) |
|
648,000 |
|
670,032 |
|
3.4% |
Wilfred van Zuilen(4) |
|
584,000 |
|
607,360 |
|
4.0% |
Chad Phipps |
|
588,000 |
|
607,992 |
|
3.4% |
Bryan Hanson |
|
1,221,000 |
|
1,262,514 |
|
3.4% |
|
CASH INCENTIVES |
|
Annual Cash Incentive Plan |
In determining the target awards for our NEOs under our annual cash incentive plan for 2023, the committee reviewed the NEOs’ job responsibilities, market data based on peer group benchmarking and internal equity. After considering these factors, in March 2023, the committee made no changes to the NEOs' target awards, maintaining Mr. Hanson's target award at 150% of his base salary, maintaining Mr. Tornos' target award at 110% of his base salary, maintaining Mr. Upadhyay's target award at 100% of his base salary and maintaining Messrs. Phipps', van Zuilen's and Yi's target awards at 80% of their respective base salaries. In connection with his appointment as President and CEO in August 2023, the committee increased Mr. Tornos’ target award from 110% to 150% of his base salary. However, recognizing that 2023 was a transitional year for Mr. Tornos, the committee provided that his payout amount under the annual cash incentive plan for 2023 would be prorated to reflect the portion of the year during which he served as COO and the portion of the year during which he served as President and CEO.
Mr. Hanson forfeited his opportunity under the annual cash incentive plan upon his separation from the company, and therefore the below discussion does not include information for Mr. Hanson.
The committee selected the following three financial measures by which to assess 2023 performance for purposes of the awards under the annual cash incentive plan: constant currency revenue, adjusted operating profit and free cash flow. The table below shows the selected financial performance measures, their respective weightings and the rationale for their selection. Additionally, the committee replaced the 100% cap on total bonus payout if either the constant currency revenue or the adjusted operating profit measures (or both) achieve less than 100% with a new cap that limits achievement on the free cash flow measure alone to 100% if both constant currency revenue and adjusted operating profit achieve less than 100% (target) performance. The cap change, as well as the increased weight
Zimmer Biomet 41
EXECUTIVE COMPENSATION
the committee assigned to the free cash flow performance measure starting in 2024, reflect the committee's continuing efforts to prioritize the performance measures that the committee viewed would be most valuable to investors in different economic circumstances.
The below table shows the three performance measures, their respective weightings and the rationale for their selection.
Performance |
Weighting |
Rationale |
Constant currency revenue |
45% |
The committee selected revenue because it measures our ability to innovate and compete in the global marketplace, it focuses NEOs on top-line sales growth, it is one of the primary bases on which we set performance expectations for the year, it is a widely-used measure of overall company performance and the committee believes it is highly correlated to shareholder return. It is also a measure with respect to which we generally provide financial guidance to the investment community. Constant currency revenue is a non-GAAP financial measure.* |
Adjusted operating profit |
45% |
The committee selected adjusted operating profit because it is one of the primary bases on which we set performance expectations for the year, it is a widely-used measure of overall company performance and the committee believes it is highly correlated to shareholder return. Adjusted operating profit is a non-GAAP financial measure.* |
Free cash flow |
10% |
The committee selected free cash flow because it recognizes the importance of the efficient use of cash on our ability to fund investments in our business, including internal and external development, innovation and geographic expansion. For 2023, the committee established a 100% cap on payouts under the free cash flow measure if both the constant currency revenue and the adjusted operating profit measures achieve less than 100% (target) performance. Free cash flow is a non-GAAP financial measure.* |
* See footnotes (3), (4) and (5) to the “2023 Annual Cash Incentive Plan” table below and Appendix A for a discussion of our non-GAAP financial measures and reconciliations of those measures to the most directly comparable financial measures determined in accordance with U.S. generally accepted accounting principles (“GAAP”).
The committee believes that, together, these measures provide a balanced set of performance targets that focus on growth, profitability and operating efficiency, and are most important for generating total shareholder return. The committee set corporate performance metrics based on our consolidated results for Messrs. Tornos, Upadhyay and Phipps, which it retained for Mr. Tornos after his promotion to President and CEO in August 2023. Mr. Yi is the executive with top-line responsibility for the APAC region, so the committee set performance measures based on a blend of 50% consolidated results and 50% on the results of our APAC region. Mr. van Zuilen is the executive with top-line responsibility for the EMEA region, so the committee set performance measures based on a blend of 50% consolidated results and 50% on the results of our EMEA region. The committee believes this approach more closely aligns those executives’ pay with the performance of the portfolios for which they are primarily responsible. In addition to corporate performance metrics, NEOs had individual goals and objectives as described further below.
The committee established specific goals for each of the measures based on the annual operating plan approved by the Board at the beginning of the year. The committee set each performance target at a level it believed would represent attractive performance by management in light of the environment in which we were operating, industry conditions and growth trends and which would be reasonably achievable, while requiring what it believed would be outstanding performance to achieve the maximum payout level. The achievement percentage ranges established by the committee were consistent with those established for 2022. Because the operating plan forms the basis for both our financial guidance communicated to the investment community and the annual cash incentive plan, the interests of the NEOs are aligned with those of shareholders.
The payout curves applied to these performance measures are shown below:
Payout curves applied to performance measures |
||||||||||
Constant Currency Revenue |
|
Adjusted Operating Profit |
|
Free Cash Flow |
||||||
Achievement |
|
Payout (% of Target) |
|
Achievement |
|
Payout (% of Target) |
|
Achievement |
|
Payout (% of Target) |
110%+ |
|
200% |
|
115%+ |
|
200% |
|
120%+ |
|
200% |
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
90% |
|
50% |
|
85% |
|
50% |
|
80% |
|
50% |
Less than 90% |
|
0% |
|
Less than 85% |
|
0% |
|
Less than 80% |
|
0% |
Zimmer Biomet 42
EXECUTIVE COMPENSATION
The annual performance measures, our actual performance against the targets and the resulting achievement and payout percentages for 2023 are shown in the below table.
|
|
($ in millions) |
|
|
|
|
|
|
|
|
||
2023 Annual Cash Incentive Plan |
|
Target |
|
Actual |
|
Achievement(1)(2) |
|
Weight |
|
|
|
Weighted |
Corporate – Messrs. Tornos, Upadhyay and Phipps (100%); Messrs. van Zuilen and Yi (50%) |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated constant currency revenue(3) |
|
7,152 |
|
7,353 |
|
102.8 |
|
45 |
|
|
|
57.4 |
Adjusted operating profit(4) |
|
2,010 |
|
2,087 |
|
103.8 |
|
45 |
|
|
|
56.4 |
Consolidated free cash flow(5) |
|
975 |
|
979 |
|
100.4 |
|
10 |
|
|
|
10.2 |
|
|
|
|
|
|
Subtotal |
|
124.0 |
||||
|
|
|
|
|
|
Impact of ESG global quality bonus modifier(6) |
|
x5.0 |
||||
|
|
|
|
Total weighted payout(7) |
|
130.2 |
||||||
EMEA – Mr. van Zuilen (50%) |
|
|
|
|
|
|
|
|
|
|
|
|
Constant currency revenue(3) |
|
1,553 |
|
1,613 |
|
103.9 |
|
45 |
|
|
|
62.5 |
Adjusted operating profit(4) |
|
453 |
|
489 |
|
107.9 |
|
45 |
|
|
|
68.6 |
Free cash flow(5) |
|
320 |
|
499 |
|
155.9 |
|
10 |
|
|
|
20.0 |
|
|
|
|
|
|
Subtotal |
|
151.1 |
||||
|
|
|
|
|
|
Impact of ESG global quality bonus modifier(6) |
|
x5.0 |
||||
|
|
|
|
|
|
Unit weighted payout |
|
158.7 |
||||
|
|
|
|
|
|
At overall 50% weight |
|
79.4 |
||||
|
|
|
|
|
|
Corporate total weighted payout |
|
130.2 |
||||
|
|
|
|
|
|
At overall 50% weight |
|
65.1 |
||||
|
|
|
|
Total weighted payout for Mr. van Zuilen(7) |
|
144.4 |
||||||
APAC – Mr. Yi (50%) |
|
|
|
|
|
|
|
|
|
|
|
|
Constant currency revenue(3) |
|
1,274 |
|
1,253 |
|
98.4 |
|
45 |
|
|
|
41.3 |
Adjusted operating profit(4) |
|
390 |
|
402 |
|
103.1 |
|
45 |
|
|
|
54.3 |
Free cash flow(5) |
|
418 |
|
392 |
|
93.8 |
|
10 |
|
|
|
8.4 |
|
|
|
|
|
|
Subtotal |
|
104.0 |
||||
|
|
|
|
|
|
Impact of ESG global quality bonus modifier(6) |
|
x5.0 |
||||
|
|
|
|
|
|
Unit weighted payout |
|
109.2 |
||||
|
|
|
|
|
|
At overall 50% weight |
|
54.6 |
||||
|
|
|
|
|
|
Corporate total weighted payout |
|
130.2 |
||||
|
|
|
|
|
|
At overall 50% weight |
|
65.1 |
||||
|
|
|
|
|
|
Total weighted payout for Mr. Yi(7) |
|
119.7 |
||||
Zimmer Biomet 43
EXECUTIVE COMPENSATION
The committee believes using adjusted metrics is important when setting performance targets. Using only GAAP metrics could result in performance targets that incorporate certain items outside of a management team’s control and reduce comparability and could also result in performance targets that are misaligned with the long-term interests of the company and shareholders. We believe our shareholders recognize that adjusted metrics are indicators of core operational performance. We also understand that our shareholders commonly make adjustments to inform their own views of historical and future expectations for underlying operational performance. Our disclosures showing our adjustments to GAAP earnings help guide shareholders’ own evaluation of the company’s performance. The majority of S&P 500 companies disclose non-GAAP metrics when reporting financial results, which we believe is reflective of shareholders’ interest in, and understanding of, both GAAP and non-GAAP results.
We provide thorough disclosure of the adjustments made to our GAAP financial information. We provide reconciliations between operating profit and adjusted operating profit on a quarterly and annual basis. In addition, if the committee, in its discretion, determines any additional adjustments are appropriate, those additional discretionary adjustments are disclosed in our proxy statement, as well as a narrative explaining any discretionary adjustments. Shareholders are therefore able to see the exact adjustments we make for the purposes of their analysis. However, the committee does not believe that GAAP metrics are as appropriate for purposes of our compensation program, as it believes adjusted results better reflect core operating results. See Appendix A for additional details on each adjustment as well as a reconciliation of operating profit to adjusted operating profit on a consolidated basis.
ESG Global Quality Bonus Modifier
As noted on the inside front cover of this proxy statement, our second Guiding Principle is commitment to the highest standards of patient safety and quality in our products and services and to world-class integrity and ethical business practices. In support of this Guiding Principle, and to drive accountability for compliance with, and sustained improvements in, our global quality system, the committee again included a global quality bonus modifier component to the annual cash incentive plan for 2023. The committee believes that quality is a critical ESG measure for a medical device company.
In 2023, the committee replaced the global quality modifier used in 2022 with a new ESG global quality modifier to drive and sustain improved quality achievement and to further reflect the importance the committee places on this ESG goal for management. As depicted in the below payout matrix, as applied to NEOs, the modifier provides for an opportunity to change the payout for the NEOs either upward or downward by up to 5% based on the results of the following specified metrics related to our global quality program, except that, if the company receives any new FDA warning letter(s) in 2023, there will be no upward adjustment under the ESG global quality modifier. The payout matrix was developed based on the company’s historical performance.
2023 ESG Global Quality Payout Matrix |
||||||
Quality Measure |
|
Increase |
|
Neutral |
|
Decrease |
FDA Warning Letters |
|
Warning Letter |
|
No Warning Letter |
|
Any Warning Letters |
Network FDA Form 483 Observations per Inspection |
|
0-2 |
|
3-4 |
|
5 or More |
Average Corrective and Preventive Actions (CAPA) On-Time Global Quality Report Score(1) |
|
10-9.5 |
|
9.49-9.0 |
|
Below 9.0 |
In 2023, across our global network, we received zero new FDA warning letters, cleared one FDA warning letter, received two FDA Form 483 observations per inspection, and our Average CAPA On-Time Global Quality Report Score was 9.81. As a result, the ESG global quality modifier applied at the maximum level, increasing bonus payouts by 5%.
The Committee retained the ESG global quality bonus modifier substantially unchanged for 2024, except that, as the only outstanding FDA warning letter was cleared in 2023, it is no longer possible to achieve the +2% adjustment for clearing FDA warning letters, so the maximum potential adjustment declines to +3%, while the payout can still be reduced by up to -5%.
Zimmer Biomet 44
EXECUTIVE COMPENSATION
Individual Performance
After the potential payout amounts under the annual cash incentive plan were computed based on our financial performance and the impact of the ESG global quality bonus modifier as described above, the committee considered each NEO’s individual performance during 2023 to determine the actual cash incentive payment amounts. Based on its assessment of an NEO’s individual performance, the committee could increase or decrease the NEO’s payout by up to ten percent (10%) of the NEO’s target opportunity. During 2023, these individual performance components included individual performance targets relating to employee engagement, DEI, quality and other measures.
The committee considered each NEO’s achievement of established goals and objectives, each NEO’s contributions to our performance and each NEO’s other leadership attributes and accomplishments. The goals set for each NEO for 2023 reflected the wide range of responsibilities that are attributed to each executive and included goals pertaining to corporate strategy, financial performance, team member engagement scores, corporate compliance and regulatory compliance, including product quality and safety, and other ESG-related goals, among other areas.
With respect to Mr. Upadhyay, based on its assessment of his individual performance in relation to his individual goals, including specifically due to its practice of more highly compensating executives with highly successful performance on their individual goals, the committee determined it was appropriate to increase his payout by $10,440, reflecting 110% achievement of his individual performance goals and resulting in a total payout under the 2023 annual cash incentive plan of 131.5% of target (as compared to his 130.2% weighted payout percentage under the annual financial performance measures discussed above). With respect to Mr. van Zuilen, based on its assessment of his individual performance in relation to his individual goals, including specifically due to its practice of more highly compensating executives with highly successful performance on their individual goals and relating to the strong overall business performance of the EMEA region under his leadership, the committee determined it was appropriate to increase the individual component of his payout by $18,173, reflecting 125% achievement of his individual performance goals and resulting in a total payout under the 2023 annual cash incentive plan of 148.0% of target (as compared to his 144.4% weighted payout percentage under the annual financial performance measures discussed above). With respect to Mr. Phipps based on the committee's assessment of his individual performance in relation to his individual goals, including specifically due to its practice of more highly compensating executives with highly successful performance on their individual goals, the committee determined it was appropriate to increase his payout by $6,285, reflecting 110% achievement of his individual performance goals and resulting in a payout under the 2023 annual cash incentive plan of 131.5% of target (as compared to his 130.2% weighted payout percentage under the annual financial performance measures discussed above). With respect to the other NEOs, the committee determined that each achieved 100% of his individual performance goals, and therefore approved actual payments equal to the weighted payout percentage under the annual cash incentive plan set forth above applicable to such NEO.
2023 Annual Cash Incentive Payouts
Set forth below are the payouts to our NEOs under our annual cash incentive plan for 2023 based on company and individual performance as described above.
|
|
Annual Cash Incentive Plan |
||||||
|
|
Opportunity |
|
Actual Payment |
||||
NEO |
|
(as a % of |
|
(at Target |
|
(as a % of Target |
|
2023 |
Ivan Tornos(1) |
|
150% |
|
$1,231,200 |
|
130.2% |
|
$1,603,022 |
Suketu Upadhyay(2) |
|
100% |
|
$801,839 |
|
131.5% |
|
$1,054,435 |
Sang Yi(3) |
|
80% |
|
$528,961 |
|
119.7% |
|
$633,166 |
Wilfred van Zuilen(4) |
|
80% |
|
$503,413 |
|
148.0% |
|
$745,102 |
Chad Phipps |
|
80% |
|
$482,703 |
|
131.5% |
|
$634,764 |
Zimmer Biomet 45
EXECUTIVE COMPENSATION
|
EQUITY INCENTIVES |
Equity incentives are the most significant component of each NEO’s compensation package. The committee believes the emphasis on equity awards is appropriate as these officers have the greatest role in establishing the company’s direction and should have the greatest proportion of their compensation aligned with the long-term interests of shareholders.
In 2023, the committee awarded the following equity incentives to our NEOs:
Mr. Hanson forfeited his outstanding unvested PRSU, RSU and stock option awards in connection with his separation in August 2023.
|
Annual Equity Awards |
Equity Grant Value Determination
In determining target grant values for the 2023 annual grant of long-term equity-based awards, the committee reviewed market data based on peer group benchmarking in order to determine grant levels that would be competitive with the market. The committee also took into consideration other factors, including the target annual grant value awarded to each NEO in 2022; each NEO’s 2022 performance, including the NEO’s contribution to our 2022 performance; the committee’s expectations of each NEO’s future contributions to the company; internal equity; external market conditions; shares available to be granted; potential shareholder dilution; and the expense associated with stock-based compensation.
After considering these factors, the committee approved the following awards of PRSUs and RSUs in March 2023 and September 2023:
NEO |
|
Grant Date Fair Value |
|
|
Grant Date Fair Value |
|
|
Grant Date Fair Value |
|
|
Percentage Change of All 2023 LTI Awards at Target From |
|
||||
Ivan Tornos |
|
$ |
3,950,017 |
|
|
$ |
4,025,183 |
|
|
$ |
3,447,401 |
|
|
|
89 |
% |
Suketu Upadhyay |
|
$ |
3,300,033 |
|
|
$ |
3,375,111 |
|
|
$ |
5,000,017 |
|
|
|
154 |
% |
Sang Yi |
|
$ |
1,699,961 |
|
|
$ |
1,750,247 |
|
|
$ |
250,026 |
|
|
|
18 |
% |
Wilfred van Zuilen |
|
$ |
1,400,215 |
|
|
$ |
1,600,169 |
|
|
$ |
— |
|
|
|
14 |
% |
Chad Phipps |
|
$ |
1,550,111 |
|
|
$ |
1,550,145 |
|
|
$ |
— |
|
|
|
0 |
% |
Bryan Hanson |
|
$ |
11,000,114 |
|
|
$ |
11,750,072 |
|
|
$ |
— |
|
|
|
7 |
% |
(1) Excludes the incremental fair value associated with the conversion and adjustments to outstanding equity awards in connection with the ZimVie spinoff, as well as the one-time equity grants to Messrs. Yi and Phipps in March 2022.
(2) Reflects only the grant date fair value of equity awards approved by the committee at its March 6, 2023 meeting.
The committee considered these target grant values in connection with its determination of each NEO’s total compensation for 2023.
Zimmer Biomet 46
EXECUTIVE COMPENSATION
Equity Award Types
The 2023 annual equity awards granted to the NEOs included an equal mix (based on grant date fair value) of RSUs and PRSUs. The committee determined to adopt RSUs in place of stock options beginning in 2023 after evaluating the relative prevalence of stock options and RSUs as long-term equity compensation tools in public companies as a whole and because RSUs better address volatile environments and provide more stability in value as compared to stock options, particularly as was experienced in connection with the COVID-19 pandemic. The annual RSUs vest ratably over three years. The vesting of the annual PRSUs is contingent on achievement of financial performance measures over a three-year period.
PRSU Design for Awards Made in 2023
Building in part on feedback received from our shareholders, the committee added a third performance measure for the 2023 PRSU awards, relative TSR. Constant currency revenue growth and adjusted EPS growth are key drivers of long-term shareholder value creation that are more readily controlled by executive officers, and relative TSR further aligns executive incentives to our shareholders' experience.
* Constant currency revenue and adjusted EPS are non-GAAP financial measures. See footnote (3) to the “2023 Annual Cash Incentive Plan” table above for a discussion of constant currency revenue and its associated adjustments. The performance measure of adjusted EPS growth provides for certain non-GAAP adjustments so that the performance measure will more consistently reflect underlying business operations than the comparable GAAP measure and is consistent with the measure management uses when evaluating the performance of the business internally, as well as with how management generally provides earnings guidance and reports the company’s operating results to the investment community.
In addition to the annual PRSUs and Mr. Tornos’ and Mr. Yi’s additional PRSUs granted in September 2023 (all of which substantially have the same performance conditions described above), the committee, in recognition of the broader scope of Mr. Upadhyay’s responsibilities beginning in August 2023, made a promotion-related award of PRSUs to Mr. Upadhyay on September 1, 2023, with a grant date fair value of approximately $5,000,000. This award will be earned and vest if and to the extent that certain financial and organizational goals are achieved over two separate one-year performance periods of October 1, 2023 to September 30, 2024 and October 1, 2024 to September 30, 2025.
PRSU Results for Past Performance Periods
During our shareholder outreach, certain shareholders requested that we disclose the company's performance against the original performance criteria for our converted 2021 PRSUs. As previously disclosed, we converted certain equity awards in connection with our March 1, 2022, spinoff of ZimVie, including our 2021 PRSU awards, which were converted into RSUs with the same vesting date, which was three years following the original grant date. The converted 2021 PRSUs vested and were settled on their scheduled vesting date, February 25, 2024. At the time the committee approved the conversion, the 2021 PRSUs were estimated to achieve an 82.5% payout level based on the projected achievement of the relevant performance measures through that date, so the 2021 PRSU awards were converted into RSUs at an 82.5% payout level, and also modified to give effect to the relative difference in the volume-weighted average share price of our stock immediately before and after the ZimVie spinoff. It was determined that the 2021 PRSUs would have achieved an 83.9% payout level based on their initial performance measures, which was higher than the 82.5% level at which the PRSUs were converted to RSUs in connection with the spinoff, as noted above.
Zimmer Biomet 47
EXECUTIVE COMPENSATION
|
OTHER COMPENSATION |
|
Employment and Change in Control Severance Agreements |
We do not have employment agreements with our NEOs, other than as required under the laws of non-U.S. jurisdictions; however, we have entered into change in control severance agreements with them. These agreements are intended to maintain continuity of management, particularly in the context of a transaction in which we undergo a change in control.
These agreements are “double triggered,” which means that an executive is only entitled to severance payments if:
The committee believes that it is appropriate to provide the NEOs with the specified severance in the event that their employment is terminated in connection with a change in control or their position is modified in such a way as to diminish their compensation, authority or responsibilities. See “Change in Control Arrangements” in the narrative discussion following the Potential Payments upon Termination of Employment table for a more detailed description of the material terms of these agreements. Since 2009, all change in control severance agreements that we have entered into with newly hired or promoted executives contain no excise tax gross-up provisions. Accordingly, our agreement with Mr. Phipps is the only agreement that contains such provisions.
During the first quarter of 2024, in connection with a survey of peer group practices by our independent compensation consultant Semler Brossy, we amended our change in control severance agreements with each of our executive officers (including NEOs), except for Mr. Phipps, to better conform to current market practices related to the treatment for excise taxes. The amendments changed the payout limit, which previously provided that if amounts payable in connection with a change in control would be subject to the excise tax imposed under the Internal Revenue Code, then the value of those payments would be reduced to the extent necessary so that the payments would not trigger the excise tax. The amendments modify this provision such that payments will either be reduced so as not to trigger the excise tax, or will be paid in full, depending on which course of action would result in the better net after-tax result for the executive.
|
Severance Benefits (Unrelated to a Change in Control) |
We maintain an Executive Severance Plan applicable to certain members of our executive leadership team, which currently consists of our executive officers and certain other members of senior management. Under the plan, following a termination by us of a participant’s employment, unless his or her employment is terminated for misconduct or any of the other reasons specified in the plan, a participant will be eligible to receive a lump-sum severance amount equal to two times (for Mr. Tornos) or one times (for other participants) the sum of (1) his or her annualized base salary in effect when the termination occurs and (2) his or her target annual bonus amount in effect when the termination occurs.
In addition, if a participant’s employment is terminated on or after January 1 but prior to the payment date for bonuses related to the previous calendar year under the annual cash incentive plan, and the participant was eligible to participate in the annual cash incentive plan immediately prior to the separation and is entitled to severance benefits under the Executive Severance Plan, the participant’s severance benefit will be increased by the value of the bonus he or she would have received under the annual cash incentive plan, if any, had he or she remained employed on the payment date.
Participants eligible to receive severance benefits under the Executive Severance Plan and who are eligible to elect COBRA will also be eligible to receive a lump-sum amount equal to the then-current monthly COBRA premium (for medical and dental insurance only) in effect the day prior to the separation date, multiplied by 24 for Mr. Tornos and by 12 for other participants. Eligible participants will also be offered outplacement services with a value not to exceed $25,000, or an equivalent cash benefit in the plan administrator’s discretion.
Similar to our broad-based severance plan, to receive benefits under the Executive Severance Plan, a participant must sign a general release of claims and continue to be bound by the terms of his or her non-competition agreement with us. If a participant violates or breaches any term of the plan or the general release or any restrictive covenant agreement with us, or if facts are later disclosed or discovered that could have supported the participant’s termination for cause and would have rendered the participant ineligible to receive severance benefits under the plan, then the participant will forfeit any and all rights to benefits under the plan and, to the extent benefits have already been paid, must repay the full amount within 15 days of written notice from us.
Zimmer Biomet 48
EXECUTIVE COMPENSATION
|
Retirement and Other Post-Employment Benefits |
During 2023, NEOs based in the U.S. were eligible to participate in the following plans:
We originally established the 401(k) plan in 2001 to maintain levels of benefits consistent with those of our former parent company. We established the DCP in 2016 following the Biomet merger to harmonize and align the legacy Zimmer and Biomet benefit plans. The DCP provides executives with the opportunity to defer each year, on a pre-tax basis, up to 50% of base salary and up to 95% of annual incentive awards. With the adoption of the DCP, we amended three legacy non-qualified Zimmer and Biomet plans to remove provisions of those plans that allowed executives to defer compensation.
We offer retirement and post-employment benefit plans in an effort to remain competitive with market practices, retain talented employees, assist employees in preparing for retirement, provide income to employees following retirement and, in the case of the DCP, provide benefits to eligible employees that are comparable, as a percentage of compensation, to benefits provided to employees whose compensation is not subject to limits under U.S. law. We believe that the total retirement benefits we provide are comparable to the retirement benefits provided by other companies within the medical device and biotech industries. Additionally, the cost of providing retirement benefits generally affects decisions regarding the types and amounts of other compensation and benefits that we may offer our employee population as a whole, but the provision of, or an NEO’s accumulated benefit under, our retirement plans generally does not affect decisions regarding the types or amounts of other compensation paid to that NEO in a given year. These plans are discussed in greater detail in the narratives following the "Pension Benefits in 2023" section of this proxy statement and the "Nonqualified Deferred Compensation in 2023" section of this proxy statement. For a description of the non-U.S. plans in which Messrs. van Zuilen and Yi participate, see the "Pension Benefits in 2023" table and the narrative that follows it.
|
Disability Compensation |
NEOs based in the U.S. may participate in the Restated Zimmer Biomet Holdings, Inc. Long-Term Disability Income Plan for Highly Compensated Employees. This plan is funded from our general assets, long-term disability insurance and individual disability insurance policies for which we pay. The plan provides disability benefits, as a percentage of total compensation, that are comparable to benefits provided to employees whose compensation is not limited for purposes of determining benefits payable under our base long-term disability insurance plan.
|
Perquisites |
We provide executives with a limited range of perquisites or other benefits not generally available to all salaried employees. For 2023, these included the DCP, an executive physical program, applicable non-U.S. pension plans and the long-term disability income plan discussed above. Executives may at times participate in rewards trips provided to top performing team members, or their spouses may be permitted to attend certain events as guests; the executives are personally taxed on their own or their spouses’ expenses and we do not provide them with any tax gross-up payments. We do not provide executives with company cars, car allowances or payment of office parking fees unless they are living outside the U.S. and such practices are consistent with local market practice. For example, we provide an apartment in Zug, Switzerland and a company car for Mr. van Zuilen.
We provide all management-level employees who relocate their principal residence at our request with benefits provided under our relocation assistance program, including, for example, reimbursement of temporary housing and moving expenses and associated tax gross-up payments.
Prior to his separation, Mr. Hanson was permitted reasonable personal use of our corporate aircraft in 2023 up to $190,000 in aggregate incremental cost to us. Further, pursuant to a time sharing agreement between Mr. Hanson and us, he was permitted to reimburse us for the incremental cost of his personal use of our corporate aircraft consistent with Federal Aviation Administration regulations. Messrs. Tornos and Upadhyay are permitted limited personal use of our corporate aircraft, up to $190,000 and $50,000, respectively, in aggregate incremental cost to us per calendar year. These executives are personally taxed on their personal use of our corporate aircraft and we do not provide them with any tax gross-up payments. The aggregate incremental cost to us for our NEOs’ personal use of our corporate aircraft in 2023 is included in the footnotes to the 2023 Summary Compensation Table.
During 2023, the committee also determined to reimburse up to $12,000 to members of our leadership team (including the NEOs) for financial planning and tax services, as set forth in the footnotes to the 2023 Summary Compensation Table.
Zimmer Biomet 49
EXECUTIVE COMPENSATION
|
THE COMMITTEE’S PROCESSES AND ANALYSES |
Role of Committee and Input from Management. The committee is responsible for determining our executive compensation strategies, structure, policies and programs and must specifically approve compensation actions relating to our NEOs.
When setting compensation for our executives, the committee receives input from management and from its independent compensation consultant. The committee gives significant consideration to the recommendations of management when setting compensation for our NEOs other than our CEO. Management’s recommendations include specific amounts for base salaries, target cash incentive opportunities and equity-based awards. These recommendations are typically developed initially by our Human Resources personnel in consultation with the committee’s independent compensation advisor, taking into consideration such factors as compensation history, tenure, internal equity, responsibilities and retention concerns to maintain consistency among our executives. These recommendations are then reviewed, and may be adjusted, by our CEO, who also considers his own assessment of the performance of each executive officer other than himself. All proposals are then reviewed by the committee’s independent compensation advisor. Our CEO and senior Human Resources personnel participate in committee meetings to provide background information and explanations supporting compensation recommendations.
The committee and other independent members of the Board review our CEO’s performance and determine his compensation, taking into consideration his achievement of specified goals and objectives and the company’s performance. The committee receives input and recommendations with respect to our CEO’s compensation from its independent compensation consultant.
The committee also reviews and approves actions related to other aspects of compensation that affect employees below the senior executive level, including compensation philosophy, annual incentive plan design and performance goals, equity award design and performance goals, equity value ranges and share pools.
Use of Peer Group Data. The committee reviews compensation data for a peer group of publicly traded companies, including other large healthcare equipment and services companies, life sciences services companies and companies with whom we compete for business and for executive talent, as a market reference point for executive compensation levels, equity usage and incentive plan design, industry trend analysis and for performance comparisons. The committee reviews the peer group annually and selects the companies which it believes provide the best match for the company and its characteristics, including industry served, market capitalization, innovation and other factors. The peer group data is one of several inputs the committee considers when making compensation determinations. At the time compensation recommendations were developed and decisions were made relating to 2023 compensation, the following 14 companies made up the peer group:
Peer group at the time 2023 compensation decisions were made: |
||||||||
Company |
|
Trading Symbol |
|
Market Capitalization at March 11, 2024 |
||||
Agilent Technologies, Inc. |
|
A |
|
|
|
43,164 |
|
|
Align Technology, Inc. |
|
ALGN |
|
|
|
23,139 |
|
|
Baxter International Inc. |
|
BAX |
|
|
|
22,080 |
|
|
Becton, Dickinson and Company |
|
BDX |
|
|
|
69,192 |
|
|
Boston Scientific Corporation |
|
BSX |
|
|
|
97,004 |
|
|
DexCom, Inc. |
|
DXCM |
|
|
|
51,289 |
|
|
Edwards Lifesciences Corporation |
|
EW |
|
|
|
54,616 |
|
|
Hologic, Inc. |
|
HOLX |
|
|
|
17,917 |
|
|
Intuitive Surgical, Inc. |
|
ISRG |
|
|
|
133,496 |
|
|
Laboratory Corporation of America Holdings |
|
LH |
|
|
|
18,378 |
|
|
Quest Diagnostics Incorporated |
|
DGX |
|
|
|
14,329 |
|
|
Stryker Corporation |
|
SYK |
|
|
|
135,218 |
|
|
Teleflex Incorporated |
|
TFX |
|
|
|
10,687 |
|
|
The Cooper Companies, Inc. |
|
COO |
|
|
|
20,162 |
|
|
The committee routinely reviews the continuing relevancy of the companies in the peer group and makes changes as circumstances warrant.
Role of Compensation Consultant. The committee has engaged Semler Brossy as its independent compensation consultant to provide advice and guidance to the committee on compensation proposals, including changes to compensation levels, the design of incentive plans, the setting of performance goals, and the design of other forms of compensation and benefits programs, as well as relevant information about market practices and trends. Typically, Semler Brossy attends committee meetings, reviews existing compensation programs to ensure consistency with our compensation philosophy and current market practices, and produces the comparative information derived from peer group and published survey data that the committee reviews when setting compensation. With respect to 2023, Semler Brossy's major activities included:
Zimmer Biomet 50
EXECUTIVE COMPENSATION
In accordance with SEC rules, prior to retaining an independent compensation consultant, and on an annual basis, the committee considers any factors relevant to the consultant's independence from management, including the factors specified in the New York Stock Exchange listing standard, to evaluate whether the services to be performed will raise any conflicts of interest or compromise the independence of the consultant. Based on its review of these factors, the committee concluded that the work of Semler Brossy did not raise any conflicts of interest.
Zimmer Biomet 51
EXECUTIVE COMPENSATION
GOVERNANCE FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM |
|
|
Equity Incentive Grant Practices |
The committee approves annual equity-based awards to NEOs at approximately the same time each year, typically the day of its meeting in February or March. In 2023, the committee established an early March grant date for annual equity grants to all eligible employees. The grant date timing was driven by these considerations:
The committee also approves equity-based awards outside of the annual grant cycle from time to time ("off-cycle awards"), such as those approved in August 2023 in connection with the appointment of our new President and CEO, for purposes of attracting new hires for executive-level positions, in connection with promotions to executive-level positions, to reward superior performance, to recognize exceptional effort and commitment, to retain and motivate executive-level employees or for other purposes the committee deems appropriate.
The committee approves target grant values for long-term equity awards on or prior to the grant date. On the grant date in 2023, those values were converted to a number of RSUs and PRSUs based on:
The committee typically delegates authority to our CEO to grant a limited number of off-cycle awards to non-executive level employees as he deems appropriate. The aggregate number of shares underlying all such grants by our CEO during 2023 was approximately 71,452. The CEO subsequently reports all such grants to the committee. New hire grants are effective on the first trading day of the month following the later of the CEO’s approval of the grant or the new hire’s start date.
|
Executive Stock Ownership Guidelines |
Our NEOs must meet stock ownership guidelines set by the Board. The committee oversees compliance with these guidelines and periodically reviews the guidelines. The guidelines require our CEO to own shares or units with a value equal to at least six times his or her base salary and the other NEOs to own shares or units with a value equal to at least three times their respective base salaries. NEOs have a period of five years to reach the guideline level of ownership. The value of long shares and time-based RSUs is counted toward these guidelines. The value of unearned PRSUs and the unrealized gain on unvested stock options is not counted; additionally, starting in February 2024, the unrealized gain on vested stock options also ceased to be counted toward achievement. NEOs may not sell shares acquired through option exercises or vesting of RSUs or PRSUs (other than to pay option exercise costs and cover any required tax withholding obligation) until the minimum ownership requirements have been met. As of December 31, 2023, all NEOs are in compliance with the guidelines (as calculated both including and excluding the unrealized gain on vested stock options) or are within the time period prior to required compliance. We have approved procedures by which every executive officer must obtain clearance prior to selling any shares of our common stock, in part to ensure no executive falls out of compliance with the guidelines.
|
Executive Compensation Recoupment Policies and Provisions |
Effective October 2, 2023, the committee approved a new Compensation Recovery Policy (the “Clawback Policy”), in compliance with the listing standards of the New York Stock Exchange. The Clawback Policy provides that promptly following an accounting restatement due to the material noncompliance of the company with any financial reporting requirement under the securities laws (including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period), the committee will determine the amount of the excess of the amount of incentive-based compensation received by Section 16 officers during the three completed fiscal years immediately preceding the required restatement date over the amount of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts. The company will provide each such officer with a written notice of such amount and a demand for repayment or return. If such repayment or return is not made within a reasonable time, the Clawback Policy provides that the company will recover the erroneously awarded
Zimmer Biomet 52
EXECUTIVE COMPENSATION
compensation in a reasonable and prompt manner using any lawful method, subject to limited exceptions as permitted by New York Stock Exchange listing standards. The applicable officer shall also be required to reimburse the company for any and all expenses (including legal fees) reasonably incurred by the company in recovering such erroneously awarded compensation. The Clawback Policy also provides that any action by the company to recover erroneously awarded compensation under the policy will not be deemed “good reason” for resignation or to serve as a basis for a claim of constructive termination under any benefits or compensation arrangement, or to constitute a breach of a contract or other arrangement to which such officer is party.
In addition to the Clawback Policy, our equity incentive plan and related award agreements continue to contain provisions that permit the committee, in its discretion, to require a participant to forfeit his or her right to any unvested portion of an award and, to the extent that any portion of an award has previously vested, to return to us the shares of common stock covered by the award or any cash proceeds the participant received upon the sale of such shares, in the event that the participant engages in activity that is deemed detrimental to our interests, including, but not limited to, breach of restrictive covenants or violations of our Code of Business Conduct and Ethics or other policies, procedures or standards.
Prohibition on Hedging and Pledging
Please see above under "CORPORATE GOVERNANCE - STOCK TRADING POLICY AND PROHIBITION ON PLEDGING AND HEDGING."
Tax Deductibility of Executive Compensation
The committee views the tax deductibility of compensation as one of many factors to be considered in the design of our executive compensation program. Section 162(m) of the Internal Revenue Code (the “Code”) limits our ability to deduct for U.S. tax purposes compensation in excess of $1.0 million that is paid to certain executive officers. In determining the compensation paid or awarded to our NEOs, the committee seeks to achieve the objectives of our compensation program, including attracting, retaining, motivating and sustaining high performing executive talent and incentivizing the achievement of both short- and long-term results through the alignment of rigorous performance goals and pay. In structuring our compensation program in a manner consistent with these objectives, the committee may approve compensation that is not fully deductible for U.S. tax purposes if the committee believes it will contribute to the achievement of our business objectives and is in our best interests and the best interests of our shareholders.
Zimmer Biomet 53
EXECUTIVE COMPENSATION
0
COMPENSATION COMMITTEE REPORT
The Compensation and Management Development Committee of the Board of Directors consists of the four directors named below, each of whom meets the independence standards of the Board’s Corporate Governance Guidelines, the New York Stock Exchange listing standards and applicable securities laws.
We reviewed and discussed with management the Compensation Discussion and Analysis that precedes this report. Based on our review and discussions with management, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Zimmer Biomet’s Annual Report on Form 10-K for the year ended December 31, 2023 and this proxy statement.
Compensation and Management Development Committee
Michael Farrell, Chair
Arthur Higgins
Syed Jafry
Michael Michelson
Zimmer Biomet 54
EXECUTIVE COMPENSATION
2023 SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to or earned by our NEOs for the years ended December 31, 2023, 2022, and 2021:
Name and Principal |
|
Year |
|
Salary |
|
Bonus(1) |
|
Stock |
|
Option |
|
Non-Equity |
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings(5) |
|
All Other |
|
Total |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
Ivan Tornos |
|
2023 |
|
968,702 |
|
— |
|
7,472,584 |
|
— |
|
1,603,022 |
|
— |
|
147,168 |
|
10,191,476 |
President and CEO |
|
2022 |
|
823,077 |
|
— |
|
2,408,723 |
|
1,975,002 |
|
1,059,530 |
|
— |
|
168,735 |
|
6,435,067 |
|
|
2021 |
|
730,684 |
|
— |
|
1,600,089 |
|
1,600,020 |
|
808,356 |
|
— |
|
139,760 |
|
4,878,909 |
Suketu Upadhyay |
|
2023 |
|
801,839 |
|
— |
|
8,375,128 |
|
— |
|
1,054,435 |
|
— |
|
153,527 |
|
10,384,929 |
CFO and EVP - Finance, |
|
2022 |
|
753,080 |
|
— |
|
2,067,692 |
|
1,650,017 |
|
928,587 |
|
— |
|
123,942 |
|
5,523,318 |
Operations and Supply Chain |
|
2021 |
|
663,431 |
|
2,779 |
|
1,500,072 |
|
1,500,016 |
|
773,449 |
|
— |
|
176,467 |
|
4,616,214 |
Sang Yi(7) |
|
2023 |
|
609,950 |
|
— |
|
2,000,273 |
|
— |
|
633,166 |
|
— |
|
141,605 |
|
3,384,994 |
Group President, APAC |
|
2022 |
|
638,853 |
|
— |
|
1,361,788 |
|
851,046 |
|
595,104 |
|
— |
|
124,048 |
|
3,570,839 |
|
|
2021 |
|
623,307 |
|
— |
|
1,075,000 |
|
1,075,010 |
|
478,802 |
|
— |
|
120,761 |
|
3,372,880 |
Wilfred van Zuilen(8) |
|
2023 |
|
629,267 |
|
— |
|
1,600,169 |
|
— |
|
745,102 |
|
344,026 |
|
99,611 |
|
3,418,175 |
Group President, EMEA |
|
2022 |
|
555,629 |
|
— |
|
700,197 |
|
700,018 |
|
572,182 |
|
118,602 |
|
92,505 |
|
2,739,133 |
|
|
2021 |
|
331,990 |
|
— |
|
1,630,038 |
|
1,630,032 |
|
276,481 |
|
155,803 |
|
51,112 |
|
4,075,456 |
Chad Phipps(9) |
|
2023 |
|
603,378 |
|
— |
|
1,550,145 |
|
— |
|
634,764 |
|
— |
|
85,216 |
|
2,873,503 |
Senior VP, General Counsel and Secretary |
|
2022 |
|
584,031 |
|
— |
|
1,212,221 |
|
783,255 |
|
582,629 |
|
— |
|
65,428 |
|
3,227,564 |
Bryan Hanson(10) |
|
2023 |
|
841,676 |
|
— |
|
11,750,072 |
|
— |
|
— |
|
— |
|
169,563 |
|
12,761,312 |
Former Chairman, |
|
2022 |
|
1,212,692 |
|
— |
|
7,134,720 |
|
5,500,022 |
|
2,268,340 |
|
— |
|
333,330 |
|
16,449,105 |
President and CEO |
|
2021 |
|
1,120,283 |
|
— |
|
5,825,077 |
|
5,825,003 |
|
1,837,775 |
|
— |
|
375,394 |
|
14,983,532 |
PRSU awards represent the grant date fair value based upon the probable outcome of the performance conditions at the date of grant. PRSUs awarded in 2023 have the conditions and goals described above in this footnote. PRSUs awarded in 2022 are subject to internal performance goals of constant currency revenue growth and adjusted EPS growth over a three-year performance period. PRSUs awarded in 2021 were (prior to conversion to RSUs in connection with the ZimVie spinoff) subject to both internal (constant currency revenue growth) and market-related (relative TSR) performance goals over a three-year performance period. The grant date fair value of the relative TSR component for all awards with such goal was determined using a Monte Carlo simulation model. The following table presents the grant date fair value of the annual PRSUs subject to performance conditions included in the “Stock Awards” column and the grant date fair value of these awards assuming that the highest level of performance conditions would be achieved.
Zimmer Biomet 55
EXECUTIVE COMPENSATION
|
|
2023 PRSU Awards |
|
2022 PRSU Awards |
|
2021 PRSU Awards |
||||||
Name |
|
Grant Date Fair Value |
|
Grant Date Fair Value |
|
Grant Date Fair Value |
|
Grant Date Fair Value |
|
Grant Date Fair Value |
|
Grant Date Fair Value |
Ivan Tornos |
|
3,762,635 |
|
7,525,270 |
|
1,975,015 |
|
3,950,030 |
|
1,600,089 |
|
3,200,178 |
Suketu Upadhyay |
|
6,687,563 |
|
13,375,126 |
|
1,650,016 |
|
3,300,032 |
|
1,500,072 |
|
3,000,144 |
Sang Yi |
|
1,125,157 |
|
2,250,314 |
|
850,026 |
|
1,700,052 |
|
1,075,000 |
|
2,150,000 |
Wilfred van Zuilen |
|
800,056 |
|
1,600,112 |
|
700,035 |
|
1,400,071 |
|
— |
|
— |
Chad Phipps |
|
775,075 |
|
1,550,149 |
|
775,090 |
|
1,550,180 |
|
975,165 |
|
1,950,330 |
Bryan Hanson |
|
5,875,052 |
|
11,750,105 |
|
5,500,092 |
|
11,000,184 |
|
5,825,077 |
|
11,650,154 |
|
|
2023 |
|
2022 |
|
2021 |
|
SVE(a) |
|
63,665 |
|
27,891 |
|
16,920 |
|
JJS(a) |
|
554,766 |
|
246,514 |
|
138,883 |
|
Total |
|
618,431 |
|
274,405 |
|
155,803 |
|
(a) SVE and JJS refer to our defined benefit cash balance type pension plans generally available to all employees in Switzerland. The SVE provides benefits based on compensation up to $181,729, $156,278 and $163,212 for 2023, 2022 and 2021, respectively, and the JJS provides benefits based on compensation in excess of the SVE amount up to $1,048,522, $901,678 and $941,684 for 2023, 2022 and 2021, respectively. The assumed interest rates for 2023, 2022 and 2021 are 1.50%, 2.25% and 0.40%, respectively. The mortality assumptions for 2023, 2022 and 2021 are based on the BVG 2020 Generational Mortality Table. The JJS has a maximum allowable monthly retirement pension of $8,738, $7,703 and $7,847 for 2023, 2022 and 2021, respectively. Mr. van Zuilen has an accumulated benefit of $2,445, $1,320 and $478 monthly under the JJS, payable at age 65, as of 2023, 2022 and 2021, respectively. The reported amounts are based upon the portion of the accumulated benefits attributable to company contributions.
Zimmer Biomet 56
EXECUTIVE COMPENSATION
|
|
|
|
I. Tornos |
|
S. Upadhyay |
|
S. Yi |
|
W. van Zuilen |
|
C. Phipps |
|
B. Hanson |
Company matching contributions to 401(k) plan |
|
|
|
19,800 |
|
19,800 |
|
__ |
|
__ |
|
19,800 |
|
19,800 |
Company matching contributions to deferred compensation plan (credited to participants’ accounts in 2024) |
|
|
|
58,122 |
|
84,026 |
|
__ |
|
__ |
|
51,360 |
|
— |
Non-business use of corporate aircraft(a) |
|
|
|
49,780 |
|
39,200 |
|
__ |
|
__ |
|
__ |
|
147,520 |
Automobile allowance |
|
|
|
— |
|
— |
|
67,806 |
|
31,601 |
|
— |
|
— |
Office parking fees |
|
|
|
— |
|
— |
|
4,299 |
|
— |
|
— |
|
— |
Disability insurance premiums |
|
|
|
2,520 |
|
3,263 |
|
__ |
|
__ |
|
2,056 |
|
2,243 |
Mandatory Provident Fund contribution(b) |
|
|
|
— |
|
— |
|
63,642 |
|
— |
|
— |
|
— |
Executive physical |
|
|
|
4,976 |
|
— |
|
— |
|
— |
|
— |
|
— |
Personal tax assistance |
|
|
|
11,970 |
|
7,238 |
|
5,859 |
|
— |
|
12,000 |
|
— |
Corporate paid apartment |
|
|
|
— |
|
— |
|
— |
|
68,010 |
|
— |
|
— |
|
|
Total |
|
147,168 |
|
153,527 |
|
141,605 |
|
99,611 |
|
85,216 |
|
169,563 |
Zimmer Biomet 57
EXECUTIVE COMPENSATION
GRANTS OF PLAN-BASED AWARDS IN 2023
The following table sets forth non-equity incentive plan arrangements and equity awards granted to our NEOs in 2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Stock |
|
|
|
|
|
|
|
|
Estimated Possible Payouts |
|
Estimated Future Payouts |
|
Awards: Number |
|
Grant Date |
||||||||
|
|
|
|
Date of |
|
Under Non-Equity Incentive |
|
Under Equity Incentive |
|
of Shares |
|
Fair Value |
||||||||
|
|
|
|
Comp. |
|
Plan Awards(1) |
|
Plan Awards |
|
of Stock |
|
of Stock |
||||||||
|
|
Grant |
|
Committee |
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
or Units |
|
Awards(2) |
Name |
|
Date |
|
Action |
|
($) |
|
($) |
|
($) |
|
(#) |
|
(#) |
|
(#) |
|
(#) |
|
($) |
(a) |
|
(b) |
|
|
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(l) |
Ivan Tornos |
|
|
|
|
|
615,600 |
|
1,231,200 |
|
2,462,400 |
|
|
|
|
|
|
|
|
|
|
Annual PRSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
7,654 |
|
15,307 |
|
30,614 |
|
|
|
2,012,564 |
Annual RSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
16,315 |
|
2,012,618 |
Transitional PRSU |
|
09/01/23 |
|
08/16/23 |
|
|
|
|
|
|
|
7,696 |
|
15,392 |
|
30,784 |
|
|
|
1,750,070 |
Transitional RSU |
|
09/01/23 |
|
08/16/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
14,491 |
|
1,697,331 |
Suketu Upadhyay |
|
|
|
|
|
400,920 |
|
801,839 |
|
1,603,679 |
|
|
|
|
|
|
|
|
|
|
Annual PRSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
6,418 |
|
12,835 |
|
25,670 |
|
|
|
1,687,546 |
Annual RSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
13,680 |
|
1,687,565 |
Promotion PRSU |
|
09/01/23 |
|
08/16/23 |
|
|
|
|
|
|
|
21,264 |
|
42,528 |
|
85,056 |
|
|
|
5,000,017 |
Sang Yi(3) |
|
|
|
|
|
264,480 |
|
528,961 |
|
1,057,921 |
|
|
|
|
|
|
|
|
|
|
Annual PRSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
3,328 |
|
6,656 |
|
13,312 |
|
|
|
875,131 |
Annual RSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
7,094 |
|
875,116 |
Retention PRSU |
|
09/01/23 |
|
08/16/23 |
|
|
|
|
|
|
|
1,100 |
|
2,199 |
|
4,398 |
|
|
|
250,026 |
Wilfred van Zuilen(4) |
|
|
|
|
|
251,707 |
|
503,413 |
|
1,006,827 |
|
|
|
|
|
|
|
|
|
|
Annual PRSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
3,043 |
|
6,085 |
|
12,170 |
|
|
|
800,056 |
Annual RSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
6,486 |
|
800,113 |
Chad Phipps |
|
|
|
|
|
241,351 |
|
482,703 |
|
965,405 |
|
|
|
|
|
|
|
|
|
|
Annual PRSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
2,948 |
|
5,895 |
|
11,790 |
|
|
|
775,075 |
Annual RSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
6,283 |
|
775,071 |
Bryan Hanson(5) |
|
|
|
|
|
946,886 |
|
1,893,771 |
|
3,787,542 |
|
|
|
|
|
|
|
|
|
|
Annual PRSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
22,342 |
|
44,684 |
|
89,368 |
|
|
|
5,875,052 |
Annual RSU |
|
03/06/23 |
|
03/06/23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
47,625 |
|
5,875,020 |
Zimmer Biomet 58
EXECUTIVE COMPENSATION
Narrative Discussion
Non-Equity Incentive Plan Awards. The non-equity incentive plan awards reflected in the first row of the table for each NEO in columns (c) through (e) represent the annual cash incentive opportunity under the EPIP for 2023. Material terms of the awards, including a discussion of the applicable performance measures and target and actual performance for 2023, are described in the CD&A. Amounts actually earned for 2023 performance are shown in column (g) of the 2023 Summary Compensation Table.
Equity Incentive Plan Awards. The equity incentive plan awards reflected in columns (f) through (h) were granted under the 2009 Plan and represent PRSUs. Other than the PRSUs granted to Mr. Upadhyay in September 2023 in connection with the expansion of his responsibilities, the PRSUs were related to the annual PRSU grant, with Messrs. Tornos and Yi receiving additional PRSUs in connection with the senior leadership changes in August 2023, which PRSUs have the same terms as the annual PRSU grants. The annual PRSUs had a grant date fair value of $131.48 per unit for the PRSUs granted on March 6, 2023 and a grant date fair value of $113.70 per unit for the PRSUs granted to Messrs. Tornos and Yi on September 1, 2023. These PRSUs are subject to internal performance goals (constant currency revenue growth and adjusted EPS growth) and market-related (relative TSR) performance goals over a three-year performance period. The grant date fair value of the annual PRSUs represents the weighted average fair value of the three PRSU tranches. For the constant currency revenue growth performance goal and for the adjusted EPS growth performance goal, the grant date fair value is based upon our stock price on the grant date and the time period to vest. For the market-related (relative TSR) performance goal, the performance period has a grant date fair value based upon a Monte Carlo simulation model covering the period. The PRSUs granted to Mr. Upadhyay on September 1, 2023 had a grant date fair value of $117.57 per unit and are subject to financial and organizational goals over two performance periods of October 1, 2023 to September 30, 2024 and October 1, 2024 to September 30, 2025. The grant date fair value of those PRSUs is based on the weighted average fair value of the two PRSU tranches and is based upon our stock price on the grant date and the time period to vest. The material terms of the PRSUs, including applicable performance measures and targets, are described in the CD&A. We do not pay or accrue dividends or dividend equivalents on PRSUs.
Other Stock Awards. The equity incentive plan awards reflected in column (i) were granted under the 2009 Plan and represent the annual grant of RSUs, including the additional RSUs granted to Mr. Tornos in connection with his promotion to President and CEO, which RSUs have the same terms as the annual RSU grants in March 2023. The grant date fair value of the RSUs was $123.36 per unit for the RSUs granted on March 6, 2023 and $117.13 per unit for the RSUs granted on September 1, 2023. We do not pay or accrue dividends or dividend equivalents on RSUs. Material terms of the RSUs are described in the CD&A.
Zimmer Biomet 59
EXECUTIVE COMPENSATION
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
The following table summarizes the outstanding equity awards held by the NEOs as of December 31, 2023. Mr. Hanson stepped down as Chairman of the Board, President and Chief Executive Officer of the company and as a member of the company’s Board, all effective as of August 22, 2023, and remained as an employee in an advisory capacity until August 31, 2023. As a result, Mr. Hanson forfeited all stock awards previously granted to him, and did not hold any equity awards as of December 31, 2023.
|
|
Option Awards(1) |
|
Stock Awards |
|
|||||||||||||||||||||||||||
Name |
|
Grant Date |
|
Number of |
|
|
Number of |
|
|
Option |
|
|
Option |
|
Number of |
|
|
Market Value |
|
|
Equity |
|
|
Equity |
|
|||||||
(a) |
|
|
|
(b) |
|
|
(c) |
|
|
(e) |
|
|
(f) |
|
(g) |
|
|
(h) |
|
|
(i) |
|
|
(j) |
|
|||||||
Ivan Tornos |
|
2/18/2022 |
|
|
20,582 |
|
|
|
41,164 |
|
|
|
117.22 |
|
|
2/18/2032 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/25/2021 |
|
|
18,644 |
|
|
|
18,644 |
|
|
|
158.90 |
|
|
2/25/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/21/2020 |
|
|
32,466 |
|
|
|
10,822 |
|
|
|
152.84 |
|
|
2/21/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/26/2019 |
|
|
41,277 |
|
|
|
— |
|
|
|
120.04 |
|
|
2/26/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
12/3/2018 |
|
|
15,198 |
|
|
|
— |
|
|
|
113.69 |
|
|
12/3/2028 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
12/3/2018 |
|
|
17,878 |
|
|
|
— |
|
|
|
113.69 |
|
|
12/3/2028 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
9/1/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,392 |
|
(4) |
|
1,873,206 |
|
|||||
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,307 |
|
(4) |
|
1,862,862 |
|
|||||
|
|
2/18/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,252 |
|
(5) |
|
2,099,568 |
|
|||||
|
|
9/1/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
14,491 |
|
(6) |
|
1,763,555 |
|
|
|
|
|
|
|
|||||
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
16,315 |
|
(6) |
|
1,985,536 |
|
|
|
|
|
|
|
|||||
|
|
2/25/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
7,513 |
|
(7) |
|
914,332 |
|
|
|
|
|
|
|
|||||
Suketu Upadhyay |
|
2/18/2022 |
|
|
17,196 |
|
|
|
34,390 |
|
|
|
117.22 |
|
|
2/18/2032 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/25/2021 |
|
|
17,478 |
|
|
|
17,479 |
|
|
|
158.90 |
|
|
2/25/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/21/2020 |
|
|
31,243 |
|
|
|
10,414 |
|
|
|
152.84 |
|
|
2/21/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
7/1/2019 |
|
|
65,464 |
|
|
|
— |
|
|
|
114.29 |
|
|
7/1/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
9/1/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,528 |
|
(8) |
|
5,175,658 |
|
|||||
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,835 |
|
(4) |
|
1,562,020 |
|
|||||
|
|
2/18/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,414 |
|
(5) |
|
1,754,184 |
|
|||||
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
13,680 |
|
(6) |
|
1,664,856 |
|
|
|
|
|
|
|
|||||
|
|
2/25/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
7,043 |
|
(7) |
|
857,133 |
|
|
|
|
|
|
|
|||||
Sang Yi |
|
2/18/2022 |
|
|
26,575 |
|
|
|
— |
|
|
|
117.22 |
|
|
2/18/2032 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/25/2021 |
|
|
25,053 |
|
|
|
— |
|
|
|
158.90 |
|
|
2/25/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/21/2020 |
|
|
26,135 |
|
|
|
— |
|
|
|
152.84 |
|
|
2/21/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/26/2019 |
|
|
26,919 |
|
|
|
— |
|
|
|
120.04 |
|
|
2/26/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
3/20/2018 |
|
|
24,816 |
|
|
|
— |
|
|
|
111.03 |
|
|
3/20/2028 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2/20/2018 |
|
|
22,228 |
|
|
|
— |
|
|
|
116.04 |
|
|
2/20/2028 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
3/21/2017 |
|
|
21,978 |
|
|
|
— |
|
|
|
118.25 |
|
|
3/21/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
3/21/2016 |
|
|
24,460 |
|
|
|
— |
|
|
|
100.91 |
|
|
3/21/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
6/24/2015 |
|
|
21,637 |
|
|
|
— |
|
|
|
110.44 |
|
|
6/24/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
6/24/2015 |
|
|
21,640 |
|
|
|
— |
|
|
|
110.44 |
|
|
6/24/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
3/17/2014 |
|
|
1,705 |
|
|
|
— |
|
|
|
91.53 |
|
|
3/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
9/1/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,199 |
|
(4) |
|
267,618 |
|
|||||
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,656 |
|
(4) |
|
810,035 |
|
|||||
|
|
2/18/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,425 |
|
(5) |
|
903,623 |
|
|||||
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
7,094 |
|
(6) |
|
863,340 |
|
|
|
|
|
|
|
|||||
|
|
3/1/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,052 |
|
(9) |
|
249,728 |
|
|
|
|
|
|
|
|||||
|
|
2/25/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,047 |
|
(7) |
|
614,220 |
|
|
|
|
|
|
|
|||||
Wilfred van Zuilen |
|
2/18/2022 |
|
|
7,295 |
|
|
|
14,590 |
|
|
|
117.22 |
|
|
2/18/2032 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
7/1/2021 |
|
|
20,722 |
|
|
|
20,723 |
|
|
|
157.11 |
|
|
7/1/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,085 |
|
(4) |
|
740,545 |
|
|||||
|
|
2/18/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,116 |
|
(5) |
|
744,317 |
|
|||||
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
6,486 |
|
(6) |
|
789,346 |
|
|
|
|
|
|
|
|||||
|
|
7/1/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,264 |
|
(10) |
|
640,629 |
|
|
|
|
|
|
|
|||||
Zimmer Biomet 60
EXECUTIVE COMPENSATION
|
|
Option Awards(1) |
|
Stock Awards |
||||||||||||||
Name |
|
Grant Date |
|
Number of |
|
Number of |
|
Option |
|
Option |
|
Number of |
|
Market Value |
|
Equity |
|
Equity |
(a) |
|
|
|
(b) |
|
(c) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
Chad Phipps |
|
2/18/2022 |
|
8,077 |
|
16,153 |
|
117.22 |
|
2/18/2032 |
|
|
|
|
|
|
|
|
|
|
2/25/2021 |
|
11,360 |
|
11,362 |
|
158.90 |
|
2/25/2031 |
|
|
|
|
|
|
|
|
|
|
2/21/2020 |
|
17,768 |
|
5,923 |
|
152.84 |
|
2/21/2030 |
|
|
|
|
|
|
|
|
|
|
2/26/2019 |
|
24,676 |
|
— |
|
120.04 |
|
2/26/2029 |
|
|
|
|
|
|
|
|
|
|
3/20/2018 |
|
22,919 |
|
— |
|
111.03 |
|
3/20/2028 |
|
|
|
|
|
|
|
|
|
|
2/20/2018 |
|
26,269 |
|
— |
|
116.04 |
|
2/20/2028 |
|
|
|
|
|
|
|
|
|
|
3/21/2017 |
|
23,970 |
|
— |
|
118.25 |
|
3/21/2027 |
|
|
|
|
|
|
|
|
|
|
3/21/2016 |
|
29,351 |
|
— |
|
100.91 |
|
3/21/2026 |
|
|
|
|
|
|
|
|
|
|
6/24/2015 |
|
25,969 |
|
— |
|
110.44 |
|
6/24/2025 |
|
|
|
|
|
|
|
|
|
|
6/24/2015 |
|
38,948 |
|
— |
|
110.44 |
|
6/24/2025 |
|
|
|
|
|
|
|
|
|
|
3/17/2014 |
|
26,156 |
|
— |
|
91.53 |
|
3/17/2024 |
|
|
|
|
|
|
|
|
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,895 |
(4) |
717,422 |
|
|
2/18/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
6,772 |
(5) |
824,152 |
|
|
3/6/2023 |
|
|
|
|
|
|
|
|
|
6,283 |
(6) |
764,641 |
|
|
|
|
|
|
3/1/2022 |
|
|
|
|
|
|
|
|
|
1,641 |
(9) |
199,710 |
|
|
|
|
|
|
2/25/2021 |
|
|
|
|
|
|
|
|
|
4,580 |
(7) |
557,386 |
|
|
|
|
Zimmer Biomet 61
EXECUTIVE COMPENSATION
OPTION EXERCISES AND STOCK VESTED IN 2023
The following table sets forth certain information regarding stock options exercised by our NEOs in 2023 and RSUs held by our NEOs that vested in 2023.
|
|
Option Awards |
|
|
Stock Awards |
|
||||||||||
|
|
Number of |
|
|
Value |
|
|
Number of |
|
|
Value |
|
||||
Name |
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
||||
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
||||
Ivan Tornos |
|
|
— |
|
|
|
— |
|
|
|
4,011 |
|
|
|
495,840 |
|
Suketu Upadhyay |
|
|
— |
|
|
|
— |
|
|
|
7,628 |
|
|
|
1,025,794 |
|
Sang Yi |
|
|
— |
|
|
|
— |
|
|
|
2,423 |
|
|
|
300,452 |
|
Wilfred van Zuilen |
|
|
— |
|
|
|
— |
|
|
|
2,633 |
|
|
|
383,365 |
|
Chad Phipps |
|
|
23,045 |
|
|
|
1,229,220 |
|
|
|
2,195 |
|
|
|
271,346 |
|
Bryan Hanson |
|
|
135,532 |
|
|
|
661,487 |
|
|
|
15,132 |
|
|
|
1,870,618 |
|
PENSION BENEFITS IN 2023
The following table sets forth information on defined pension plans in which Mr. van Zuilen participated in 2023. None of the other NEOs is eligible to, or does, participate in any defined benefit pension plans.
Name |
|
Plan Name(1) |
|
Number of Years Credited Service (#) |
|
Present Value of Accumulated Benefit(2) ($) |
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
Wilfred van Zuilen |
|
SVE |
|
2.58 |
|
63,665 |
|
|
|
JJS |
|
2.58 |
|
554,766 |
|
Narrative Discussion
During 2023, our U.S.-based NEOs were not eligible to participate in any defined benefit pension plans sponsored by the company.
Non-U.S. Pension Plans. We maintain a number of pension plans for our employees whose principal place of employment is outside the U.S. These pension plans are governed, and in some cases mandated, by the laws of the applicable countries and can vary significantly from plan to plan.
We do not offer a company-sponsored retirement plan for employees in Hong Kong. Our employees in Hong Kong who are Hong Kong citizens or permanent residents receive a pension benefit from the Mandatory Provident Fund (“MPF”), a compulsory social security savings plan provided by that country’s government to which we make contributions as required by Hong Kong law. In 2023, we made mandatory contributions to the MPF with respect to Mr. Yi, as he is a Hong Kong citizen.
Mr. van Zuilen participated in two cash balance defined benefit pension plans generally available to all employees in Switzerland, known as the SVE and the JJS. We contributed a percentage of Mr. van Zuilen’s pay, which varied by plan, into each of the SVE and the JJS. At the time of his retirement, Mr. van Zuilen may elect to receive his account balances in a lump sum payment, partial or full, or
Zimmer Biomet 62
EXECUTIVE COMPENSATION
in an annuity payment up to a maximum limit, with any residual account balance paid as a lump sum. If Mr. van Zuilen terminates employment prior to becoming eligible for retirement benefits, he will receive his account balances in a lump sum payment.
NONQUALIFIED DEFERRED COMPENSATION IN 2023
Name |
|
Executive |
|
|
Registrant |
|
|
Aggregate |
|
|
Aggregate |
|
||||
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(f) |
|
||||
Ivan Tornos |
|
|
|
|
|
|
|
|
|
|
|
|
||||
DCP |
|
|
58,122 |
|
|
|
58,122 |
|
|
|
77,197 |
|
|
|
490,453 |
|
Suketu Upadhyay |
|
|
|
|
|
|
|
|
|
|
|
|
||||
DCP |
|
|
103,826 |
|
|
|
84,026 |
|
|
|
177,717 |
|
|
|
1,141,571 |
|
Sang Yi |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Wilfred van Zuilen |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Chad Phipps |
|
|
|
|
|
|
|
|
|
|
|
|
||||
DCP |
|
|
177,901 |
|
|
|
51,360 |
|
|
|
186,178 |
|
|
|
1,122,963 |
|
401(k) BEP |
|
|
— |
|
|
|
— |
|
|
|
81,170 |
|
|
|
459,576 |
|
Bryan Hanson |
|
|
|
|
|
|
|
|
|
|
|
|
||||
DCP |
|
|
280,742 |
|
|
|
— |
|
|
|
467,120 |
|
|
|
2,906,080 |
|
|
|
Amount |
|
|
Amount |
|
||
|
|
($) |
|
|
($) |
|
||
Ivan Tornos |
|
|
|
|
|
|
||
DCP |
|
|
58,122 |
|
|
|
— |
|
Suketu Upadhyay |
|
|
|
|
|
|
||
DCP |
|
|
103,826 |
|
|
|
— |
|
Sang Yi |
|
|
— |
|
|
|
— |
|
Wilfred van Zuilen |
|
|
— |
|
|
|
— |
|
Chad Phipps |
|
|
|
|
|
|
||
DCP |
|
|
177,901 |
|
|
|
— |
|
401(k) BEP |
|
|
— |
|
|
|
— |
|
Bryan Hanson |
|
|
|
|
|
|
||
DCP |
|
|
280,742 |
|
|
|
— |
|
Zimmer Biomet 63
EXECUTIVE COMPENSATION
|
|
Aggregate Amount Reported |
|
|
|
|
($) |
|
|
Ivan Tornos |
|
|
|
|
DCP |
|
|
411,444 |
|
Suketu Upadhyay |
|
|
|
|
DCP |
|
|
1,022,994 |
|
Sang Yi |
|
|
— |
|
Wilfred van Zuilen |
|
|
— |
|
Chad Phipps |
|
|
|
|
DCP |
|
|
896,123 |
|
401(k) BEP |
|
|
54,018 |
|
Bryan Hanson |
|
|
|
|
DCP |
|
|
2,456,311 |
|
Narrative Discussion
Deferred Compensation Plan (“DCP”). We adopted the DCP effective as of January 1, 2016 and froze all other nonqualified defined contributions plans for employees as of December 31, 2015. The DCP provides U.S.-based executives with the opportunity to defer each year, on a pre-tax basis, up to 50% of base salary and up to 95% of annual incentive awards. To be effective, a participant must have made the election by December 31 of the year preceding the year in which the compensation was earned. We will match 100% of a participant’s contributions, up to a maximum of 6% of the participant’s aggregate base salary and annual incentive award, minus our matching contributions under the 401(k) plan. An executive must be employed on December 31 of the year the compensation was earned to be eligible to receive our matching contributions, unless termination of employment was due to the executive’s death, disability or retirement, as defined in the DCP. Our matching contributions vest 25% per year of service.
The plan does not offer any above-market rates of return. Participants may select from various investment alternatives to serve as the measure of investment earnings on their accounts. Investment alternatives under this plan are slightly different than those offered under the 401(k) plan. During 2023, the investment alternatives included 16 different mutual funds from a number of different fund families. Our contributions follow the investment direction of participant contributions. Participants may change the investment direction of their existing account balances at any time by contacting the plan administrator. During 2023, the rates of return of the various investment alternatives available under the plan ranged from 3.8% to 46.2%.
We do not hold contributions to the plan in a trust and, therefore, they may be subject to the claims of our creditors in the event of our bankruptcy or insolvency. When payments come due under the plan, we distribute cash from our general assets. The plan does not permit loans. During employment, the plan permits hardship distributions of vested amounts prior to the scheduled payment date only in the event of an unforeseeable emergency and only if the financial hardship resulting from the unforeseeable emergency cannot be relieved by other means, including cessation of deferrals under the DCP. If a participant receives a hardship distribution, the participant will be ineligible to defer compensation under the DCP for the remainder of that year and the following year.
At the time a participant makes an annual deferral election, the participant also chooses a withdrawal payment date and the form of payment he or she wishes to receive with respect to the payment of the vested amounts attributable to those deferrals. A participant may choose to commence payments on a specified date in the future or following separation from service. If a participant elects to commence payments on a specified date in the future, the participant may elect to receive his or her vested amounts in a lump sum or in substantially equal annual installments over two to five years. If a participant elects to commence payments following separation from service, the participant may elect to receive his or her vested amounts in a lump sum or in substantially equal annual installments over five to 15 years. In accordance with Section 409A of the Code, payments are delayed six months following a participant’s separation from service.
If an executive is terminated for cause (as defined under the DCP, including willfully engaging in conduct that is demonstrably and materially injurious to us or our subsidiaries, monetarily or otherwise), or information is discovered after the executive’s separation that would have allowed us to terminate the executive for cause, then the executive will forfeit any and all amounts in his or her company matching contribution account.
The following is a description of a plan that allowed NEOs to defer compensation prior to 2016.
Benefit Equalization Plan of the Zimmer Biomet Holdings, Inc. Savings and Investment Program (“401(k) BEP”). The 401(k) BEP is a nonqualified plan that supplements the 401(k) plan. Prior to 2016, a U.S.-based executive could elect to defer, on a pre-tax basis, up to 30% of base pay in excess of the maximum compensation limit for tax-qualified plans, which was $265,000 for 2015. To be effective, a participant must have made the election by December 31 of the year preceding the year in which the base pay was earned. Participants could also receive company contributions under this plan that they would otherwise forego under the 401(k) plan because of U.S. tax law limitations. Effective as of December 31, 2015, in connection with the adoption of the DCP, we amended the 401(k) BEP to remove the provision that allowed U.S.-based executives to elect to defer a portion of their base pay under this plan.
Zimmer Biomet 64
EXECUTIVE COMPENSATION
The plan does not offer any above-market rates of return. Participants may select from various investment alternatives to serve as the measure of investment earnings on their accounts. Investment alternatives under this plan are slightly different than those offered under the 401(k) plan. During 2023, the investment alternatives included 16 different mutual funds from a number of different fund families. Our contributions followed the investment direction of participant contributions. Participants may change the investment direction of their existing account balances at any time by contacting the plan administrator. During 2023, the rates of return of the various investment alternatives available under the plan ranged from 3.8% to 46.2%.
We do not hold contributions to the plan in a trust and, therefore, they may be subject to the claims of our creditors in the event of our bankruptcy or insolvency. When payments come due under the plan, we distribute cash from our general assets. The plan does not permit loans. During employment, the plan permits withdrawals only for extreme financial hardship or unforeseen emergencies. A participant must withdraw all available funds from his or her 401(k) plan account before making a withdrawal from this plan.
Unless a participant elected otherwise, the participant’s account balance will be paid in a single lump sum following separation of service. For amounts deferred prior to 2008, a participant may have irrevocably elected, however, prior to the beginning of each year, to defer receipt of the portion of his or her account balance attributable to that year’s contributions for a period of one to five years following retirement and/or to have that amount paid in equal annual installments following retirement over a period of (1) up to 15 years, (2) the participant’s life expectancy, or (3) the joint life expectancy of the participant and the participant’s designated beneficiary. Despite any election that a participant might have made, if the participant terminates employment prior to attaining age 55 with at least ten years of service, or if the participant’s account balance at the time of retirement is $15,000 or less, the participant’s account balance will be paid in a single lump sum following his or her termination of employment or retirement. In accordance with Section 409A of the Code, payments are delayed six months following a participant’s separation from service.
Zimmer Biomet 65
EXECUTIVE COMPENSATION
|
POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT |
The table below reflects the estimated amount of compensation payable to each of the NEOs in the event of the termination of the NEO’s employment. The table shows the potential compensation payable to each NEO, as applicable, upon a termination in connection with a change in control, voluntary resignation, retirement, death, disability, company-initiated (with cause) termination and company-initiated (without cause) termination, assuming such termination was effective as of December 31, 2023. With respect to Mr. Hanson, the table reflects compensation payable upon his employment termination. The table and footnotes exclude certain amounts payable pursuant to plans that do not discriminate in favor of executive officers and that are available generally to all salaried employees. The amounts shown are only estimates of the amounts that would be payable to the NEOs upon termination of employment and do not reflect tax positions we may take or the accounting treatment of such payments or limitations on payments and benefits arising under change in control severance agreements for U.S.-based NEOs to avoid the application of an excise tax under Section 280G of the Internal Revenue Code. Actual amounts to be paid can only be determined at the time of separation.
|
|
Termination Scenario |
||||||||||||
Compensation Components |
|
Change in |
|
Voluntary |
|
Retirement($) |
|
Death($) |
|
Disability($) |
|
Company- |
|
Company- |
Ivan Tornos |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance – Salary(1) |
|
3,600,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
2,400,000 |
Severance – Cash Incentive Award(2) |
|
5,400,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
3,600,000 |
2023 Annual Cash Incentive Award(3) |
|
1,231,200 |
|
— |
|
— |
|
1,603,022 |
|
1,603,022 |
|
— |
|
— |
Stock Options (accelerated)(4) |
|
184,415 |
|
— |
|
— |
|
184,415 |
|
— |
|
— |
|
184,415 |
PRSUs and RSUs (accelerated)(5) |
|
10,499,059 |
|
— |
|
— |
|
914,332 |
|
— |
|
— |
|
— |
DCP(6) |
|
490,453 |
|
490,453 |
|
490,453 |
|
490,453 |
|
490,453 |
|
293,524 |
|
490,453 |
Health and Welfare(7) |
|
70,153 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
34,230 |
Disability(8) |
|
— |
|
— |
|
— |
|
— |
|
10,477,387 |
|
— |
|
— |
Outplacement(9) |
|
25,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
25,000 |
Suketu Upadhyay |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance – Salary(1) |
|
1,700,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
850,000 |
Severance – Cash Incentive Award(2) |
|
2,550,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
850,000 |
2023 Annual Cash Incentive Award(3) |
|
801,839 |
|
— |
|
— |
|
1,054,435 |
|
1,054,435 |
|
— |
|
— |
Stock Options (accelerated)(4) |
|
154,067 |
|
— |
|
— |
|
154,067 |
|
— |
|
— |
|
— |
PRSUs and RSUs (accelerated)(5) |
|
11,013,850 |
|
— |
|
— |
|
857,133 |
|
— |
|
— |
|
— |
DCP(6) |
|
1,141,571 |
|
1,141,571 |
|
1,141,571 |
|
1,141,571 |
|
1,141,571 |
|
310,453 |
|
1,141,571 |
Health and Welfare(7) |
|
58,268 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
28,338 |
Disability(8) |
|
— |
|
— |
|
— |
|
— |
|
5,272,690 |
|
— |
|
— |
Outplacement(9) |
|
25,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
25,000 |
Sang Yi |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance – Salary(1) |
|
1,219,900 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
609,950 |
Severance – Cash Incentive Award(2) |
|
1,463,880 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
487,960 |
2023 Annual Cash Incentive Award(3) |
|
528,961 |
|
— |
|
— |
|
633,166 |
|
633,166 |
|
— |
|
— |
Stock Options (accelerated)(4) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
PRSUs and RSUs (accelerated)(5) |
|
3,708,564 |
|
— |
|
— |
|
863,948 |
|
— |
|
— |
|
— |
Health and Welfare(7) |
|
164,462 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Outplacement(9) |
|
25,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
25,000 |
Zimmer Biomet 66
EXECUTIVE COMPENSATION
|
|
Termination Scenario |
||||||||||||
Compensation Components |
|
Change in |
|
Voluntary |
|
Retirement($) |
|
Death($) |
|
Disability($) |
|
Company- |
|
Company- |
Wilfred van Zuilen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance – Salary(1) |
|
1,258,534 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
629,267 |
Severance – Cash Incentive Award(2) |
|
1,510,241 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
503,414 |
2023 Annual Cash Incentive Award(3) |
|
50,302 |
|
— |
|
— |
|
745,102 |
|
745,102 |
|
— |
|
— |
Stock Options (accelerated)(4) |
|
65,363 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
PRSUs and RSUs (accelerated)(5) |
|
2,914,837 |
|
— |
|
— |
|
1,429,975 |
|
— |
|
— |
|
— |
Swiss Pension Plans(11) |
|
|
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
SVE |
|
57,402 |
|
57,402 |
|
63,665 |
|
57,402 |
|
57,402 |
|
57,402 |
|
57,402 |
JJS |
|
500,272 |
|
500,272 |
|
554,766 |
|
500,272 |
|
500,272 |
|
500,272 |
|
500,272 |
Health and Welfare(7) |
|
50,302 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Disability(8) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Outplacement(9) |
|
25,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
25,000 |
Chad Phipps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance – Salary(1) |
|
1,215,984 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
607,992 |
Severance – Cash Incentive Award(2) |
|
1,459,181 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
486,394 |
2023 Annual Cash Incentive Award(3) |
|
482,703 |
|
— |
|
— |
|
634,764 |
|
634,764 |
|
— |
|
— |
Stock Options (accelerated)(4) |
|
72,365 |
|
— |
|
— |
|
72,365 |
|
— |
|
— |
|
72,365 |
PRSUs and RSUs (accelerated)(5) |
|
3,063,311 |
|
— |
|
— |
|
1,521,737 |
|
— |
|
— |
|
— |
401(k) BEP(10) |
|
495,576 |
|
495,576 |
|
495,576 |
|
495,576 |
|
495,576 |
|
197,275 |
|
495,576 |
DCP(6) |
|
1,122,963 |
|
1,122,963 |
|
1,122,963 |
|
1,122,963 |
|
1,122,963 |
|
494,767 |
|
1,122,963 |
Health and Welfare(7) |
|
57,814 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
28,338 |
Disability(8) |
|
— |
|
— |
|
— |
|
— |
|
3,308,176 |
|
— |
|
— |
Outplacement(9) |
|
25,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
25,000 |
Bryan Hanson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance – Salary(1) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Severance – Cash Incentive Award(2) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
2023 Annual Cash Incentive Award(3) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Stock Options (accelerated)(4) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
PRSUs and RSUs (accelerated)(5) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
DCP(6) |
|
— |
|
2,906,080 |
|
— |
|
— |
|
— |
|
— |
|
— |
Health and Welfare(7) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Disability(8) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Outplacement(9) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
Zimmer Biomet 67
EXECUTIVE COMPENSATION
Zimmer Biomet 68
EXECUTIVE COMPENSATION
|
CHANGE IN CONTROL ARRANGEMENTS |
We have entered into change in control severance agreements with the NEOs. The agreements provide the NEOs with certain severance benefits following a change in control of us and qualifying termination of their employment. The agreements are intended to encourage executives to remain employed with us during a time when their prospects for continued employment following a transaction may be uncertain (since many transactions result in significant organizational changes at the executive level). We choose to provide these agreements to promote a stable executive team and so that executives will remain focused on shareholders’ and customers’ interests during the transition process. To receive the severance benefits provided under the agreements, an executive must sign a general release of any claims against us.
We do not believe NEOs should receive severance benefits merely because a change in control transaction occurs. Therefore, our agreements have a “double trigger.” This means that severance benefits are provided only upon the occurrence of both a change in control of us and either (1) an involuntary termination of employment without “cause” (as defined in the agreement) or (2) a voluntary termination of employment with “good reason” (as defined in the agreement). If both triggers occur, the NEO would be provided with severance benefits that would include a lump sum payment equal to three times (in the case of Mr. Tornos) or two times (in the case of each of Messrs. Upadhyay, Yi, Phipps and van Zuilen) the sum of the NEO’s base salary and target annual incentive award. In addition, the NEO would receive a payout of any unpaid incentive compensation allocated or awarded to the NEO for the completed calendar year preceding the date of termination and a pro rata portion to the date of termination of the aggregate value of all contingent incentive compensation awards to the NEO for the current calendar year. If prior to a change in control, the NEO’s employment is terminated without cause at the direction of a person who has entered into an agreement with us, the consummation of which would constitute a change in control, or by the NEO for good reason, the NEO would be entitled to a lump-sum severance payment equal to three times (in the case of Mr. Tornos) or two times (in the case of each of Messrs. Upadhyay, Yi, Phipps and van Zuilen) the sum of the NEO’s base salary and the amount of the largest aggregate annual bonus paid to the NEO during the three years immediately prior to the year in which the termination occurred. In addition, the NEO would receive a payout of any unpaid incentive compensation allocated or awarded to the NEO for the completed calendar year preceding the date of termination, provided that the performance conditions applicable to such incentive compensation are met, and an amount equal to a pro rata portion to the date of termination of the average annual award paid to the NEO under our incentive compensation plans during the three years immediately prior to the year in which the notice of termination was given.
Further, unless otherwise provided for under a written award agreement, (1) all outstanding stock options granted to the NEO would become immediately vested and exercisable, (2) all time-based restrictions on RSUs would immediately lapse, and (3) with respect to PRSUs, the number of units that would be earned would be the greater of (a) the target number, or (b) the number that would have been earned based on actual performance through the date of the change in control. Each U.S.-based NEO would receive a cash amount equal to the unvested portion, if any, of our matching contributions (and attributable earnings) credited to him under the 401(k) plan and the DCP, as well as a lump-sum payment equal to two times the annual value for life and health (including medical and dental) insurance benefits and any applicable perquisites prior to termination.
Given that none of our U.S.-based NEOs has an employment agreement with us, we have concluded that a constructive termination severance trigger is appropriate to prevent potential acquirers from causing the constructive termination of an NEO’s employment to avoid paying any severance benefits at all. Without a constructive termination trigger, following a change in control, an acquirer could materially demote an NEO, materially reduce his or her salary and reduce or eliminate his or her annual bonus opportunity in order to encourage the NEO to resign voluntarily and thereby avoid paying severance. Thus, our agreements provide certain benefits for NEOs in the event of a voluntary termination for “good reason” (as defined in the agreements).
Other than the agreement we entered into with Mr. Phipps prior to August 2009, none of the change in control severance agreements with the NEOs includes any tax gross-up provisions. Prior to 2024, all payments and benefits under the change in control severance agreements for our U.S.-based NEOs were limited to less than the amount which would subject such payments and benefits to the excise tax under Section 280G of the Internal Revenue Code. However, in February 2024, we amended our change in control severance agreements with our executive officers so that, if amounts payable to an executive under the change in control severance agreement or otherwise in connection with a change in control would be subject to such excise tax, then the value of those payments will either (i) be reduced to the extent necessary so that the payments will not trigger that excise tax, or (ii) be paid in full, depending on which course of action would result in the better net after-tax result for the executive, taking into account the excise tax and any other applicable tax.
Under the terms of the agreement we entered into before August 2009 with Mr. Phipps, in the event that any payments made to him in connection with a change in control and qualifying termination of employment would be subject to excise tax as excess parachute payments under the Code, we will “gross up” his compensation to fully offset such excise taxes provided the payments exceed 110% of the maximum total payment which could be made without triggering the excise taxes. If the aggregate parachute payments exceed such maximum amount but do not exceed 110% of such maximum amount, then the parachute payments would be automatically reduced so that no portion of the parachute payments is subject to excise tax and no gross-up payment would be made. Since 2009, all change in control severance agreements that we have entered into with newly hired or promoted executives contain no excise tax gross-up provisions. Accordingly, our agreement with Mr. Phipps is the only agreement that contains such provisions.
Zimmer Biomet 69
EXECUTIVE COMPENSATION
|
Executive severance plan |
The Zimmer Biomet Holdings, Inc. Executive Severance Plan is applicable to certain members of our executive leadership team, which includes all of the NEOs. Under the Executive Severance Plan, following a termination by the company of a participant’s employment, unless his or her employment is terminated for misconduct or any of the other reasons specified in the Executive Severance Plan, a participant will be eligible to receive a lump-sum severance amount equal to two times (for the President and CEO) or one times (for the other NEOs) the sum of (i) the participant’s annualized base salary in effect when the termination occurs and (ii) the participant’s target annual bonus amount in effect when the termination occurs. Participants eligible to receive severance benefits under the Executive Severance Plan and who are covered under COBRA will also be eligible to receive a lump-sum amount equal to the then-current monthly COBRA premium (for medical and dental insurance only) in effect the day prior to the separation date, multiplied by 24 for the President and CEO and by 12 for the other NEOs. Eligible participants will also be offered outplacement services with a value not to exceed $25,000, or an equivalent cash benefit in the plan administrator’s discretion.
In addition to the foregoing benefit amounts, if a participant’s employment is terminated on or after January 1 but prior to the payment date for bonuses related to the previous calendar year under the annual cash incentive plan, and the participant was eligible to participate in the annual cash incentive plan immediately prior to the separation and is entitled to severance benefits under the Executive Severance Plan, the participant’s severance benefit under the Executive Severance Plan will be increased by the value of the bonus the participant would have received under the annual cash incentive plan, if any, had the participant remained employed on the payment date.
In order to receive benefits under the Executive Severance Plan, a participant must sign a general release of claims and continue to be bound by the terms of his or her non-competition agreement with us. If a participant violates or breaches any term of the Executive Severance Plan or the general release or any restrictive covenant agreement with us, or if facts are later disclosed or discovered that could have supported the participant’s termination for cause and would have rendered the participant ineligible to receive severance benefits under the Executive Severance Plan, then the participant will forfeit any and all rights to benefits under the Executive Severance Plan and, to the extent benefits have already been paid to the participant, must repay the full amount within 15 days of written notice from us.
|
NON-COMPETE ARRANGEMENTS |
We have entered into Confidentiality, Non-Competition and Non-Solicitation Agreements with the NEOs.
Agreements with U.S.-Based NEOs. The agreements with U.S.-based NEOs provide that the NEO is restricted from competing with us for a period of two years, in the case of Mr. Tornos, or 18 months, in the case of the other U.S.-based NEOs, following termination of employment within a specified territory, which generally includes every country in which we have significant operations. With respect to U.S.-based NEOs other than Mr. Tornos, in the event of an NEO’s involuntary separation from employment with us for a reason that renders the NEO eligible for severance benefits, then, to the extent the NEO is denied, solely because of the provisions of the non-competition agreement, a specific employment, consulting or other position that would otherwise be offered to the NEO by a competing organization, and provided the NEO satisfies all conditions of the non-competition agreement, then upon expiration of the NEO’s severance benefit period, the company will make monthly payments to the NEO for each month the NEO remains unemployed through the end of the non-competition period. These monthly payments will equal the lesser of the NEO’s monthly base pay at the time of his or her separation of employment from the company or the monthly compensation that would have been offered to the NEO from the competing organization.
Agreement with Mr. Yi. Our agreement with Mr. Yi is similar to our agreements with U.S.-based NEOs except that the specified territory in which he is restricted from competing with us is defined as Australia, China, Hong Kong, India, Japan, Korea, Malaysia, New Zealand, Singapore, Taiwan, Thailand and any other country where we have, at the relevant time, established a representative office or entity.
Agreement with Mr. van Zuilen. Our agreement with Mr. van Zuilen is similar to our agreements with U.S.-based NEOs except that the specified territory in which he is restricted from competing with us is defined as Switzerland, the European Community member states, the European Free Trade Association member states and any other country for which he possesses knowledge of confidential company information.
Zimmer Biomet 70
EXECUTIVE COMPENSATION
PAY VERSUS PERFORMANCE
The following table reports the compensation of our Principal Executive Officers (“PEOs”) and the average compensation of the other NEOs (the “Non-PEO NEOs”) as reported in the Summary Compensation Table for the past four fiscal years, as well as their “compensation actually paid” (“CAP”) as calculated pursuant to rules adopted by the SEC. CAP amounts for purposes of the tabular disclosure and the following graphs were calculated in accordance with Item 402(v) of Regulation S-K and do not necessarily represent the actual final amount of compensation earned by or actually paid to our NEOs during the applicable years. The Compensation and Management Development Committee does not use CAP as the basis for making its compensation decisions. For information concerning the Compensation and Management Development Committee’s compensation philosophy and how the Compensation and Management Development Committee aligns executive compensation with financial performance, refer to the CD&A section of this proxy statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Initial Fixed $100 |
|
|
|
Company |
||
Year(1) |
|
Summary |
|
Compensation |
|
Summary Compensation Table Total for Current PEO |
|
Compensation |
|
Average |
|
Average |
|
Total |
|
Peer Group |
|
Net Income |
|
Consolidated |
(a) |
|
(b) |
|
(c) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
2023 |
|
$ |
|
$( |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
2022 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
2021 |
|
$ |
|
$( |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
2020 |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$( |
|
$ |
|
|
Former PEO |
Current PEO |
||
Year |
|
2023 |
|
2023 |
|
Summary Compensation Table Total |
|
$ |
|
$ |
|
Summary Compensation Table Stock Awards and Option Awards |
|
$( |
|
$( |
|
Summary Compensation Table Change in Pension Value |
|
$ |
|
$ |
|
Year End Fair Value of Equity Awards Granted in the Year |
|
$ |
|
$ |
|
Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards |
|
$ |
|
$( |
|
Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year |
|
$( |
|
$( |
|
Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year |
|
$( |
|
$ |
|
Pension Service Costs |
|
$ |
|
$ |
|
Compensation Actually Paid |
|
$( |
|
$ |
|
Zimmer Biomet 71
EXECUTIVE COMPENSATION
Year |
|
2023 |
Summary Compensation Table Total |
|
$ |
Summary Compensation Table Stock Awards and Option Awards |
|
$( |
Summary Compensation Table Change in Pension Value |
|
$( |
Year End Fair Value of Equity Awards Granted in the Year |
|
$ |
Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards |
|
$( |
Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year |
|
$( |
Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year |
|
$ |
Pension Service Costs |
|
$ |
Compensation Actually Paid |
|
$ |
Tabular Disclosure of the Most Important Measures Linking Compensation Actually Paid During 2023 to Company Performance
The table below reflects the most important measures used by the company to link CAP to our NEOs for 2023 to company performance. For further information regarding these performance metrics and their function in our executive compensation program, please see the CD&A.
2023 Most Important Measures (Unranked) |
|
● |
● |
● |
● |
Relationship Between Compensation Actually Paid and Performance Measures
The following graphs further illustrate the relationship between the pay and performance figures that are included in the pay versus performance tabular disclosure above. In addition, the first graph below further illustrates the relationship between company total shareholder return and that of the industry index peer group described above. As noted above, CAP amounts for purposes of the tabular disclosure and the following graphs were calculated in accordance with SEC rules and do not necessarily represent the actual final amount of compensation earned by or actually paid to our NEOs during the applicable years. See Appendix A in this proxy statement for a reconciliation of consolidated constant currency revenue, a non-GAAP measure, to the most directly comparable GAAP measure.
Zimmer Biomet 72
EXECUTIVE COMPENSATION
Zimmer Biomet 73
EXECUTIVE COMPENSATION
2023 CEO PAY RATIO
As required by Item 402(u) of Regulation S-K of the Exchange Act, we are providing the following information about the relationship of the annual total compensation of our CEO and the annual total compensation of our employees for 2023.
Total Compensation Amounts and Ratio for 2023
As a result of our CEO transition during 2023, we calculated the annual total compensation of our CEO for this purpose by annualizing the compensation of Mr. Tornos, the individual serving as our CEO on December 31, 2023. For 2023, the ratio of the annualized total compensation of Mr. Tornos, to the median of the annual total compensation of all employees is 250 to 1. This ratio is based on the following:
This pay ratio is a reasonable good faith estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pay ratios within our industry will also differ and may not be comparable depending on the size, scope, global breadth and structure of the company.
Median Employee Identification and Compensation Calculation
Under the pay ratio rule, a company is required to identify its median employee only once every three years so long as during the last completed fiscal year there has been no change in its employee population or employee compensation arrangements that it reasonably believes would result in a significant change to its pay ratio disclosure. We concluded that during 2023, we did not experience any changes in our employee population or employee compensation arrangements that we reasonably believed would result in a significant change to our pay ratio disclosure. Therefore, we believe it is reasonable to continue to use the median employee identified for 2022 for purposes of calculating the pay ratio disclosure for 2023 that is required in this proxy statement.
In 2022, we identified our median employee using our global employee population as of December 31, 2022 (excluding our CEO on that date, and excluding 899 employees in 10 countries, constituting five percent (5%) of our non-U.S. employees on that date, as permitted by the de minimis exemption under the pay ratio rule) by utilizing target total cash compensation as our consistently applied compensation measure. Target total cash compensation included base salary (for salaried employees), base hourly compensation (for hourly employees), target sales commissions (as applicable), and target annual cash incentive compensation (annual bonus) for the year ended December 31, 2022. We identified the employees whose target total cash compensation was within a one percent (1%) range (plus or minus one-half of one percent (0.5%)) of the median value of the target total cash compensation for the applicable employee population (the “Median Group”). We then identified the median employee from the Median Group as an employee whose annual total compensation included elements that we reasonably believed reflected our compensation practices for a representative employee.
Annual Total Compensation of Median Employee
To determine the annual total compensation of the median employee, we calculated the elements of that employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation in the amount of $66,850.
Zimmer Biomet 74
EXECUTIVE COMPENSATION
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2023 about our equity compensation plans under which shares of our common stock have been authorized for issuance.
|
|
A |
|
|
|
B |
|
|
|
C |
|
|
|||
Plan Category |
|
Number of securities to |
|
|
|
Weighted-average |
|
|
|
Number of securities remaining |
|
|
|||
Equity compensation plans approved by security holders(1) |
|
|
7,486,337 |
|
(2) |
|
|
123.29 |
|
(3) |
|
|
8,401,732 |
|
(4)(5)(6)(7) |
Equity compensation plans not approved by security holders(8) |
|
|
14,986 |
|
(9) |
|
N/A |
|
(10) |
|
|
409,933 |
|
|
|
Total |
|
|
7,501,323 |
|
|
|
|
123.29 |
|
|
|
|
8,811,665 |
|
|
Zimmer Biomet 75
EXECUTIVE COMPENSATION
The Sales Representative Plan is an unfunded, deferred compensation plan for our independent distributors. A participant may allocate each year’s contribution to his or her account in 10% increments between deferred stock units and a non-interest bearing deferred compensation account. For plan years prior to 2008, participants could also allocate contributions to stock option units. Neither stock option units nor deferred stock units have any dividend or voting rights. A participant’s stock option units will be converted into deferred stock units upon the earlier of (1) the ten-year anniversary of the date of grant of the applicable stock option unit, or (2) the date of the termination of the participant’s distributor agreement. Deferred stock units will be converted into shares of common stock on a one-to-one basis upon distribution from the plan. Prior to 2009, participants could have elected to receive distributions of their interest in the plan in annual installments over a period of three to ten years. For amounts deferred after 2008, distributions of participants’ interests in the plan will generally be made in three annual installments. The maximum number of shares that may be issued over the life of the plan is 750,000.
Zimmer Biomet 76
EXECUTIVE COMPENSATION
Approval of the amended Employee Stock Purchase Plan
|
Proposal 4 – Approval of the Amended Employee Stock Purchase Plan |
4 |
On February 20, 2024, the Board approved proposed amendments to the company's Employee Stock Purchase Plan (the “ESPP”) in accordance with the recommendation of the Compensation and Management Development Committee (the “committee”) and directed that the amended plan be submitted to shareholders for approval at the annual meeting.
Proposed Changes
If approved by shareholders at the annual meeting, the proposed changes to the Employee Stock Purchase Plan would:
• increase the number of shares available for issuance and purchase by participants under the plan by 10,000,000 shares; and • modify certain other ESPP provisions to facilitate administration of the ESPP and implement best practice changes.
The copy of the ESPP included in this proxy statement as Appendix B is marked to show all of the proposed amendments to the plan.
Our Board recommends a vote FOR approval of the Amended Employee Stock Purchase Plan.
|
|
|
We believe that the ESPP is an essential tool that helps us compete for talent in the labor markets in which we operate. We also believe the ESPP is a crucial element in rewarding and encouraging current employees that promotes stock ownership by employees and aligns their interests with those of our shareholders.
As of the end of our last offering period under the ESPP on December 31, 2023, a total of 236,074 shares remained available for issuance and purchase under the ESPP. Based on historical offerings of the ESPP, present participation levels and our current stock price, we anticipate that this number of shares will not be sufficient to allow for the continuation of the ESPP beyond the next scheduled purchase date on June 30, 2024. Accordingly, in order to be able to continue to offer the ESPP on a broad basis to our employees and employees of our subsidiaries around the world and to encourage additional participation, the Board, on recommendation of the committee, determined that it was necessary and appropriate to approve an increase of 10,000,000 shares in the number of shares reserved under the ESPP.
As of the close of business on March 11, 2024, a total of 205,461,451 shares of our common stock were outstanding and the closing price of our common stock on the New York Stock Exchange was $128.04 per share. The requested increase to the ESPP share reserve represents approximately 4.9% of the total number of shares of our common stock outstanding as of March 11, 2024.
If shareholders approve the amended ESPP, we estimate that the additional shares would enable us to continue offering the ESPP for approximately 7 years. However, the additional shares could last for a longer or shorter period of time based on various factors which cannot be predicted, including the growth of our employee population, future ESPP offering practices, our stock price and prevailing market conditions.
If our shareholders do not approve the amended ESPP, we will continue to operate the ESPP with the remaining shares available. However, such number of shares may not be sufficient to allow for participants in the current offering period to purchase shares to the full extent of their contributions or applicable plan limits, in which case, the remaining shares under the ESPP will be credited to participants on a prorata basis, we will refund the balance of each participant's contributions to the ESPP to such participant, and the ESPP will terminate following the June 30, 2024 purchase date.
Without shareholder approval of this proposal, we believe our ability to attract and retain talent would be hampered, and our recruiting, retention and incentive efforts would become more difficult. The Board believes that the interests of the company and its shareholders will be advanced if the company can continue to offer employees the opportunity to acquire or increase their ownership interests in the company. Accordingly, we are asking shareholders to approve increasing the number of shares available under the ESPP to help the company meet the goals of its compensation strategy.
Zimmer Biomet 77
EXECUTIVE COMPENSATION
|
Key and Material Changes to the ESPP |
The ESPP is intended to be tax-qualified for U.S. tax purposes under Section 423(b) of the Internal Revenue Code (the “Code”) and allows for the grant of options that are intended to be tax-qualified, but also allows for the grant of options that are not U.S. tax-qualified under a "non-Section 423" component of the ESPP. The following summary highlights the proposed material changes and other key changes to the ESPP:
Material Changes to the ESPP
Other Key Changes to the ESPP
|
Summary of the ESPP |
General
The purpose of the ESPP is to provide employees of the company and its designated subsidiaries with an opportunity to purchase shares of common stock and, therefore, to have an additional incentive to enhance the value of the company. The ESPP further aligns the interests of employees with those of shareholders through increased stock ownership.
Administration
The ESPP is administered by the committee. The committee may establish rules for administration of the ESPP, interpret the ESPP, supervise its administration, make determinations about ESPP entitlements, adopt sub-plans, and take other actions consistent with the delegation from the Board. The decisions by the Board and the committee are final and binding upon all participants. To the extent not prohibited by applicable law, the committee may, from time to time, delegate some or all of its authority under the ESPP to a subcommittee or subcommittees of the committee, one or more officers of the company or other persons or groups of persons as it deems necessary, appropriate or advisable under conditions or limitations that it may set at or after the time of the delegation.
Eligibility
Any employee of the company or any company subsidiary designated by the committee who is employed on the first business day of an Offering Period (defined below) (the "Offering Date") is eligible to participate in the ESPP during the Offering Period beginning on that Offering Date, subject to administrative rules established by the committee. The committee has authority to limit ESPP participation to full-time employees (defined in accordance with Code Section 423), impose an eligibility service requirement (no longer than 2 years) as of any prospective Offering Date, and exclude some or all highly compensated employees from participation in the ESPP. An employee is not eligible to participate in the ESPP to the extent that, immediately after the grant, the employee would have owned 5% of either the voting power or the value of the company’s common stock. Additionally, an employee’s rights to purchase common stock pursuant to the ESPP may not accrue at a rate that exceeds $25,000 per calendar year pursuant to the Internal Revenue Service rules. Eligible employees become participants in the ESPP by filing the required enrollment documents with the company by a date set by the committee prior to the applicable Offering Date. As of January 23, 2024 the number of employees eligible to participate in the ESPP was approximately 18,331, including all of our executive officers. In certain international locations, local tax, exchange control or other regulations make certain features of the ESPP impracticable and it may otherwise be necessary or appropriate to vary features of the ESPP in order to accommodate the requirements of local laws, customs and procedures. The ESPP therefore authorizes the grant of options and issuance of common stock to employees participating in a non-U.S. sub-plan, which sub-plans may have terms different than the ESPP and which may be part of the non-423 component of the ESPP in order to achieve the desired tax or other objectives in particular locations outside the United States.
Zimmer Biomet 78
EXECUTIVE COMPENSATION
Share Reserve
Currently, up to 3,000,000 shares of our common stock may be purchased by participants under the ESPP. If the amended ESPP is approved by shareholders, the total number of shares which may be issued under the plan would be increased by 10,000,000 shares. As outlined above, this additional number of shares was determined based on current employee participation rates and plans to encourage further eligible employee participation.
The number of shares available under the ESPP is subject to adjustment as described below under "Adjustments Upon Changes in Capitalization or Corporate Transactions."
Participation in an Offering
The ESPP is implemented by purchase periods lasting six months or other periods as determined by the committee (an “Offering Period”). Common stock is purchased under the ESPP at the end of each Offering Period, unless the participant withdraws or terminates employment earlier. The ESPP is implemented at different dates in different countries, as determined by the committee. To participate in the ESPP, each eligible employee must authorize payroll deductions from his or her after-tax pay by completing a subscription agreement, in an amount of up to 100% of the employee's eligible pay or such lower limit as is designated by the committee. The payroll deductions will be subject to the plan limitations discussed above, as well as any other limits or conditions imposed by the committee that are not inconsistent with the terms of the ESPP. Additionally, a participant may not in any case purchase more than 5,000 shares during any Offering Period.
In countries where payroll deductions are not feasible, the committee may allow participants to participate in the ESPP by an alternative means, such as by check. A participant may discontinue participation in the ESPP in accordance with the procedures established by the committee.
Purchase Price; Shares Purchased
Employees who choose to participate in the ESPP receive an option to purchase shares of company common stock at a discount. Under the option, the purchase price of the shares will be not less than 85% of the fair market value of the common stock on (i) the Offering Date or (ii) the last trading day of the Offering Period, whichever is less. However, to the extent that additional shares approved by the shareholders for the ESPP are used to purchase shares in the Offering Period underway at the time of such shareholder approval and the fair market value of the common stock is higher on such shareholder approval date than it was on the original Offering Date, then the first prong of the foregoing purchase price formula will be determined based on the fair market value of the shares on the date of shareholder approval and such date will be considered the Offering Date with respect to such shares. The fair market value as of any trading day will be the closing price of common stock on the New York Stock Exchange on that day. On March 11, 2024, the closing price of a share of the company’s common stock was $128.04. At the end of an Offering Period, a participant’s option will be exercised automatically to purchase the number of shares of common stock that the participant’s accumulated payroll deduction will buy at the purchase price, subject to applicable plan limits and provided that sufficient shares remain available for purchase on the applicable purchase date. Subject to the foregoing, the number of shares of common stock a participant purchases in each Offering Period is determined by dividing the total amount of payroll deductions withheld from the participant’s compensation during that Offering Period by the purchase price.
Termination of Employment
If a participant dies or terminates employment for any reason, the participant will immediately cease to participate in the ESPP. In that event, all of the common stock purchased in the most recent Offering Period by the participant under the ESPP will be distributed to him or her (or, in the case of the participant’s death, to the participant’s beneficiary), and any payroll deductions credited to the participant’s account will be returned without interest to him or her (or, in the case of a participant’s death, to the participant’s beneficiary).
Adjustments Upon Changes in Capitalization or Corporate Transactions
In the event that company common stock is changed by reason of any stock split, stock dividend, combination, recapitalization, a Corporate Transaction (defined below) in which the company is the surviving corporation, or similar changes to the company’s capital structure, the committee will appropriately adjust the number and kind of shares of stock subject to the ESPP, the number of shares of stock to be purchased pursuant to an option, and the price per share of common stock covered by an option, and other relevant provisions of the ESPP. The committee’s determination will be conclusive and binding on all persons. In the event of a Corporate Transaction in which the company is not the surviving corporation, the committee may take such actions with respect to the ESPP that the committee deems appropriate, which could be a determination that each option issued under the ESPP will be assumed by, or an equivalent option substituted by, the successor company or its affiliates, that the purchase date will be accelerated, or that all outstanding options will terminate and accumulated payroll deductions will be refunded. For purposes of the ESPP, a Corporate Transaction is a sale of all or substantially all of the company’s assets, or a merger, consolidation, or other capital reorganization of the company with or into another corporation.
Zimmer Biomet 79
EXECUTIVE COMPENSATION
Transferability
Options under the ESPP cannot be voluntarily or involuntarily assigned. The shares of common stock acquired under the ESPP will be freely transferable, except as otherwise determined by the committee. The committee may require that shares purchased under the Plan be retained with the Plan’s designated broker for a designated period of time and may restrict dispositions during that period.
Amendment and Termination of the ESPP
The Board may terminate or amend the ESPP at any time, except that it may not increase the number of shares subject to the ESPP other than as described in the ESPP.
Withdrawal
Generally a participant may withdraw from the ESPP during an Offering Period subject to any requirements established by the committee. If a participant elects to withdraw, all of the payroll deductions credited to the participant’s account will be returned to the participant, and the participant may not make any further contributions under the ESPP for the purchase of common stock during that Offering Period. A participant’s voluntary withdrawal during an Offering Period will not have any effect on the participant’s eligibility to participate in the ESPP during a subsequent Offering Period.
New Plan Benefits
Because participation in the ESPP is voluntary, and the amounts of future purchases under the ESPP are dependent upon each participant’s elective contributions, as well as the value of the company’s shares, the benefits to be received in the future by participants are not determinable.
However, as described earlier in this Proposal under the heading “Request for Increase in Share Reserve,” if this Proposal is not approved by our shareholders, the number of shares currently remaining available under the ESPP may be insufficient to allow participants in the Offering Period currently underway to purchase shares to the full extent of their contributions or applicable plan limits. To the extent that such share deficiency applies on the June 30, 2024 purchase date of the current Offering Period and our shareholders approve this Proposal 4, then a portion of the shares purchased on such purchase date will have been contingent on shareholder approval. Because the number of shares that may be contingent on shareholder approval is dependent on factors that are not currently known, including the number of participants in our ESPP on the June 30, 2024 purchase date, the fair market value of our common stock at such date and the purchase price for the current Offering Period, the amount of such contingent benefit is currently not determinable. As of March 8, 2024, 5,102 employees are participating in the current Offering Period, including the following NEOs: Ivan Tornos, Suketu Upadhyay, Sang Yi, Wilfred van Zuilen, and Chad Phipps, and three of our other executive officers, subject to their ability to withdraw from the ESPP in accordance with the plan terms. For information on past participation in the ESPP, please refer to the section below.
Past Participation in the ESPP
The table below sets forth the number of shares purchased by participants since the inception of the ESPP through December 31, 2023. No associate of an executive officer has purchased shares under the ESPP, and no participant has purchased 5% or more of the shares purchased under the ESPP. Non-employee directors are not eligible for participation in the ESPP.
Name and Position |
Aggregate Number of Shares Purchased |
Ivan Tornos, President and CEO |
894.54 |
Suketu Upadhyay, CFO and EVP - Finance, Operations and Supply Chain |
736.51 |
Sang Yi, Group President, APAC |
1,860.13 |
Wilfred van Zuilen, Group President, EMEA |
529.39 |
Chad Phipps, General Counsel and Secretary |
1,374.03 |
Bryan Hanson, Former Chairman, President and CEO |
762.73 |
All current executive officers as a group |
7,562.66 |
All employees, excluding current executive officers, as a group |
2,756,363.34 |
Zimmer Biomet 80
EXECUTIVE COMPENSATION
U.S. Federal Income Tax Consequences
The following is a summary of the general U.S. federal income tax consequences applicable to the purchase of shares under the ESPP based on U.S. federal income tax laws, current as of March 27, 2024, but is not a detailed or complete description of all U.S. federal tax laws or regulations that may apply, and does not address any local, state or other country laws. The summary is general in nature and is not intended to cover all tax consequences that may apply to a particular employee or to the company or any other company designated by the committee to participate under the ESPP. The provisions of the Code and treasury regulations relating to these matters are complicated, may change and their impact in any one case may depend upon the particular circumstances.
U.S. Federal Income Tax Information for the Section 423 Component of the ESPP. Shares purchased under the Section 423 component of the ESPP are intended to qualify for the U.S. federal income tax treatment available to options granted under an employee stock purchase plan that qualifies under the provisions of Section 423(b) of the Code. Under these provisions, no income will be taxable to a participant until the shares purchased under the ESPP are sold or otherwise disposed of. If the shares are disposed of within two years from the applicable Offering Date or within one year from the purchase date of the shares, a transaction referred to as a “disqualifying disposition,” the participant will realize ordinary income in the year of such disposition equal to the difference between the fair market value of the shares on the purchase date and the purchase price. The amount of such ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be a capital gain or loss. A capital gain or loss will be long-term if the participant holds the shares for more than one year after the purchase date.
If the shares purchased under the Section 423 component of the ESPP are sold (or otherwise disposed of) more than two years after the applicable Offering Date and more than one year after the shares are transferred to the participant, then the lesser of (i) the excess of the sale price of the shares at the time of disposition over the purchase price, and (ii) the excess of the fair market value of the shares as of the Offering Date over the purchase price will be treated as ordinary income. If the sale price is less than the purchase price, no ordinary income will be reported. The amount of any such ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be long-term capital gain or loss.
The company generally will be entitled to a deduction in the year of a disqualifying disposition equal to the amount of ordinary income realized by the participant as a result of such disposition, subject to any applicable limitations under the Code. In other cases, no deduction is allowed.
U.S. Federal Income Tax Information for Non-Section 423 Component of the ESPP. If the option to purchase shares under the ESPP is granted under the non-Section 423 component of the ESPP, then the amount equal to the difference between the fair market value of the shares on the purchase date and the purchase price will be treated as ordinary income at the time of such purchase. In such instances, the amount of such ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be a capital gain or loss. A capital gain or loss will be long-term if the participant holds the shares for more than one year after the purchase date.
If an option is exercised under the non-423 component of the ESPP, the company generally will be entitled to a deduction in the year of purchase equal to the amount of ordinary income recognized by the participant as a result of such purchase, subject to any applicable limitations under the Code
Incorporation by Reference
The above description is only a summary of the ESPP as proposed to be amended and is qualified in its entirety by reference to its full text, a copy of which is included in this proxy statement as Appendix B.
Zimmer Biomet 81
OWNERSHIP OF OUR STOCK
|
OWNERSHIP OF OUR STOCK |
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of January 1, 2024 by each non-employee director, each of the executives named in the 2023 Summary Compensation Table and all current directors and executive officers as a group.
Beneficial Owner |
|
Common Stock Beneficially Owned(1) |
||||||||||||
|
|
Total Shares |
|
|
Shares |
|
|
Deferred |
|
|
Percent of |
|||
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|||
Non-Employee Directors |
|
|
|
|
|
|
|
|
|
|
|
|||
Christopher B. Begley |
|
|
21,229 |
|
|
|
9,735 |
|
|
|
7,954 |
|
|
* |
Betsy J. Bernard |
|
|
33,947 |
|
|
|
17,631 |
|
|
|
11,045 |
|
|
* |
Michael J. Farrell |
|
|
15,435 |
|
|
|
6,882 |
|
|
|
6,553 |
|
|
* |
Robert A. Hagemann |
|
|
34,388 |
|
|
|
19,052 |
|
|
|
11,336 |
|
|
* |
Arthur J. Higgins |
|
|
34,583 |
|
|
|
19,507 |
|
|
|
11,676 |
|
|
* |
Maria Teresa Hilado |
|
|
8,099 |
|
|
|
2,223 |
|
|
|
4,226 |
|
|
* |
Syed Jafry |
|
|
11,271 |
|
|
|
2,223 |
|
|
|
4,988 |
|
|
* |
Sreelakshmi Kolli |
|
|
3,838 |
|
|
|
— |
|
|
|
2,838 |
|
|
* |
Michael W. Michelson |
|
|
15,228 |
|
|
|
5,666 |
|
|
|
6,177 |
|
|
* |
Named Executive Officers |
|
|
|
|
|
|
|
|
|
|
|
|||
Ivan Tornos |
|
|
211,924 |
|
|
|
194,284 |
|
|
|
— |
|
|
* |
Suketu Upadhyay |
|
|
187,942 |
|
|
|
174,771 |
|
|
|
— |
|
|
* |
Sang Yi |
|
|
258,960 |
|
|
|
250,245 |
|
|
|
— |
|
|
* |
Wilfred van Zuilen |
|
|
40,575 |
|
|
|
35,311 |
|
|
|
— |
|
|
* |
Chad Phipps |
|
|
325,423 |
|
|
|
281,364 |
|
|
|
— |
|
|
* |
Bryan Hanson |
|
|
102,994 |
|
|
|
— |
|
|
|
— |
|
|
* |
All current directors and executive officers as a group (18 persons) |
|
|
1,395,352 |
|
|
|
1,102,780 |
|
|
|
66,795 |
|
|
* |
* Less than 1.0%
Zimmer Biomet 82
OWNERSHIP OF OUR STOCK
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning each person (including any group) known to us to beneficially own more than 5% of our common stock as of March 11, 2024. Unless otherwise noted, shares are owned directly or indirectly with sole voting and investment power.
Name and Address of Beneficial Owner |
|
Total Number |
|
|
Percent |
|
||
The Vanguard Group(2) |
|
|
23,858,865 |
|
|
|
11.6 |
% |
BlackRock, Inc.(3) |
|
|
18,704,377 |
|
|
|
9.1 |
% |
Dodge & Cox.(4) |
|
|
11,474,535 |
|
|
|
5.6 |
% |
Zimmer Biomet 83
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION |
|
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING |
1. Why am I receiving these materials?
We have made this proxy statement available to you on the Internet or, upon your request, have delivered a printed version of this proxy statement to you by mail, in connection with the solicitation of proxies by our Board of Directors for use at our 2024 annual meeting of shareholders to be held on Friday, May 10, 2024 at 8 a.m. Eastern Time, and at any postponement(s) or adjournment(s) thereof. You are receiving this proxy statement because you owned shares of Zimmer Biomet common stock at the close of business on March 11, 2024, and that entitles you to vote at the meeting. By use of a proxy, you can vote whether or not you virtually attend the meeting. This proxy statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed decision.
2. What am I voting on?
There are four proposals scheduled to be voted on at the annual meeting:
3. How does the Board recommend that I vote?
The Board recommends that you vote your shares:
4. How many votes do I have?
You will have one vote for every share of Zimmer Biomet common stock that you owned at the close of business on March 11, 2024.
5. How many shares are entitled to vote?
There were 205,461,451 shares of Zimmer Biomet common stock outstanding as of March 11, 2024 and entitled to vote. Each share is entitled to one vote.
6. What is the quorum requirement for the annual meeting?
The holders of a majority of the outstanding shares entitled to vote at the meeting must be present or represented by proxy at the meeting for the transaction of business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against or abstained, if you attend virtually and vote during the meeting or have voted before the meeting via the Internet, by telephone or by properly submitting a proxy card or vote instruction form by mail. If a quorum is not present, the meeting will be adjourned until a quorum is obtained.
7. What is the voting requirement to approve each of the proposals?
The voting requirement for each of the proposals is as follows:
8. What if I vote “abstain”?
A vote to “abstain” on the election of directors (Proposal 1) will have no effect on the outcome of this proposal. A vote to “abstain” on Proposals 2, 3 and 4 will have the effect of a vote against those proposals.
Zimmer Biomet 84
ADDITIONAL INFORMATION
9. Why did I receive a notice in the mail instead of a full set of proxy materials?
As allowed by SEC rules, we have elected to provide access to our proxy materials via the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (“Notice”) to our shareholders. All shareholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. The Notice provides instructions on how to access the proxy materials over the Internet or to request a printed copy. In addition, shareholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We encourage you to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of our annual meetings.
10. What is the difference between a shareholder of record and a beneficial owner?
The difference is as follows:
11. If I am a shareholder of record, how do I vote?
There are four ways to vote:
12. If I am a beneficial owner, how do I vote?
There are four ways to vote:
13. Is my vote confidential?
Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed, except:
Occasionally, shareholders provide written comments on their proxy cards, which may be forwarded to management and the Board.
14. Can I change my vote?
Yes. At any time before your proxy is voted, you may change your vote by:
Zimmer Biomet 85
ADDITIONAL INFORMATION
15. How are proxies voted?
All shares represented by valid proxies received prior to the annual meeting will be voted and, where a shareholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the shareholder’s instructions.
16. What happens if a nominee for director declines the nomination or is unable to serve?
If that happens, the persons named as proxies may vote for a substitute nominee designated by the Board to fill the vacancy, or, if no substitute has been nominated, for the remaining nominees, leaving a vacancy, or the Board may reduce its size. The Board has no reason to believe that any of the nominees will be unable or decline to serve if elected.
17. What happens if I do not give specific voting instructions?
It depends on how your shares are held:
This is generally referred to as a “broker non-vote.” Broker non-votes will be counted as present for purposes of determining whether enough votes are present to hold the annual meeting, but they will not be counted in determining the outcome of the vote for any of the proposals.
18. Who will serve as the inspector of election?
A representative from Broadridge Financial Solutions will serve as the independent inspector of election.
19. How can I find out the results of the annual meeting?
Preliminary voting results will be announced at the meeting. The final voting results will be tallied by the inspector of election and published in our Current Report on Form 8-K, which we are required to file with the SEC within four business days following the annual meeting.
20. Who is paying for the cost of this proxy solicitation?
We are paying the costs of the solicitation of proxies. We have retained Alliance Advisors LLC to assist in soliciting proxies for a fee of $26,800 plus out-of-pocket expenses. We must also pay brokerage firms and other persons representing beneficial owners of shares held in street name certain fees associated with:
In addition to soliciting proxies by mail, certain of our directors, officers and employees, without additional compensation, may solicit proxies personally or by telephone, facsimile or email on our behalf.
21. Are there any requirements for attending the annual meeting?
The annual meeting will be held by remote communication in a virtual-only format. Holders of our common stock at the close of business on March 11, 2024, the record date, may attend and participate in the meeting by accessing www.virtualshareholdermeeting.com/ZBH2024 and entering the 16-digit control number on the proxy card, Notice or voting instruction form previously received. Online access to the meeting will begin at 7:50 a.m. Eastern Time on Friday, May 10, 2024. Shareholders will have the ability to vote during the meeting using the directions on the virtual meeting website. Shareholders may also vote in advance of the meeting by proxy at www.proxyvote.com after logging in with the 16-digit control number referred to above. Beginning 10 minutes prior to, and during, the annual meeting, support will be available to assist shareholders with any technical difficulties they may have accessing or hearing the virtual meeting. If you encounter any technical difficulties, please call the support team at the numbers listed on the log-in screen of the virtual meeting website.
Zimmer Biomet 86
ADDITIONAL INFORMATION
22. Can I ask questions in advance of or during the annual meeting?
Shareholders may submit questions in advance of the meeting at www.proxyvote.com after logging in with the 16-digit control number referred to above. Shareholders may submit questions during the meeting by accessing www.virtualshareholdermeeting.com/ZBH2024 and entering the 16-digit control number referred to above. Time may not permit the answering of every question submitted. Questions relevant to the business of the meeting to which a response is not provided during the Question and Answer period will be addressed at the Zimmer Biomet website, www.zimmerbiomet.com, within three days of the meeting.
23. Is there a list of shareholders entitled to vote at the annual meeting?
A list of shareholders entitled to vote will be available for ten days prior to the meeting, between the hours of 9 a.m. and 5 p.m. Eastern Time, at our offices at 345 East Main Street, Warsaw, Indiana. If you would like to view the shareholder list, please contact our Corporate Secretary to schedule an appointment.
24. What is “householding”?
“Householding” is a procedure under which we are delivering a single copy of this proxy statement and our 2023 Annual Report to multiple shareholders who share the same address unless we have received contrary instructions from one or more of the shareholders. This procedure reduces our printing and mailing costs. Upon request, we will deliver promptly a separate copy of this proxy statement and our 2023 Annual Report to any shareholder at a shared address to which we delivered a single copy of these documents. To receive a separate copy of this proxy statement or the 2023 Annual Report, or to notify us that you wish to receive separate copies in the future, or a single copy if you are currently receiving multiple copies, please contact our Corporate Secretary at Zimmer Biomet Holdings, Inc., 345 East Main Street, Warsaw, Indiana 46580 or by telephone at (574) 267-6131. Shareholders who hold shares in “street name” may contact their brokerage firm, bank, broker dealer or other similar organization to request information about householding.
25. What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2025 annual meeting of shareholders?
It depends on whether the information is to be included in our proxy materials:
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our officers and directors and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC. Based on our review of such filings, we believe that all such reports required by Section 16(a) of the Exchange Act were in compliance with such filing requirements during the year ended December 31,
Zimmer Biomet 87
ADDITIONAL INFORMATION
2023, with the exception of Mr. Begley, one of our directors, who filed one Form 4 late, reporting the purchase of 1,000 shares, and Ms. Bernard, one of our directors, who filed one Form 4 late, reporting the purchase of 150 shares.
OTHER MATTERS
We do not know of any other matters that will be considered at the annual meeting. Nonetheless, in case there is an unforeseen need, the accompanying proxy gives discretionary authority to the persons named on the proxy with respect to any other matters that might be brought before the meeting. Those persons intend to vote that proxy in their judgment and discretion.
ANNUAL REPORT AND FORM 10-K
Our 2023 Annual Report, containing our 2023 Form 10-K, which includes our consolidated financial statements for the year ended December 31, 2023, accompanies this proxy statement but is not a part of our soliciting materials.
INCORPORATION BY REFERENCE
The statements in this proxy statement under the captions “AUDIT COMMITTEE MATTERS – AUDIT COMMITTEE REPORT” and “EXECUTIVE COMPENSATION – COMPENSATION COMMITTEE REPORT” do not constitute soliciting material and should not be deemed filed with the SEC or incorporated by reference into any other filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate them by reference into such filing.
The information on our website, www.zimmerbiomet.com, is not, and should not be deemed to be, a part of this proxy statement, or incorporated into any other filings we make with the SEC.
Zimmer Biomet 88
Appendix A
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
Presented below are reconciliations of non-GAAP financial measures discussed in the Compensation Discussion and Analysis and Pay Versus Performance sections of this proxy statement to the most directly comparable financial measures prepared in accordance with GAAP. These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP.
The following are reconciliation of reported net sales (revenue) for each of 2023, 2022, 2021 and 2020 prepared in accordance with GAAP to net sales (revenue) on a constant currency basis (i.e., adjusted to eliminate the effect on revenue of foreign currency rate fluctuations) as used in our annual cash incentive plan for 2023 and in our pay versus performance disclosure for each of those years.
RECONCILIATION OF REPORTED NET SALES (REVENUE) TO
CONSTANT CURRENCY NET SALES (REVENUE)
(in millions, unaudited)
|
|
For the Year Ended December 31, |
|
||||||||||||
Consolidated Net Sales |
|
2023 |
|
|
2022 |
|
|
2021 |
|
2020 |
|
||||
As Reported |
|
$ |
7,394.2 |
|
|
$ |
6,939.9 |
|
|
$ |
7,836.0 |
|
$ |
7,025.0 |
|
Foreign Exchange Impact |
|
$ |
(41.2 |
) |
|
$ |
220.5 |
|
|
$ |
(27.0 |
) |
$ |
(61.0 |
) |
As Adjusted |
|
$ |
7,353.0 |
|
|
$ |
7,160.4 |
|
|
$ |
7,809.0 |
|
$ |
6,964.0 |
|
The following is a reconciliation of operating profit from continuing operations prepared in accordance with GAAP to adjusted operating profit from continuing operations as used in our annual cash incentive plan for 2023.
RECONCILIATION OF OPERATING PROFIT FROM CONTINUING
OPERATIONS TO ADJUSTED OPERATING PROFIT FROM CONTINUING OPERATIONS
(in millions, unaudited)
|
|
Year Ended December 31, 2023(1) |
|
|
Operating profit |
|
$ |
1,277.7 |
|
Inventory and manufacturing-related charges(2) |
|
|
18.3 |
|
Intangible asset amortization(3) |
|
|
561.5 |
|
Restructuring and other cost reduction initiatives(4) |
|
|
151.9 |
|
Acquisition, integration, divestiture and related(5) |
|
|
21.7 |
|
Litigation(6) |
|
|
10.1 |
|
European Union Medical Device Regulation(7) |
|
|
56.1 |
|
Other charges(8) |
|
|
(10.6 |
) |
Adjusted Operating Profit |
|
$ |
2,086.9 |
|
A-1
The following is a reconciliation of net cash provided by operating activities from continuing operations prepared in accordance with GAAP to free cash flow as used in our annual cash incentive plan for 2023.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING
ACTIVITIES FROM CONTINUING OPERATIONS TO FREE CASH FLOW
FROM CONTINUING OPERATIONS
(in millions, unaudited)
|
|
Year Ended December 31, 2023 |
|
|
Net cash provided by operating activities from continuing operations |
|
$ |
1,581.6 |
|
Additions to instruments |
|
|
(311.7 |
) |
Additions to other property, plant and equipment |
|
|
(291.1 |
) |
Free cash flow |
|
$ |
978.8 |
|
A-2
Appendix B
ZIMMER BIOMET HOLDINGS, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As proposed to be amended and restated effective June 1, 2018)May 10, 2024)
Section 1. Designation and Purpose. The name of this Plan is the Zimmer Biomet Holdings, Inc. Employee Stock Purchase Plan. The purpose of the Plan is to provide Employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company. The Plan is intended to qualify as an "Employee Stock Purchase Plan" under Code Section 423. The provisions of the Plan will, accordingly, be construed so as to extend and limit participation in a manner within the requirements of that section of the Code. However, the Company makes no undertaking or representation to maintain such qualification. In addition, this Plan authorizes the grant of options and issuance of Common Stock that do not qualify under Code Section 423 pursuant to rules, procedures, agreements, appendices, or sub-plans adopted by the Committee and designedfor such purpose, including, without limitation, to achieve desired tax or other objectives in particular locations outside the United States.
For purposes of this Plan and with respect to the Code Section 423 component of the Plan, unless the Committee otherwise determines, each Designated Subsidiary (as defined in Section 2(l) below) shall be deemed to participate in a separate offering from the Company or any other Designated Subsidiary, provided that the terms of participation within any such offering are the same for all Employees in such offering, as determined under Code Section 423.
Section 2. Definitions. As used in the Plan, the following terms, when capitalized, have the following meanings:
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(t)(u) "Plan" means the Zimmer Biomet Holdings, Inc. Employee Stock Purchase Plan, as amended and restated, and as may be further amended from time to time.
(u)(v) "Purchase Date" means the last day of each Offering Period of the Plan.
(v)(w) "Purchase Price" means, with respect to an Offering Period beginning on or after July 1, 2018, an amount equal to eighty-five percent (85%) of the Fair Market Value of a Share of Common Stock on the Offering Date or on the Purchase Date, whichever is lower; provided, however, that in the event (i) of any stockholder-approved increase in the number of Shares available for issuance under the Plan, (ii) all or a portion of such additional Shares are to be issued with respect to the Offering Period that is underway at the time of such increase ("Additional Shares"), and (iii) the Fair Market Value of a Share of Common Stock on the date of such increase (the "Approval Date Fair Market Value") is higher than the Fair Market Value on the Offering Date for any such Offering Period, then in such instance, the Purchase Price with respect to the Additional Shares will be eighty-five percent (85%) of the Approval Date Fair Market Value or the Fair Market Value of a Share of Common Stock on the Purchase Date, whichever is lower.
(w)(x) "Share" means a share of Common Stock, as adjusted in accordance with Section 1618 of the Plan.
(x)(y) "Subsidiary" means a domestic or foreign corporation of which not less than fifty percent (50%) of the voting shares are held by the Company or a Subsidiary, within the meaning of Code Section 424,(f), whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary; provided, however, that solely for purposes of the non-Code Section 423 component of the Plan, "Subsidiary" will include any entity that is directly or indirectly controlled by the Company.
B-2
(z) "Tax-Related Items" means any income tax, social insurance, payroll tax, payment on account or other tax-related items arising in relation to the Participant's participation in the Plan.
Section 3. Eligibility.
Section 4. Participation. An Employee may become a Participant in the Plan by completing a subscription agreement that authorizes payroll deductions and any other required documents ("Enrollment Documents") provided by the Committee or its designee and submitting them to the Committee (or its designee) or the Designated Broker, pursuant to the rules prescribed by the Committee, during the 30-day period prior to the applicable Offering Date, unless a different time for submission of the Enrollment Documents is set by the Board or the Committee for all Employees with respect to a given Offering Period.offering. The Enrollment Documents will set forth the amount of the Participant's Compensation, up to one hundred percent (100%) or such lower limit as is designated by the Committee, that the Participant elects to be paid as Contributions pursuant to the Plan. The Committee may provide for a separate election (of a different percentage) for a specified item or items of pay.Compensation, (on a uniform and nondiscriminatory basis for purposes of the Code Section 423 component of the Plan). In countries where payroll deductions are not feasible, or as otherwise determined necessary for legal or administrative reasons, the Committee may permit an Employee to participate in the Plan by an alternative means, such as by check, subject to compliance with Code Section 423(b) with respect to an offering under the Code Section 423 component of the Plan.
Section 5. Method of Payment of Contributions.
B-3
Section 6. Participant Purchases and Common Stock Accounts. On each Purchase Date, each Participant will be deemed, without further action, to have elected to purchase Shares of Common Stock with the entire balance in the Participant's Payroll Deduction Account, and the Designated Broker will credit the purchased sharesShares to the Participant's Common Stock Account.
Section 7. Limitation on Purchases. Participant purchases are subject to the following limitations:
Section 8. Withdrawal from Participation.
Section 9. Stock Purchases by Designated Broker. As of each Purchase Date, the Designated Broker will acquire, using the accumulated balances of all Participants' Payroll Deduction Accounts, Shares of Common Stock to be credited to those Participants' Common Stock Accounts.
B-4
Section 10. Common Stock Account Withdrawals. Except as otherwise provided in this Section, upon 14 days advance written notice to the Designated Broker, (or upon such other notice period as may be prescribed by the Designated Broker or the Company), a Participant may elect to withdraw the assets in the Participant's Common Stock Account.
Notwithstanding the foregoing, the Committee may require that Shares of Common Stock credited to a Participant's Common Stock Account be retained by the Designated Broker for a designated period of time and may restrict dispositions during that period, and/or the Committee may establish other procedures to permit tracking of disqualifying dispositions of the Shares of Common Stock or to restrict transfer of the Shares.
Section 11. Cessation of Participation. If a Participant dies or terminates employment, the Participant will cease to participate in the Plan, the Company or its designee will refund the balance in the Participant's Payroll Deduction Account, and the Designated Broker will distribute the assets in the Participant's Common Stock Account.
Notwithstanding the foregoing, if a Participant dies or terminates employment, the Committee may require that Shares of Common Stock credited to the Participant's or Beneficiary's Common Stock Account be retained by the Designated Broker for a designated period of time and may restrict dispositions during that period, and/or the Committee may establish other procedures to permit tracking of disqualifying dispositions of the Shares of Common Stock or to restrict transfer of the Shares.
Section 12. Designation of Beneficiary. Each Payroll Deduction Account and each Common Stock Account will be in the name of the Participant. To the extent permitted by the Committee, a Participant may designate a Beneficiary to receive the Participant's interests in both accounts in the event of the Participant's death by complying with procedures prescribed by the Committee. If a Participant is married and the designated Beneficiary is not the spouse, spousal consent willmay be required for such designation to be effective. A Participant may change a Beneficiary designation (with spousal consent if necessary) at any time by complying with the procedures prescribed by the Committee. If a Participant dies without having designated a
Beneficiary, or if the Beneficiary does not survive the Participant, the Participant's estate will be the Participant's Beneficiary.
Section 13. Administration of the Plan. The Plan will be administered by the Committee, consisting of not less than three members appointed by the Board.
B-5
Section 14. Non-U.S. Sub-Plans. The Committee may adopt such rules, procedures, agreements, appendices, or sub-plans (collectively, "Sub-Plans") relating to the operation and administration of the Plan to accommodate local laws, customs and procedures for jurisdictions outside of the United States, the terms of which Sub-Plans may take precedence over other provisions of this Plan, with the exception of Section 17 hereof, but unless otherwise superseded by the terms of such Sub-Plan, the provisions of this Plan will govern the operation of such Sub-Plan. To the extent inconsistent with the requirements of Code Section 423(b), any such Sub-Plan will be considered part of an offering under the non-Code Section 423 component of the Plan, and options granted thereunder will not be required by the terms of the Plan to comply with Code Section 423(b). Without limiting the generality of the foregoing, the Committee is authorized to adopt Sub-Plans for particular non-U.S. jurisdictions that modify or supplement the terms of the Plan to meet applicable local requirements, customs or procedures regarding, without limitation, (a) eligibility to participate, (b) the definition of Compensation, (c) the dates and duration of Offering Periods or other periods during which Participants may make
Contributions towards the purchase of Shares, (d) the method of determining the Purchase Price and the discount from Fair Market Value at which Shares may be purchased, (e) the handling of payroll deductions, (f) establishment of bank, building society or trust accounts to hold Contributions, (g) payment of interest, (h) obligations to pay payroll tax, (i) determination of beneficiary designation requirements, (j) withholding procedures and (k) handling of Share issuances.
Section 15. Taxes. At the time a Participant's option is exercised, in whole or in part, or at the time a Participant disposes of some or all of the Shares acquired under the Plan, the Participant will make adequate provision for any Tax-Related Items. In their sole discretion, and except as otherwise determined by the Committee, the Company or the Designated Subsidiary that employs the Participant may satisfy their obligations to withhold Tax-Related Items by (a) withholding from the Participant's wages or other compensation, (b) withholding a sufficient number of Shares otherwise issuable following purchase having an aggregate Fair Market Value sufficient to pay the Tax-Related Items required to be withheld with respect to the Shares, (c) withholding from proceeds from the sale of Shares issued upon purchase, either through a voluntary sale or a mandatory sale arranged by the Company, or (d) any other method deemed acceptable by the Committee and permitted under applicable law.
Section 14Section 16.Rights Not Transferable. Rights under the Plan are not transferable by a Participant.
Section 15Section 17. Shares Reserved for the Plan. Subject to the following sentence and any adjustments as provided in Section 1618, the maximum number of Shares that will be made available for purchase under the Plan as of May 10, 2024 will be 313,000,000 Shares or. For avoidance of doubt, up to the lessermaximum number of Shares determined byreserved under this Section 17 may be used to satisfy purchases of Shares under the BoardCode Section 423 component of the Plan and any remaining portion of such maximum number of Shares may be used to satisfy purchases of Shares under the non-Code Section 423 component.
Section 16Section 18. Change in Capital Structure. Despite anything in the Plan to the contrary, the Committee may take the following actions without the consent of any Participant or Beneficiary, and the Committee's determination will be conclusive and binding on all persons for all purposes.
B-6
Section 17Section 19. Amendment of the Plan. The Board may at any time, or from time to time, amend the Plan in any respect. The stockholders of the Company, however, must approve any amendment that would increase the number of Shares of Common Stock that may be issued under the Plan (other than an increase merely reflecting a change in capitalization of the Company pursuant to Section 1618) or a change in the designation of any corporations (other than a Subsidiary) whose employees become Employees under the Plan.
Section 18Section 20. Termination of the Plan. The Plan and all rights of Employees and Beneficiaries under the Plan will terminate:
In the event that the Plan terminates under circumstances described in (a) above, reserved Shares remaining as of the termination date will be credited to Participants' Common Stock Accounts on a prorata basis. Upon termination of the Plan, each Participant will receive the balance in the Participant's Payroll Deduction Account and all Shares in the Participant's Common Stock Account.
Section 19Section 21. Indemnification of Committee. Service on the Committee will constitute service as a director of the Company so that members of the Committee will be entitled to indemnification and reimbursement as directors of the Company pursuant to its Certificate of Incorporation and Bylaws.
Section 20Section 22. Government Regulations. The Plan, the grant and exercise of the rights to purchase Shares under the Plan, and the Company's or Designated Broker's obligation to sell and deliver Shares upon the exercise of rights to purchase Shares, will be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any regulatory or government agency as may, in the opinion of counsel for the Company, be required.
Section 21Section 23. Reports. Statements of account will be provided to Participants by the Committee or the Designated Broker at least annually, which statements will set forth the amounts of Contributions, the per Share Purchase Price, the number of Shares purchased and credited to Participants' Common Stock Accounts, and the remaining cash balance, if any, in Participants' Payroll Deduction Accounts.
Section 22Section 24. Governing Law. ThisExcept to the extent that provisions of this Plan shall beare governed by the lawsapplicable provisions of the State of Indiana, except that a sub-plan adopted for a Designated Subsidiary in a location outsideCode or any other substantive provision of the United States federal law, this Plan will be governed by theand construed in accordance with the internal laws of the jurisdiction in which that Designated Subsidiary is locatedstate of Indiana without giving effect to the conflict of laws principles thereof.
Section 25. Tax Qualification. Although the Company may endeavor to (a) qualify an option to purchase Shares for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (b) avoid adverse tax treatment (e.g., under Code Section 409A), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan. The Company will be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
Section 23.Section 26. Effective Date. This Plan as amended and restated by the Board on February 16, 201820, 2024, shall be effective as of June 1, 2018. upon its approval by the stockholders of the Company at the Company's annual meeting of stockholders in 2024.
B-7
Corporate and Shareholder Information |
|
Stock Symbol |
ZBH |
Exchanges |
New York Stock Exchange and SIX Swiss Exchange |
Shares Outstanding as of March 11, 2024 |
205,461,451 |
Headquarters |
345 East Main Street, Warsaw, Indiana 46580 |
Company Website |
www.zimmerbiomet.com |
Investor Relations Website |
http://investor.zimmerbiomet.com |
Annual Meeting Voting Website |
www.ProxyVote.com |
Virtual Annual Meeting Website |
www.virtualshareholdermeeting.com/ZBH2024 |
Transfer Agent and Dividend Reinvestment Plan Administrator |
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ZIMMER BIOMET Your progress. Our promise®. ZIMMER BIOMET HOLDINGS, INC. STOCKHOLDER SERVICES 345 EAST MAIN STREET WARSAW, IN 46580 SCAN TO VIEW MATERIALS & VOTE Vote 24 Hours a Day, 7 Days a Week by Internet, Telephone or Mail VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 9, 2024. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/ZBH2024 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 9, 2024. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Zimmer Biomet Holdings, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. If you vote your proxy by Internet or by telephone, please do NOT mail back the proxy card. You can access, view and download this year's Annual Report and Proxy Statement at www.proxyvote.com. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: V33158-P05300 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. ZIMMER BIOMET HOLDINGS, INC. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES. 1. Election of Directors: Nominees: For Against Abstain 1a. Christopher B. Begley 1b. Betsy J. Bernard 1c. Michael J. Farrell 1d. Robert A. Hagemann 1e. Arthur J. Higgins 1f. Maria Teresa Hilado 1g. Syed Jafry 1h. Sreelakshmi Kolli 1i. Louis Shapiro 1j. Ivan Tornos THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 2, 3 AND 4. For Against Abstain 2. Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2024. 3. Approve, on a non-binding advisory basis, named executive officer compensation ("Say on Pay"). 4. Approve the amended Employee Stock Purchase Plan. NOTE: In their discretion, the proxies are authorized to vote on any other business that may properly come before the meeting and any postponement(s) or adjournment(s) thereof. The shares represented by this proxy will be voted as directed by the stockholder. Where no direction is given, when the duly executed proxy is voted, such shares will be voted "FOR" proposals 1, 2, 3 and 4. NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held May 10, 2024: The Notice and Proxy Statement and Annual Report/Form 10-K Wrap are available at www.proxyvote.com. V33159-P05300 ZIMMER BIOMET HOLDINGS, INC. ANNUAL MEETING OF STOCKHOLDERS - TO BE HELD MAY 10, 2024 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Ivan Tornos, Suketu Upadhyay and Chad F. Phipps, and each of them, as proxies, with full power of substitution in each of them, for and on behalf of the undersigned, to represent and to vote as proxies, as designated on the reverse side of this form, all the shares of common stock of Zimmer Biomet Holdings, Inc. that the undersigned is entitled to vote at the Annual Meeting of Stockholders on Friday, May 10, 2024, at 8:00 a.m. Eastern Time, and at any adjournments or postponements thereof, upon matters set forth in the Proxy Statement and, in their judgment and discretion, upon such other business as may properly come before the meeting. When properly executed, your proxy will be voted as you indicate, or where no contrary indication is made, will be voted "FOR" each nominee listed under proposal 1, "FOR" each of proposals 2, 3 and 4. The full text of the proposals and position of the Board of Directors on each appears in the Proxy Statement and should be reviewed prior to voting. IMPORTANT: YOUR VOTE IS IMPORTANT. PLEASE VOTE THESE SHARES TODAY. Continued and to be signed on the reverse side