Teva Pharmaceutical Industries Limited (TEVA) DEF 14ADefinitive proxy

Notice of 2023 Annual Meeting of Shareholders & Proxy Statement

FROM OUR CHAIRMAN OF THE BOARD
Dear Shareholder
Dr. Sol J. Barer
Chairman of the
Board of Directors
On behalf of the entire Teva Board of Directors, I thank you for your support and investment in Teva. This past year represented continued stabilization and growth for Teva on several fronts. We marked a successful CEO leadership transition, continued to drive growth for our key brands (AUSTEDO and AJOVY) and continued investment in our product pipeline. In 2022, Teva delivered solid results, despite the challenging macroeconomic environment, and made significant progress in bringing the opioids nationwide settlement to finalization. We also remain focused on reducing our debt and optimizing our manufacturing and supply chain, while investing for growth.
Leadership transition
Kåre Schultz retired from the Company effective December 31, 2022 and Richard D. Francis was appointed President and CEO and a member of the Board of Directors on January 1, 2023. Under Kåre’s leadership, the Company executed on a comprehensive restructuring plan, which significantly reduced our spending to allow us to further pay down our debt I want to thank Kåre for his years at Teva. Kȧre’s success positioned us to smoothly transition to Richard and what we anticipate to be a period of growth for Teva under his leadership. Richard brings an entrepreneurial leadership style and extensive experience as a senior executive in the pharmaceutical industry, along with a rack-record of success in the life
sciences, biologics and generic drug sectors. We are confident that we are well-positioned to benefit from strong and effective leadership in the coming years. Growth at Teva We believe that Teva is positioned to return to growth and create shareholder value. Our key innovative medicines, AUSTEDO and AJOVY, continue to show promise for sustainable growth. AUSTEDO revenues grew to approximately $1 billion in 2022, and AJOVY has now launched in most of the European countries and in Japan, with plans to launch in additional markets. Our generics business has also performed well in 2022. In addition, over the last six years, we have built a strong pipeline of biosimilars. Aligning financing and our sustainability goals In addition to the debt reduction progress cited above, in March 2023, we concluded a successful $2.49 billion refinancing through a sustainability-linked bond offering, which continues to better align our debt maturities with our expected free cash flows for the coming years. We chose to do this through a sustainability-linked bond offering to establish a direct connection with both our social and environmental targets. Environmental, Social and Governance (“ESG”) ESG is critical to our long-term sustainability and success. Over the last few years, we ave worked hard to lay strong ESG foundations, formalize ESG, ensure our efforts are tied to meaningful goals and that our progress is reported transparently. In our forthcoming 2022 ESG Progress Report, we will provide detail on how we manage our come ESG topics, in accordance with broadly accepted reporting standards. Litigation The Board and its committees have been engaged in monitoring Teva’s efforts to bring the opioids litigation to an acceptable conclusion. After finalizing the documentation for the nationwide opioids settlements, in January 2023, we confirmed participation from 49 of the 50 states and have moved forward with the participation process of the subdivisions. Most importantly, the settlement makes critical medicines part of the solution when addressing the opioids epidemic. While the

agreement includes no admission of wrongdoing, it remains in our best interest to put these cases behind us and focus on the patients we serve every day. We are also making progress on the U.S. generic antitrust litigation, and have reached settlements with a number of individual states. Board refreshment We continue our focus on refreshment, to ensure that the Board is composed of members with the diverse skills and experiences necessary to oversee our strategy and stay ahead of the evolving pharmaceutical industry. We are therefore very excited with the nomination of Michal Braverman Blumenstyk to serve as a member of the Board. Michal brings a nuanced understanding in innovation, R&D and technology. Her expertise includes over 25 years in global leadership of leading technology corporations, leading their innovation, R&D and cybersecurity divisions. Her perspective and experience will be a valuable addition to the Board, complementing the skills and experiences of our other Board members. Additionally, Jean-Michel Halfon and Nechemia (Chemi) Peres will each retire from our Board following the Annual Meeting. The Board is grateful for their invaluable service and significant contributions to Teva over the past years. Continued dialogue with our shareholders I was pleased to have the opportunity to meet and speak directly with several of our investors, while our management team engaged with others. Our discussions focused on Teva’s ESG efforts, including our long-term goals linked to our financing strategy, human capital management and inclusion and diversity, CEO leadership succession, as well as the various changes to our executive compensation program over recent years. We look forward to continuing our dialogue, incorporating your feedback into our discussions as we strive to grow Teva in al responsible and inclusive way. Looking ahead at 2023 I am excited to continue working closely with my fellow Board members, our President and CEO, Richard Francis, our talented management team and dedicated employees, as we shift our perspective to the future. We believe that Teva is positioned to return to growth and create shareholder value.
We are pleased to invite you to attend our annual meeting of shareholders, which will take place on June 15, 2023, at 4 p.m., Israel time/9 a.m. Eastern time. Your vote is very important. We hope you will vote as soon as possible. Sincerely, Dr. Sol J. Barer Chairman of the Board of Directors April 19, 2023

For an accessible version of this Proxy Statement, please visit www.tevapharm.com/2023proxymaterials.

Notice of 2023 Annual Meeting of Shareholders

By Order of the Board of Directors,

Dov Bergwerk

Senior Vice President,

Company Secretary

April 19, 2023

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on June 15, 2023

The accompanying Proxy Statement and our Annual Report are available at www.tevapharm.com/2023proxymaterials. We expect the proxy materials to be mailed and/or made available on or before April 21, 2023.

Table of Contents

Cautionary Note Regarding Forward-Looking Statements

This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current beliefs and expectations and are subject to substantial risks and uncertainties, both known and unknown, that could cause our future results, performance or achievements to differ significantly from that expressed or implied by such forward-looking statements. You can identify these forward-looking statements by the use of words such as “should,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. Risks that could cause actual results to differ from those expressed or implied in such forward-looking statements are set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, including in the section captioned “Risk Factors,” and other documents we may subsequently file with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statements or other information contained herein, whether as a result of new information, future events or otherwise. You are cautioned not to put undue reliance on these forward-looking statements.

2022 Overview

Teva is a leading global pharmaceutical company. In 2022, we continued helping patients around the world to access affordable medicines and benefit from innovations to improve their health. Our key growth drivers delivered promising results and milestones, and we met all components of our 2022 financial guidance.

Looking ahead, we expect to see continued growth of our key innovative medicines, AUSTEDO and AJOVY, as well as to continue to develop our exciting pipeline in neuroscience and immunology and advance our core business through the launch of high quality generics, biosimilar and innovative medicines around the world.

2022 Financial Results

Revenue		Earnings (Loss) Per Share		Cash
$14.9 billion		$(2.12)   (GAAP)		$1.6 billion   (cash flow from operating activities)
		$2.52 (non-GAAP*)		$2.2 billion   (free cash flow**)

Key Product and Pipeline Updates—Leveraging Our Growth Engines

Continuing to Reduce our Debt

		In the past six years, we have reduced our net debt by more than $15 billion. As of December 31, 2022, our net debt was $18.4 billion.

Board and Corporate Governance Highlights

Our Board of Directors (the “Board of Directors” or the “Board”) continually evaluates Teva’s corporate governance policies and practices, focusing on ensuring effective oversight of Teva’s business and management. We have established a strong and effective framework to monitor the risks of our business.

Board and Corporate Governance

Board Oversight of Risk

Director Alignment with Shareholder Interests

Shareholder Engagement

Board and Corporate Governance Highlights

Our Environmental, Social and Governance Priorities and Accomplishments

Proposal 1: Election of Directors

The election of highly qualified directors is fundamental to the Board’s successful oversight of Teva’s strategy and risks. We seek directors who add diverse perspectives, possess a variety of skills and provide global pharmaceutical experience and other qualifications. In March 2023, the Board approved and adopted the “Board’s Inclusion and Diversity Statement” (“Board I&D Statement”) as part of the Company’s Statement of Corporate Governance Principals, which is available on our website. The Board’s vision, as reflected in the Board I&D Statement, is that the Board is a reflection of the cultural and geographical breadth of our business, and therefore we should continuously strive to align the composition and diversity of our Board with the size and geographical spread of Teva, its broad product portfolio, history and culture. Additionally, a diverse Board with a range of views, skills and expertise enhances decision-making, which is beneficial to the Company’s success in the interests of generating value for all Teva’s stakeholders. The Board believes, as stipulated in the Board I&D Statement, that Teva’s directors should ultimately be selected based on wide-ranging experiences, backgrounds, skills, knowledge, and insight, while also considering the gender, ethnicity, nationality, and cultural diversity of its members. The process of selecting directors is based on objective criteria without discrimination and focuses on a candidate’s ability to perform as a director.

The average tenure of our current directors is 6.25 years of service and the average age is 62.8. We currently have three directors who identify as female out of 12 members serving on our Board of Directors. Subject to the approval of shareholders of this Proposal 1, we will have 11 members serving on our Board of Directors, of which four directors who identify as female, the average tenure will be reduced to 5.45 years of service, and the average age of our directors will be reduced to 61.9.

Dr. Barer, our Chairman of the Board, is an independent director under NYSE regulations. Richard D. Francis, our President and Chief Executive Officer (the “President and CEO”) serves on the Board, which facilitates collaboration between the Board of Directors and management. Corporate governance remains a high priority and we continue to evaluate the size and composition of the Board to ensure that it maintains dynamic, exceptionally qualified leadership.

Following the recommendation of our Corporate Governance and Nominating Committee, the Board of Directors recommends that shareholders approve the appointment of Dr. Sol J. Barer, Michal Braverman-Blumenstyk and Janet S. Vergis to serve as directors until our 2026 annual meeting of shareholders. Dr. Sol J. Barer and Janet S. Vergis are currently members of the Board of Directors and all nominees qualify as independent directors under NYSE regulations. If re-appointed as a director at this Annual Meeting, Dr. Barer will continue to serve as Chairman of the Board of Directors.

In accordance with the Israeli Companies law, 5759-1999 (as amended from time to time, the “Israeli Companies Law”), all nominees for election as directors at the Annual Meeting have declared in writing that they possess the requisite skills and expertise, as well as sufficient time, to perform their duties as directors.

Proposal 1: Election of Directors

Directors

The following table sets forth information regarding the directors and director nominees of Teva as of April 1, 2023:

Persons Being Considered for Election at the Annual Meeting

Proposal 1: Election of Directors

Proposal 1: Election of Directors

Continuing Directors

Proposal 1: Election of Directors

Proposal 1: Election of Directors

Proposal 1: Election of Directors

Proposal 1: Election of Directors

Directors whose Services are Concluding at the Annual Meeting

Jean-Michel Halfon is not standing for re-election at the Annual Meeting. Mr. Halfon joined the Board of Directors in 2014, and has previously served as chair of the HR and Compensation Committee and more recently chair of the Compliance Committee. We sincerely thank Jean-Michel for his nine years on Teva’s Board of Directors, and his invaluable impact and contribution to the Board and to Teva.

Nechemia (Chemi) J. Peres is not standing for re-election at the Annual Meeting. Mr. Peres joined the Board of Directors in 2017 and served on several of the Board’s committees. We sincerely thank Chemi for his immense contribution to the Board and to Teva, along with his extensive efforts on behalf of Teva throughout his term of service.

Family Relationships

There are no family relationships among any of our executive officers, directors or director nominees.

Corporate Governance and Director Compensation

Pursuant to our Articles of Association, the Board of Directors must consist of three to 18 directors (which includes our President and CEO, if serving as a member of the Board, and two statutory independent directors, if such are appointed in accordance with the Israeli Companies Law, and in the event the CEO and/or the statutory independent directors are not appointed to the Board of Directors, such maximum number of directors shall be reduced accordingly). Our Board of Directors consists of 12 persons, including our President and CEO. Following the Annual Meeting and subject to the approval of shareholders of Proposal 1, our Board of Directors will consist of 11 persons, including our President and CEO. The Board of Directors has determined that all of the directors that currently serve and that will serve on the Board of Directors following the Annual Meeting are independent, except for Richard D. Francis, our President and CEO.

We currently maintain a policy to have at least two directors qualify as financial and accounting experts under Israeli law. Accordingly, the Board of Directors has determined that Gerald M. Lieberman and Roberto A. Mignone are financial and accounting experts under such criteria.

Our directors are generally entitled to review and retain copies of our documentation and examine our assets, as required to perform their duties as directors and to receive assistance, in special cases, from outside experts at our expense.

Board Diversity and Skills*

Over the course of 2022, inclusion and diversity was a point of emphasis for our Board and our management team. Teva believes that inclusion and diversity are essential to its ability to innovate and grow its business. It is our desire to create and sustain an inclusive and diverse work environment. In its search for suitable candidates, our Board recognizes the value of overall diversity and considers members’ and candidates’ opinions, perspectives, personal and professional experiences, and backgrounds, including gender, race and ethnicity.

Corporate Governance and Director Compensation

The chart below summarizes the notable skills, qualifications and experience of each of our directors and director nominees (subject to the approval of Proposal 1, and in addition to requisite skills and expertise to perform their duties as directors) and highlights the balanced mix of skills, qualifications and experience of the Board as a whole. These are the same attributes that the Board considers as part of its ongoing director succession planning process. This high-level summary is not intended to be an exhaustive list of each director’s and director nominee’s skills or contributions to the Board.

Board Practices

Director Terms and Education. Our directors are generally elected in three classes for terms of approximately three years. Due to the complexity of our businesses and our extensive global activities, we value the insight and familiarity with our operations that a director is able to develop over his or her service on the Board of Directors. Because we believe that extended service on our Board enhances a director’s ability to make significant contributions to Teva, we do not believe that arbitrary term limits on directors’ service are appropriate. At the same time, it is the policy of the Board that directors should not expect to be renominated automatically.

In recent years, we strengthened our Board of Directors with the addition of new highly qualified and talented directors, adding expertise as well as diversity to our Board of Directors. The average tenure of our current directors is 6.25 years of service and the average age is 62.8. We currently have three directors who identify

Corporate Governance and Director Compensation

as female out of 12 members serving on our Board of Directors. Subject to the approval of shareholders of Proposal 1, we will have 11 members serving on our Board of Directors, of which four directors who identify as female, the average tenure will be reduced to 5.45 years of service, and the average age of our directors will be reduced to 61.9. Our Chairman of the Board is independent under NYSE regulations, and 11 out of 12 of our current directors are independent under NYSE regulations. Subject to the approval of shareholders of Proposal 1, 10 out of 11 of our directors will be independent under NYSE regulations. Our only non-independent director is our President and CEO, which facilitates collaboration between the Board of Directors and management. We continue to evaluate the size and composition of our Board of Directors to ensure it maintains dynamic, exceptionally qualified members.

We provide an orientation program and a continuing education process for our directors, which include business and industry briefings, provision of materials, sessions from leading experts and professionals, meetings with key management and visits to Teva facilities. We evaluate and improve our education and orientation programs to ensure that our directors have the knowledge and background needed for them to best perform their duties.

Board Meetings. The Board of Directors holds at least six meetings each year to review significant developments affecting Teva and to consider matters requiring approval of the Board, with additional meetings scheduled when important matters require Board of Directors action between scheduled meetings. Members of senior management regularly attend Board meetings to report on and discuss their areas of responsibility. Information regarding the number of Board committee meetings and attendance rates for 2022 is presented in the table below under “—Committee Composition and Board and Committee Attendance in 2022.”

Executive Sessions of the Board. Our directors meet in executive session (i.e., without the presence of management, including our President and CEO) generally in connection with each regularly scheduled Board meeting and additionally as needed. Executive sessions are chaired by Dr. Barer, the Chairman of the Board.

Annual Meetings. We do not have a formal policy requiring members of the Board to attend our annual meetings, although all directors are strongly encouraged to attend. Eight out of 12 of our directors attended the 2022 annual meeting of shareholders.

Board Leadership. The Board of Directors recognizes that one of its key responsibilities is to establish and evaluate an appropriate leadership structure for the Board of Directors so as to provide effective oversight of management. The Board of Directors has separate roles for the Chief Executive Officer and Chairman of the Board of Directors, with Dr. Barer serving as independent Chairman and Mr. Richard D. Francis as President and CEO. Dr. Barer’s long career as a senior pharmaceutical executive and leadership roles in various biopharmaceutical companies, as well as his extensive scientific expertise and knowledge of the global pharmaceutical business, have made him an invaluable resource to both the Board of Directors and the Chief Executive Officer. If reappointed as a director at this Annual Meeting, Dr. Barer will continue to serve as Chairman of the Board of Directors. The Board of Directors has determined that this leadership structure is appropriate for Teva at this time because it ensures that the appropriate level of oversight, independence and responsibility is applied to all Board decisions.

Board of Directors Role in Risk Oversight. Management is responsible for assessing and managing risk, subject to oversight by the Board of Directors. Our annual risk assessment process includes both a top-down review of strategic risks and a bottom-up review of operational risks, which are presented to the Board of Directors. The Board of Directors fulfills its oversight responsibility for risk assessment and management by reviewing risk management policies and the risk profile of our operations and business strategy, while its committees, as appropriate, monitor and address risks that may be within the scope of a particular committee’s expertise or charter, as described below. Each committee provides regular updates to the full Board regarding its activities.

Corporate Governance and Director Compensation

During 2022, the Board and Audit Committee participated in monitoring strategic litigation, including with respect to the opioids litigation.

Cybersecurity Risk Management. The Audit Committee assists the Board with the oversight of cybersecurity risks. As part of its risk oversight function, the Audit Committee oversees risks associated with our information systems and technology, including cybersecurity, reviews our cyber risk assessment and management policies and receives updates from our Chief Information Officer relating to Teva’s information security and technology risks, including cybersecurity. During 2022, the Audit Committee received regular briefings on Teva’s information security and risk management programs, including with respect to cyber security, global cyber threat trends, and Teva’s related policies, processes and practices in place for managing and mitigating cybersecurity incidents and other technology-related risks, as well as SAP implementation and privacy controls. Teva’s information security office leads our cybersecurity risk management program. We also maintain cyber risk insurance coverage.

Director Service Contracts. Except for equity awards that accelerate upon termination, we do not have any contracts with any of our non-employee directors that provide for benefits upon termination of services. Information regarding director compensation can be found under “Non-Employee Director Compensation” below.

Communications with the Board. Shareholders, employees and other interested parties can contact any director or committee of the Board of Directors by writing to them care of Teva Pharmaceutical Industries Ltd., 124 Dvora HaNevi’a Street, Tel Aviv, 6944020, Israel, Attn: Company Secretary or Internal Auditor or by email to TevaIR@tevapharm.com. Comments or complaints relating to our accounting, internal controls or auditing matters may also be referred to members of the Audit Committee, as well as other appropriate Teva departments. The Board of Directors has adopted a global “whistleblower” policy, which provides employees and others with an anonymous means of communicating with the Audit Committee.

Nominees for Directors. Pursuant to the Israeli Companies Law, a nominee for service as a director must submit a declaration to us, prior to his or her election, specifying that he or she has the requisite qualifications to serve as a director and the ability to devote the appropriate time to performing his or her duties as such and that he or she is not restricted from serving as director under the Israeli Companies Law.

Corporate Governance and Director Compensation

All of our directors, including those nominated for appointment as directors at the Annual Meeting, have provided such declaration. A director who ceases to meet the statutory requirements to serve as a director must notify us to that effect immediately and his or her service as a director will terminate upon submission of such notice.

Our Board of Directors believes that it should be composed of directors with diverse, complementary backgrounds and that directors should, at a minimum, exhibit proven leadership capabilities and possess experience at a high level of responsibility within their chosen fields. When considering a candidate for director, our Corporate Governance and Nominating Committee considers whether the directors, both individually and collectively, can and do provide the experience, judgment, commitment, skills and expertise appropriate to lead Teva in the context of its industry. In addition, our Corporate Governance and Nominating Committee considers a nominee’s expected contribution to the diversity of skills, background, experiences and perspectives, as well as whether such nominee could provide added value to any of the committees of the Board of Directors, given the then existing composition of the Board of Directors as a whole. When seeking new candidates, the Corporate Governance and Nominating Committee also considers candidates representing a diversity of backgrounds, perspectives, ethnicities, races, genders, nationalities, and cultures. Our Corporate Governance and Nominating Committee also provides input and guidance regarding the independence of directors, for formal review and approval by our Board of Directors.

When seeking candidates for directorships, our Corporate Governance and Nominating Committee may solicit suggestions from incumbent directors, management, shareholders and others. Additionally, the Board of Directors has in the past used and may continue to use the services of third-party search firms to assist in the identification and analysis of appropriate candidates. After conducting an initial evaluation of a prospective candidate, members of the Board of Directors will interview that candidate if they believe the candidate may be suitable. The Chairman of the Board of Directors may also ask the candidate to meet with certain members of executive management.

If our Corporate Governance and Nominating Committee believes a director should be re-elected or a candidate would be a valuable addition to the Board of Directors, it may recommend to the Board of Directors that candidate’s appointment or re-election, who, in turn, can submit the candidate for consideration by the shareholders.

The Israeli Companies Law provides a process by which one or more shareholders holding 1% or more of the voting rights of Teva may propose the nomination of a candidate to the Board of Directors. See “Shareholder Proposals for the 2023 Annual Meeting and the 2024 Annual Meeting” below.

Non-Employee Director Compensation

As required by the Israeli Companies Law, we have adopted a Compensation Policy for Executive Officers and Directors (the “Compensation Policy”), which is presented for shareholder approval at least once every three years. Pursuant to the Israeli Companies Law and regulations promulgated thereunder, any arrangement between Teva and a director relating to his or her compensation as a director or other position with Teva must generally be consistent with Teva’s Compensation Policy and approved by the HR and Compensation Committee, the Board and by a simple majority of Teva’s shareholders.

As approved at our 2019 annual general meeting of shareholders, our non-employee director annual compensation program (applicable to all non-employee directors except for the Chairman of the Board) is comprised of:

Corporate Governance and Director Compensation

As approved at our 2019 annual general meeting of shareholders, the annual compensation for the Chairman of the Board is comprised of:

The Chairman of the Board is not entitled to additional annual cash fees for service on Board Committees.

Fees for Board and committee service are payable over the period of time during which the individual serves as a non-employee director. In the event that a non-employee director serves as a member of the Board during only part of the year, a pro-rated amount of the annual board membership fee and standing committee fees will be paid. In the event of an appointment to the Board between annual meetings of shareholders, the annual equity-based award shall be pro-rated. Upon completion of a non-employee director’s service as a director, other than removal pursuant to a shareholder resolution due to a breach of fiduciary duties, any unvested awards granted to such director by virtue of such position and held by such director will immediately become vested.

We purchase directors’ and officers’ liability insurance for our directors and executive officers, as approved by our shareholders and consistent with the Compensation Policy. In addition, we release our directors from liability and indemnify them to the fullest extent permitted by law and our Articles of Association, and provide them with indemnification and release agreements for this purpose, substantially in the form approved by our shareholders at our 2012 annual meeting.

In addition, Teva reimburses or covers its non-employee directors’ expenses (including travel expenses) incurred in connection with attending meetings of the Board and its committees or in performing other services for Teva in their capacity as non-employee directors, in accordance with Israeli law and the Compensation Policy.

Any director elected to serve as a member of our Board and all continuing non-employee directors will be compensated in the manner described above and will benefit from the insurance, indemnification and release discussed above.

No additional compensation is received for attendance at a Board or committee meeting.

Corporate Governance and Director Compensation

Director Stock Ownership Guidelines

In 2019, we established director stock ownership guidelines requiring ownership of five times the annual cash fee paid to directors for board membership (excluding committees fees), which must be achieved within the later of six years of first becoming subject to these guidelines and January 1, 2025.

2022 Director Compensation

Mr. Kåre Schultz, who served as Teva’s President and CEO until December 31, 2022, was not entitled to any compensation in his capacity as a member of the Board or any committee thereof.

Corporate Governance and Director Compensation

Committees of the Board

Our Articles of Association provide that the Board of Directors may delegate its powers to one or more committees as it deems appropriate to the extent such delegation is permitted under the Israeli Companies Law. The Board of Directors has appointed the standing committees listed below, as well as ad-hoc committees appointed from time to time for specific purposes determined by the Board.

We have adopted charters for all of our standing committees, formalizing the committees’ procedures and duties. These committee charters are available on our website at www.tevapharm.com.

Committee Composition and Board and Committee Attendance in 2022

In 2022, our Board of Directors met ten times with an average attendance rate of 98%, and each of our current directors attended at least 90% of the meetings of the Board and Board committees on which he or she served.

Audit Committee

The Israeli Companies Law requires publicly held Israeli companies to appoint an audit committee. As a NYSE-listed company, Teva’s Audit Committee must be comprised solely of independent directors, as defined by the SEC and NYSE regulations.

The responsibilities of our Audit Committee include, among others: (a) identifying flaws in the management of our business and making recommendations to the Board of Directors as to how to correct them and providing for arrangements regarding employee complaints with respect thereto; (b) making determinations and considering providing approvals concerning certain related party transactions and certain actions involving conflicts of interest; (c) reviewing the internal auditor’s performance and approving the internal audit work program and examining our internal control structure and processes; (d) examining the independent auditor’s scope of work and fees; and (e) providing for arrangements regarding employee complaints regarding questionable accounting or auditing matters and monitoring compliance with and investigating alleged violations and enforcing provisions of Teva’s Code of Conduct. Furthermore, the Audit Committee discusses the financial statements and the disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (the “MD&A”) and presents to the Board of Directors its recommendations with respect to the proposed financial statements and MD&A.

Corporate Governance and Director Compensation

In accordance with the Sarbanes-Oxley Act and NYSE requirements, the Audit Committee is directly responsible for the appointment, compensation and oversight of the work of our independent auditors. In addition, the Audit Committee is responsible for assisting the Board of Directors in monitoring our financial statements, the effectiveness of our internal controls and our compliance with legal and regulatory requirements. The Audit Committee also discusses our policies with respect to risk assessment and risk management regarding financial reporting and risks that may be material to us and major legislative and regulatory developments that could materially impact Teva’s contingent liabilities and risks.

The Audit Committee charter sets forth the scope of the committee’s responsibilities, including its structure, processes and membership requirements; the committee’s purpose; its specific responsibilities and authority with respect to, among others, registered public accounting firms; complaints relating to accounting, internal accounting controls or auditing matters; and its authority to engage advisors as determined by the Audit Committee.

The Audit Committee also reviews and receives briefings concerning Teva’s information security and technology risks, including cybersecurity, and is briefed on Teva’s information security and risk management programs, policies, practices and processes. Teva’s information security office leads our cybersecurity risk management program.

All of the Audit Committee members have been determined to be independent as defined by SEC and NYSE regulations.

The Board of Directors has determined that, of the directors on this committee, Gerald M. Lieberman (chair) and Roberto A. Mignone are “audit committee financial experts” as defined by applicable SEC regulations.

Human Resources and Compensation Committee

The Israeli Companies Law requires publicly held Israeli companies to appoint a compensation committee. As a NYSE-listed company, Teva’s HR and Compensation Committee must be comprised solely of independent directors, as defined by the SEC and NYSE regulations.

The HR and Compensation Committee is responsible for establishing annual and long-term performance goals and objectives for our executive officers, as well as reviewing our compensation philosophy and policies (including our Compensation Policy).

The HR and Compensation Committee is responsible for reviewing plans for the succession of our chief executive officer and other senior members of executive management, and led the search and appointment process of our current President and CEO, Richard D. Francis.

The HR and Compensation Committee also evaluates the performance of our chief executive officer and other executive officers, makes recommendations to the Board of Directors regarding the compensation of our executive officers and directors, reviews any organizational restructuring pertaining to the roles, responsibilities and selection of executive officers and oversees our labor practices.

All of the HR and Compensation Committee members have been determined to be independent as defined by SEC and NYSE regulations.

Corporate Governance and Nominating Committee

The NYSE Listed Company Manual requires publicly listed companies to appoint a corporate governance / nominating committee composed entirely of independent directors, as defined by NYSE regulations.

Corporate Governance and Director Compensation

The role of our Corporate Governance and Nominating Committee is to (i) identify individuals who are qualified to become directors; (ii) recommend to the Board of Directors director nominees for each annual meeting of shareholders; and (iii) assist the Board of Directors in establishing and reviewing Teva’s statement of corporate governance principles and promoting good corporate governance in Teva.

All of the Corporate Governance and Nominating Committee members have been determined to be independent as defined by NYSE regulations.

Finance and Investment Committee

The role of our Finance and Investment Committee is to assist the Board of Directors in fulfilling its responsibilities with respect to our financial and investment strategies and policies, including determining policies on these matters and monitoring implementation. It is also authorized to approve certain financial transactions (such as material loans and other financing arrangements), review our financial risk management policies and evaluate the execution, financial results and integration of Teva’s completed acquisitions, as well as various other finance-related matters, including our global tax structure and allocation policies. According to the committee’s charter, at least one of the committee’s members must be qualified as a financial and accounting expert under SEC regulations and/or the Israeli Companies Law.

The Board of Directors has determined that, of the directors on this committee, Gerald M. Lieberman and Roberto A. Mignone (chair) are financial and accounting experts under Israeli law.

A majority of committee members must be determined to be independent as defined by NYSE regulations.

Compliance Committee

The role of our Compliance Committee is to oversee our: (i) policies and practices for complying with laws, regulations and internal procedures; (ii) policies and practices regarding issues that have the potential to seriously impact our business and reputation; (iii) global public policy positions; (iv) strategy and governance of ESG matters and to advise the Board on ESG matters; and (v) implementation of our culture of integrity.

A majority of committee members must be determined to be independent as defined by NYSE regulations. The chairperson of the Audit Committee shall be invited by the committee chairperson to participate in the Compliance Committee, as deemed relevant to the committee’s agenda.

Science and Technology Committee

The Science and Technology Committee oversees our overall strategic direction and investment in research and development and technological and scientific initiatives. As part of this responsibility, it reviews scientific and R&D strategy and priorities, scientific aspects of business development activities and technological trends. It assists the Board of Directors in risk management oversight relating to R&D and our intellectual property, advises on our intellectual property strategy, reviews new technology in which Teva is, or is considering, investing and reviews the efficacy and safety profile of new pharmaceuticals.

All of the committee members must be determined to have scientific, medical or other related expertise. A majority of committee members must be determined to be independent as defined by NYSE regulations.

Code of Business Conduct

Teva has adopted a code of business conduct applicable to its directors, executive officers, and all other employees. A copy of the code is available to every Teva employee on Teva’s internet site, upon request to its human resources department, and to investors and others on Teva’s website at www.tevapharm.com or by contacting Teva’s investor relations department, legal department or the internal auditor. If we make any amendment or grant any waiver to this code that applies to our chief executive officer, chief financial officer, chief accounting officer or controller, or persons performing similar functions, and that relates to an

Corporate Governance and Director Compensation

element of the SEC’s “code of ethics” definition, then we will disclose the nature of the amendment or waiver on Teva’s website. The Board of Directors has approved a whistleblower policy which functions in coordination with Teva’s code of business conduct and provides an anonymous means for employees and others to communicate with various departments of Teva, including the Audit Committee. Teva has also implemented a training program for new and existing employees concerning the code of business conduct and whistleblower policy.

Principles of Corporate Governance

We have adopted a set of corporate governance principles, which is available on our website at www.tevapharm.com. We place great emphasis on maintaining high standards of corporate governance and continuously evaluate and seek to improve our governance standards. These efforts are expressed in our corporate governance principles, our committee charters and the policies of our Board of Directors. Teva is in compliance with all corporate governance standards currently applicable to Teva under Israeli and U.S. laws, SEC regulations and NYSE listing standards.

Insider Trading Policy

Our directors, executive officers and employees, as well as their immediate family members, persons living in their home and entities controlled by any of the foregoing persons are subject to Teva’s insider trading policy (the “Policy”). The Policy prohibits insider trading and certain speculative transactions (including short sales, buying put and selling call options and other hedging or derivative transactions in Teva’s securities), and establishes a regular blackout period schedule during which directors, executive officers and certain employees may not trade in Teva’s securities. In addition, the Policy establishes pre-clearance procedures that directors and executive officers must observe prior to effecting any transaction in Teva’s securities. The Policy applies not only to Teva’s ADSs and ordinary shares, but also to its debt securities and other securities for which Teva securities serve as underlying assets.

Board Evaluation Process

Our Board of Directors is committed to continuous improvement and recognizes the fundamental role a robust Board of Directors and committee evaluation process play in ensuring that our Board of Directors maintains optimal composition and functions effectively.

In the annual self-evaluation process, the members of the Board of Directors conduct a confidential oral assessment of the performance, risk oversight and composition of the Board and any committees of which he or she is a member with the Company Secretary. As part of the evaluation process, the Board of Directors, in conjunction with the Corporate Governance and Nominating Committee, reviews the effectiveness and overall composition of the Board of Directors, including director tenure, board leadership structure, diversity and skill sets, the quality and scope of the materials distributed in advance of meetings and the boards access to Company executives and operations, to ensure the Board of Directors serves the best interests of shareholders and positions the Company for future success. The results of the oral assessments are then communicated back to each committee, committee chair and the entire Board of Directors during an executive session. After the evaluations, each committee, committee chair and the entire Board of Directors and management work to improve upon any issues presented during the evaluation process and to identify opportunities that may lead to further improvement. The Corporate Governance and Nominating Committee also uses this process to assess and determine the characteristics and skills required of prospective candidates for election to the Board of Directors.

Self-evaluation items requiring follow-up and execution are monitored by the Board and each of the committees. While this formal self-evaluation is conducted on an annual basis, the evaluation process is an ongoing process throughout the year. Directors continuously share their perspectives, feedback, and suggestions throughout the year.

Shareholder Engagement

In late 2022, the Board and senior management conducted discussions with shareholders, as part of our regular, ongoing, annual commitment to strong corporate governance and continuous dialogue with our stakeholders, which we believe enables us to better understand their perspectives.

During this time, we contacted our top 25 shareholders, which represent approximately 33% of our outstanding shares and a significant majority of identified institutional holders, as well as the research teams at proxy advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. We participated in discussions with shareholders representing approximately 14% of our outstanding shares. Our Chairman of the Board and senior management with responsibility for investor relations, corporate governance, ESG and executive compensation participated in relevant discussions with shareholders.

The discussions covered a broad array of matters, including:

Feedback from our shareholders was shared and discussed with the HR and Compensation Committee, the Corporate Governance and Nominating Committee, the Compliance Committee and the Board.

The Board and management continue to engage regularly in dialogue with many of the Company’s largest shareholders, and the HR and Compensation Committee will continue to consider the shareholder-approved Compensation Policy, shareholder feedback and the results of the advisory vote on executive compensation in connection with its determinations of executive compensation. Through our shareholder outreach, we have established important feedback channels that provide a valuable way to receive ongoing input from our shareholders.

See also “Executive Compensation—Compensation Discussion & Analysis—2022 Say-on-Pay Vote and Shareholder Engagement.”

Human Capital Management

Our employees are the heart of our company. We seek to make Teva an inclusive, diverse and safe workplace, with meaningful compensation, benefits and wellbeing programs, and we offer training and leadership development programs that foster career growth.

Our HR and Compensation Committee, Compliance Committee and Board play key roles in overseeing human capital management at Teva and devote time throughout the year to its strategy and execution.

The Board and executive management view inclusion and diversity as essential to our ability to innovate and grow our business. We strive to create and sustain an inclusive and diverse work environment.

We foster an inclusive work environment that allows all people to express themselves and realize their full potential. Our Inclusion and Diversity (“I&D”) framework, governed by our I&D task force, provides a foundation for embedding I&D across our business. Our dedicated Global I&D Lead is responsible for the execution of the global I&D framework, including strategy and initiatives, partnerships and alignment of activities across regions and business units. In addition, we support recruitment, development and retention of individuals with diverse backgrounds.

Human Capital Management

As of December 31, 2022, Teva’s work force consisted of 36,826 employees. We have employees in 58 countries around the world, representing a wide range of nationalities. Employees identifying as female represent 46% of our global employee population, 48% of managers and 27% of senior management as of December 31, 2022.

We seek to support our inclusive and diverse culture through employee resource groups, mentoring programs and training, among other things. For instance, we developed a global mentoring program for women, aimed at advancing women to senior leadership positions. In addition, in January 2022, we launched the Catalyst program, a group of senior leaders tasked with establishing a plan to support the progression of women to senior leadership roles. In the U.S., the Teva Employee Resource Group Network represents ten distinct ERGs, which have a key role in creating a culture of inclusion and bringing together employees with shared characteristics and life experiences to foster opportunities for networking, mentoring, collaboration, community outreach, career development, leadership training and cultural exchanges. In Israel, we partnered with Co-Impact, a non-governmental organization focused on supporting employment among the Arab community. In addition, we provided mandatory training for all employees globally on fostering inclusive behavior and we include an inclusive leadership module in all Teva global leadership development programs.

The health and safety of our employees is critical to our ability to supply medicines to our patients. Our Environment, Health, Safety and Sustainability Policy and global Environment Health and Safety Management System guide our employee health and safety practices. We have implemented this system, which often exceeds regulatory requirements, to provide a global standard of care.

We invest in employee career growth and development at Teva. Our talent development programs benefit employees individually by providing them with the resources they need to enhance their professional and management abilities, develop leadership skills and achieve their career aspirations, which in turn helps us to remain competitive in our industry. Our Teva Grow program for employees provides development in essential soft skills, success in a global setting and company knowledge. For our managers, we refreshed our development programs to develop the skills, capabilities and mindset required of managers, taking into account the challenges of a disruptive environment. We focus on succession planning through global and local talent review processes that identify and accelerate successors’ readiness to fill senior positions across Teva.

In 2022, we began implementing our wellbeing strategy globally. In addition to having our first global wellbeing month dedicated to raising awareness of the importance of wellbeing, we leveraged practical tools and local programs to address the physical, financial, social and mental health needs of our employees and their families.

Human Capital Management

We have been monitoring employee morale during this time in many ways, including by conducting our annual employee survey. Results of the 2022 survey show that employee engagement levels have remained high and steady. Employees are feeling connected with Teva’s mission and values, are confident in Teva’s positive impact on society and believe they are treated with respect. In addition, they feel they are able to be themselves at work, they are treated fairly regardless of personal background or characteristics, and that Teva promotes a culture of diversity and inclusiveness.

For further information, see “Item 1—Business— Human Capital Management” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Environmental, Social and Governance

Teva views ESG as core to its business and our ESG strategy reflects how we plan to address environmental and social issues, while also bringing value to Teva and its stakeholders. In 2020, we conducted a materiality assessment to identify the ESG topics that matter most to our stakeholders and our business. We are currently reviewing our materiality assessment with the results expected to be included in our 2022 ESG progress report.

Teva’s 2022 ESG Progress report will show our efforts to enhance transparency on how we manage these 21 topics (outlined in the graphic below), in accordance with GRI and SASB standards and the TCFD framework.

Ten of the core 21 topics (in green in the graphic below) represent areas where we believe Teva can have the greatest impact, and/or which could have the greatest impact on our business. Each of these priority topics has a designated task force, working group or committee to guide our management’s approach, goal setting, activities and reporting.

At the end of 2021, Teva issued what was at the time the largest-ever SLB at $5 billion. We became the first pharmaceutical company to issue an SLB tied to both access to medicines and environmental targets, reflecting our commitment to implement our ESG strategy, and to increasing the reach of our medicines in low-and-middle-income countries (“LMICs”) and further reducing the impact of our operations on the

Environmental, Social and Governance

planet. In March 2022, Teva further integrated its ESG and financing strategy by entering into a $1.8 billion Sustainability-Linked Revolving Credit Facility. In March 2023, Teva issued SLBs in an aggregate principal amount of $2.49 billion (equivalent). As has been the case in previous years, Teva plans to obtain external assurance and report on related progress and performance, including our various public ESG goals, in our annual ESG Progress Report (with the 2022 report expected to be published on our website in May 2023).

Environmental

As a health-based company, we recognize the interconnection of planetary health and human health. With 53 manufacturing sites around the world as of December 31, 2022, we believe that we have a responsibility to lessen our impact on the environment.

With the launch of Teva’s SLB in 2021, we formally set targets to reduce absolute scope 1 and 2 GHG emissions by 25% by 2025 and by 46% by 2030 (compared to a 2019 baseline), and like our 2021 SLB, our 2023 SLB is also linked to such 2025 target. Our 2030 Scope 1 and 2 GHG emissions target, which was validated in December 2022 by the Science Based Target initiative (SBTi), is aligned to global efforts to meet the Paris Climate Agreement to limit mean global temperature rises to 1.5°C above pre-industrial levels. In 2021, we also set additional long-term 2030 environmental targets, including, but not limited to, reducing absolute scope 3 GHG emissions by 25% (compared to a 2020 baseline) aligned to a well below 2°C pathway (also validated by the SBTi) and increasing electricity purchased or generated from renewable sources to 50% and increasing energy efficiency by 10%.

Monitoring and delivery in respect of our environmental targets is overseen by our Global Sustainability Taskforce, and our Environmental, Health and Safety Management System (EHSMS) is governed by our EHS&S Corporate Committee.

Social

As one of the world’s leading providers of generic medicines, we are a committed global health partner addressing unmet needs, increasing the reach of affordable medicines and expanding our generic and innovative medicines portfolio. Our efforts to create quality and affordable medicines for more people around the world are governed by our Access to Medicines steering committee and guided by Teva’s Position on Access to Medicines. In 2022, we donated $699.6 million worth of medicines to patients in need. We received marketing authorizations for 1,153 generic medicines and 18 innovative medicines. We engaged partners to advance access initiatives, help reduce healthcare costs and create cost-effective solutions, respond to drug shortages and participated in global health tenders in an effort to make treatments accessible and affordable for all.

Our 2021 and 2023 SLBs are tied to two 2025 social targets related to access to medicines—increasing the cumulative number of new regulatory submissions in LMICs on the World Health Organization’s Essential Medicines List (EML) by 150% (compared to a 2017 to 2020 baseline) between 2022 and 2025, and increasing product volume by 150% (compared to a 2020 baseline). In 2022, we submitted 21 new regulatory submissions, which represent 28% of our target, and we donated ~360,000 doses eligible to our SLB target.

Governance

Conducting business with integrity is non-negotiable for Teva. Our compliance vision is for business to be gained the right way. At Teva, compliance and ethics is everyone’s responsibility. Over the last seven years, Teva has strengthened its compliance and ethics program across the globe, with an emphasis on policies, training and support that meet the business in areas related to compliance. Our Compliance Committee oversees our policies and practices for legal, regulatory and internal compliance and is updated on a regular basis by our Chief Compliance Officer. Our Global Compliance & Ethics (GC&E) department is structured to ensure our business partners have a consistent and dedicated partner at all levels of work.

Environmental, Social and Governance

One way we cultivate a culture of compliance and accountability is by seeking to reflect our values in our policies and procedures. Primary among these is Teva’s Code of Conduct, which outlines our values and foundational compliance and ethics expectations for all employees. We have a range of policies and positions on corporate governance topics which are available on our website at https://www.tevapharm.com/our-company/corporate-governance/corporate-governance-documents/. Information on our website is not part of, and is not incorporated into, this Proxy Statement.

In 2022, we established compliance and ethics goals, including:

Progress on the above compliance and ethics goals, will be described in our 2022 ESG Progress (expected to be published in May 2023).

Teva has a risk-based global compliance training and communications program. To determine compliance and ethics training requirements, Teva evaluates job roles on a compliance-risk basis, and then assigns a general or advanced training curriculum based on that evaluation. In 2022, Teva trained a total of approximately 32,000 employees on a variety of compliance and ethics topics, with a completion rate of more than 99% of the target training populations. Additionally, Teva assigns all new employees a Code of Conduct training, and conducts a recertification regarding the Code of Conduct every two years for all active employees.

ESG Governance

Our executive management and Board of Directors provide oversight of our ESG activities. Teva’s Board of Directors oversees our ESG activities and provides strategic guidance and direction, and the Compliance Committee oversees our ESG strategy and receives updates on ESG matters.

In 2022, we strengthened our ESG governance by forming our ESG Steering Committee, chaired by our President and CEO. This committee provides strategic guidance on a quarterly basis, reviews and approves, as necessary, our global commitments and targets and reviews Teva’s annual ESG Progress Report. As part of our ESG governance, we have an ESG forum, which brings together the ESG leaders from various business units to discuss emerging ESG issues, risks and opportunities.

Environmental, Social and Governance

Teva’s 2022 ESG Performance

We continue to enhance ESG transparency, which has contributed to further improvements in ESG ranking indices in 2022, as evidenced by the table below:

For more details on Teva’s ESG performance, please see our 2022 ESG Progress Report (expected to be published in May 2023). Information on our website is not part of, and is not incorporated into, this Proxy Statement.

Executive Officers

The following table sets forth information regarding our executive officers as of April 1, 2023:

Executive Officers

Executive Officers

Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

This compensation discussion and analysis (“CD&A”) describes the philosophy, objectives, process, components and additional aspects of our 2022 executive compensation program. This CD&A is intended to be read in conjunction with the tables that immediately follow this section, which provide further historical compensation information for the following named executive officers (“NEOs”):

Quick CD&A Reference Guide

I. BUSINESS AND COMPENSATION OVERVIEW

Compensation Objectives

In order to accomplish our key corporate objectives, we must attract, motivate and retain highly skilled and experienced people to execute our corporate strategy and lead our team. To that end, our executive officer compensation program is designed to:

Executive Compensation

2022 Select Business Highlights

In 2022, we continued to make progress in executing on our strategic plan and we delivered solid results, as detailed below.

Executive Compensation

Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share (“EPS”) were $2,812 million and $2.52, respectively, compared to $2,855 million and $2.58, respectively, in 2021. Please see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Net Income and Non-GAAP EPS Data” of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 10, 2023, for a reconciliation of non-GAAP net income and non-GAAP EPS.

Macroeconomic Environment. In 2022, the global economy was significantly affected by fluctuating foreign exchange rates. Approximately 47% of our 2022 revenues were denominated in currencies other than the U.S. dollar. The strengthening of the U.S. dollar versus other currencies in which we operate negatively

Executive Compensation

impacted our revenues, results of operations, profits and cash flows. We also manufacture largely outside of the United States, which may have, to varying degrees, resulted in lower expenses. Additionally, high levels of inflation have resulted in significant economic volatility and monetary tightening by central banks. The global economy has also been affected by the ongoing conflict between Russia and Ukraine, which has spurred rising energy costs and caused disruptions to the global, and the Company’s internal, supply chain. Supply chain disruptions and rising energy costs could continue to result in delays in our production and distribution processes, R&D initiatives and our ability to timely respond to consumer demand.

We have implemented certain measures in response to such macroeconomic pressures and are continually considering various initiatives, including price adjustments, enhanced inventory management and alternative sourcing strategies for our raw material supply, to allow us to partially mitigate and offset the impact of these macroeconomic factors. However, although inflationary and other macroeconomic pressures may ease, the higher costs we have experienced during the recent period have already impacted our operations and will likely continue to have an effect on our financial results.

Bringing our ESG Strategy to Life

Teva is dedicated to advancing the health of its patients, the planet and its business. As a company focused on improving patients’ lives, ESG has been a central priority to Teva. Over the last few years, we have laid strong foundations for ESG. In pursuing ESG leadership, we formalized our ESG building blocks which encompass: materiality and prioritization; strategy; oversight and governance; targets and goals; policies, positions and processes; and reporting and disclosures. We have greatly expanded our reporting, in part, to meet the growing expectations of our stakeholders, which has resulted in us disclosing more qualitative and quantitative information in accordance with the relevant global ESG standards and frameworks.

During 2022, we embedded a robust ESG governance structure; we significantly increased our ESG ratings performance as determined by leading ESG rating agencies (e.g. S&P Global, Sustainalytics, MSCI, Moody’s and EcoVadis); we executed a revolving credit facility linked to sustainability key performance indicators; and we further aligned our reporting to the Task Force on Climate-Related Financial Disclosures (TCFD), including quantifying climate risks and opportunities. We had our Greenhouse Gas (GHG) emission reduction targets validated by the Science Based Target initiative (SBTi) as aligning to the Paris Climate Agreement and by year end 2021 achieved a 13% reduction in our Scope 1 and Scope 2 GHG emissions as compared to our 2019 target baseline. We have now launched five access to medicines programs, and in 2022 alone made 21 new regulatory submissions and distributed over 300,000 doses of medicine in access programs in low- and middle-income countries. Lastly, we held our first ESG webinar for strategic suppliers, and 99.6% of active employees were trained or retrained on applicable compliance policies.

Key Aspects of 2022 Executive Compensation

As in 2021, approximately 86% of our CEO’s 2022 compensation was variable and at-risk, with the substantial majority being performance-based. In addition, 70% of our CEO’s long-term incentive equity grant was in the form of performance share units (“PSUs”). The PSUs are subject to three-year performance metrics tied to our key goals and there is a relative Total Shareholder Return (“TSR”) modifier (+/- 20%). The PSUs will vest, if at all, at the end of the performance period. The other 30% of our CEO’s long-term incentive equity grant was in the form of time-based restricted share units (“RSUs”), which vest over four years. There was no increase to the CEO’s compensation, which was the level approved by our shareholders, as compared to 2021.

Executive Compensation

2022 CEO Target Total Direct Compensation

In addition to 70% of the CEO’s target equity grant in the form of PSUs, similar to 2021, 50% of the value of the target equity grant for our other executive officers is subject to performance-based vesting conditions in the form of PSUs, and the other 50% is in the form of time-based RSUs. This enhances the strong link between pay and performance for our NEOs and the alignment of the interests of the NEOs with those of Teva and its shareholders.

A minimum of 85% of target performance must be achieved in order to earn any PSUs for a particular metric, which is a rigorous and challenging level. In addition, the HR and Compensation Committee and the Board established three-year goals for the performance period.

Long-Term Incentives. For the 2020-2022 PSUs, the HR and Compensation Committee and the Board determined that the achievement for the combined three-year performance period was 92% of the target for Net Revenue, resulting in an earning percentage of 59%, and achievement of 96% of the target for Non-GAAP Operating Profit, resulting in an earning percentage of 78%. The average of these earning percentages, 69%, was then subject to a relative TSR modifier, which adjusted the earning percentage to be only 80% of the actual earning percentage, resulting in a modified earning percentage of 55% of the target number of PSUs.

Annual Cash Incentives. At the beginning of 2022, we established annual cash incentive plan targets for Non-GAAP EPS and Free Cash Flow that were aligned to the high end of the range of our outlook as communicated to investors in February 2022. These goals were considered rigorous, aggressive and challenging, attainable only with strong performance, and took into account the relevant opportunities and risks, including the significant and continuing headwinds we were facing.

The 2022 Non-GAAP EPS goal was set at $2.60 and the Free Cash Flow goal was set at $2.2 billion, based on the assumptions communicated to investors in February 2022, including:

During the course of 2022, due in part to exchange rate fluctuations, our guidance with respect to Company annual revenues was lowered by approximately $800 million. However, the goals for Non-GAAP EPS and Free Cash Flow were not lowered.

Executive Compensation

For the 2022 annual incentive plan, the HR and Compensation Committee and the Board determined that the Company’s achievement was 97% of our 2022 Non-GAAP EPS target, and 108% of our 2022 Free Cash Flow target. Based on achievement of these corporate objectives, along with the determinations of the NEOs’ individual performance achievement (which represented 25% of the target total opportunity), the HR and Compensation Committee and the Board approved an annual incentive plan payout of 101% of target for the CEO and between 96% and 121% of target for the other NEOs.

Realizable Pay Demonstrates Pay for Performance Alignment

As described in more detail below, a core component of our compensation philosophy is to incentivize our executive officers by creating a strong link between their performance and compensation. To show the alignment of pay outcomes with performance, it is useful to illustrate the amounts realizable as of December 31, 2022 relative to the target amounts of CEO compensation set by the HR and Compensation Committee, the Board, and shareholders for the relevant year.

Realizable pay shows this relationship because it reflects the actual value of annual incentives and equity awards received or to be received by our CEO, and fluctuates with financial metric performance and with increases or decreases in share price. For this reason, contrasting target pay with realizable pay provides a meaningful demonstration of the pay for performance alignment of Teva’s executive compensation program.

The following charts demonstrate the relationship between the target and realizable pay values, in each of the past three years, of our CEO’s: (1) annual incentive, and (2) annual equity grants, including PSUs and RSUs.

When the Company does not meet performance targets and/or the share price decreases, the CEO’s realizable pay is affected.

The realizable value shown for the annual cash incentive reflects actual Non-GAAP EPS, Free Cash Flow and individual performance for the applicable year, and when contrasted with target value, underscores the link of the pay outcome to actual performance. We calculated the realizable value of annual equity grants by multiplying the number of 1) actual earned shares (for the completed 2020-2022 performance period) based on actual three-year non-GAAP operating profit, net revenue and relative TSR performance, 2) target

Executive Compensation

shares for each other PSU grant, and 3) the number of vested and unvested RSUs for each RSU grant, by the stock price per share on the last trading day of 2022. In 2020 and 2021, because of the decrease in the share price that is a key component of the equity value, the realizable equity value represented substantially less than the target value, demonstrating the direct link between performance and pay outcomes. In 2022, the realizable equity value represented more than the target value due to the increase in the share price, which also demonstrates the direct link between performance and pay outcomes.

No Earned Shares for CEO Five-Year Sign-On PSU Grant. In 2017, in connection with the recruitment and inducing of Kåre Schultz to serve as CEO of Teva, the Company granted three-year and five-year sign-on PSUs to Mr. Schultz. The five-year PSUs had a target grant date fair value of $7.5 million (as determined based on the closing price of Teva’s shares on the date prior to the announcement of Mr. Schultz’s hire), to be earned based on the achievement of performance goals related to the absolute increase in the price of Teva’s shares over the five-year period following the commencement date of his employment. The performance goals ranged from a 28% increase to a 385% increase for the five-year performance period and would have vested on the fifth anniversary of the commencement date. Similar to the three-year PSU where no shares were earned, at the end of the five-year performance period, our stock price had not reached the threshold performance level. Accordingly, our CEO did not earn any shares in respect of the five-year sign-on PSUs, which underscores the substantial pay for performance orientation of our CEO’s compensation.

2022 Say-on-Pay Vote and Shareholder Engagement

At the 2022 annual meeting of shareholders, our shareholders approved the compensation of our NEOs on an advisory basis through our Say-on-Pay proposal and approved our Compensation Policy, with approximately 76% and 77% of the votes cast in support of the proposals, respectively.

In late 2022, the Board and senior management conducted discussions with shareholders, as part of our regular, ongoing, annual commitment to strong corporate governance and continuous dialogue with our stakeholders, which we believe enables us to better understand their perspectives.

During this time, we contacted our top 25 shareholders, which represent approximately 33% of our outstanding shares and a significant majority of identified institutional holders, as well as the research teams at proxy advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. We participated in discussions with shareholders representing approximately 14% of our outstanding shares. Our Chairman of the Board and senior management with responsibility for investor relations, corporate governance, ESG and executive compensation participated in relevant discussions with shareholders.

The discussions covered a broad array of matters as presented in the table below.

Executive Compensation

Executive Compensation

Executive Compensation

Feedback from our shareholders was shared and discussed with the HR and Compensation Committee, the Corporate Governance and Nominating Committee, the Compliance Committee and the Board.

Executive Compensation

The Board and management continue to regularly engage in dialogue with many of the Company’s largest shareholders, and the HR and Compensation Committee will continue to consider the shareholder-approved Compensation Policy, shareholder feedback, and the results of the advisory vote on executive compensation in connection with its determinations of executive compensation as depicted in our annual shareholder engagement cycle below. Through our shareholder outreach, we have established important feedback channels that provide a valuable way to receive ongoing input from our shareholders.

II. COMPENSATION PHILOSOPHY AND OBJECTIVES

Compensation Philosophy

Executive Compensation

Compensation Policy under the Israeli Companies Law

Due to our unique position as an Israeli company with an extensive global footprint, we aim to adopt compensation policies and practices that match those of similar global companies, but we must also comply with applicable Israeli law, including the requirement that Israeli publicly-traded companies adopt a compensation policy which is submitted periodically for shareholder approval and contains certain limits on elements of compensation. Executive compensation decisions must generally be consistent with that policy.

As approved at our 2022 annual meeting of shareholders, and as required by the Israeli Companies Law, we have adopted a Compensation Policy regarding the terms of office and employment of our “Office Holders” (as defined under the Israeli Companies Law, which includes directors, the CEO, other executive officers and any other managers directly subordinate to the CEO), including cash compensation, equity-based awards, releases from liability, indemnification and insurance, severance, and other benefits (the “Terms of Office and Employment”). During 2022, each of our NEOs was an Office Holder within the meaning of the Israeli Companies Law. The Compensation Policy is reviewed from time to time by the HR and Compensation Committee and the Board to ensure its alignment with our compensation philosophy and objectives and to consider its appropriateness for Teva. Under the Israeli Companies law, we are required to submit the compensation policy to shareholders at least once every three years for approval. Please see “—Compensation Policy Requirements” below.

Compensation Governance

The HR and Compensation Committee assesses the effectiveness of our compensation program periodically and reviews risk mitigation and governance matters. We do this by maintaining the following best practices:

Executive Compensation

Executive Compensation

III. COMPENSATION DETERMINATION PROCESS

Key Participants

The roles and responsibilities of all parties involved with the compensation determination process are set forth below:

Executive Compensation

Role of Independent Compensation Consultant

The HR and Compensation Committee has the authority to retain independent compensation consultants to assist it in the performance of its duties and responsibilities without consulting or obtaining the approval of management of the Company. The HR and Compensation Committee has retained Semler Brossy Consulting Group LLC (“Semler Brossy”) as its independent compensation consultant. Semler Brossy reported directly to, and was directly accountable to, the HR and Compensation Committee. While the HR and Compensation Committee took into consideration the review and recommendations of this independent advisor when making decisions about the Company’s executive officer and director compensation practices and governance related topics, the HR and Compensation Committee ultimately made its own independent decisions about these matters.

The HR and Compensation Committee assessed the independence of Semler Brossy pursuant to the rules of the SEC and the NYSE. In doing so, the HR and Compensation Committee considered the factors set forth by the SEC and NYSE with respect to a compensation consultant’s independence. The HR and Compensation Committee also considered the nature and amount of work performed for the HR and Compensation Committee and the fees paid for those services in relation to the firm’s total revenues. After these reviews, the HR and Compensation Committee concluded that there were no conflicts of interest, and that Semler Brossy was independent pursuant to SEC and NYSE rules.

Compensation Peer Group and Peer Selection Process

The HR and Compensation Committee believes that obtaining relevant market and benchmark data is very important to making determinations about executive compensation. This information provides a solid reference point for making decisions and very helpful context even though, relative to other companies, there are differences and unique aspects of the Company.

The HR and Compensation Committee takes into consideration the structure and components of, and the amounts paid under, the executive compensation programs of other, comparable peer companies, as derived from public filings and other sources when making decisions about the structure and component mix of our executive compensation program. The HR and Compensation Committee also considers broader industry practices and our competitors for talent.

The HR and Compensation Committee has developed and maintained a relevant group of peer companies (the “Peer Group”) that represent the companies with which we believe we primarily compete for talent. The HR and Compensation Committee generally use the following criteria when conducting the initial screening of the Peer Group:

In general, the HR and Compensation Committee accords less weight to market capitalization due in part to the number of factors that can influence and cause volatility in the spot price of the common stock of a company. In addition, the HR and Compensation Committee views the consistency and robustness of the peer group over time as being very important.

Executive Compensation

The Peer Group established for setting 2022 compensation consisted of the following companies:

The HR and Compensation Committee periodically reviews the Peer Group to ensure that the companies included continue to meet the primary selection criteria outlined above. The HR and Compensation Committee decided to keep the same Peer Group as the prior year except for Mylan NV, which became Viatris, Inc.

The HR and Compensation Committee and the Board consider data from the Peer Group companies as a reference point in reviewing market pay levels, allocations and practices, but do not tie CEO and executive officer compensation to specific market percentiles. Other factors considered when setting the compensation of our CEO and executive officers include sustained performance, criticality of contributions to Teva, and the executive officer’s role, skills, experience and development. The HR and Compensation Committee retains discretion in determining the nature and extent of the use of Peer Group data.

Internal Considerations. The HR and Compensation Committee also reviews relevant internal ratios between executive officer compensation and the compensation of other employees, specifically the average and median values of other employee compensation, and its potential effect on the Company’s labor relations in connection with the review and approval of compensation to executive officers.

Executive Compensation

IV. COMPONENTS OF OUR COMPENSATION PROGRAM

2022 Components in General

The HR and Compensation Committee, Board and shareholders each participated in the selection of the components of compensation set forth in the chart below to achieve our stated executive compensation program objectives. The majority of the compensation of each executive officer is variable and at-risk and a significant portion is subject to the achievement of performance goals in order to be earned. The HR and Compensation Committee and the Board review all components of the compensation of executive officers in order to verify that each executive officer’s total compensation is consistent with our compensation philosophy and objectives and within the parameters set by our shareholder-approved Compensation Policy.

Executive Compensation

2022 Target Pay Mix

The target pay mix supports the core principles of our executive officer compensation philosophy of compensating for performance and aligning executive officers’ interests with those of Teva and its shareholders, by emphasizing short- and long-term incentives.

The following charts outline the HR and Compensation Committee and the Board’s allocation of annual target total direct compensation payable to the CEO and to other NEOs. The HR and Compensation Committee and the Board allocated compensation among (i) base salary, (ii) short-term annual cash incentive opportunity and (iii) long-term annual equity.

A sizeable majority of target total direct compensation is variable, at-risk pay, consistent with our pay-for-performance philosophy. Specifically, in 2022, 86% of our CEO’s target total direct compensation was at-risk compensation, and 79%, on average, of the target total direct compensation of our other NEOs was at-risk compensation. We consider compensation to be “at risk” if it is subject to performance-based payment or vesting conditions or if its value depends on stock price appreciation.

Executive Compensation

Target Pay Mix

The percentages of target total direct compensation as calculated above are based on the annualized 2022 base salary, the 2022 annual cash incentive compensation opportunity (assuming achievement at the target level), and the grant date fair value of the annual equity grants. Each compensation element is outlined in more detail in the 2022 Summary Compensation Table and 2022 Grants of Plan-Based Awards table.

Base Salary

Base salaries provide stable compensation to executive officers, allow Teva to attract and retain qualified global executive talent and maintain a stable management team. Base salaries vary among executive officers and are individually determined according to each executive officer’s areas of responsibility, role and experience based on a variety of considerations, which may include, inter alia, professional background (education, skills, expertise, professional experience and achievements and previous compensation arrangements, as relevant), external competitiveness, job criticality and internal fairness.

For 2022, there were no changes made to the annual base salary for our CEO compared to 2021. The HR and Compensation Committee adjusted the annual base salary of our CFO, EVP, North America Commercial, and EVP, Global Operations, to bring them more in line with the market levels.