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22 Our Insider Trading Guidelines prohibit short sales of and option trading on Stryker stock. Recoupment Policy In February 2015, our Board adopted a recoupment policy that applies uniformly to all cash and equity incentive payments made pursuant to awards granted to our elected corporate officers after 2014. Under this policy, the Compensation Committee may require recoupment from an elected officer if it determines that it is in the best interest of the Company to do so and the amount of the incentive compensation was based upon the achievement of certain financial results that were subsequently reduced due to a material restatement as a result of misconduct and would have been lower had it been based upon the restated financial results or the elected officer engaged in material misconduct or was negligent in exercising his or her supervisory responsibility to manage or monitor conduct or risks, in each case that resulted in a material violation of a law or regulation or a material Company policy relating to manufacturing, sales or marketing of our products. We will publicly disclose recoupment of compensation under this policy in situations where the Board determines that it is in the best interests of the Company and our shareholders to do so. Employment Agreements and Severance Policy We generally do not provide employment agreements, with the exception of unique circumstances or if such agreements are customary in foreign countries. We have no employment or severance agreement in place with any NEO. We have in the past made, and are likely in the future to make, separation payments to persons who were NEOs based on the specific facts and circumstances. The terms of the Transition Agreement entered into with Mr. Jellison in connection with his retirement are discussed under "Named Executive Officers" on page 10. Company Tax and Accounting Issues In general, consideration is given to the tax and accounting treatment of our compensation plans at the time of developing the plans, when making changes to plans, in light of any regulatory changes or when making specific compensation decisions related to individual elements. The accounting treatments considered include any that may apply to amounts awarded or paid to our NEOs. The tax considerations include Sections 162(m) and 409A of the Internal Revenue Code. Deductibility of Executive Compensation: In evaluating the compensation programs covering our NEOs and making decisions related to payments, the Compensation Committee considers the potential impact on the Company of Section 162(m) of the Internal Revenue Code. Section 162(m) generally eliminates the deductibility of compensation over $1 million paid to NEOs, other than the principal financial officer, excluding "performance-based compensation" meeting certain requirements. The Compensation Committee generally intends to maximize deductibility of compensation under Section 162(m) to the extent consistent with our overall compensation program objectives, while also maintaining maximum flexibility in the design and administration of our compensation programs and in making appropriate payments to executives. Accordingly, the Compensation Committee may choose to authorize compensation that does not meet the requirements of Section 162(m) if it determines such payments are appropriate. Share-Based Compensation: We account for compensation expense from our stock awards in accordance with the Compensation — Stock Compensation Topic of the Financial Accounting Standards Board Accounting Standards Codification ("FASB Codification") that requires companies to measure the cost of employee stock awards based on the grant date fair value and recognize that cost over the period during which a recipient is required to provide services in exchange for the stock awards, typically the vesting period. We consider the impact on the Company's compensation expense when determining and making stock awards. 2017 Compensation Decisions The table below summarizes the 2017 compensation decisions that were made in February 2017 for the 2016 NEOs other than Mr. Jellison. These decisions will be more fully discussed in the proxy statement for our 2018 annual meeting. Name Annualized Base Salary ($) Target Bonus ($) (1) Number of Stock Options (#) (2) Number of Performance Stock Units at Target (#) (3) Kevin A. Lobo 1,169,000 1,636,600 193,860 38,772 Glenn S. Boehnlein 570,000 456,000 40,815 8,162 Timothy J. Scannell 635,000 539,750 59,180 11,836 David K. Floyd 620,000 527,000 55,100 11,020 Lonny J. Carpenter 520,000 442,000 46,935 9,386 ______________ (1) Each NEO bonus plan for 2017 includes an opportunity to earn an overachievement bonus of up to an additional 100% of target bonus based on sales and earnings metrics. (2) Stock options to purchase shares of the Company's Common Stock were granted at an exercise price of $122.51 per share (the closing price as reported for NYSE Composite Transactions on February 7, 2017, the last trading day before the grant date). (3) Key design features for the 2017 performance stock units include the following: • In order to earn any shares, a pre-established threshold level of three-year average adjusted diluted net earnings per share growth must be achieved, with the actual number of shares earned based on actual average adjusted diluted net earnings per share growth and sales growth relative to a comparison group of companies over the three-year performance period; • Payout range of 0% to 200% of the target award; and • Settled in Common Stock in early 2020 following the completion of the three-year performance period.