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10 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. 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 Glenn S. Boehnlein Vice President, Chief Financial Officer (1) Timothy J. Scannell Group President, MedSurg and Neurotechnology David K. Floyd Group President, Orthopaedics Lonny J. Carpenter Group President, Global Quality and Business Operations William R. Jellison Advisor to the Chief Financial Officer and Former Vice President, Chief Financial Officer _____________ (1) Mr. Boehnlein became Vice President, Chief Financial Officer effective April 1, 2016. Mr. Jellison retired from his role as Vice President, Chief Financial Officer effective April 1, 2016 and is employed as Advisor to the Chief Financial Officer through March 31, 2017. In connection with his retirement, Mr. Jellison entered into a Transition Agreement with the Company that governs the terms of his service as Advisor. Mr. Jellison's base salary during the first three months of 2016 and during the advisory period is at the annual rate of $554,000, which is unchanged from 2015. He received an advisory period incentive bonus in the amount of $387,800 through December 31, 2016 and will be entitled to an additional $150,000 if he continues to serve in that capacity through the conclusion of the advisory period on March 31, 2017. Mr. Jellison received no equity awards in 2016 and will not receive any during the 2017 advisory period. Pursuant to the terms of the plans and award agreements under which he had been granted stock options, restricted stock units and performance stock units in 2015 and prior years, any unvested grants will lapse when his employment terminates and stock options that are vested on that date will lapse unless exercised within 30 days thereafter. 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 2016 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 limited 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 2016, the value of the variable, performance and stock-based compensation elements for the NEOs other than Mr. Jellison — bonuses, stock option grants valued using the Black-Scholes method and performance stock units — averaged 85% 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 challenging 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 2016 (143% of target on average) were greater than the 2015 levels (134% of target on average) as a result of performance that, overall, was above 2016 bonus plan goals that were generally more challenging than prior year actual results; • 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 2014 grant of performance stock units, which is discussed under "2014 Performance Stock Units: Results for the 2014-2016 Performance Period" beginning on page 18, was 149% of target as a result of performance that reached the maximum goal for sales growth relative to a comparison group of companies and performance that approximated 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 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 independent consultant to conduct a risk assessment of compensation programs in 2016 as discussed under "Compensation Risks" on page 8 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 2016 annual meeting of shareholders at which the executive compensation program for our NEOs as disclosed in the proxy statement for that meeting