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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

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))

o

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

Abbott Laboratories

(Name of Registrant as Specified In Its Charter)

 

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

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
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    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
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Fee paid previously with preliminary materials.

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

 

 

(1)

 

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Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-6400 U.S.A.

 







On the Cover: Tyler Walsh, Quality Control Technician, Rapid Diagnostics


    
By leveraging Abbott's experience in
infectious disease assay development and
research—knowing which regions of the
virus to target and applying proven
development approaches—we were able
to quickly develop a comprehensive array
of highly accurate tests for COVID-19 in a
matter of months, a process that often
takes years.


Table of Contents

TABLE OF CONTENTS

 
  PAGE

Notice of Annual Meeting of Shareholders

  2

Proxy Summary

 
3

Information About the Annual Meeting

 
12

Notice and Access

  12

How to Attend the Meeting on the Virtual Meeting Platform

  12

How to Attend the Meeting by Phone

  12

Who Can Vote

  12

How To Vote

  13

How to Submit Questions

  13

Technical Support

  13

Revoking a Proxy

  13

Cumulative Voting

  13

Discretionary Voting Authority

  14

Quorum and Vote Required to Approve Each Item on the Proxy

  14

Effect of Withhold Votes, Broker Non-Votes, and Abstentions

  14

Inspectors of Election

  14

Cost of Soliciting Proxies

  15

Abbott Laboratories Stock Retirement Plan

  15

Confidential Voting

  15

Householding of Proxy Materials

  15

Nominees for Election as Directors (Item 1 on Proxy Card)

 
16

The Board of Directors and its Committees

 
23

The Board of Directors

  23

Leadership Structure

  23

Director Selection

  24

Board Diversity and Composition

  25

Board Evaluation Process

  26

Committees of the Board of Directors

  27

Communicating with the Board of Directors

  29

Corporate Governance Materials

  29

2020 Director Compensation

  30

Security Ownership of Executive Officers and Directors

 
32

Executive Compensation

 
33

Compensation Discussion and Analysis

  33

Compensation Committee Report

  60

Compensation Risk Assessment

  61

Summary Compensation Table

  63

2020 Grants of Plan-Based Awards

  66

2020 Outstanding Equity Awards at Fiscal Year-End

  67

2020 Option Exercises and Stock Vested

  75

Pension Benefits

  75

Potential Payments Upon Termination or Change in Control

  78

CEO Pay Ratio

  80

 
  PAGE

Ratification of Ernst & Young LLP as Auditors (Item 2 on Proxy Card)

  81

Report of the Audit Committee

  82

Say on Pay—An Advisory Vote on the Approval of Executive Compensation (Item 3 on Proxy Card)

 
83

Approval and Adoption of Amendments to the Articles of Incorporation To Eliminate Statutory Supermajority Voting Standards (Item 4 on Proxy Card)

 
85

Shareholder Proposals

 
87

Shareholder Proposal on Lobbying Disclosure (Item 5 on Proxy Card)

  88

Shareholder Proposal on Report on Racial Justice (Item 6 on Proxy Card)

  91

Shareholder Proposal on Independent Board Chairman (Item 7 on Proxy Card)

  95

Approval Process for Related Person Transactions

 
97

Additional Information

 
98

Information Concerning Security Ownership

  98

Date for Receipt of Shareholder Proposals for the 2022 Annual Meeting Proxy Statement

  98

Procedure for Recommendation and Nomination of Directors and Transaction of Business at Annual Meeting

  99

General

  100

Exhibit A—Director Independence Standard

 
A-1

Exhibit B—Proposed Amendments to
the Articles of Incorporation

 
B-1

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NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS


Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 23, 2021

The Annual Meeting of the Shareholders of Abbott Laboratories will be held at Abbott's headquarters, 100 Abbott Park Road, at the intersection of Route 137 and Waukegan Road, Lake County, Illinois, on Friday, April 23, 2021, at 9:00 a.m.

In light of restrictions and guidelines on group gatherings issued by government and public health officials regarding the ongoing coronavirus pandemic, and to support the health and safety of Abbott's shareholders, employees, and communities, shareholders may only attend the Annual Meeting virtually. Shareholders will not be able to attend the Annual Meeting in person.

Shareholders of record as of the close of business on February 24, 2021 will be able to attend the Annual Meeting at www.meetingcenter.io/290382097. To be admitted to the Annual Meeting, shareholders will be required to enter the meeting password (ABT2021) and a 15-digit control number. Shareholders who wish to attend the meeting on a listen-only phone line should contact Abbott representatives at 224-668-7238 or abbottshareholders@abbott.com to obtain the meeting telephone number in advance of the meeting. Please see pages 12 and 13 for further instructions on how to be admitted to the Annual Meeting.

Shareholders will be asked to vote on the following items of business:

Agenda       Board Voting
Recommendation
Item 1   Election of the 13 director nominees named in this proxy statement to
hold office until the next Annual Meeting or until the next meeting of
shareholders at which directors are elected
  FOR
Each Director
Nominee
Item 2   Ratification of the appointment of Ernst & Young LLP as auditors of
Abbott for 2021
  FOR
Item 3   Approval, on an advisory basis, of executive compensation   FOR
Item 4   Approval and adoption of amendments to the Articles of Incorporation
to eliminate statutory supermajority voting standards for:
  FOR
        (a) amendments to the Articles of Incorporation, and    
        (b) approval of certain extraordinary transactions    
Items
5 – 7
  Three shareholder proposals, if properly presented at the meeting   AGAINST

Shareholders will also transact such other business as may properly come before the meeting, including any adjournment or postponement thereof.

Abbott's 2021 Proxy Statement and 2020 Annual Report to Shareholders are available at www.abbott.com/proxy.

YOUR VOTE IS IMPORTANT

Please sign and promptly return your proxy or voting instruction form in the enclosed envelope, or vote your shares by telephone or using the Internet.

If you are a registered shareholder (you received your proxy materials from Abbott through Abbott's transfer agent, Computershare), you may vote your shares by telephone (1-800-652-VOTE (8683)) or on the Internet at www.investorvote.com/abt.

If you are a beneficial shareholder (you received your proxy materials from a broker, bank, or other agent), please refer to the voting instructions provided to you by your broker, bank, or other agent.

By order of the Board of Directors.

Hubert L. Allen
Secretary

March [      ], 2021

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PROXY SUMMARY

This summary contains highlights about Abbott and the upcoming 2021 Annual Meeting of Shareholders. This summary does not contain all of the information that you should consider in advance of the meeting, and we encourage you to read the entire proxy statement carefully before voting.

The accompanying proxy is solicited by the Board of Directors on behalf of Abbott for use at the Annual Meeting of Shareholders. The meeting will be held on April 23, 2021, at Abbott's headquarters, 100 Abbott Park Road, at the intersection of Route 137 and Waukegan Road, Lake County, Illinois. This proxy statement and the accompanying proxy card are being mailed to shareholders on or about March [      ], 2021.

In light of restrictions and guidelines on group gatherings issued by government and public health officials regarding the ongoing coronavirus pandemic, and to support the health and safety of Abbott's shareholders, employees, and communities, any shareholder who wishes to attend the Annual Meeting may only attend virtually. Shareholders will not be able to attend the Annual Meeting in person. For more information on how to access and participate in the Annual Meeting, please see pages 12 to 13.

ABBOTT'S DIVERSIFIED BUSINESS MODEL DELIVERS LEADING LONG-TERM GROWTH

Abbott's sustained strong performance has resulted in total shareholder return (TSR) significantly exceeding the peer median and major market indices on a one-, three-, and five-year basis.

Abbott's three-year TSR of 101.7% is more than twice that of the peer group median and the broader Standard & Poor's 500 (S&P 500) and more than three times that of the Dow Jones Industrial Average (DJIA) market index. These consistent above-market returns are driven by the strength of our diversified business model with leadership positions in some of the largest and fastest growing markets in healthcare and innovative product portfolios across our businesses.

Abbott delivered strong returns for shareholders in 2020, despite the global market challenges from COVID-19, and achieved or exceeded the financial targets that were set before the pandemic in January 2020. Abbott's one-year TSR was 28.0%, more than three times the peer median TSR, and significantly above major market indices, a testament to the strength of our diversified business model and ability to innovate and deliver in this challenging environment.

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In addition to delivering significant shareholder returns, Abbott continued to take important steps to position the Company for long-term, sustainable growth.

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COVID-19 RESPONSE

CONTRIBUTION TO GLOBAL TESTING NEEDS

Abbott quickly responded to the global spread of SARS-CoV-2. We leveraged our expertise in infectious disease diagnostic testing and in a short period time, developed multiple diagnostic tests to meet the various needs in the market. We have launched and scaled significant manufacturing capacity for our tests around the globe and sold over 400 million tests in 2020.

Abbott's rapid response, significant manufacturing scale, and affordable pricing strategy have allowed for broad access to testing and have further positioned Abbott as a world leader in diagnostic testing. The demand for COVID-19 tests remains strong and Abbott will continue to be a leader in supporting global testing needs.

PROTECTING OUR PEOPLE

As a healthcare company, Abbott has continued to provide an uninterrupted supply of vital diagnostics, medical devices, medicines and nutritional products to our customers. To help keep our own people safe, Abbott has taken aggressive steps to limit exposure and enhance the safety of facilities for our employees, including implementing mandatory temperature screening and social distancing, providing and requiring the use of personal protective equipment, and at most U.S. facilities, on-site COVID-19 testing.

Abbott has 109,000 employees in more than 160 countries, and throughout 2020, there were no pay cuts and we did not lay off or furlough any employees due to COVID-19. We're also assisting Abbott families whose lives have been disrupted by COVID-19 including, paying people when sick or in quarantine, offering flexible working hours, providing support for employees with children, and expanding employee assistance programs that offer health and wellness resources.

MAINTAINING ACCESS TO OUR TECHNOLOGIES AND PRODUCTS

Throughout the pandemic, we were able to continue providing our essential products to people around the world—even when route closures meant we needed to adapt and identify new delivery pathways. With more than 75,000 suppliers in 120 countries, Abbott's global supply chain enabled our life-changing technologies to get to the millions of people who need them, when they need them. That's why we have spent years building our supply chain resilience to function even under the greatest stresses.

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COMMITMENT TO DIVERSITY AND INCLUSION

Diversity is fundamental at Abbott—from our people and our mindset to our business model. It's core to fulfilling our purpose, is embedded in our values and key to our long-term growth and success.

Over the years we have received numerous honors related to a diverse and inclusive culture—Fortune 100 Best Workplaces for Diversity, Forbes Best Employers for Diversity, Working Mother, Top Company for Executive Women, DiversityInc, and Best Companies for Multicultural Women. Our Chief Executive Officer heads our Diversity Council and executive leader compensation has been tied to diversity results for several years.

During 2020, we reviewed our practices and took steps to further our commitment to diversity and inclusion, including:

Looking ahead, we are committed to further advancing diversity and inclusion across our company, and in our work with others, including:

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EXECUTIVE COMPENSATION

SHAREHOLDER FEEDBACK

During 2020, we conducted extensive shareholder outreach to discuss our compensation program, among other topics. In the spring, we engaged shareholders representing over 60% of our outstanding shares to discuss various topics, including Abbott's market-leading disclosures that enhance shareholder understanding of how pay decisions are made and how the metrics we use are linked to business strategy and goals. Their feedback was overwhelmingly positive, which was reflected in the 92% support for Say-on-Pay Vote.

KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM

The following practices and policies ensure alignment of interests between shareholders and executives, and effective ongoing compensation governance.

    COMPENSATION PRACTICE     ABBOTT POLICY     MORE INFORMATION
ON PAGE

 
    Compensation is Market-Based     Yes     Benchmark peers with investment profiles, operating characteristics, and employment and business markets similar to Abbott. Annual incentive plan goals are set to exceed market growth in relevant markets/business segments     35-37  
    Compensation is Performance-Based       Yes       Short-term and long-term incentive awards are 100% performance based. Annual incentive plan goals are set to exceed market growth in relevant markets/business segments       36-37    
    Double-Trigger Change in Control     Yes     Provide change in control benefits under double-trigger circumstances only     78-80  
    Recoupment Policy       Yes       Forfeiture for misconduct provision in equity grants and recoup compensation when warranted       60    
    Robust Share Ownership Guidelines     Yes     Require significant share ownership for officers and directors, and share retention requirements until guidelines are met     30-31 and 59  
    Capped Incentive Awards       Yes       Incentive award payments are capped       36 and 61    
    Independent Compensation Committee Consultant     Yes     Committee consultant performs no other work for Abbott     28  
    Tax Gross Ups       No       No tax gross ups under our executive officer pay program       58-59 and 79    
    Guaranteed Bonuses     No     No guaranteed bonuses     36  
    Employment Contracts       No       No employment contracts       78    
    Excessive Risk Taking     No     No highly leveraged incentive plans that encourage excessive risk taking     61-62  
    Hedging of Company Shares       No       No hedging of Abbott shares is allowed       60    
    Discounted Stock Options     No     No discounted stock options are allowed or granted     61  

Details of the compensation decisions made for our named executive officers are outlined on pages 42 to 57.

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DIRECTOR NOMINEES

The Board of Directors recommends a vote FOR the election of each of the following nominees for director. All nominees, other than Mr. Roman, are currently serving as directors. Additional information about each director nominee's background and experience can be found beginning on page 16.

    Name
Principal Occupation

Age
Director
Since


Committee Memberships  
    Robert J. Alpern, M.D.   Professor and Former Dean,   70   2008  

Nominations and

 
        Yale School of Medicine           Governance  
             

Public Policy

 
    Roxanne S. Austin   President and CEO,     60   2000  

Compensation (Chair)

   
        Austin Investment Advisors            

Nominations and

   
                          Governance    
                     

Executive

   
    Sally E. Blount, Ph.D.   CEO, Catholic Charities of the   59   2011  

Nominations and

 
      Archdiocese of Chicago, and           Governance  
      Professor and Former Dean,      

Public Policy

 
      J.L. Kellogg Graduate School        
      of Management        
    Robert B. Ford   President and CEO,     47   2019  

Executive

   
        Abbott Laboratories                  
    Michelle A. Kumbier   Former Chief Operating Officer,   53   2018  

Audit

 
        Harley-Davidson Motor Company      

Compensation

 
    Darren W. McDew   Retired General, U.S. Air Force,     60   2019  

Nominations and

   
        and Former Commander of                 Governance    
        U.S. Transportation Command            

Public Policy

   
    Nancy McKinstry   CEO and Chairman of the Executive   62   2011  

Audit

 
        Board, Wolters Kluwer N.V.      

Nominations and

 
                  Governance  
    William A. Osborn   Retired Chairman and CEO,     73   2008  

Compensation

   
    (Lead Independent Director)   Northern Trust Corporation            

Nominations and

   
                          Governance (Chair)    
                     

Executive

   
    Michael F. Roman   Chairman, President, and CEO,   61   New    
      3M Company     Nominee    
    Daniel J. Starks   Retired Chairman, President and CEO,     66   2017  

Public Policy

   
        St. Jude Medical, Inc.                  
    John G. Stratton   Retired Executive Vice President and   60   2017  

Audit

 
      President of Global Operations,      

Public Policy

 
      Verizon Communications Inc.        
    Glenn F. Tilton   Retired Chairman, President     72   2007  

Audit

   
        and CEO, UAL Corporation            

Public Policy

   
    Miles D. White   Executive Chairman,   66   1998  

Executive (Chair)

 
      Abbott Laboratories        

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CORPORATE GOVERNANCE

Abbott is committed to strong corporate governance that is aligned with shareholder interests. Our Board spends significant time with Abbott's senior management to understand the dynamics, issues, and opportunities for Abbott. During these interactions, directors provide insights and ask probing questions which guide management decision-making. This collaborative approach to risk oversight and emphasis on long term sustainability begins with our leaders and is engrained in Abbott's culture. The Board also regularly monitors leading practices in governance and adopts measures that it determines are in the best interest of Abbott and its shareholders.

CEO SUCCESSION PLANNING:

On March 31, 2020, Miles D. White stepped down as Chief Executive Officer, after a remarkable 21-year tenure and became Executive Chairman of the Board. Robert B. Ford, previously President and Chief Operating Officer and a 24-year Abbott veteran, succeeded Mr. White as Abbott's President and Chief Executive Officer.

With this transition, Mr. Ford became the 13th CEO of Abbott in its 132-year history, all having been appointed from within, a testament to Abbott's strong management philosophy and succession-planning discipline.

BOARD GOVERNANCE HIGHLIGHTS:

Lead Independent Director with Distinct Responsibilities


  

 

Elected annually by independent directors

 

  

 

Authority to call meetings of independent directors

  

 

Liaises between chairman and independent directors

 

  

 

Reviews matters such as meeting topics and schedules

  

 

Consults and engages directly with major shareholders

 

  

 

Regularly presides over executive sessions of independent directors at Board meetings

  

 

Leads annual Board and individual director performance reviews

 

 

 

 

Robust Board Evaluation and Refreshment Process

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Other Board Governance Highlights

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Highly qualified Board, with broad diversity across backgrounds, skills and experiences

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SHAREHOLDER OUTREACH:

Active shareholder engagement throughout the year is essential to maintaining good corporate governance. We routinely seek investor input on a variety of topics, including corporate governance, executive compensation, sustainability and other strategic matters. During 2020, we conducted outreach with a cross-section of shareholders representing more than 60% of our outstanding shares. Investor sentiment and specific feedback was shared with executive management and the Board of Directors, as appropriate.

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SUSTAINABILITY

At Abbott, sustainability means managing our company to deliver long-term impact for the people we serve—shaping the future of healthcare and helping the greatest number of people live better and healthier lives.

Our Sustainability efforts are focused on the most relevant industry and company-specific risks and opportunities. In December 2020, we launched our new 2030 Sustainability Plan focused on Abbott's greatest opportunities to make an impact: creating new life-changing technologies and products, expanding the access and affordability of this innovation, and breaking down barriers that prevent people from getting the care they need. That reach and impact requires a strong foundation and sustainable business, which is why we're also taking action in key areas, including building the workforce of tomorrow, responsibly applying data to advance care, building a more resilient, diverse and responsible supply chain and protecting health by safeguarding the environment.

These areas have been identified through an in-depth materiality analysis, directed by executive management, and in partnership with numerous diverse stakeholders. We aim to deliver sustainable, responsible growth that improves lives and creates value in communities around the world.

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The Board of Directors and its committees have oversight over Abbott's environmental, social and governance practices. The Board was presented with sustainability objectives and efforts and has regular discussions with management on all the above sustainability matters, as well as workplace, management, and Board diversity, emerging governance practices and trends, global compliance matters, and sustainability reporting. In addition, executive compensation is linked to Sustainability commitments, as discussed in more detail on pages 40 and 41.

To learn more about Abbott's Sustainability efforts, please visit www.abbott.com/responsibility/sustainability.html.

SELECT RECOGNITION BY THIRD-PARTY ORGANIZATIONS

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Dow Jones Sustainability Index global Industry Group Leader for 8 consecutive years.  
  

Fortune's Most Admired Top 50 Company and leader in the Medical Products and Equipment sector for the past 8 years, and on Fortune's 2020 "Change the World" list for companies making positive social impacts through their core business.

  
  
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Fast Company's 2020 World-Changing Company of the Year.  
  

Recognized by Working Mother, Great Place to Work, DiversityInc, and several other publications for workplace leadership and diversity.  
  

Member of the elite S&P 500 Dividend Aristocrats Index, which recognizes companies who have raised their dividend payout annually for at least 25 consecutive years. In December 2020, Abbott announced a 25% increase to its quarterly dividend. This is the 49th consecutive year that Abbott has increased its quarterly dividend.

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VOTING MATTERS AND BOARD RECOMMENDATIONS

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Election of 13 Director Nominees Named in this Proxy Statement: The Board recommends a vote FOR

Highly qualified Board, with diversity in backgrounds, skills and experiences.

Relevant expertise to provide oversight and guidance for Abbott's diversified operating model. See pages 16 to 22 for more information.

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Ratification of Ernst & Young as Auditors: The Board recommends a vote FOR

Independent firm with significant industry and financial reporting expertise.

See pages 81 to 82 for more information.
    

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Say on Pay: Advisory Vote on the Approval of Executive Compensation: The Board recommends a vote FOR

Market-based structure producing differentiated awards based on both company and individual performance, managed with independent oversight by the Compensation Committee.

Aligned to drive Abbott's strategic priorities, reflects consistent above-market TSR and upper-quartile Relative 3-year TSR performance vs. Peers. See pages 83 to 84 for more information.

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Approval and Adoption of Amendments to the Articles of Incorporation to Eliminate Statutory Supermajority Voting Standards: The Board recommends a vote FOR

Implementing majority voting standards for amendments to the Articles of Incorporation and approval of certain extraordinary transactions. See pages 85 to 86 for more information.

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The Board recommends a vote AGAINST

Proposal 5: Lobbying Disclosure

Proposal 6: Report on Racial Justice

Proposal 7: Independent Board Chairman

See pages 87 to 96 for more information.

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INFORMATION ABOUT THE ANNUAL MEETING

NOTICE AND ACCESS

In accordance with the Securities and Exchange Commission's "Notice and Access" rules, Abbott mailed a Notice of Internet Availability of Proxy Materials (the "Notice") to certain shareholders in mid-March of 2021. The Notice describes the matters to be considered at the Annual Meeting and how the shareholders can access the proxy materials online. It also provides instructions on how those shareholders can vote their shares. If you received the Notice, you will not receive a print version of the proxy materials, unless you request one. If you would like to receive a print version of the proxy materials, free of charge, please follow the instructions on the Notice.

HOW TO ATTEND THE MEETING ON THE VIRTUAL MEETING PLATFORM

Shareholders can attend, vote their shares, and submit questions during the Annual Meeting at www.meetingcenter.io/290382097. Shareholders may log into the Annual Meeting beginning at 8:15 Central Time on April 23, 2021. The Annual Meeting will begin promptly at 9:00 a.m. Central Time.

To be admitted to the Annual Meeting, shareholders will be required to enter the meeting password (ABT2021) and a 15-digit control number.

Registered Shareholders.    If you are a registered holder (i.e., you received your proxy materials from Abbott through Abbott's transfer agent, Computershare), you may attend the Annual Meeting without advance registration. Your 15-digit control number is provided on your proxy card, email, or Notice. Please follow the instructions on your proxy card, email, or Notice to attend the meeting. If you no longer have these documents, please contact Computershare at 1-888-332-2268.

Beneficial Shareholders.    If you are a beneficial holder (i.e., you received your proxy materials from your broker, bank, or other agent), you must register in advance to receive a 15-digit control number and attend the Annual Meeting. To register, you must submit your name, email address, and one of the following registration materials to Computershare:

Please send your registration materials to Computershare at legalproxy@Computershare.com, with "Registration Materials" in the subject line. Registration requests must be received by Computershare no later than 5 p.m. Eastern Time on Tuesday, April 20, 2021.

You will receive a confirmation of your registration by email from Computershare, along with a 15-digit control number needed to be admitted to the Annual Meeting. If you have questions, please contact Computershare at the telephone support line provided on the virtual meeting platform at www.meetingcenter.io/290382097.

HOW TO ATTEND THE MEETING BY PHONE

Shareholders who wish to attend the Annual Meeting by phone should contact Abbott representatives at 224-668-7238 or abbottshareholders@abbott.com to obtain the meeting telephone number in advance of the meeting. Shareholders participating by phone will be able to listen to the meeting but will not have the ability to vote or submit questions during the meeting. If you would like to vote your shares or submit questions during the meeting, please follow the instructions above in "How to Attend the Meeting on the Virtual Meeting Platform."

WHO CAN VOTE

Shareholders of record at the close of business on February 24, 2021 will be entitled to notice of and to vote at the Annual Meeting. As of January 31, 2021, Abbott had 1,771,529,358 outstanding common shares, which are Abbott's only outstanding voting securities. All shareholders have cumulative voting rights in the election of directors and one vote per share on all other matters.

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HOW TO VOTE

Whether or not you plan to virtually attend the Annual Meeting, Abbott strongly urges you to submit your proxy or vote your shares in advance of the Annual Meeting.

Registered Shareholders.    Registered shareholders may vote by mail by signing and promptly returning their proxy in the enclosed envelope. Abbott's By-Laws provide that a shareholder may authorize no more than two persons as proxies to attend and vote at the meeting. Registered shareholders may also vote their shares:

If you vote by telephone or using the Internet, you do not need to return your proxy card. The instructions for voting can be found with your proxy card or on the Notice.

Registered shareholders who have not voted their shares in advance of the meeting may do so at the Annual Meeting by clicking the "Cast Your Vote" link on the meeting center site.

Beneficial Shareholders.    Beneficial shareholders should refer to the voting instructions provided by their broker, bank, or other agent to direct the voting of their shares in advance of the meeting.

Beneficial shareholders may vote their shares at the Annual Meeting if they obtain a legal proxy from their broker, bank, or other agent giving the shareholder the right to vote such shares at the Annual Meeting. Please follow the instructions provided above in "How to Attend the Meeting on the Virtual Meeting Platform."

Shareholders participating by phone will not be able to vote their shares at the Annual Meeting.

HOW TO SUBMIT QUESTIONS

Following conclusion of the business items on the agenda for the Annual Meeting, Abbott will hold a live question and answer session where questions pertinent to meeting matters will be answered, as time permits. Shareholders participating in the meeting on the virtual meeting platform can submit questions during the Annual Meeting by clicking on the message icon in the upper right-hand corner of the page on the meeting center site. Questions that are substantially similar may be grouped together in a single response to avoid repetition and to allow more time for other questions.

Shareholders participating in the meeting by phone will not be able to submit questions during the meeting.

TECHNICAL SUPPORT

If you experience technical difficulties accessing the Annual Meeting, a technical support telephone number and additional support information will be available on the virtual meeting platform at www.meetingcenter.io/290382097.

The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the Annual Meeting.

REVOKING A PROXY

You may revoke your proxy by voting in person at the Annual Meeting or, at any time prior to the meeting:

CUMULATIVE VOTING

Cumulative voting allows a shareholder to multiply the number of shares owned by the number of directors to be elected and to cast the total for one nominee or distribute the votes among the nominees, as the shareholder desires. Shareholders may not cumulate their votes against a nominee. If shares are voted cumulatively and there are more nominees than there are director vacancies, nominees who receive the greatest number of votes will be

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elected. If you wish to cumulate your votes, you must sign and mail in your proxy card or attend the Annual Meeting.

DISCRETIONARY VOTING AUTHORITY

Unless authority is withheld in accordance with the instructions on the proxy, the persons named in the proxy will vote the shares covered by proxies they receive to elect the 13 nominees named in Item 1 on the proxy card. Should a nominee become unavailable to serve, the shares will be voted for a substitute designated by the Board of Directors, or for fewer than 13 nominees if, in the judgment of the proxy holders, such action is necessary or desirable. The persons named in the proxy may also decide to vote shares cumulatively in their sole discretion so that one or more of the nominees may receive fewer votes than the other nominees (or no votes at all), although they have no present intention of doing so. The proxy holders may not cast your vote for any nominee from whom you have withheld authority to vote.

Where a shareholder has specified a choice for or against the ratification of the appointment of Ernst & Young LLP as auditors, the advisory vote on the approval of executive compensation, the management proposal for approval and adoption of amendments to the Articles of Incorporation, or a shareholder proposal, or where the shareholder has abstained on these matters, the shares represented by the proxy will be voted (or not voted) as specified. Where no choice has been specified, the proxy will be voted FOR the ratification of Ernst & Young LLP as auditors, FOR the approval of executive compensation, FOR the approval and adoption of amendments to the Articles of Incorporation, and AGAINST the shareholder proposals.

Aside from matters set forth in this proxy statement, the Board of Directors is not aware of any other issue which may properly be brought before the meeting. If other matters are properly brought before the meeting, the accompanying proxy will be voted in accordance with the judgment of the proxy holders.

QUORUM AND VOTE REQUIRED TO APPROVE EACH ITEM ON THE PROXY

A majority of the outstanding shares entitled to vote on a matter, represented in person or by proxy, constitutes a quorum for consideration of that matter at the meeting. The affirmative vote of a majority of the shares represented at the meeting and entitled to vote on a matter shall be the act of the shareholders with respect to that matter, except for the management proposal to approve and adopt amendments to Abbott's Articles of Incorporation, which requires the affirmative vote of at least two-thirds of the votes of the shares entitled to vote on such amendments.

EFFECT OF WITHHOLD VOTES, BROKER NON-VOTES, AND ABSTENTIONS

Shares represented by proxies which are present and entitled to vote on a matter but which have elected to withhold authority to vote for one or more directors or to abstain from voting on another matter will have the effect of votes against those directors or that matter. A proxy submitted by an institution, such as a broker or bank that holds shares for the account of a beneficial owner, may indicate that all or a portion of the shares represented by that proxy are not being voted with respect to a particular matter. This could occur, for example, when the broker or bank is not permitted to vote those shares in the absence of instructions from the beneficial owner of the shares. These "non-voted shares" will be considered shares not present and, therefore, not entitled to vote on those matters, although these shares may be considered present and entitled to vote for other purposes. Brokers and banks have discretionary authority to vote shares in the absence of instructions on matters the New York Stock Exchange considers "routine", such as the ratification of the appointment of the auditors. They do not have discretionary authority to vote shares in absence of instructions on "non-routine" matters. The election of directors, the advisory vote on the approval of executive compensation, and management and shareholder proposals are "non-routine" matters. Non-voted shares will not affect the determination of the outcome of the vote on any matter to be decided at the meeting, except for the management proposal to approve and adopt amendments to Abbott's Articles of Incorporation, for which non-voted shares will have the effect of votes against that matter.

INSPECTORS OF ELECTION

The inspectors of election and the tabulators of all proxies, ballots, and voting tabulations that identify shareholders are independent and are not Abbott employees.

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COST OF SOLICITING PROXIES

Abbott will bear the cost of making solicitations from its shareholders and will reimburse banks and brokerage firms for out-of-pocket expenses incurred in connection with this solicitation. Proxies may be solicited by mail, telephone, Internet, or in person by directors, officers, or employees of Abbott and its subsidiaries.

Abbott has retained Morrow Sodali LLC to aid in the solicitation of proxies at an estimated cost of $19,500 plus reimbursement for reasonable out-of-pocket expenses.

ABBOTT LABORATORIES STOCK RETIREMENT PLAN

Participants in the Abbott Laboratories Stock Retirement Plan will receive voting instructions for their shares held in the Abbott Laboratories Stock Retirement Trust. The Stock Retirement Trust is administered by both a trustee and an Investment Committee. The trustee of the Trust is The Northern Trust Company. The members of the Investment Committee are Mary K. Moreland, Karen M. Peterson, and Brian P. Wentworth, employees of Abbott. The voting power with respect to the shares is held by and shared between the Investment Committee and the participants. The Investment Committee must solicit voting instructions from the participants and follow the voting instructions it receives. The Investment Committee may use its own discretion with respect to those shares for which no voting instructions are received.

CONFIDENTIAL VOTING

It is Abbott's policy that all proxies, ballots, and voting tabulations that reveal how a particular shareholder has voted be kept confidential and not be disclosed, except:

HOUSEHOLDING OF PROXY MATERIALS

Shareholders sharing an address may receive only one copy of the proxy materials or the Notice of Internet Availability of Proxy Materials, unless their broker, bank, or other intermediary has received contrary instructions from any shareholder at that address. This is known as "householding." Shareholders wishing to discontinue householding and receive separate copies of the proxy materials or the Notice of Internet Availability of Proxy Materials should notify their broker, bank, or other intermediary.

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NOMINEES FOR ELECTION AS DIRECTORS

GRAPHIC ROBERT J. ALPERN, M.D.
Director since 2008 Age 70
Ensign Professor of Medicine and Physiology and Professor of
Internal Medicine and Cellular and Molecular Physiology, and
Former Dean of Yale School of Medicine, New Haven, Connecticut
    

Dr. Alpern has served as the Ensign Professor of Medicine and Professor of Internal Medicine at Yale School of Medicine since June 2004. From June 2004 to January 2020, Dr. Alpern served as Dean of Yale School of Medicine. From July 1998 to May 2004, Dr. Alpern was the Dean of The University of Texas Southwestern Medical Center. Dr. Alpern also serves as a Director of AbbVie Inc. and Tricida, Inc. and served as a Director on the Board of Yale New Haven Hospital from October 2005 through January 2020.

As a result of his long-tenured leadership positions at the Yale School of Medicine and The University of Texas Southwestern Medical Center, and as a former Director on the Board of Yale New Haven Hospital, Dr. Alpern contributes valuable insights to the Board through his medical and scientific expertise and his knowledge of the health care environment and the scientific nature of Abbott's key research and development initiatives.


GRAPHIC ROXANNE S. AUSTIN
Director since 2000 Age 60
President and Chief Executive Officer, Austin Investment Advisors,
Newport Coast, California (Private Investment and Consulting Firm)
    

Ms. Austin is President and Chief Executive Officer of Austin Investment Advisors, a private investment and consulting firm, and chairs the U.S. Mid-Market Investment Advisory Committee of EQT Partners. Previously, Ms. Austin also served as the President and Chief Executive Officer of Move Networks, Inc., a provider of Internet television services. Ms. Austin served as President and Chief Operating Officer of DIRECTV, Inc. Ms. Austin also served as Executive Vice President and Chief Financial Officer of Hughes Electronics Corporation and as a partner of Deloitte & Touche LLP. Ms. Austin served on the Board of Directors of Telefonaktiebolaget LM Ericsson from 2008 to 2016 and Target Corporation from 2002 to 2020. Ms. Austin currently serves on the Board of Directors of AbbVie Inc., CrowdStrike Holdings, Inc., Teledyne Technologies Incorporated, and Verizon Communications. Ms. Austin will not stand for re-election at Teledyne Technologies Incorporated's 2021 annual meeting of stockholders.

Through her extensive management and operating roles, including her financial roles, Ms. Austin contributes significant oversight and leadership experience, including financial expertise and knowledge of financial statements, corporate finance and accounting matters.

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GRAPHIC SALLY E. BLOUNT, PH.D.
Director since 2011 Age 59
Chief Executive Officer, Catholic Charities of the Archdiocese of Chicago, and Michael L. Nemmers Professor of Strategy and Former Dean of the J.L. Kellogg Graduate School of Management at Northwestern University, Evanston, Illinois
    

Ms. Blount has served as Chief Executive Officer of Catholic Charities of the Archdiocese of Chicago since August 2020. Ms. Blount also is the Michael L. Nemmers Professor of Strategy and former Dean of the J.L. Kellogg Graduate School of Management at Northwestern University from 2010 to 2018. From 2004 to 2010, she served as the Vice Dean and Dean of the Undergraduate College of New York University's Leonard N. Stern School of Business. Ms. Blount joined the faculty of New York University's Leonard N. Stern School of Business in 2001 and was the Abraham L. Gitlow Professor of Management and Organizations. Prior to joining NYU in 2001, Ms. Blount held academic posts at the University of Chicago's Graduate School of Business from 1992 to 2001. Ms. Blount currently serves on the Board of Directors of Ulta Beauty, Inc. and the Joyce Foundation.

Having served as Dean of the J.L. Kellogg Graduate School of Management at Northwestern University and as the Vice Dean and Dean of the Undergraduate College of New York University's Leonard N. Stern School of Business, Ms. Blount provides Abbott's Board with expertise on business organization, governance and business management matters.

 

GRAPHIC ROBERT B. FORD
Director since 2019 Age 47
President and Chief Executive Officer, Abbott Laboratories
    

Mr. Ford has served as Abbott's President and Chief Executive Officer since March 2020. Previously, Mr. Ford served as Abbott's President and Chief Operating Officer from 2018 to 2020, Executive Vice President, Medical Devices from 2015 to 2018, Senior Vice President, Diabetes Care from 2014 to 2015, and Vice President, Diabetes Care, Commercial Operations from 2008 to 2014. Prior to 2008, he served in various leadership roles across Abbott's Diagnostics, Nutrition, and Diabetes Care businesses in the U.S. and Latin America. Mr. Ford joined Abbott in 1996.

As Abbott's President and Chief Executive Officer, and having previously held leadership positions across several of Abbott's businesses, and ultimately assuming responsibility for all of Abbott's operating businesses as Chief Operating Officer, Mr. Ford contributes an extensive knowledge of the Company's global operations, a wide breadth of experience in strategy and execution, and valuable insights into global healthcare markets.

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GRAPHIC MICHELLE A. KUMBIER
Director since 2018 Age 53
Former Senior Vice President and Chief Operating Officer of Harley-Davidson Motor Company,
Milwaukee, Wisconsin (Motorcycle and Related Products Manufacturer)
    

Ms. Kumbier served as Senior Vice President and Chief Operating Officer of Harley-Davidson Motor Company from 2017 to 2020. Previously, she served as Senior Vice President of Motor Company Product and Operations from 2015 to 2017, as Senior Vice President of Motorcycle Operations from 2012 to 2015, and as Senior Vice President of Product Development from 2010 to 2012. She started her career with Harley-Davidson in 1997. Prior to Harley-Davidson, Ms. Kumbier was employed with Kohler Company, maker of premium plumbing products, in a variety of positions from 1986 to 1997. Ms. Kumbier currently serves as a Director of Teledyne Technologies Incorporated.

Having served in several executive roles at Harley-Davidson, Ms. Kumbier contributes extensive experience in the management of a multinational public company, including significant manufacturing, product development, business development, and strategic planning experience.


GRAPHIC DARREN W. MCDEW
Director since 2019 Age 60
Retired General, United States Air Force, and Former Commander of
U.S. Transportation Command, Scott Air Force Base, Illinois
    

General McDew is a retired four-star general who served for 36 years in the United States military before retiring in October 2018. From August 2015 to August 2018, General McDew served as Commander, U.S. Transportation Command, the single manager for global air, land and sea transportation for the U.S. Department of Defense. Previously, he also served as Vice Director for Strategic Plans and Policy for the Joint Chiefs of Staff, Military Aide to the President, Director of Air Force Public Affairs, and Chief of Air Force Senate Liaison Division. General McDew currently serves on the Board of Directors of Parsons Corporation, Rolls-Royce, North America, Inc., United Services Automobile Association, and Boys & Girls Club of America.

Through his extensive leadership in the U.S. Air Force, General McDew contributes significant experience managing large, complex global operations, including strategic planning, security and risk management, cybersecurity, and supply chain and infrastructure management.

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GRAPHIC NANCY MCKINSTRY
Director since 2011 Age 62
Chief Executive Officer and Chairman of the Executive Board of
Wolters Kluwer N.V., Alphen aan den Rijn, the Netherlands
(Global Information, Software, and Services Provider)
    

Ms. McKinstry has been the Chief Executive Officer and Chairman of the Executive Board of Wolters Kluwer N.V. since September 2003 and a member of its Executive Board since June 2001. Ms. McKinstry serves on the Board of Accenture plc, the Board of Overseers of Columbia Business School, and the Board of Directors of Russell Reynolds Associates. Ms. McKinstry is also a member of the European Round Table of Industrialists. Ms. McKinstry served on the Board of Directors of Telefonaktiebolaget LM Ericsson (LM Ericsson Telephone Company) from 2004 to 2012.

As the Chief Executive Officer and Chairman of the Executive Board of Wolters Kluwer N.V., Ms. McKinstry contributes global perspectives and management experience, including an understanding of key issues facing a multinational business such as Abbott's.


GRAPHIC WILLIAM A. OSBORN
Lead Independent Director

Director since 2008 Age 73
Retired Chairman and Chief Executive Officer of Northern Trust Corporation (Multibank Holding Company) and The Northern Trust Company, Chicago, Illinois (Banking Services Company)
    

Mr. Osborn was Chairman of Northern Trust Corporation from 1995 through 2009 and served as its Chief Executive Officer from 1995 through 2007. Mr. Osborn currently serves as a Director of Caterpillar Inc. and General Dynamics Corporation. Mr. Osborn served on the Board of Directors of Nicor, Inc. from 1999 to 2006 and on the Board of Directors of Tribune Company from 2001 to 2012.

As the Chairman and Chief Executive Officer of Northern Trust Corporation and The Northern Trust Company, Mr. Osborn acquired broad experience in successfully overseeing complex global businesses operating in highly regulated industries.

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GRAPHIC MICHAEL F. ROMAN
Director Nominee Age 61
Chairman of the Board, President and Chief Executive Officer, 3M Company, St. Paul, Minnesota (Global Manufacturing and Technology Company)
    

Mr. Roman has served as the Chairman of the Board, President and Chief Executive Officer of 3M Company since May 2019. Previously, he served as Chief Executive Officer from July 2018 to May 2019 and as Chief Operating Officer and Executive Vice President from July 2017 to June 2018 with direct responsibilities for 3M's five business groups and its international operations. From June 2014 to July 2017, Mr. Roman served as 3M's Executive Vice President, Industrial Business Group. He served as 3M's Senior Vice President, Business Development, from May 2013 to June 2014 and as Vice President and General Manager of Industrial Adhesives and Tapes Division from September 2011 to May 2013.

As Chairman of the Board, President and Chief Executive Officer of 3M Company, Mr. Roman has extensive experience leading a multinational public company with multiple businesses, contributing significant manufacturing, supply chain, technology, and finance experience, as well as valuable insights into corporate strategy and risk management.

GRAPHIC DANIEL J. STARKS
Director since 2017 Age 66
Retired Chairman, President and Chief Executive Officer of St. Jude Medical, Inc.,
St. Paul, Minnesota (Medical Device Manufacturer)
    

Mr. Starks served as the Chairman, President and Chief Executive Officer of St. Jude Medical, Inc. from 2004 until his retirement in January 2016, after which he served as its Executive Chairman of the Board until January 2017, when Abbott completed the acquisition of St. Jude Medical. Mr. Starks also served as President and Chief Operating Officer of St. Jude Medical from 2001 to 2004 and as its President and CEO, Cardiac Rhythm Management Business from 1997 to 2001.

Having served as St. Jude Medical's Executive Chairman and its Chairman, President and Chief Executive Officer, and having joined St. Jude Medical in 1996, Mr. Starks contributes not only comprehensive and critical knowledge of the medical devices industry, but also extensive business and management experience operating a global public company in a highly regulated industry.

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GRAPHIC JOHN G. STRATTON
Director since 2017 Age 60
Retired Executive Vice President and President of Global Operations, Verizon Communications Inc., New York, New York (Telecommunications and Media Company)
    

Mr. Stratton served as Executive Vice President and President of Global Operations of Verizon Communications Inc. from February 2015 to December 2018. Previously, he served as Executive Vice President and President of Global Enterprise and Consumer Wireline from April 2014 to February 2015, as President of Verizon Enterprise Solutions from January 2012 to April 2014, and as Chief Operating Officer and Executive Vice President of Verizon Wireless from October 2010 to January 2012. Mr. Stratton currently serves on the Board of Directors of General Dynamics Corporation. Mr. Stratton also served as a member of The President's National Security Telecommunications Advisory Committee from October 2012 to July 2018 and as Director of the Cellular Telecommunications Industry Association from February 2015 to July 2018.

Through his executive leadership at Verizon Communications, Mr. Stratton contributes extensive business and management experience operating a global public company such as Abbott, including valuable insights on corporate strategy and risk management. His service on the National Security Telecommunications Advisory Committee enables him to provide government perspective and experience in a highly regulated industry.

GRAPHIC GLENN F. TILTON
Director since 2007 Age 72
Retired Chairman, President and Chief Executive Officer of UAL Corporation, Chicago, Illinois (Airline Holding Company)
    

Mr. Tilton served as Chairman, President and Chief Executive Officer of UAL Corporation, and Chairman and Chief Executive Officer of United Air Lines, Inc., an air transportation company and wholly owned subsidiary of UAL Corporation, from September 2002 to October 2010. Mr. Tilton also served on the Board of United Continental Holdings, Inc. from 2001 to 2013 and served as its Non-Executive Chairman of the Board from October 2010 to December 2012. Mr. Tilton is also a Director of AbbVie Inc. and Phillips 66. Mr. Tilton also served on the Board of Directors of Lincoln National Corporation from 2002 to 2007, of TXU Corporation from 2005 to 2007, of Corning Incorporated from 2010 to 2012, and as Chairman of the Midwest for JPMorgan Chase & Co. and a member of its companywide Executive Committee from June 2011 to June 2014.

Having previously served as Chief Executive Officer of UAL Corporation and United Air Lines, Non Executive Chairman of the Board of United Continental Holdings, Inc., Chairman of the Midwest for JPMorgan Chase & Co., Chairman, President, and Vice Chairman of Chevron Texaco, and as Interim Chairman of Dynegy, Inc., Mr. Tilton acquired strong management experience overseeing complex multinational businesses operating in highly regulated industries, as well as expertise in finance and capital markets matters.

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GRAPHIC MILES D. WHITE
Director since 1998 Age 66
Executive Chairman of the Board, Abbott Laboratories
    

Mr. White has served as Abbott's Executive Chairman of the Board since March 2020. Mr. White previously served as Abbott's Chairman of the Board and Chief Executive Officer from 1999 to 2020 and as an Executive Vice President from 1998 to 1999. He joined Abbott in 1984. He currently serves as a Director of Caterpillar Inc. and McDonald's Corporation.

Having joined Abbott in 1984 and having served as Chairman of the Board and Chief Executive Officer for 21 years, Mr. White contributes not only his valuable business, management and leadership experience, but also his extensive knowledge of the Company and its global operations, as well as key insights into strategic, management and operation matters, ensuring the appropriate level of oversight and responsibility is applied to all Board decisions.

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THE BOARD OF DIRECTORS AND ITS COMMITTEES

THE BOARD OF DIRECTORS

The Board of Directors held 8 meetings in 2020. The average attendance of all directors at Board and committee meetings in 2020 was 98% and each director attended at least 75% of the total number of Board meetings and meetings of the committees on which he or she served. Abbott encourages its Board members to attend the annual shareholders meeting. Last year, all of Abbott's directors attended the annual shareholders meeting.

The Board has determined that each of the following individuals is independent in accordance with the New York Stock Exchange listing standards: R. J. Alpern, R. S. Austin, S. E. Blount, M. A. Kumbier, E. M. Liddy, D. W. McDew, N. McKinstry, P. N. Novakovic, W. A. Osborn, M. F. Roman, S. C. Scott III, D. J. Starks, J. G. Stratton, and G. F. Tilton. To determine independence, the Board applied the categorical standards attached as Exhibit A to this proxy statement. The Board also considered whether a director has any other material relationships with Abbott or its subsidiaries and concluded that none of these directors had a relationship that impaired the director's independence. This included consideration of the fact that some of the directors or their family members are officers or serve on boards of companies or entities to which Abbott sold products or made contributions or from which Abbott purchased products and services during the year. In making its determination, the Board relied on both information provided by the directors and information developed internally by Abbott.

The Board has risk oversight responsibility for Abbott and administers this responsibility both directly and with assistance from its committees.

LEADERSHIP STRUCTURE

On March 31, 2020, Miles D. White stepped down as Chief Executive Officer, after a remarkable 21-year tenure, and became Executive Chairman of the Board. Robert B. Ford, Abbott's then-President and Chief Operating Officer, succeeded Mr. White as Abbott's President and Chief Executive Officer. With this transition, Mr. Ford became the 13th CEO of Abbott in its 132-year history, all having been appointed from within, a testament to Abbott's strong management philosophy and succession planning.

The Board is actively involved in succession planning and is focused on ensuring leadership continuity. The Board believes that the continuation of Mr. White's service as Executive Chairman is in the best interests of Abbott and its shareholders. Mr. White contributes comprehensive, in-depth knowledge of Abbott's businesses and the global health care industry, as well as valuable insights on leadership and strategy. The Board believes that his advice and guidance to Mr. Ford and the Board will help continue to facilitate a successful leadership transition.

The Board also has a lead independent director that is chosen by and from the independent members of the Board of Directors. Currently, the Chair of the Nominations and Governance Committee, Mr. Osborn, is the lead independent director, whose key functions and responsibilities include:

The Board reviews its leadership structure on at least an annual basis. The Board has determined that this leadership structure ensures the appropriate level of oversight, independence and responsibility is applied to all Board decisions, including risk oversight, and is in the best interests of Abbott and its shareholders.

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DIRECTOR SELECTION

The Nominations and Governance Committee assists the Board of Directors in identifying individuals qualified to become Board members and recommends to the Board the nominees for election as directors at the next annual meeting of shareholders. The process used by the Nominations and Governance Committee to identify a nominee to serve as a member of the Board of Directors depends on the qualities being sought. From time to time, Abbott engages an executive search firm to assist the Committee in identifying individuals qualified to be Board members. Mr. Roman was recommended as a director nominee by a third-party search firm retained to help identify and evaluate potential director nominees.

Abbott's outline of directorship qualifications, which is part of Abbott's corporate governance guidelines, is available in the corporate governance section of Abbott's investor relations website (www.abbottinvestor.com). These qualifications describe specific characteristics that the Nominations and Governance Committee and the Board take into consideration when selecting nominees for the Board, such as: strong management experience and senior-level experience in medicine, hospital administration, medical and scientific research and development, finance, international business, technology, government, and academic administration. An individual nominee is not required to satisfy all the characteristics listed in the outline of directorship qualifications and there is no requirement that all such characteristics be represented on the Board.

In addition, Board members should have backgrounds that, when combined, provide a portfolio of experience and knowledge that will serve Abbott's governance and strategic needs. Board candidates will be considered on the basis of a range of criteria, including broad-based business knowledge and relationships, prominence, and excellent reputations in their primary fields of endeavor, as well as a global business perspective and commitment to good corporate citizenship. Directors should have demonstrated experience and ability that is relevant to the Board of Directors' oversight role with respect to Abbott's business and affairs. Each director's biography includes the particular experience and qualifications that led the Board to conclude that the director should serve on the Board. The directors' biographies are on pages 16 through 22.

A description of the procedure for the recommendation and nomination of directors, including by proxy access, is on page 99.

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BOARD DIVERSITY AND COMPOSITION

In the process of identifying nominees to serve as members of the Board of Directors, the Nominations and Governance Committee considers the Board's diversity of relevant experience, areas of expertise, ethnicity, gender, and geography and assesses the effectiveness of the process in achieving that diversity.

The process used to identify and select nominees has resulted in a balanced, diverse, and well-rounded Board of Directors that possesses the skills, experiences, and perspectives necessary for its oversight role. All of Abbott's directors exhibit:

     Global business perspective        Successful track record        Innovative thinking

  

 

Knowledge of corporate governance requirements and practices

 

  

 

High integrity

 

  

 

Commitment to good corporate citizenship

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BOARD EVALUATION PROCESS

Each year, Abbott's directors evaluate the effectiveness of the Board and its Committees in performing its governance and risk oversight responsibilities. Directors assess the performance of their peers, as well as the full Board of Directors and each of the Committees on which they serve, as follows:

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COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has five committees established in Abbott's By-Laws: Audit Committee, Compensation Committee, Nominations and Governance Committee, Public Policy Committee, and Executive Committee.

All members of the Audit Committee, Compensation Committee, Nominations and Governance Committee, and Public Policy Committee are independent. These Committees are governed by written charters setting forth their respective responsibilities, and each Committee reviews its charter at least annually, with any changes being recommended to the full Board for approval. Copies of the Committee charters are all available in the governance section of Abbott's investor relations website (www.abbottinvestor.com).

  Current Members

Audit*

Compensation

Nominations
and Governance


Public Policy†

Executive

  R. J. Alpern     GRAPHIC GRAPHIC    
  R. S. Austin GRAPHIC GRAPHIC GRAPHIC
  S. E. Blount     GRAPHIC GRAPHIC    
R. B. Ford GRAPHIC
  M. A. Kumbier GRAPHIC GRAPHIC        
E. M. Liddy GRAPHIC GRAPHIC GRAPHIC
  D. W. McDew     GRAPHIC GRAPHIC    
N. McKinstry GRAPHIC GRAPHIC
  P. N. Novakovic   GRAPHIC   GRAPHIC GRAPHIC  
W. A. Osborn GRAPHIC GRAPHIC GRAPHIC
  D. J. Starks       GRAPHIC    
J. G. Stratton GRAPHIC GRAPHIC
  G. F. Tilton GRAPHIC     GRAPHIC    
M. D. White GRAPHIC
  Total Meetings Held in 2020 8 4 5 4 0  

GRAPHIC

*
Each of the committee members is financially literate, as is required of audit committee members by the New York Stock Exchange. The Board of Directors has determined that Edward M. Liddy and Nancy McKinstry are "audit committee financial experts." The Board of Directors will appoint a new Audit Committee chair upon Mr. Liddy's retirement at the Annual Meeting.

Ms. Novakovic is not standing for re-election at the Annual Meeting. The Board of Directors will appoint a new Public Policy Committee chair upon conclusion of her tenure at the Annual Meeting.

Audit Committee

The Audit Committee assists the Board of Directors in fulfilling its oversight responsibility with respect to:

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In performing these functions, the Audit Committee meets regularly with the independent auditor, Abbott's management, and Abbott's internal auditors to review the adequacy, effectiveness and quality of Abbott's accounting and financial reporting principles, policies, procedures and controls, as well as Abbott's enterprise risk management, including Abbott's risk assessment and risk management policies.

A copy of the report of the Audit Committee is on page 82.

Compensation Committee

The Compensation Committee assists the Board of Directors in carrying out the Board's responsibilities relating to the compensation of Abbott's executive officers and directors. Its primary responsibilities include:

The Compensation Committee engaged Meridian Compensation Partners, LLC as its compensation consultant for 2020. Meridian performs no other work for Abbott. Based on its evaluation of Meridian's independence in accordance with the New York Stock Exchange listing standards and information provided by Meridian, the Committee determined that the work performed by Meridian does not present any conflicts of interest.

A copy of the Compensation Committee report is on page 60.

Nominations and Governance Committee

The Nominations and Governance Committee assists the Board in fulfilling its oversight responsibility with respect to governance matters. Its primary responsibilities include:

The process used by this Committee to identify a nominee to serve as a member of the Board of Directors depends on the qualities being sought. From time to time, Abbott engages an executive search firm to assist the Committee in identifying individuals qualified to be Board members. The process used by the Committee to identify nominees is described on page 24 in the section captioned, "Director Selection."

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Public Policy Committee

The Public Policy Committee assists the Board of Directors in fulfilling its oversight responsibility with respect to:

Executive Committee

The Executive Committee may exercise all the authority of the Board in the management of Abbott, except for matters expressly reserved by law for Board action.

COMMUNICATING WITH THE BOARD OF DIRECTORS

Interested parties may communicate with the Board of Directors by writing a letter to the Chairman of the Board, to the Chair of the Nominations and Governance Committee, who acts as the lead independent director, or to the independent directors c/o Abbott Laboratories, 100 Abbott Park Road, D-364, AP6D, Abbott Park, Illinois 60064, Attention: Corporate Secretary. The General Counsel and Corporate Secretary regularly forwards to the addressee all letters other than mass mailings, advertisements, and other materials not relevant to Abbott's business. In addition, directors regularly receive a log of all correspondence received by Abbott that is addressed to a member of the Board and may request any correspondence on that log.

CORPORATE GOVERNANCE MATERIALS

Abbott's corporate governance guidelines, outline of directorship qualifications, director independence standards, code of business conduct, and the charters of Abbott's Audit Committee, Compensation Committee, Nominations and Governance Committee, and Public Policy Committee are all available in the corporate governance section of Abbott's investor relations website (www.abbottinvestor.com).

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2020 DIRECTOR COMPENSATION

Messrs. White and Ford are not compensated for serving on the Board or Board committees. Abbott's remaining directors, who are all non-employee directors, are compensated for their service under the Abbott Laboratories Non-Employee Directors' Fee Plan and the Abbott Laboratories 2017 Incentive Stock Program.

The following table sets forth a summary of the non-employee directors' 2020 compensation.

Name


Fees Earned
or Paid in Cash
($)(1)



Stock
Awards
($)(2)



Option
Awards
($)(3)



Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(4)








All Other
Compensation
($)(5)



Total
($)


R. J. Alpern

$ 126,000 $ 184,920 $ 0 $ 63,098 $ 25,000 $ 399,018  

R. S. Austin

152,000 184,920 0 0 25,000 361,920

S. E. Blount

126,000 184,920 0 9,508 25,000 345,428  

M. A. Kumbier

132,000 184,920 0 0 0 316,920

E. M. Liddy

151,000 184,920 0 0 0 335,920  

D. W. McDew

126,000 184,920 0 0 0 310,920

N. McKinstry

132,000 184,920 0 0 20,000 336,920  

P. N. Novakovic

141,000 184,920 0 0 0 325,920

W. A. Osborn

156,000 184,920 0 0 0 340,920  

S. C. Scott III

44,000 0 0 0 0 44,000

D. J. Starks

126,000 184,920 0 0 0 310,920  

J. G. Stratton

126,000 184,920 0 0 25,000 335,920

G. F. Tilton

132,000 184,920 0 0 25,000 341,920  
(1)
Under the Abbott Laboratories Non-Employee Directors' Fee Plan, non-employee directors earn $10,500 for each month of service as a director. Audit Committee members, other than the Audit Committee chair, receive $500 for each month of service on the Audit Committee. Board Committee chairs receive monthly fees of: $2,083.33 for the Audit Committee chair, $1,666.66 for the Compensation Committee chair, $1,250.00 for the Public Policy Committee chair, and $1,250.00 for the chair of any other Board committee. In addition, the lead independent director earns $2,500 for each month of such service and does not receive a fee for service as Nominations and Governance Committee chair. Fees earned under the Abbott Laboratories Non-Employee Directors' Fee Plan are paid in cash to the director, paid in the form of vested non-qualified stock options (based on an independent appraisal of their fair value), deferred (as a non-funded obligation of Abbott), or paid currently into an individual grantor trust established by the director. The distribution of deferred fees and amounts held in a director's grantor trust generally commences when the director reaches age 65, or upon retirement from the Board of Directors, if later. The director may elect to have deferred fees and fees deposited in trust credited to either a guaranteed interest account or to a stock equivalent account that earns the same return as if the fees were invested in Abbott shares. If necessary, Abbott contributes funds to a director's trust so that as of year-end the stock equivalent account balance (net of taxes) is not less than seventy-five percent of the market value of the related common shares at year-end.

(2)
The amounts reported in this column represent the aggregate grant date fair value of the awards calculated in accordance with Financial Accounting Standards Board ASC Topic 718. Abbott determines the grant date fair value of stock unit awards by multiplying the number of restricted stock units granted by the average of the high and low market prices of an Abbott common share on the date of grant. In addition to the fees described in footnote 1, each non-employee director elected to the Board of Directors at the annual shareholders meeting receives vested restricted stock units having a value of $185,000 (rounded down) under the Abbott Laboratories 2017 Incentive Stock Program). In 2020, this was 1,974 units. The non-employee directors receive cash payments equal to the dividends paid on the shares covered by the units at the same rate as other shareholders. Upon termination, retirement from the Board, death, or a change in control of Abbott, a non-employee director will receive one common share for each restricted stock unit outstanding under the Incentive Stock Program. Each director is required to own, within five years of becoming a director, the number of Abbott shares having a fair

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    market value equal to five times the annual director fees earned or paid in cash. All directors with five years tenure or more meet or exceed the guidelines. The following Abbott restricted stock units were outstanding as of December 31, 2020: R. J. Alpern, 32,380; R. S. Austin, 40,043; S. E. Blount, 25,640; M. A. Kumbier, 4,215; E. M. Liddy, 27,807; D. W. McDew, 1,974; N. McKinstry, 25,640; P. N. Novakovic, 27,807; W. A. Osborn, 34,297; D. J. Starks, 10,597; J. G. Stratton, 7,160; and G. F. Tilton, 36,027.

(3)
The following options were outstanding as of December 31, 2020: R. S. Austin, 57,618; E. M. Liddy, 56,414; N. McKinstry, 56,356; P. N. Novakovic, 93,553; W. A. Osborn, 37,733; and S. C. Scott III, 44,440.

(4)
The totals in this column include reportable interest credited under Abbott Laboratories Non-Employee Directors' Fee Plan during the year.

(5)
Charitable contributions made by Abbott's non-employee directors are eligible for a matching contribution (up to $25,000 annually). The amounts reported in this column represent charitable matching grant contributions, as follows: R. J. Alpern, $25,000; R. S. Austin, $25,000; S. E. Blount, $25,000; N. McKinstry, $20,000; J. G. Stratton, $25,000; and G. F. Tilton, $25,000.

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SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS

The table below reflects the number of Abbott common shares beneficially owned as of January 31, 2021 by (i) each director nominee, (ii) each individual serving as Chief Executive Officer and as Chief Financial Officer during 2020, and the three other most highly paid executive officers in 2020 (collectively, the "named officers"), and (iii) all directors and executive officers of Abbott as a group. It also reflects the number of stock equivalent units held by non-employee directors under the Abbott Laboratories Non-Employee Directors' Fee Plan and restricted stock units held by non-employee directors, named officers, and executive officers.

    Name

Shares
Beneficially
Owned(1)(2)



Stock Options
Exercisable
Within 60 Days of
January 31, 2021(3)




Stock
Equivalent
Units



 
    H. L. Allen   151,896   1,109,341   0    
  R. J. Alpern   32,380   0   8,214  
    R. S. Austin   40,043   57,618   0    
  S. E. Blount   28,240   0   0  
    R. B. Ford   244,868   1,218,661   0    
  R. E. Funck, Jr.   200,475   378,314   0  
    J. F. Ginascol   89,003   169,059   0    
  M. A. Kumbier   5,248   0   0  
    E. M. Liddy   30,127   56,414   21,584    
  D. W. McDew   1,974   0   0  
    N. McKinstry   25,640   56,356   0    
  P. N. Novakovic   41,004   93,553   0  
    W. A. Osborn   79,745   37,733   28,935    
  M. F. Roman   0   0   0  
    D. G. Salvadori   102,433   594,254   0    
  D. J. Starks   7,020,657   0   0  
    J. G. Stratton   10,615   0   6,049    
  G. F. Tilton   43,377   0   33,196  
    M. D. White   3,141,293   5,959,728   0    
  B. B. Yoor   69,886   197,150   0  
    All directors and executive officers as a group(4)(5)   12,367,861   14,370,846   97,978    
(1)
This column includes shares held in the officers' accounts in the Abbott Laboratories Stock Retirement Trust as follows: R. E. Funck, Jr., 17,758; M. D. White, 35,146; B. B. Yoor, 2,272; and all executive officers as a group, 79,829. Each officer has shared voting power and sole investment power with respect to the shares held in his or her account.

(2)
This column includes restricted stock units held by the non-employee directors and payable in stock upon their retirement from the Board as follows: R. J. Alpern, 32,380; R. S. Austin, 40,043; S. E. Blount, 25,640; M. A. Kumbier, 4,215; E. M. Liddy, 27,807; D. W. McDew, 1,974; N. McKinstry, 25,640; P. N. Novakovic, 27,807; W. A. Osborn, 34,297; D. J. Starks, 10,597; J. G. Stratton, 7,160; G. F. Tilton, 36,027; and all directors as a group, 273,587.

(3)
This column also includes 72,590 restricted stock units held by all named officers and executive officers as a group that will be payable in stock within 60 days of January 31, 2021.

(4)
Certain executive officers of Abbott are fiduciaries of several employee benefit trusts maintained by Abbott. As such, they have shared voting and/or investment power with respect to the common shares held by those trusts. The table does not include the shares held by the trusts. As of January 31, 2021, these trusts owned a total of 29,672,769 (1.7%) of the outstanding shares of Abbott.


None of the directors, named officers, or executive officers has pledged shares.

(5)
No director or executive officer beneficially owns more than one percent of the outstanding shares of Abbott. Excluding the shared voting and/or investment power over the shares held by the trusts described in footnote 4, the directors and executive officers as a group beneficially own 1.5 percent of the outstanding shares of Abbott.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION

This Compensation Discussion and Analysis (CD&A) describes Abbott's executive compensation program in 2020. In particular, this CD&A explains how the Compensation Committee (the Committee) and Board of Directors made compensation decisions for the Company's executives, including the seven named officers: Robert B. Ford, President and Chief Executive Officer effective March 31, 2020 (previously President and Chief Operating Officer); Robert E. Funck, Jr., Executive Vice President, Finance and Chief Financial Officer effective March 1, 2020; Hubert L. Allen, Executive Vice President, General Counsel and Secretary; John F. Ginascol, Executive Vice President, Core Diagnostics; Daniel G. Salvadori, Executive Vice President, Nutritional Products; Miles D. White, Executive Chairman of the Board effective March 31, 2020 (previously Chairman and Chief Executive Officer); and Brian B. Yoor, former Executive Vice President, Finance and Chief Financial Officer.

The CD&A also describes the process the Committee utilizes to examine performance in the context of executive pay decisions, the performance goals and results for each named officer, and recent updates to our compensation program. This year's CD&A reflects the feedback from our shareholders gathered during our 2020 shareholder outreach described on page 34.

2020 PERFORMANCE

Abbott's sustained strong performance has resulted in total shareholder return (TSR) significantly exceeding the peer median and major market indices on a one-, three-, and five-year basis.

Abbott's three-year TSR of 101.7% is more than twice that of the peer group median and the broader Standard & Poor's 500 (S&P 500) and more than three times that of the Dow Jones Industrial Average (DJIA) market index. These consistent above-market returns are driven by the strength of our diversified business model with leadership positions in some of the largest and fastest growing markets in healthcare and innovative product portfolios across our businesses.

Abbott delivered strong returns for shareholders in 2020, despite the global market challenges from COVID-19, and achieved or exceeded the financial targets that were set before the pandemic in January 2020. Abbott's one-year TSR was 28.0%, more than three times the peer median TSR, and significantly above major market indices, a testament to the strength of our diversified business model and ability to innovate and deliver in this challenging environment.


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In addition to delivering significant shareholder returns, Abbott continued to take important steps to position the Company for long-term, sustainable growth.

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CHANGES BASED ON SHAREHOLDER FEEDBACK AND MARKET PRACTICES

During 2020, we conducted extensive shareholder outreach to discuss our compensation program, among other topics. In the spring, we engaged shareholders representing over 60% of our outstanding shares in an open dialogue to discuss various topics, including Abbott's market-leading disclosures that enhance shareholder understanding of how pay decisions are made and how the metrics we use are linked to business strategy and goals. Their feedback was overwhelmingly positive, which was reflected in the 92% support for our Say-on-Pay Proposal.

As illustrated in the table below, over the past several years we have made numerous changes to our program and our proxy statement based on feedback from our shareholders as well as a review of market practices.

  
RECENT EXECUTIVE COMPENSATION CHANGES
    


 
 

 

Significantly increased disclosure related to payouts for both annual and long-term incentives

Revised annual cash incentive plan goals and weighting

Changed performance-based restricted stock awards to vest only over a 3-year term with no more than one-third of the award vesting in any one year

Implemented a strengthened recoupment policy

 

Introduced new long-term incentive measures to reflect sustained performance over a three-year period

Increased director share ownership guidelines

Increased the ROE target for vesting of performance restricted shares

Updated our peer group to reflect increased size and complexity of business
    


 

 

ABBOTT'S PEER GROUP FOR PAY AND COMPANY PERFORMANCE BENCHMARKING

To determine the competitiveness of our compensation and benefit programs, the Committee, in consultation with its independent consultant, annually compares the level of compensation, pay practices, and our relative performance to those of peer companies. Our Compensation Committee reviewed our peer group in 2020 to determine whether any changes were necessary to better reflect the increased size (sales and market capitalization) and complexity of Abbott's business. They also reviewed whether United Technologies should remain a peer following its corporate transaction with Raytheon in which they merged and spun off various businesses, resulting in the new company, Raytheon Technologies.

Based on this review, the Compensation Committee replaced Raytheon Technologies with Cisco and Nike. This revised peer group strikes the appropriate balance between size (revenue and market capitalization between approximately one-third and three times Abbott's), growth and return profiles, geographic breadth, and management and operating structure. This approach has been overwhelmingly supported by our investors during shareholder outreach.

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The updated peer group is summarized below, showing the primary characteristics for each company selected, including the Abbott business segment(s) represented by the peer company.

  Company Name Sales/
Rev.(1)
(billions)
Market
Cap(1)
(billions)
% Rev.
Outside
U.S.
Similar #
Employees
Mfg. Driven/
Consumer-
Facing
Abbott Business Segment(s)/Characteristics
Represented
 
  3M Company $ 32.2 $ 100.8 ü ü ü Diagnostics  
  Becton Dickinson $ 17.1 $ 72.8 ü ü ü Diagnostics, Medical Devices  
  Boston Scientific $ 10.1 $ 51.5 ü   ü Medical Devices  
Bristol-Myers Squibb $ 39.4 $ 140.2 ü ü Established Pharmaceuticals  
  Cisco $ 48.1 $ 189.1 ü ü ü Diagnostics, Medical Devices  
The Coca-Cola Company $ 33.5 $ 235.7 ü ü ü Consumer  
  Danaher Corporation $ 22.3 $ 157.8 ü ü ü Diagnostics  
Honeywell International $ 32.6 $ 149.2 ü ü ü Diagnostics, Medical Devices  
  Johnson & Johnson $ 82.6 $ 414.3 ü ü ü Diagnostics, Established Pharmaceuticals, Medical Devices  
Medtronic $ 27.9 $ 157.7 ü ü ü Medical Devices  
  Merck $ 47.3 $ 207.0 ü ü ü Established Pharmaceuticals  
Mondelez International $ 26.6 $ 83.6 ü ü ü Consumer  
  Nike $ 38.3 $ 222.1 ü ü ü Consumer  
  Procter & Gamble $ 74.0 $ 345.0 ü ü ü Consumer  
  Reckitt Benckiser(2) $ 18.4 $ 63.4 ü   ü Nutrition  
Stryker Corporation $ 14.4 $ 92.1 ü Medical Devices  
  Thermo Fisher Scientific $ 32.2 $ 184.6 ü ü ü Diagnostics  
Peer Group Median $ 32.2 $ 157.7  
  Abbott $ 34.6 $ 194.1 ü ü ü    
Abbott Percentile Rank 65th 71st  
(1)
Data source: Nasdaq IR Insight database reflects most recently disclosed (as of January 31, 2021) trailing 12-month sales/revenue. The market cap reflects values on December 31, 2020.

(2)
Revenue/Market Cap converted to USD for companies outside the U.S.

BASIS FOR COMPENSATION DECISIONS

Abbott and its Compensation Committee have designed a compensation program that balances short- and long-term objectives to focus our executives on actions that create value today, while building for sustainable future success. Approximately two-thirds of our pay is equity-based, directly tying a significant portion of executive compensation to shareholder returns.

Our compensation program is market-based (to ensure our ability to attract and retain talented executives) and produces compensation outcomes that are performance-based (to incent the achievement of profitable growth that increases shareholder value).

COMPENSATION PROGRAM IS MARKET-BASED

All components of total direct compensation are market-based. Each year, the Compensation Committee reviews market data with the independent compensation consultant to ensure our programs are aligned and our officers are positioned appropriately relative to the market.

Base Salary

Base salary targets are initially set using the median of the peer group as a benchmark. Base salaries then vary depending on the officer's experience, expertise, and performance. The average base salary of our executive officers is approximately at the market median.

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Annual Incentive Plan

Annual incentive targets are initially set using the median of the peer group as a benchmark. The targets may vary based on other factors, including internal pay comparisons. Further linkage to the market is achieved by setting targets that require our officers to exceed the anticipated growth of the market in which they compete in order to achieve a target payout of their annual incentives.

Long-Term Incentive Plan (LTI)

To set annual LTI award guidelines, the Committee first reviews LTI grants made by peer companies to identify the competitive market range. Each year the guidelines are set at the appropriate level within the competitive market range based on Abbott's relative performance, as described on the following page. To recognize the continued growth focus of Abbott and to directly align the interests of executive officers with the interests of our shareholders, the Compensation Committee grants long-term incentive awards in the form of 50% stock options and 50% performance restricted shares. This mix of incentive awards is consistent with our peers.

COMPENSATION OUTCOMES ARE PERFORMANCE-BASED

Other than base salary, which is the smallest component of our executives' compensation, all remaining components of Total Direct Compensation (i.e., annual incentive, performance-based restricted stock awards, and stock options) are aligned with individual, business segment and Company performance.

Annual Incentive Plan

In order for the annual incentive plan to pay out, the EPS goal must be achieved. If the EPS goal is not achieved, then the annual incentive plan is not funded. Final payouts are determined based upon performance relative to annual goals and are capped as a percentage of consolidated net earnings (CEO cap is 0.15%; other NEO cap is 0.075%). The following formula summarizes the annual incentive payout process for officers, assuming the EPS goal is achieved.

For example:

BASE SALARY       BONUS TARGET %      

TOTAL GOAL SCORE

      AWARD PAYOUT
 $525,000   x   90%   x  

95%

  =   $448,875
 

For 2020 performance, annual incentive payouts for Abbott executive officers averaged 96% of target. For individual calculations for each named officer, see pages 42 to 57. The annual incentive plan is formula driven based on financial, strategic, and talent and succession results. Officer financial goals are based on adjusted financial measures that reflect the true results of our ongoing operations and are set based on the expected market growth of the businesses in the markets in which we compete.

The goals used to determine annual incentive payouts for Abbott executive officers were set at the beginning of 2020. Abbott did not adjust 2020 financial goals due to the impact of the pandemic. Instead, the Compensation Committee evaluated and rewarded each business leader based on their original goals, as well as their contribution to the Company's extraordinary response to the pandemic.

This response, which enhanced Abbott's position as a world leader in diagnostic testing, included:

In addition, business continuity across the Company was maintained through close partnerships with existing suppliers and a focus on supply chain management that ensured customer needs were met and R&D programs continued yielding approvals and a strong pipeline for future growth.

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Long-Term Incentive Plan

Throughout the process, Abbott's awards are based on Company and individual performance, from guideline positioning all the way through vesting. Conversely, most other companies reflect performance only at the company level, through relative TSR at vesting. Thus, Abbott's process is much more rigorous and performance-based than other companies' programs.

The Committee positions LTI award guidelines relative to the market by comparing Abbott's 3-year TSR performance against our peers. 5- and 1-year TSR performance are also referenced to ensure long-term performance is sustained, and current performance is on track with shareholder expectations.

For example, guidelines for grants made in February 2020 were set at the 60th percentile of our peer group, reflecting 100th percentile relative 3-year TSR performance for the period ending in 2019. The 5-year TSR ranked at the 75th percentile of our peer group for the period ending in 2019, while the 1-year TSR was at the 25th percentile of our peer group.

The recommendation for each officer starts with the Company LTI award guideline (based on relative TSR performance and market data as described above) for the officer's position and is adjusted based upon assessment of their sustained contributions over the last three years. Contribution scores are totaled and used to adjust each officer's award guideline. Final awards may be increased or decreased based on the long-term impact each individual officer had on the organization. For example:

    SAMPLE INDIVIDUAL LTI PERFORMANCE ASSESSMENT
 
    METRIC     2017     2018     2019     OVERALL  
                   
    Sales and Market Growth Contribution     Met (0)     Did not meet (-1)     Exceeded (+1)     0  
                   
    Margin Contribution       Met (0)       Met (0)       Exceeded (+1)       +1    
    Strategic Financial Contribution     Met (0)     Met (0)     Met (0)     0  
                   
                            Total       +1    
                LTI Adjustment
  110%  
                   
 LTI ADJUSTMENT LEGEND
 TOTAL   RESULT
 
 +4 or More   125%
 
 +1 to +3   110%
 0   100%
 
 -1 or -2   90%
 -3 or Less   75%
 

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Awards granted in 2020, based on individual officer performance for the three-year period ending in 2019, resulted in awards ranging from the 10th percentile to the 90th percentile of our peer group, with an average of the 60th percentile. For individual calculations for each named officer, see pages 42 to 57.

Since stock options realize value only through share price appreciation, the value realized upon the exercise of vested stock options directly aligns the compensation earned with the value shareholders received over the same period. Options are also aligned with shareholder value through the impact of relative TSR in determining the LTI award guidelines.

Performance restricted shares vest one-third each year only if the Adjusted Return on Equity (ROE) performance target is achieved. Vesting is absolute—either 100% or 0%. There is no partial vesting if the target is missed and no additional vesting upside if the Company over-performs. The Committee believes Adjusted ROE is the appropriate performance measure for vesting because ROE measures how much profit the Company generates over the long-term with the capital that shareholders have invested and is a measure reflecting deployment of capital or capital allocation. Adjusted ROE reflects earnings from continuing operations excluding specified items, such as intangible amortization expense and various other costs including expenses related to restructuring actions or business acquisitions. Adjusted ROE also excludes the impact of foreign exchange on equity.

In 2021, the Adjusted ROE vesting target to determine future vesting was increased from 13% to 14%. This increase follows similar increases in prior years, which have increased this target 40% since 2014. This is consistent with our stated intent to increase our Adjusted ROE targets over time following the separation of AbbVie, which had a significant impact on our ROE and other return measures, including Return on Assets (ROA).

Prior to the separation of Abbott and AbbVie, the AbbVie business accounted for the majority (65%) of Abbott's adjusted net income. However, at the separation of AbbVie, Abbott retained the majority (90%) of the equity. While Abbott's ROE was disproportionally lower following the AbbVie separation, shareholders that retained both their Abbott and AbbVie shares over the past eight years since the AbbVie separation would have seen a 231% appreciation in their holdings.

 

IMPACT OF ABBOTT/ABBVIE SEPARATION

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Summary of LTI Process

The graphic below summarizes the LTI process and its direct linkage to the market and company and individual performance.

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COMPENSATION PROGRAM IS DIRECTLY LINKED TO BUSINESS STRATEGY

Our compensation program is also linked directly to our business strategy, to ensure that officers are focused on those activities that drive our business strategy and create value for shareholders.

The table below explains the strategic link of the key metrics used in our annual and long-term incentive plans.

    EVALUATION OF PERFORMANCE
 
    METRIC     STRATEGIC LINK
       
    Our annual incentive plan is aligned to the following drivers of shareholder value:    
    Sales     Measures Abbott's ability to compete effectively in the markets in which we participate and focuses management on achieving strong top-line growth, consistent with our business strategy.  
       
    Diluted EPS       Basis on which Abbott sets annual performance expectations and consistent with how we report operating results to the financial community.    
    Return on Assets     Measures profitability and how effectively Company assets are used to generate profit.  
       
    Free Cash Flow       Recognizes the importance of generating cash to fund ongoing investments in our business and to pay down debt, pay dividends, and fund investments outside of capital expenditures.    
    Our long-term incentive plan relies on the following Company metrics, and 3-year sustained individual performance metrics, to determine award value:    
    Total Shareholder Return     Measures Abbott's stock and dividend performance against our peer group. Used to position LTI award guidelines relative to the market.  
       
    3-year LTI Contribution Metrics       Measures how each officer has performed relative to their sales, margin, and strategic financial contribution goals. Used to adjust LTI award guidelines to reflect individual performance.    
    Return on Equity     Measures how much profit Abbott generates over the long-term with the capital that shareholders have invested. Used to determine if performance-restricted awards vest.  
       

Officer financial goals are set and assessed based on adjusted measures that the Committee believes more accurately reflect the results of our ongoing operations. We make certain adjustments for specified items, whether favorable or unfavorable, that are unusual or unpredictable, such as cost reduction initiatives, restructuring programs, integration activities and other business acquisition-related costs, and the impact of significant tax changes. We also exclude intangible amortization expense to provide greater visibility on the results of operations excluding these costs, similar to how Abbott's management internally assesses performance.

The Committee believes these adjusted measures provide a more stable assessment of Abbott's core business and encourage decision-making that considers long-term value. They also align compensation goals with the financial guidance we communicate to investors, which is also based on adjusted measures.

COMPENSATION LINK TO SUSTAINABILITY

Our leadership covenant includes commitments to multiple environmental, social and governance efforts. Examples include:

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Since this covenant is considered the minimum requirement of being an officer at Abbott, any officer that does not fulfill the covenant can receive a reduction of up to 100% of their annual incentive and/or long-term incentive awards.

In addition, we maintain several sustainability commitments, which are further described in our Proxy Summary on page 10, and include:

PAY DECISIONS FOR NAMED EXECUTIVE OFFICERS

The following pages detail the goals and metrics used to determine each named officer's payout under our annual and long-term incentive plans. For some goals, the target is not disclosed for competitive reasons. The long-term incentive decisions shown in the Summary Compensation Table of this proxy statement and detailed here were based upon performance through 2019, whereas the annual incentive plan payouts are based upon performance during 2020.

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NAMED EXECUTIVE OFFICER COMPENSATION DECISIONS

GRAPHIC ROBERT B. FORD
 
President and Chief Executive Officer, and Director
    
    

Mr. Ford previously served as President and Chief Operating Officer until his appointment to President and Chief Executive Officer on March 31, 2020.

Base Salary

Mr. Ford's annual base salary was increased to $1,400,000 in March 2020 in connection with his promotion to President and Chief Executive Officer.

Annual Incentive Plan

Mr. Ford's target bonus was increased to 175% in connection with his promotion to President and Chief Executive Officer. Based on performance in 2020, Mr. Ford received a bonus in February 2021 which was calculated as follows:

  2019
2020 GOAL MEASUREMENT
2020
  GOAL
  RESULTS
ACHIEVED


  GOAL
WEIGHT


  THRESHOLD
  TARGET
  MAXIMUM
  RESULTS
ACHIEVED


  GOAL
SCORE


 
  FINANCIAL METRICS(1)
 
  Adjusted Sales(2) $31.96B 25% $34.02B $34.18B $34.33B $34.92B 37.5%
 
  Adjusted Diluted EPS   $3.24   25%   $3.55   $3.60   $3.65   $3.65   37.5%  
 
  Adjusted ROA 10.9% 10% 11.6% 11.7% 11.8% 11.8% 15.0%
 
  Free Cash Flow   $4.5B   10%   $4.3B   $4.6B   $4.8B   $5.7B   15.0%  
 
                         Financial Total   105.0%  
(1)
Adjusted Sales exclude the impact of foreign exchange on actual sales relative to the goal target. Adjusted Diluted EPS is diluted earnings per common share from continuing operations excluding specified items, such as intangible amortization expense and various other costs including expenses related to restructuring actions or business acquisitions. Adjusted Return on Assets (ROA) reflects earnings from continuing operations, excluding interest expense and specified items. Adjusted ROA also reflects total assets less current liabilities excluding short-term borrowings. Free Cash Flow equals Operating Cash Flow less acquisitions of property and equipment.

(2)
Set based on expected market growth of the businesses and markets in which we compete. To achieve target payout, must increase market share.
 
  STRATEGIC METRICS(3)   
 
  Diabetes Care Sales Growth 10% 93.7% of Target Target 106.0% of Target Below Threshold 0.0%
 
  Structural Heart Sales Growth   10%   83.6% of Target   Target   109.3% of Target   Below Threshold   0.0%