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

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BIOGEN IDEC INC.
(Name of Registrant as Specified In Its Charter)

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

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NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 2011

 

To our stockholders:

 

The annual meeting of stockholders of Biogen Idec Inc., a Delaware corporation, will be held at 9:00 a.m., local time, on Thursday, June 2, 2011 at our offices located at 15 Cambridge Center, Cambridge, Massachusetts 02142 for the following purposes:

 

1. If Proposal 5 is approved by our stockholders, to elect the twelve nominees identified in this Proxy Statement to our Board of Directors to serve for a one-year term extending until the 2012 annual meeting of stockholders and their successors are duly elected and qualified. If Proposal 5 is not approved, to elect the four nominees identified in this Proxy Statement as Class 2 directors to our Board of Directors to serve for a three-year term extending until the 2014 annual meeting of stockholders and their successors are duly elected and qualified.

 

2. To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011.

 

3. To hold an advisory vote on executive compensation.

 

4. To hold an advisory vote on the frequency of the advisory vote on executive compensation.

 

5. To approve an amendment to our Amended and Restated Certificate of Incorporation eliminating the classification of our Board of Directors.

 

6. To transact such other business as may be properly brought before the meeting and any adjournments or postponements.

 

Only Biogen Idec stockholders of record at the close of business on April 4, 2011 will be entitled to vote at the meeting.

 

Our Board of Directors recommends voting FOR the election of all of the director nominees listed in Proposal 1, FOR Proposals 2, 3 and 5, and for the ONE YEAR option for Proposal 4.

 

Your vote is extremely important regardless of the number of shares you own. Whether or not you expect to attend the annual meeting in person, we urge you to vote as promptly as possible by telephone or by Internet or by signing, dating and returning a printed proxy card or voting instruction form, as applicable.

 

BY ORDER OF OUR BOARD OF DIRECTORS,

 

Susan H. Alexander,
Secretary

 

133 Boston Post Road

Weston, Massachusetts 02493

April 21, 2011

 

TABLE OF CONTENTS

 

Biogen Idec Inc.
133 Boston Post Road
Weston, Massachusetts 02493

 

PROXY STATEMENT FOR 2011 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 2011

 

We are making this Proxy Statement and other annual meeting materials available to you on the Internet or, upon your request, sending printed versions of these materials to you by mail because the Board of Directors of Biogen Idec Inc. (Biogen Idec or Company) is soliciting your proxy to vote at our 2011 annual meeting of stockholders (Annual Meeting) to be held at 9:00 a.m., local time, on Thursday, June 2, 2011 at our offices located at 15 Cambridge Center, Cambridge, Massachusetts 02142 for the purposes summarized in the accompanying Notice of 2011 Annual Meeting of Stockholders. Our 2010 Summary Annual Report and 2010 Annual Report on Form 10-K are also available with this Proxy Statement.

 

Who can vote?

 

Each share of our common stock that you own as of the close of business on the record date of April 4, 2011 (Record Date) entitles you to one vote on each matter to be voted upon at the Annual Meeting. As of the Record Date, 241,150,369 shares of our common stock were outstanding and entitled to vote. We are making this Proxy Statement and other Annual Meeting materials available on the Internet or, upon request, sending printed versions of these materials on or about April 21, 2011 to all stockholders of record as of the Record Date. For 10 days before the Annual Meeting, a list of stockholders entitled to vote will be available for inspection at our offices located at 133 Boston Post Road, Weston, Massachusetts 02493. If you would like to review the list, please call our Investor Relations department at (781) 464-2442.

 

Who can attend the Annual Meeting?

 

Attendance at the Annual Meeting will be limited to stockholders of Biogen Idec as of the Record Date (or their authorized representatives). If your shares are held by a bank, broker or other nominee, please bring to the Annual Meeting your bank or broker statement evidencing your beneficial ownership of Biogen Idec stock to gain admission to the Annual Meeting. Stockholders who plan to attend the Annual Meeting must present valid photo identification. Stockholders of record will be verified against an official list available at the registration area. We reserve the right to deny admittance to anyone who cannot show sufficient proof of share ownership as of the Record Date.

 

How do proxies work?

 

Our Board of Directors is asking for your proxy authorizing us to vote your shares at the Annual Meeting in the manner you direct. You may abstain from voting on any matter. If you submit your proxy without specifying your voting instructions, we will vote your shares as follows:

 

 

 

Shares represented by valid proxies received in time for the Annual Meeting and not revoked before the Annual Meeting will be voted at the Annual Meeting. You can revoke your proxy and change your vote in the manner described below (under “How can I change my vote?”). If your shares are held through a bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee.

 

How do I vote?

 

It is important that your shares are represented at the Annual Meeting, whether or not you attend the Annual Meeting in person.

 

If you are a registered stockholder (also called a “record holder”), there are four ways to vote:

 

 

If your shares are held in a brokerage account in your broker’s name (this is called “street name”), please follow the voting instructions provided by your bank, broker or other nominee. In most cases, you may submit voting instructions by telephone or by Internet to your bank, broker or other nominee, or you can sign, date and return a voting instruction form to your bank, broker or other nominee. If you provide specific voting instructions by telephone, by Internet or by mail, your bank, broker or other nominee must vote your shares as you have directed. If you wish to vote in person at the Annual Meeting, you must request a legal proxy from your bank, broker or other nominee.

 

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

 

We have elected to provide access to our proxy materials on the Internet, consistent with the rules of the Securities and Exchange Commission (SEC). Accordingly, in most instances we are mailing a Notice of Internet Availability of Proxy Materials to our stockholders. You can access our proxy materials on the website referred to in the Notice of Internet Availability of Proxy Materials or you may request printed versions of our proxy materials for the Annual Meeting. Instructions on how to access our proxy materials on the Internet or to request printed versions are provided in the Notice of Internet Availability of Proxy Materials. In addition, you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

 

What does it mean if I receive more than one notice regarding the Internet availability of proxy materials or more than one set of printed proxy materials?

 

If you hold your shares in more than one account, you may receive a separate Notice of Internet Availability of Proxy Materials or a separate set of printed proxy materials, including a separate proxy card or voting instruction form, for each account. To ensure that all of your shares are voted, please vote by telephone or by Internet or sign, date and return a proxy card or voting instruction form for each account.

How can I change my vote?

 

You may revoke your proxy and change your vote at any time before the Annual Meeting by:

 

 

Only your latest vote, in whatever form, will be counted.

 

Will my shares be counted if I do not vote?

 

If you are a record holder and do not vote by telephone or by Internet or by signing, dating and returning a printed proxy card, your shares will not be voted.

 

If you are the beneficial owner of shares held in “street name,” your bank, broker or other nominee, as the record holder of the shares, is required to vote those shares in accordance with your instructions. If no voting instructions are provided, these record holders can vote your shares only on discretionary, or routine, matters and not on non-discretionary, or non-routine, matters. Uninstructed shares whose votes cannot be counted on non-routine matters result in what are commonly referred to as “broker non-votes.”

 

If you do not give your broker voting instructions, your broker will be entitled to vote your shares only on the routine matter of the ratification of our independent accounting firm. All of the other proposals — the election of directors, advisory vote on executive compensation, advisory vote on the frequency of executive compensation advisory vote and amendment to our Amended and Restated Certificate of Incorporation — are non-routine matters and your broker will not be able to vote on them without your instructions. We urge you to provide instructions to your bank, broker or other nominee so that your votes may be counted on all of these important matters.

 

You should vote your shares by telephone or by Internet according to the instructions provided by your bank, broker or other nominee or by signing, dating and returning a printed voting instruction form to your bank, broker or other nominee to ensure that your shares are voted on your behalf.

 

How many shares must be present to hold the Annual Meeting?

 

A majority of our outstanding shares of common stock as of the Record Date must be present at the Annual Meeting to hold the Annual Meeting and conduct business. This is called a quorum. Shares voted in the manner described above (under “How do I vote?”) will be counted as present at the Annual Meeting. Shares that are present and entitled to vote on one or more of the matters to be voted upon are counted as present for establishing a quorum. If a quorum is not present, we expect that the Annual Meeting will be adjourned until we obtain a quorum.

 

What vote is required to approve each proposal and how are votes counted?

 

 

 

Are there other matters to be voted on at the Annual Meeting?

 

We do not know of any other matters that may come before the Annual Meeting. If any other matters are properly presented at the Annual Meeting, your proxy authorizes us to vote, or otherwise act, in accordance with our best judgment.

 

Where do I find the voting results of the Annual Meeting?

 

We will publish voting results in a Current Report on Form 8-K filed with the SEC within four business days after the end of the Annual Meeting. You may request a copy of this Form 8-K by contacting Investor Relations, Biogen Idec Inc., 133 Boston Post Road, Weston, Massachusetts 02493, (781) 464-2442. You will also be able to find a copy of this Form 8-K on the Internet through the SEC’s electronic data system called EDGAR at www.sec.gov or through the “Investors” section of our website, www.biogenidec.com.

 

Who should I call if I have any questions?

 

If you have any questions or require any assistance with voting your shares, please contact your bank, broker or other nominee holding your shares, or our Investor Relations department at (781) 464-2442.

 

Important Notice Regarding the Availability of Proxy Materials for Annual Meeting of Stockholders To Be Held on June 2, 2011: The Notice of 2011 Annual Meeting of Stockholders, Proxy Statement, 2010 Summary Annual Report and 2010 Annual Report on Form 10-K are available at the following website: www.biogenidec.com/ar2010.

 

Our Board of Directors currently consists of three Classes of directors with each director serving a staggered three-year term as follows:

 

 

As described below under “Proposal 5 — Approval of Amendment to Certificate of Incorporation,” our Board of Directors is recommending that stockholders approve the declassification of our Board of Directors so that all directors will be elected annually. This Proposal 1 concerns the election of directors under two alternative scenarios:

 

1. If stockholders approve Proposal 5, the amendment to our Amended and Restated Certificate of Incorporation will eliminate our classified Board structure, which will have the effect of reducing the current terms of our four incumbent Class 1 directors and four incumbent Class 3 directors so that they expire at the Annual Meeting. Accordingly, if stockholders approve Proposal 5, the following twelve individuals recommended by our Board of Directors are standing for election to serve a one-year term extending until the 2012 annual meeting of stockholders and until their successors are duly elected and qualified, unless they resign or are removed: Alexander J. Denner, Caroline D. Dorsa, Nancy L. Leaming, Richard C. Mulligan, Robert W. Pangia, Stelios Papadopoulos, Brian S. Posner, Eric K. Rowinsky, George A. Scangos, Lynn Schenk, Stephen A. Sherwin, William D. Young.

 

2. If stockholders do not approve Proposal 5, the election of our four Class 2 director nominees will proceed under our Amended and Restated Certificate of Incorporation as currently in effect and our Class 1 and Class 3 directors will continue to serve the remainder of their current three-year terms. Accordingly, if stockholders do not approve Proposal 5, the following four individuals recommended by our Board of Directors are standing for election as Class 2 directors to serve a three-year term extending until the 2014 annual meeting of stockholders and until their successors are duly elected and qualified, unless they resign or are removed: Caroline D. Dorsa, Stelios Papadopoulos, George A. Scangos, Lynn Schenk.

 

As described in detail below, our nominees have considerable professional and business expertise. The recommendation of our Board of Directors is based on its carefully considered judgment that the experience, qualifications, attributes and skills of our nominees qualify them to serve on our Board of Directors.

 

If any of our nominees is unable to serve on our Board of Directors, the shares represented by your proxy will be voted for the election of such other person as may be nominated by our Board of Directors. In addition, in full compliance with all applicable state and federal laws and regulations, we will file an amended proxy statement and proxy card that, as applicable, (1) identifies the alternate nominee(s), (2) discloses that such nominees have consented to being named in the revised proxy statement and to serve if elected and (3) includes the disclosure required by Item 7 of Schedule 14A with respect to such nominees. We know of no reason why any nominee would be unable to accept nomination or election. All nominees have consented to be named in this Proxy Statement and to serve if elected.

 

Our Nominees for Director

 

 

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF EACH DIRECTOR NOMINEE NAMED ABOVE.

 

The Finance and Audit Committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011. PricewaterhouseCoopers served as our independent registered public accounting firm in connection with the audit for the fiscal year ended December 31, 2010. Although stockholder approval of the Finance and Audit Committee’s selection of PricewaterhouseCoopers is not required, our Board of Directors believes that it is a matter of good corporate practice to solicit stockholder ratification of this selection. If our stockholders do not ratify the selection of PricewaterhouseCoopers as our independent registered public accounting firm, the Finance and Audit Committee will reconsider its selection. Even if the selection is ratified, the Finance and Audit Committee always has the ability to change the engagement of PricewaterhouseCoopers if it determines that a change is in Biogen Idec’s best interest. Representatives of PricewaterhouseCoopers will attend the Annual Meeting, have the opportunity to make a statement if they so desire, and be available to respond to appropriate questions.

 

Audit and Other Fees

 

The following table shows fees for professional audit services billed to us by PricewaterhouseCoopers for the audit of our annual consolidated financial statements for the years ended December 31, 2010 and December 31, 2009, and fees billed to us by PricewaterhouseCoopers for other services provided during 2010 and 2009:

 

Fees		2010				2009
Audit fees		$	3,440,307			$	3,116,797
Audit-related fees			61,304				131,766
Tax fees*			1,632,008				1,995,053
All other fees			8,715				78,106
Total		$	5,142,334			$	5,321,722

 

 

 

Audit fees are fees for the audit of our 2010 and 2009 consolidated financial statements included in our Annual Reports on Form 10-K, reviews of consolidated financial statements included in our Quarterly Reports on Form 10-Q, review of the consolidated financial statements incorporated by reference into our outstanding registration statements, and statutory audit fees in overseas jurisdictions.

 

Audit-related fees are fees that principally relate to assurance and related services that are reasonably related to the performance of the audits and reviews of our consolidated financial statements, including audits of employee benefit plan information.

 

Tax fees are fees for tax compliance and planning services.

 

All other fees are fees that principally relate to audit procedures performed in connection with one of our collaboration agreements in 2009 and educational resources in 2010 and 2009.

 

Policy on Pre-Approval of Audit and Non-Audit Services

 

The Finance and Audit Committee has the sole authority to approve the scope of the audit and any audit-related services as well as all audit fees and terms. The Finance and Audit Committee must pre-approve any audit and non-audit services provided by our independent registered public accounting firm. The Finance and Audit Committee will not approve the engagement of the independent registered public accounting firm to perform any services that the independent registered public accounting firm would be prohibited from providing under applicable securities laws, NASDAQ requirements or Public Company Accounting Oversight Board rules. In assessing whether to approve the use of our independent registered public accounting firm to provide permitted non-audit services, the Finance and Audit Committee tries to minimize relationships that could appear to impair the objectivity of our independent registered public accounting firm. The Finance and Audit Committee will approve permitted non-audit

services by our independent registered public accounting firm only when it will be more effective or economical to have such services provided by our independent registered public accounting firm than by another firm.

 

The Finance and Audit Committee annually reviews and pre-approves the audit, audit-related, tax, and other permissible non-audit services that can be provided by the independent registered public accounting firm. Any proposed services exceeding pre-set levels or amounts will require separate pre-approval by the Finance and Audit Committee, although our Chief Accounting Officer can approve up to an additional $50,000 in the aggregate per calendar year for categories of services that the Finance and Audit Committee has pre-approved. In addition, any pre-approved services for which no pre-approved cost level has been set or which would exceed the pre-approved cost by an amount that would cause the aggregate $50,000 amount to be exceeded must be separately pre-approved by the Finance and Audit Committee.

 

The Finance and Audit Committee has delegated pre-approval authority to the Chair of the Finance and Audit Committee within the guidelines discussed above. The Chair of the Finance and Audit Committee is required to inform the Finance and Audit Committee of each pre-approval decision at the next regularly scheduled Finance and Audit Committee meeting.

 

All of the services provided by PricewaterhouseCoopers during 2010 were pre-approved in accordance with this policy.

 

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2011.

 

Our Compensation Discussion and Analysis, which appears later in this Proxy Statement, describes our executive compensation program and the compensation decisions that the Compensation and Management Development Committee and our Board of Directors made in 2010 with respect to the compensation of our named executive officers (listed in the Summary Compensation Table). As required pursuant to Section 14A of the Securities Exchange Act, our Board of Directors is asking that stockholders cast a non-binding, advisory vote FOR the following resolution:

 

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

 

As we describe in our Compensation Discussion and Analysis, our executive compensation program embodies a pay-for-performance philosophy that supports our business strategy and aligns the interests of our executives with our stockholders. In particular, our compensation program rewards financial, strategic and operational performance and the goals set for each performance category support our long-range plans. In light of our strong performance in 2010, we believe that the compensation paid to our named executive officers was appropriate. Highlights of our 2010 performance include: our revenue and earnings per share (EPS) for 2010 exceeded the targets we set for our compensation programs; our compensation measure for revenue increased by 11% in 2010 and our compensation measure for EPS increased by 10% in 2010; and stock price performance increased 25% in 2010. In addition, to discourage excessive risk taking, we maintain policies for share ownership and recoupment of compensation, cap payments under our annual cash incentive plan, and require multi-year vesting of long-term incentive awards.

 

For these reasons, our Board of Directors is asking that stockholders support this proposal. Although the vote you are being asked to cast is non-binding, we value the views of our stockholders, and the Compensation and Management Development Committee and our Board of Directors will consider the outcome of the vote when making future compensation decisions for our named executive officers.

 

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADVISORY VOTE ON EXECUTIVE COMPENSATION.

 

Proposal 3 above requests that you cast an advisory vote for the compensation disclosed in this Proxy Statement that we paid in 2010 to our named executive officers. That advisory vote is referred to as a “say-on-pay” vote. In this Proposal 4, as required pursuant to Section 14A of the Securities Exchange Act, our Board of Directors is asking that stockholders cast a non-binding, advisory vote on how frequently we should have say-on-pay votes in the future. You can vote to hold say-on-pay votes every one, two or three years, or you can abstain from voting.

 

Our Board of Directors believes that say-on-pay votes should be held annually to give stockholders the opportunity to provide regular input on our executive compensation programs and increase our Board’s accountability for its compensation decisions and therefore recommends that stockholders vote for the one year option. This vote, like the say-on-pay vote itself, is non-binding. If a choice other than one year receives the most votes, our Board of Directors will take the voting results into consideration in determining how frequently we will present you with a say-on-pay vote.

 

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ONE YEAR OPTION AS THE FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION.

 

Article VII of our Amended and Restated Certificate of Incorporation (Certificate of Incorporation) divides our Board of Directors into three Classes of directors (Class 1, Class 2 and Class 3) with terms of three years each. Generally, absent the earlier resignation or removal of a director, the terms of these Classes are staggered so that one Class stands for re-election at each annual meeting of stockholders. The current terms of our director Classes expire as follows: Class 1 director term expires at the 2013 annual meeting of stockholders; Class 2 director term expires at this Annual Meeting; Class 3 director term expires at the 2012 annual meeting of stockholders.

 

Our Board of Directors has approved and declared advisable an amendment to Article VII of our Certificate of Incorporation (Charter Amendment) to declassify our Board of Directors and institute annual voting for each director to serve a one-year term beginning with the 2011 Annual Meeting. The form of Charter Amendment, which is subject to stockholder approval, is set forth in Appendix A to this Proxy Statement. Our Board of Directors also has approved, subject to the Charter Amendment becoming effective, certain conforming amendments to our Second Amended and Restated Bylaws (Bylaw Amendment) to remove references to a classified Board and to reflect stockholders’ ability to remove directors on a declassified Board with or without cause.

 

Our Board of Directors recommends that stockholders support Board declassification. Declassification of our Board of Directors would further our goal of ensuring that our corporate governance policies maximize Board accountability to stockholders and would allow stockholders the opportunity each year to register their views on the composition of our Board of Directors.

 

If stockholders approve the Charter Amendment, our classified Board structure will be eliminated, which will have the effect of reducing the current terms of our Class 1 and Class 3 directors so that they expire at the Annual Meeting, and all twelve members of our Board of Directors will stand for election to a one-year term at the Annual Meeting. The Bylaw Amendment will also become effective. The incumbent Class 1 and Class 3 directors have indicated their support for the declassification of our Board of Directors by agreeing to resign from their current three-year terms if stockholders approve the Charter Amendment, effective upon filing of the Charter Amendment.

 

If stockholders do not approve the Charter Amendment, the election of our four Class 2 director nominees to a three-year term will proceed under the Certificate of Incorporation as currently in effect, our Class 1 and Class 3 directors will continue to serve the remainder of their respective three-year terms, and the Bylaw Amendment will not become effective.

 

If approved and adopted by stockholders, the Charter Amendment will be filed with the Secretary of State of the State of Delaware immediately following certification of the voting results and will be in effect immediately upon such filing.

 

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION ELIMINATING THE CLASSIFICATION OF OUR BOARD OF DIRECTORS.

 

The following table and accompanying notes provide information about the beneficial ownership of our common stock by:

 

 

Except as otherwise noted, the persons identified have sole voting and investment power with respect to the shares of our common stock beneficially owned. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to the shares. Except as otherwise noted, the information below is as of April 4, 2011 (Ownership Date).

 

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act requires our executive officers, directors and greater-than-ten-percent stockholders to file initial reports of ownership and changes of ownership. As a practical matter, we assist our directors and executive officers by monitoring transactions and completing and filing Section 16 forms on their behalf. Based solely on information provided to us by our directors and executive officers, we believe that during 2010 all such parties complied with all applicable filing requirements except for the following forms which were filed late due to administrative error: (1) Form 4/A filed on April 20, 2010 covering the sale of common stock pursuant to a trading plan on March 19, 2010 by Michael F. MacLean, at the time our Senior Vice President and Chief Accounting Officer; and (2) Form 4/A filed on April 16, 2010 covering the vesting on April 1, 2010 of a restricted stock unit granted to Robert A. Hamm, at the time our Chief Operating Officer.

 

Director Independence

 

Board of Directors.  All of our directors and nominees for director, other than Dr. Scangos, our Chief Executive Officer, satisfy the independence requirements of The NASDAQ Stock Market, Inc. (NASDAQ). Our independent directors during 2010 also included our former director Bruce Ross. In determining independence, our Board of Directors considered that Ms. Schenk is a director of Sempra Energy, which is a publicly regulated utility that supplies electricity to our facility in San Diego, California. The volume of business between Biogen Idec and Sempra Energy amounts to less than 1% of the revenues of each company and we are in the process of closing our San Diego facility.

 

Committees.  The committees of our Board of Directors consist solely of independent directors, as defined by NASDAQ. The members of the Finance and Audit Committee also meet the additional SEC and NASDAQ independence and experience requirements applicable specifically to members of the Finance and Audit Committee. In addition, all of the members of the Compensation and Management Development Committee are non-employee directors within the meaning of the rules of Section 16 of the Securities Exchange Act and outside directors for purposes of Section 162(m) of the Internal Revenue Code.

 

Leadership Structure.  We currently separate the roles of Chairman of the Board of Directors and Chief Executive Officer. Our Chairman, an independent director, presides at meetings of our Board of Directors, executive sessions of our independent directors and our annual meetings of stockholders. In addition, our Chairman sets the agenda for our Board meetings in collaboration with our Chief Executive Officer, recommends Board committee appointments and responsibilities in conjunction with the Corporate Governance Committee, and leads the evaluation process of our Chief Executive Officer. We believe that having an independent Chairman promotes a greater role for the independent directors in the oversight of the Company, including oversight of material risks facing the Company, encourages active participation by the independent directors in the work of our Board of Directors, enhances our Board of Directors’ role of representing stockholders’ interests, and improves our Board of Directors’ ability to supervise and evaluate our Chief Executive Officer and other executive officers.

 

Nominating Processes

 

The Corporate Governance Committee is responsible for identifying individuals qualified to become members of our Board of Directors and reviewing candidates recommended by stockholders. Stockholders may recommend nominees for consideration by the Corporate Governance Committee by submitting the names and supporting information to the Secretary, Biogen Idec Inc., 133 Boston Post Road, Weston, Massachusetts 02493. Any such recommendation should include at a minimum the name(s) and address(es) of the stockholder(s) making the recommendation and appropriate biographical information for the proposed nominee(s). Candidates who are recommended by stockholders will be considered in the same manner as candidates from other sources. For all potential candidates, the Corporate Governance Committee will consider all factors it deems relevant, including at a minimum those listed below in the subsection titled “Director Qualification Standards and Diversity.” Director nominations are recommended by the Corporate Governance Committee to our Board of Directors and must be approved by a majority of independent directors.

 

In addition, our Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to our Board of Directors at an annual meeting of stockholders. In order to nominate a director candidate for election at an annual meeting of stockholders, a stockholder must give timely notice in writing to our Secretary at our principal executive offices and otherwise comply with the provisions of our Bylaws. To be timely, our Bylaws provide that we must have received a stockholder’s notice not less than 90 days and not more than 120 days in advance of the first anniversary of the date our proxy statement was released to our stockholders in connection with the previous year’s annual meeting of stockholders. However, if no annual meeting of stockholders was held in the previous year or the date of the annual meeting of stockholders is more than 30 days before or more than 60 days after the first anniversary of the previous year’s annual meeting of stockholders, we must receive a stockholder’s notice not earlier than the close of business on the 120th day prior to such annual meeting of stockholders and not later than the close of business on the later of (1) the 90th day prior to such annual meeting of stockholders and (2) the 10th day following the day on which public announcement of the date of such annual meeting of stockholders is first made. Information required by the Bylaws to be in the notice includes, among other things, the name, contact information and security ownership

information for the candidate and the person making the nomination, any voting commitment by the candidate, whether the person making the nomination is part of a group that intends to deliver a proxy statement or solicit proxies, and other information about the nominee that must be disclosed in proxy solicitations under Section 14 of the Securities Exchange Act and the related rules and regulations under that Section. The Corporate Governance Committee may also require any proposed nominee to furnish such other information as may be reasonably required to determine the eligibility of such proposed nominee to serve on our Board of Directors.

 

Majority Voting

 

Under our Bylaws, directors are elected by a majority of votes cast in uncontested elections, and by a plurality of votes cast in contested elections. In addition, following their appointment or election by stockholders to our Board of Directors, directors must submit an irrevocable resignation that will be effective upon (1) the failure to receive the required number of votes for reelection at the next annual meeting of stockholders at which they face reelection and (2) acceptance of such resignation by our Board of Directors. If an incumbent director fails to receive the number of votes required for reelection, our Board of Directors (excluding the director in question) will, within 90 days after certification of the election results, decide whether to accept the director’s resignation taking into account such factors as it deems relevant. Such factors may include the stated reasons why stockholders voted against such director’s reelection, the qualifications of the director and whether accepting the resignation would cause us to fail to meet any applicable listing standards or would violate state law. Our Board of Directors will promptly disclose its decision in a filing with the SEC.

 

Director Qualification Standards and Diversity

 

Our directors should possess the highest personal and professional ethics and integrity, understand and be aligned with our core values, and be committed to representing the long-term interests of our stockholders. Our directors must also be inquisitive and objective and have practical wisdom and mature judgment. In accordance with our Corporate Governance Principles, we endeavor to have a Board of Directors that represents diverse experience at strategic and policy-making levels in business, government, education, healthcare, science and technology, and collectively has knowledge and expertise in the functional areas of accounting and finance, risk management and compliance, strategic and business planning, human resources, marketing and commercial, and research and development. Consistent with our Corporate Governance Principles, in selecting nominees to our Board of Directors, the Corporate Governance Committee considers the diversity of skills and experience that a potential nominee possesses and the extent to which such diversity would enhance the perspective, background, knowledge and experience of our Board of Directors as a whole. While the Corporate Governance Committee focuses on obtaining a diversity of professional expertise on our Board of Directors rather than a diversity of personal characteristics, it recognizes the desirability of gender, ethnic and racial diversity and considers it an additional benefit when a new director can also increase the personal diversity of our Board of Directors as a whole.

 

Our directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serving on our Board of Directors for an extended period of time. We ask directors not to serve on more than six boards of public companies including ours. In addition, our Chief Executive Officer may not serve on more than two boards of directors of public companies in addition to ours.

 

Our Board of Directors does not believe that arbitrary term limits on directors’ service are appropriate, nor does it believe that directors should expect to be re-nominated. Regular evaluations are an important determinant for continued tenure. Our Corporate Governance Principles provide that directors should offer their resignation in the event of any significant change in their personal circumstances, including a change in their principal job responsibilities or any circumstances that may adversely affect their ability to carry out their duties and responsibilities effectively. Our directors are also expected, but not required, to offer their resignation to our Board of Directors effective at the annual meeting of stockholders in the year of their 75^th birthday.

 

Committees and Meetings

 

Our Board of Directors has four standing committees, which are described in the table below. The chair of each committee periodically reports to our Board of Directors about such committee’s deliberations and decisions. Each committee’s charter is posted on our website, www.biogenidec.com, under the “Board of Directors — Corporate

Governance” subsection of the “About Us” section of the site. Also posted there are the Finance and Audit Committee Practices, which describe the key practices used by the Finance and Audit Committee in undertaking its functions and responsibilities, and our Corporate Governance Principles, which, together with our committee charters, provide the framework for our governance.

 

 

 

During 2010, our standing committees included the Transaction Committee, whose function was to provide oversight of our corporate development, business development and new ventures transaction activities. In 2010, the Transaction Committee met three times and its membership consisted of Messrs. Pangia (Chair), Mulligan, Papadopoulos and Young.

 

Our Board of Directors met 14 times in 2010. No current director who served on our Board of Directors during 2010 attended fewer than 75% of the total number of meetings of our Board of Directors and the committees on which he or she served. Our independent directors are required to meet without management present twice each year. Independent directors may also meet without management present at such other times as determined by our Chairman, or if requested by at least two other directors. In 2010, our independent directors met without management present 9 times. In addition, we expect all of our directors and director nominees to attend our annual meetings of stockholders. All of our directors at the time attended our 2010 annual meeting of stockholders other than Messrs. Mullen and Ross, who were not continuing as directors, and Ms. Schenk.

 

Risk Oversight

 

Our Board of Directors provides oversight of material risks facing the Company. Our Board of Directors regularly receives information about our material strategic, operational, financial and compliance risks and management’s response to and mitigation of such risks. In addition, our risk management systems, including our internal and external auditing procedures, internal controls over financial reporting and corporate compliance programs, are designed in part to inform management and our Board of Directors about our material risks. As part of its risk oversight function, our Board of Directors also reviews our strategies for generating long-term value for our stockholders to ensure that such strategies will not motivate management to take excessive risks.

 

The committees of our Board of Directors help to oversee our material risks within their particular area of concern. Each committee meets regularly with management to ensure that management has properly identified relevant risks and is adequately monitoring, and where necessary taking appropriate action to mitigate, such risks. The Finance and Audit Committee meets regularly with our Chief Financial Officer, Chief Accounting Officer, Chief Audit Executive and representatives of our independent registered public accounting firm to assess the integrity of our financial reporting processes, internal controls and actions taken to monitor and control risks related to such matters. The Finance and Audit Committee also reviews our policies and internal procedures designed to promote compliance with laws and regulations, and meets regularly with our Chief Compliance Officer and General Counsel to assess the status of compliance activities and investigations. In addition, the Compensation and Management Development Committee oversees risks related to our compensation plans and arrangements, the Corporate Governance Committee oversees risks associated with director independence, conflicts of interest and other corporate governance matters, and the Science and Technology Committee oversees risks associated with our research and development programs and our intellectual property portfolio.

 

Compensation Risk Assessment

 

The Compensation Discussion and Analysis (CD&A) section of this Proxy Statement describes our compensation policies, programs and practices for our executive officers. Our goal-setting, performance assessment and compensation decision-making processes described in the CD&A apply to all employees. Our long-term incentive program provides different forms of awards depending upon an employee’s level, but is otherwise consistent throughout the Company. We offer a limited number of cash incentive plans, with employees eligible for either our annual cash incentive plan or a sales incentive compensation plan; no employee is eligible to participate in more than one cash incentive plan at any time. Our annual cash incentive plan is consistent for all participants globally, with the same Company performance goals, payout curves and administrative provisions regardless of the participant’s job level, location or function in the Company. In the CD&A, we describe the risk-mitigation controls for our compensation programs, including the role of our Compensation and Management Development Committee to review and approve the design, goals and payouts under our annual cash incentive plan and long-term

incentive program as well as approving each executive officer’s compensation. In addition, we have reviewed the processes, controls and design of our sales incentive compensation plans. Based on our assessment, we believe that our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

Finance and Audit Committee Report

 

The Finance and Audit Committee’s role is to act on behalf of the Board of Directors in the oversight of all aspects of Biogen Idec’s financial reporting, internal control and audit functions. The Finance and Audit Committee has the sole authority and responsibility to select, evaluate, compensate and replace our independent registered public accounting firm. The roles and responsibilities of the Finance and Audit Committee are set forth in the written charter adopted by the Board of Directors, which is posted on our website, www.biogenidec.com, under the “Board of Directors — Corporate Governance” subsection of the “About Us” section of the site. Management has primary responsibility for the financial statements and the reporting process, including the systems of internal controls.

 

In fulfilling its oversight responsibilities, the Finance and Audit Committee reviewed and discussed with management the audited consolidated financial statements contained in Biogen Idec’s 2010 Annual Report on Form 10-K. The Finance and Audit Committee discussed with PricewaterhouseCoopers LLP, Biogen Idec’s independent registered public accounting firm, the overall scope and plans for the audit. The Finance and Audit Committee met with PricewaterhouseCoopers, with and without management present, to discuss the results of its examination, management’s response to any significant findings, its observations of Biogen Idec’s internal controls, the overall quality of Biogen Idec’s financial reporting, the selection, application and disclosure of critical accounting policies, new accounting developments and accounting-related disclosure, the key accounting judgments and assumptions made in preparing the financial statements and whether the financial statements would have materially changed had different judgments and assumptions been made, and other pertinent items related to Biogen Idec’s accounting, internal controls and financial reporting. The Finance and Audit Committee also discussed with representatives of Biogen Idec’s corporate internal audit staff their purpose and authority and their audit plan.

 

The Finance and Audit Committee also reviewed and discussed with PricewaterhouseCoopers the matters required to be discussed with the Finance and Audit Committee under generally accepted auditing standards (including Statement on Auditing Standards No. 61). In addition, the Finance and Audit Committee discussed with PricewaterhouseCoopers the independence of PricewaterhouseCoopers from management and Biogen Idec, including the written disclosures and letter concerning independence received from PricewaterhouseCoopers required by applicable requirements of the Public Company Accounting Oversight Board. The Finance and Audit Committee has determined that the provision of non-audit services to Biogen Idec by PricewaterhouseCoopers is compatible with its independence.

 

During 2010, the Finance and Audit Committee provided oversight and advice to management in connection with Biogen Idec’s system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. In connection with this oversight, the Finance and Audit Committee reviewed a report by management on the effectiveness of Biogen Idec’s internal control over financial reporting. The Finance and Audit Committee also reviewed PricewaterhouseCoopers’ Report of Independent Registered Public Accounting Firm included in Biogen Idec’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 related to its audit of the effectiveness of internal control over financial reporting.

 

In reliance on these reviews and discussions, the Finance and Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Biogen Idec’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for filing with the SEC.

 

The Finance and Audit Committee of the Board of Directors:

 

Nancy L. Leaming (Chair)

Caroline D. Dorsa

Stelios Papadopoulos

Brian S. Posner

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Introduction

 

Our Compensation and Management Development Committee (which is referred to in this section of the Proxy Statement as the “Committee” or as the “Compensation Committee”) oversees and administers our executive compensation programs. The Committee’s complete roles and responsibilities are set forth in the written charter adopted by our Board of Directors, which can be found at our website, www.biogenidec.com, under the “Board of Directors — Corporate Governance” subsection of the “About Us” section of the site.

 

Overview

 

Our executive compensation programs, like those at many companies, are designed to deliver compensation that is competitive with our peer group and that allows us to attract and retain superior talent who can perform effectively and succeed in a demanding business environment. Our compensation programs are also designed to reward performance against pre-established goals and align the interests of our executives with our stockholders. Here are the ways that we achieve those objectives in our programs:

 

 

2010 Highlights

 

We believe our executive compensation programs are effectively designed and have worked well to implement a pay-for-performance culture that is aligned with the interests of our stockholders. Last year, we implemented some changes, particularly in our long-term incentive awards. In this “Highlights” section, we discuss the financial performance and other factors that guided our compensation decisions for the year and the key changes that we made in our executive compensation programs.

 

 

 

Independent Compensation Consultants

 

The Committee believes that independent advice is important in developing Biogen Idec’s executive compensation program and currently engages Frederic W. Cook & Co., Inc. (Cook) as its independent compensation consultant. Cook reports directly to the Committee and provides guidance on trends in executive and non-employee director compensation, the development of specific executive compensation programs, the composition of the Company’s compensation peer group and other matters as directed by the Committee. During 2010, the Company paid Cook approximately $369,000 in consulting fees directly related to these services. Cook does not provide any other services to Biogen Idec.

 

Executive Compensation Philosophy and Objectives

 

Our compensation, benefits and other workplace programs have been selected and designed to achieve the following objectives:

 

 

What is our compensation program designed to reward?

 

Our compensation program rewards the achievement of financial, strategic and operational goals set by the Committee and our Board by paying compensation that is competitive with our peers if performance targets are met. Exceeding target performance will result in higher payouts, while falling short of target performance will result in lower payouts.

 

The performance goals we set, which are consistent with our Board-approved business plan, include:

 

 

 

How does the Committee set the performance goals?

 

The annual goals we set for the Company are tied directly to the Company’s annual budget and support our long-range plan. In setting our annual goals, in addition to our own internal forecasts, we consider analysts’ projections for our performance and the performance of our peers and broad economic and industry trends. We establish challenging targets that result in payouts at target levels only when Company performance warrants it. The Committee is responsible for reviewing and approving our annual Company goals, targets, payout curves and performance results.

 

Our executive officers’ individual goals for each year are discussed with and subject to the Committee’s approval; this is typically completed before March of each year. Our CEO’s goals are also approved by the Committee with input from the Chairman and the other independent directors. In setting and approving the performance goals for our executive officers and for the Company, the Committee considers the alignment to our business plan and the degree of difficulty of attainment and the potential for the goals to encourage inappropriate risk-taking. The Committee has determined that the goals and how the goals are achieved do not put our patients, investors or the Company at any material risk.

 

Compensation Program Elements and Pay Level Determination

 

What is each element of compensation and why is it paid?

 

The Committee determines the forms of compensation we provide and approves the targeted compensation competitiveness relative to our compensation peer group. The role and purpose for each element of compensation is as follows:

 

 

Each year, the Committee reviews the current compensation program design for its alignment with and support of our pay-for-performance objectives, its overall efficiency and cost-effectiveness, and its design and overall value relative to our peers’ practices and general trends. The Committee also discusses program design recommendations and approves changes to ensure that each compensation element and the overall program design are aligned with their intended role and purpose.

 

While the Committee considers the general mix of the elements in the design of our compensation program, it does not target a specific mix of value for our compensation elements in either the program design or pay decisions. To more closely tie their compensation to the Company’s overall performance, and to recognize their ability and obligation to affect that performance, our executive officers have more variability in their compensation than non-executives.

Our performance-based approach creates a motivational aspect to our compensation programs, since changes to base salaries, annual incentive payments and LTI awards are all differentiated based on each executive officer’s overall performance rating, and the value realized from LTI awards is based on our Company performance relative to financial goals and our stock price performance.

 

What factors are considered in determining the amounts of compensation?

 

The key factors the Committee considers in determining the amounts of compensation that we pay to our executive officers are:

 

 

Each year, in preparation for setting base salary, annual cash incentive opportunity and LTI awards, our CEO discusses with the Committee his assessment of each executive officer’s performance during the prior year. To understand external competitiveness, our CEO and the Committee review a report prepared by Biogen Idec’s compensation group and reviewed by the Committee’s consultant. The report compares the level of compensation of each executive officer other than our CEO relative to external data for comparable positions at our peers, by compensation element. The external data is drawn from compensation surveys and an analysis of our peers’ executive compensation disclosures.

 

Based on all of these factors, our CEO makes recommendations to the Committee for compensation actions for each executive officer. The Committee considers all of the information presented, discusses our CEO’s recommendations with him and with its consultant and applies its judgment to determine the compensation for each executive officer.

 

The actual compensation for each executive officer, including our CEO, may be above or below the targeted competitiveness for the position at any time depending principally on our CEO’s and the Committee’s subjective assessment of individual contributions made by the executive officer.

 

Dr. Scangos joined Biogen Idec in July of 2010.  When setting his compensation at the time he was hired, the Committee reviewed an analysis of peer data that had been prepared by the Committee’s consultant. Using this data, the Committee determined and our Board of Directors approved the forms and levels of Dr. Scangos’ compensation. In addition, because Dr. Scangos joined the Company in the latter half of the year when the performance period was more than half over, his LTI award was in the form of market stock units and time-vested restricted stock units; he was not granted any cash-settled performance shares at that time.

 

What external market peer group is used for compensation comparisons, and how is it established?

 

Each year, the Committee’s consultant reviews our peer group for appropriateness, considering such factors as size (e.g., revenue and market capitalization), business comparability (e.g., research-based with multiple marketed products) and geographic scope of operations (e.g., global versus domestic-only presence). Our peer group includes biotechnology and pharmaceutical companies, as we compete with companies in both of these sectors to hire and retain our executives.

Our compensation decisions in February 2010, including base salary increases, target bonus opportunities under our annual cash incentive plan and annual long-term incentive grants, were based on the following peer group, which was approved in May 2009.

 

				Additional Reference
Peer Group				Companies
Biotechnology Peers		Pharmaceutical Peers		King Pharmaceuticals
Amgen		Allergan		Mylan
Celgene		Bristol-Myers Squibb		Watson Pharmaceuticals
Cephalon		Eli Lilly & Co
Genentech		Forest Laboratories
Genzyme		Schering-Plough
Gilead Sciences		Sepracor
		Wyeth

 

During 2010, the Committee removed Genentech, Schering-Plough, Sepracor, and Wyeth from the peer group because those companies were acquired. The following table presents the peer group approved in April 2010:

 

				Additional Reference
Peer Group				Companies
Biotechnology Peers		Pharmaceutical Peers		Life Technologies
Amgen		Allergan		Mylan
Celgene		Bristol-Myers Squibb		Watson Pharmaceuticals
Cephalon		Eli Lilly & Co
Genzyme		Endo Pharmaceuticals
Gilead Sciences		Forest Laboratories

 

Our compensation decisions after April 2010, including the compensation for Dr. Scangos, were based on the peer group approved in April 2010.

 

For each of our peers, we analyze the Compensation Discussion and Analysis and other data filed during the prior year to identify those named executive officers whose positions are comparable to those held by our executive officers. We then compile and analyze the data for each comparable position. Our competitive analysis includes the rewards program structure and design, as well as the value of the compensation.

 

We also use the Towers Perrin U.S. CDB Pharmaceutical Executive Compensation Database (Towers Perrin) and the SIRS Executive Compensation Survey (SIRS) in analyzing the competitiveness of executives’ compensation. For purposes of data for our early 2010 compensation decision-making, all of our named peers except Sepracor participated in the Towers Perrin survey and all of our named peers except Bristol-Myers Squibb, Eli Lilly and Sepracor participated in the SIRS survey. Our analyses from these surveys are based on reports including only those companies that are in our peer group at the time we conduct our analyses. Benchmark compensation surveys are critical to assessing competitive practices and levels of compensation, as the data available in our peers’ public filings addresses only a limited number of our executive positions. We carefully selected these two benchmark compensation surveys based on the number of our peers that participate in the surveys, the number of positions reported by the surveys that are comparable to our executive positions and the standards under which the surveys are conducted, including data collection and analysis methodologies, provisions to ensure confidentiality, and quality assurance practices.

 

While the Towers Perrin and SIRS benchmark compensation surveys both report LTI data, differences between the surveys in methodology and reporting result in LTI data that is not comparable between the sources. The Towers Perrin survey, as compared to SIRS, has a higher proportion of our named peers as participants, and provides data on a more comparable set of benchmark positions. As a result, we relied on the Towers Perrin survey for benchmark data for our 2010 LTI decisions for our executive-level positions, with the exception of Dr. Scangos, where we relied on data publicly reported by our named peers.

Description of the structure of each element of compensation

 

Base salaries are set based on individual performance, external competitiveness, retention and internal equity

 

We pay our executive officers a salary to provide a baseline level of compensation that is competitive with the external market and which reflects each executive’s past performance, experience, responsibilities and potential to contribute to our future success. Although this subjective assessment of an executive officer’s contributions plays a role in determining that executive’s base salary, overall Company performance does not influence our base salaries. In recommending and determining individual base salaries, our CEO and the Committee consider the factors described in the previous section of this report. Base salary increases from 2009 to 2010 for all of our executive officers averaged 5.375% and ranged from 0% to 10%. These increases were approved in February 2010 as part of our annual compensation planning process. The 2010 base salary for each of our named executive officers, other than Dr. Schneier, was below the median of our peer group.

 

Annual cash incentives motivate our executive officers to meet and exceed our short-term goals

 

We maintain an annual cash incentive plan that rewards short-term financial, strategic and operational performance. Our annual incentive opportunities, which are expressed as a percentage of base salary, are targeted near the median of our peer group. The Committee reviews our annual target incentive opportunities each year to ensure they are competitive. For 2010 and 2011, our target annual cash incentive opportunity percentages were not increased from the levels set in 2009. The approved targets reflected the median targets provided by our peers. The 2010 target total cash compensation (base salary plus annual cash incentives at target performance) for each of our named executive officers was below the median of our peer group.

 

The Committee approves all Company goals and payout curves for the annual cash incentive plan based on its review and discussion of recommendations made by our CEO.

 

For the 2010 Annual Cash Incentive Plan, we selected Company goals and assigned weights that reflected the Company’s established financial, strategic and operational objectives. In 2010, we assigned a total of 60% weight to financial goals and 40% to strategic and operational goals. These goals and weights reflected the importance of linking reward opportunities to both near-term results and our progress toward longer-term results, and aligned management incentives with the enhancement of long-term stockholder value.

 

We consistently set our performance targets based on the annual budget and long-range plan approved by our Board of Directors and with reference to analyst consensus for Biogen Idec revenue and non-GAAP EPS based on the most current analyst reports at the time we set our targets. The following presents our targets relative to analyst consensus for the years 2008 through 2010.

 

The following table shows the Company goals and weighting that the Committee set for the 2010 Annual Cash Incentive Plan and our degree of attainment of these goals.

 

2010 Annual Cash Incentive Plan Company Targets and Results

 

 

 

Notes to 2010 Annual Cash Incentive Plan Company Targets and Results Table

 

 

 

The plan provides for a range of payout from 0% to 150% for each Company goal and the Company Multiplier as a whole, and from 0% to 225% for the Individual Multiplier. If either the Company Multiplier or the Individual

Multiplier is 0%, there is no payout. Our 2008 Performance-Based Management Incentive Plan limits the combined Company Multiplier and Individual Multiplier to 225% for our named executive officers.

 

We determine the individual cash incentive payments using the following calculation:

 

Company Multiplier x Individual Multiplier x Incentive Target (%) x Annual Base Salary

 

The Company Multiplier represents a percentage that for 2010 was the weighted average of the results of the two financial goals and the strategic goals. The table above provides a detailed description of our performance against these goals. Based on these results, the Committee approved a 108% Company Multiplier for 2010.

 

The Individual Multiplier reflects each executive’s overall performance rating as part of our performance assessment process. Unlike our formulaic calculation of performance versus Company goals in determining the Company Multiplier, each named executive officer’s Individual Multiplier is based on a subjective evaluation of overall performance and consideration of the achievement of individual goals established at the beginning of the year. For 2010, Dr. Scangos recommended to the Committee an Individual Multiplier for each named executive officer other than himself based on his assessment of their individual contributions for the full year. The Committee considered all of the information presented, discussed our CEO’s recommendations with him and its consultant, and applied its judgment to determine the Individual Multiplier for each named executive officer. Consistent with our agreements with Mr. Mullen and Mr. Hamm, their annual cash incentive for 2010 was determined without reference to an Individual Multiplier. Our Board of Directors determined Dr. Scangos’ Individual Multiplier based on its assessment of his performance.

 

In its evaluation, the Committee assigned Individual Multipliers to our named executive officers of between 100% and 160% based on the following accomplishments during 2010:

 

George A. Scangos

 

 

Paul J. Clancy

 

 

Francesco Granata

 

 

Craig E. Schneier

 

 

Susan H. Alexander

 

 

In addition to the established goals, the Committee reviews on a qualitative basis each named executive officer’s other contributions that are not covered by the individual performance goals, leadership competencies and relative performance among our named executive officers.

 

Based on the Committee’s evaluation, and our Board of Directors’ evaluation for Dr. Scangos, it determined the 2010 Individual Multipliers as set forth in the following table.

 

 

In accordance with his employment agreement and consistent with the design of our annual cash incentive plan, Dr. Scangos’ annual cash incentive for 2010 was prorated from his first day of employment, as shown in the above table. Consistent with our agreement with Mr. Mullen, upon his retirement on June 8, 2010 he received a prorated target bonus that was determined without reference to the Company Multiplier or an Individual Multiplier. Based on his role in the transition of his responsibilities during 2010, Mr. Hamm’s annual cash incentive for 2010 was paid at target.

Long-term incentives align future earnings potential with Company performance and stockholder interests

 

In 2010, we changed our LTI program so that all annual LTI awards granted to our executive officers and all executives at and above the level of Vice President will be performance based. Our 2010 LTI program consists of cash-settled performance shares and market stock units, in contrast to our grants of 2009 LTI awards consisting of time-vested restricted stock units (RSUs), performance-vested RSUs and time-vested stock options. We still grant RSUs to executives, but only for the year of hire for those executives who start employment on or after July 1st, as the performance period for cash-settled performance shares is substantially in progress at their time of hire. As part of our re-design of the LTI program, we eliminated promotion LTI grants for promotions after February 2010. Our LTI program for 2011 continues to grant cash-settled performance shares and market stock units to our executives.

 

Our LTI award grant values are differentiated based on individual performance and our awards provide opportunities that align compensation with stockholders’ interests and Company performance. In addition, our LTI grants reinforce our goal to retain top talent through multi-year vesting requirements.

 

Our 2010 cash-settled performance share awards had a one-year performance period based equally on revenue and EPS results versus goals. We selected these measures to reinforce the importance of achieving and exceeding our revenue and earnings goals. If the targets were achieved, 100% of the granted cash-settled performance shares would be eligible to vest. However, if performance was below or above target, the number of cash-settled performance shares eligible to vest would be similarly below or above target, based on the level of performance we achieved.

 

For the 2010 LTI grant of cash-settled performance share awards, we used the same revenue and EPS goals as the 2010 Annual Cash Incentive Plan and weighted them equally. We attained 128% of these two goals combined, resulting in our executives earning 128% of the number of cash-settled performance shares originally granted to them. The 2010 cash-settled performance shares remain subject to service-based vesting over the three years from the grant date and the value an executive may earn with respect to these awards will be determined at the time each portion of the award vests, as described above.

 

These awards support the Company’s employee retention objectives through a three-year service-based vesting period. These awards are also aligned to stock price performance because they will be settled in cash based on the then-current 60-calendar day trailing average stock price through the applicable vesting date. Since no shares are issued, these awards will not dilute stockholders’ equity.

 

Market stock units are restricted stock units with the number of units earned based on stock price performance (measured as the then-current 60-calendar day trailing average) between the date of grant and each of the four annual vesting dates. If the target is achieved, 100% of the market stock units will vest. However, if performance is below or above target, the market stock units that will vest will be similarly below or above target, based on the level of performance actually achieved. If performance is below the minimum threshold, the award is forfeited. This ties executive compensation over the four-year vesting period even more directly to our stock price performance. At vesting, these awards are settled in shares of our stock.

 

For the 2010 LTI grants of market stock units, one-fourth will become eligible to vest in 2011 and the number of shares earned for that vesting will be determined on the vesting date. For the market stock units vesting in February 2011, our stock price performance was 123% of target, so our executives received an additional 23% market stock units above the number subject to the February 2011 vesting.

 

2010 LTI grant values reflected market practice and executive performance

 

We generally grant our LTI awards at the beginning of each year. Before approving our 2010 target LTI grant values, the Committee reviewed data on our peers’ LTI grant values from the Towers Perrin survey referred to above in the subsection titled “What external market peer group is used for compensation comparisons, and how is it established?” and publicly available data for LTI compensation expense and aggregate share usage among our peers. The Committee approved target LTI grant values for 2010, increasing our 2010 LTI grant guideline values for our executive vice presidents and reducing the values for most other levels. The resulting target LTI grant values for our named executive officers for 2010 were below the median of the values granted by our market peers.

Our LTI grant guidelines significantly differentiate LTI grants based on individual performance and position level. As in prior years, the 2010 LTI grant guidelines approved by the Committee were segmented by overall performance rating, ensuring that top performing employees receive noticeably larger grants than those with average performance. Specifically, our 2010 LTI grant guidelines for our middle-performing employees ranged from 75% to 125% of the target grant value, the guidelines for our highest-performing employees ranged from 130% to 200% of the target grant value, and LTI grant guidelines for our lowest-performing employees ranged from 0% to 60% of the target grant value. This approach allows us to meaningfully reward and effectively retain those employees who have the demonstrated potential to make the greatest contributions to our long-term success and to differentiate their rewards from those received by other employees.

 

We have a consistent annual grant pattern that follows the completion of our internal performance reviews as well as our external analyses that include a review of peer equity practices and the data from the Towers Perrin survey described earlier. Since 2004, we have made our annual merit equity grant in February of each year following our annual earnings release. The date of each annual merit grant is the date upon which the Committee approves the individual grants with the exception of grants to our CEO for whom grants require Board of Directors approval and are thus granted on the date of that approval. Other grants, such as those in connection with a new hire, are granted on the first trading day of the month following the date of hire.

 

Our annual LTI grants to our named executive officers in 2010 reflected their contributions to our results in 2009 and ranged from 90% to 160% with an average of 118% of the target LTI grant value. The value that will be realized from the cash-settled performance share grants depends on our 2010 Company revenue and EPS performance (as described above) and our stock price on each of the vesting dates. The value that will be realized from the market stock unit grants depends on our stock price on each of the vesting dates. Our stock price is dependent on both our Company’s performance and external market factors.

 

Benefits

 

In addition to participating in the benefit programs provided to all employees (for example, our employee stock purchase plan and medical, dental, vision, life and disability insurance), we provide some supplemental benefits to executives. These benefits include:

 

 

Retirement Plans

 

We maintain a Supplemental Savings Plan (SSP) which covers our executive officers and other management employees in the U.S. We offer this plan as part of the retirement savings component of our benefits program. We designed it to be competitive with the nonqualified deferred compensation plans offered by our peers. Details of the SSP are presented in the narrative preceding the 2010 Non-Qualified Deferred Compensation Table.

 

Post-termination Compensation and Benefits

 

We provide severance benefits to all of our executives if they are terminated without cause or in certain other instances following a corporate transaction or a change in control. The terms of these arrangements and the amounts

payable under them are described below for each named executive officer in the subsection titled “Potential Payments Upon Termination or Change in Control.” We provide these benefits because we believe that some protection is necessary so that our executives maintain their focus when providing advice to the Company and making strategic decisions about a potential corporate transaction or change in control, and to demonstrate effective leadership in the closing and integration of approved transactions.

 

Stock Ownership Requirement

 

We maintain share ownership requirements for our executive officers to strengthen the link our compensation programs create between our executives and our stockholders. Our current policy requires each named executive officer to maintain share or share-equivalent holdings as shown in the following table:

 

		Share Requirement
CEO			75,000
Executive Vice Presidents			10,000

 

Our policy became effective for all current executive officers upon its adoption in 2009 and was amended in 2010 to give newly-elected executive officers five years from initial election to meet the requirement. Shares owned outright, unvested time-vested restricted stock units and earned but unvested performance-vested restricted stock units are credited toward the share ownership requirement. The policy requires retention of vested shares for any executive officer who does not maintain share ownership at or above the policy requirements. All of our executive officers currently meet or are on track to meet the share ownership requirement within five years from their initial election.

 

Recoupment of Compensation

 

We maintain policies to recover compensation from our employees who engage in detrimental or competitive activity. Detrimental activity includes any action or failure to act that constitutes financial malfeasance that is materially injurious to the Company, violates our Code of Business Conduct, results in restatement of our earnings or financial results or results in a violation or breach of law or contract. Competitive activity includes any action or failure to act that violates non-disclosure, non-competition and/or non-solicitation agreements. Our 2008 Performance-Based Management Incentive Plan provides for the forfeiture and/or repayment of awards and our 2008 Omnibus Equity Plan also provides for the cancellation of LTI awards in these circumstances.

 

Tax-Deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code limits to $1 million the amount a company may deduct for compensation paid to its CEO or any of its other three named executive officers (excluding the Chief Financial Officer). This limitation does not, however, apply to compensation meeting the definition of qualifying performance-based compensation.

 

Management regularly reviews the provisions of our plans and programs, monitors legal developments and works with the Committee and its consultant to preserve Section 162(m) tax deductibility of compensation payments. Changes to preserve tax-deductibility are adopted to the extent reasonably practicable, consistent with our compensation policies and as determined to be in the best interests of the Company and our stockholders. Amounts of base salary above $1,000,000 and the time-vested restricted stock units to our CEO are not deductible. For 2010, our 2010 cash-settled performance share and market stock unit LTI grants were tax-deductible compensation under Section 162(m). For 2010, our annual cash incentive plan payouts were tax-deductible compensation under Section 162(m) for each of our named executive officers other than Dr. Granata.

Compensation and Management Development Committee Report

 

The Compensation and Management Development Committee furnishes the following report:

 

The Committee has reviewed and discussed the Compensation Discussion and Analysis with Biogen Idec management. Based on this review and discussion, the Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Submitted by,

 

Robert W. Pangia (Chair)

Alexander J. Denner

Eric K. Rowinsky

Lynn Schenk

 

Summary Compensation Table

 

The following table shows the compensation paid to or earned by our named executive officers during the years ended December 31, 2008, December 31, 2009 and December 31, 2010, for the year(s) in which he or she was a named executive officer.

 

 

 

Notes to Summary Compensation Table

 

 

 

		Target				Maximum
Executive Officer		Payout ($)				Payout ($)
Dr. Scangos			3,520,000				5,280,000
Mr. Clancy			1,406,234				2,459,359
Mr. Hamm			4,017,547				7,026,346
Dr. Granata			1,707,505				2,986,269
Dr. Schneier			2,008,772				3,513,171
Ms. Alexander			1,255,305				2,195,396

 

 

										Personal
		Company								Financial				Value of
		Matching				Company				and				Company-
		Contribution				Contribution				Tax Planning				Paid Life
		to 401(k)				to SSP				Reimbursement				Insurance
Executive Officer		Plan Account ($)				Account ($)				(9) ($)				Premiums ($)				Other(7) ($)
Dr. Scangos			8,492				16,315								954				262,829
Mr. Mullen			14,700				88,315				16,282				3,108
Mr. Clancy			14,700				36,459								1,011
Mr. Hamm			14,700				65,845				2,500				1,374
Dr. Granata			14,700				17,838				5,602				1,145				218,287
Dr. Schneier			14,700				33,822				8,900				955
Ms. Alexander			14,700				31,350								997

 

 

2010 Grants of Plan-Based Awards

 

The following table shows additional information regarding all grants of plan-based awards made to our named executive officers for the year ended December 31, 2010.

 

 

 

Notes to 2010 Grants of Plan-Based Awards Table

 

 

Outstanding Equity Awards at 2010 Fiscal Year-End

 

The following table summarizes the equity awards that were outstanding as of December 31, 2010 for each of our named executive officers.