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Table of Contents 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 Chairman, President and Chief Executive Officer William R. Jellison Vice President, Chief Financial Officer Timothy J. Scannell Group President, MedSurg and Neurotechnology Ramesh Subrahmanian Group President, International (1) David K. Floyd Group President, Orthopaedics ______________ (1) 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 average exchange rates (ranging from 1.2508 SGD to 1.2674 SGD per 1 USD) for each calendar quarter in 2014, as provided by the external firm that assists with the administration of our expatriate programs. 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 executive team that has successfully driven our financial results over time. The primary elements of compensation for our NEOs in 2014 were salary, bonus and stock awards consisting of stock options and performance 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. We believe the perquisites and personal benefits we provide to our NEOs are conservative to market. 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 2014, the value of the variable, performance and stock-based compensation elements for the NEOs — bonuses, stock option grants valued using the Black-Scholes method and performance stock units — averaged 81% 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 2014 (96% of target on average) were less than the 2013 levels (103% of target on average) as a result of performance that overall was below 2014 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 2012 grant of performance stock units was 67% 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 threshold 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 independent compensation consultant and make adjustments as deemed appropriate by the Compensation Committee; and • We evaluate key risk issues related to compensation and, in this regard, engaged a third party to conduct a risk assessment of compensation programs in 2013 as discussed under "Compensation Risks" on page 6 and believe that our compensation practices do not create risks that are reasonably likely to have a material adverse effect on Stryker. The Compensation Committee considered the results of the advisory shareholder vote on executive compensation at our 2014 annual meeting of shareholders at which the executive compensation program for our NEOs as disclosed in the proxy statement for that