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9 COMPENSATION DISCUSSION AND ANALYSIS This section includes information regarding, among other things, the overall objectives of our compensation program for our NEOs and each element of compensation that we provide. Please read this section in conjunction with the detailed tables and narrative descriptions of our NEO compensation under "Executive Compensation" beginning on page 24 of this proxy statement. Named Executive Officers The names and titles of our NEOs for purposes of this proxy statement are: Name Title Kevin A. Lobo ................................ President and Chief Executive Officer William R. Jellison ......................... Vice President and Chief Financial Officer (1) Ramesh Subrahmanian ................... Group President, International (2) Timothy J. Scannell ........................ Group President, MedSurg and Neurotechnology David K. Floyd ............................... Group President, Orthopaedics Dean H. Bergy ................................ Vice President, Corporate Secretary and Former Interim Chief Financial Officer (3) ______________ (1) Mr. Jellison joined the Company on April 22, 2013. (2) Mr. Subrahmanian works as a U.S. expatriate in Singapore and certain compensation items are paid in Singapore Dollars (SGD). U.S. Dollar (USD) amounts in this proxy statement with respect to Mr. Subrahmanian have been calculated using calendar quarter 2013 average exchange rates. (3) On April 22, 2013 Mr. Bergy ceased to serve as Interim Chief Financial Officer. Mr Bergy retained his responsibilities as Vice President, Corporate Secretary. Overview Stryker has a history of delivering solid financial results. Our executive pay programs have played a significant role in our ability to attract and retain the experienced, successful executive team that drives our financial results over time. The primary elements of compensation for our NEOs in 2013 were salary, bonus and stock awards consisting of stock options and performance stock units, except for Mr. Jellison and Mr. Bergy, both of whom received their stock awards in the form of stock options and restricted stock units. Our savings and retirement plans are typically defined contribution plans that match a portion of employee contributions and have historically included an annual discretionary contribution of 7% of salary and bonus for all eligible U.S.-based employees. We do not maintain any defined benefit pension plans for our NEOs. The perquisites and personal benefits we provide to our NEOs are conservative. Our Compensation Committee believes that our compensation practices for our NEOs are appropriate in the context both of Stryker's performance and the interests of our shareholders. Among the considerations in this regard are: • An important part of our executive compensation philosophy is the alignment of the compensation of our NEOs with the interests of our shareholders and achievement of key business objectives; • In 2013, the value of the variable, performance and stock-based compensation elements for the NEOs — bonuses, stock option grants valued using the Black-Scholes method, performance stock units and restricted stock units — averaged 79% of the total value of the primary compensation elements (salary, actual bonus and stock awards). See "Summary Compensation Table" on page 24; • Our NEO bonus plans are based on difficult performance goals that, if met, should result in profitable, sustained business performance over the long term and be reflected in stock price increases over time. The NEOs' payouts for 2013 (101% of target on average) were greater than the 2012 levels (83% of target on average) as a result of performance that was generally equal to 2013 bonus plan goals that were generally more challenging than the prior year goals; • Stock-based compensation realized by our NEOs is tied directly to the interests of our shareholders via stock price performance and, for performance stock units, based on financial performance relative to pre-established financial goals for a three-year performance period. The payout related to the 2011 grant of performance stock units was 128% of target as a result of performance that exceeded the target goal for sales growth relative to a comparison group of companies but was below the target goal for average adjusted diluted net earnings per share growth; • We monitor a comparison group of medical technology companies to ensure that our compensation programs are within observed competitive practices, review trends and practices with assistance from the Compensation Committee's compensation consultant and make adjustments as deemed appropriate by the Compensation Committee. As a result of a benchmarking study conducted in late 2012, we increased the overachievement potential under our 2013 annual bonus plan to 100% from 50%, which we believe is more in line with typical market practice and increases the emphasis on variable, performance-based pay; and • We evaluate key risk issues related to compensation and, in this regard, engaged a third party to conduct a risk assessment of