UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

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Biogen Idec Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION

 

Biogen Idec Inc.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON [          ], 2009

 

TO OUR STOCKHOLDERS:

 

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Biogen Idec Inc., a Delaware corporation, will be held at 9:00 a.m., local time, on [     ], [     ], 2009 at [     ] for the following purposes:

 

1. To elect four of the nominees identified in this Proxy Statement to our Board of Directors to serve for a three-year term ending at the annual meeting of stockholders in 2012. Our Board of Directors’ nominees are Lawrence C. Best, Alan B. Glassberg, Robert W. Pangia and William D. Young.

 

2. To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009.

 

3. To approve amendments to our bylaws to change the voting standard for the election of directors in uncontested elections from a plurality standard to a majority standard.

 

4. To vote on a proposal from certain entities affiliated with Carl C. Icahn (the “Icahn Entities”) to amend our bylaws to fix the size of the Board of Directors at 13 members and remove the Board’s ability to change the size of the Board (the “Icahn Bylaw Proposal”).

 

5. To vote on a proposal from the Icahn Entities requesting that our Board of Directors take the necessary steps to propose for stockholder approval that we reincorporate from Delaware to North Dakota and elect to be subject to the North Dakota Publicly Traded Corporations Act (the “Icahn North Dakota Proposal,” together with the Icahn Bylaw Proposal, the “Icahn Proposals”).

 

6. To transact such other business as may be properly brought before the meeting and any adjournments.

 

Only Biogen Idec stockholders of record at the close of business on [     ], 2009 will be entitled to vote at the meeting.

 

Your vote is extremely important regardless of the number of shares you own. Whether or not you expect to attend the meeting in person, we urge you to vote as promptly as possible by telephone or by Internet by following the instructions on the WHITE proxy card or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. If you are a beneficial owner or you hold your shares in “street name,” please follow the voting instructions provided by your bank, broker or other nominee.

 

Please note that the Icahn Entities have provided notice that they intend to nominate their own slate of four nominees for election as directors, submit the Icahn Proposals and solicit proxies for use at the annual meeting of stockholders to vote in favor of their own slate in opposition to Item 1 above and in favor of the Icahn Proposals. We do not believe this is in your best interest. You may receive proxy solicitation materials from the Icahn Entities, including an opposition proxy statement and proxy card. OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE BOARD’S NOMINEES USING THE ENCLOSED WHITE PROXY CARD AND URGES YOU NOT TO SIGN OR RETURN OR VOTE ANY PROXY CARD SENT TO YOU BY THE ICAHN ENTITIES. Even if you have previously signed a proxy card sent by the Icahn Entities, you have the right to change your vote by telephone or by Internet by following the instructions on the WHITE proxy card or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy card you vote will be counted. We urge you to disregard any proxy card sent to you by the Icahn Entities.

 

If you have any questions or require any assistance with voting your shares, please contact:

 

INNISFREE M&A INCORPORATED
STOCKHOLDERS CALL TOLL FREE: 877-750-5836
BANKS AND BROKERS CALL COLLECT: 212-750-5833

 

BY ORDER OF OUR BOARD OF DIRECTORS

 

Susan H. Alexander
Secretary

 

Cambridge, Massachusetts

[DATE]

 

TABLE OF CONTENTS

 

 

Biogen Idec Inc.
14 Cambridge Center
Cambridge, Massachusetts 02142

 

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON [          ], 2009
AT 9:00 A.M., LOCAL TIME

 

We are sending you this Proxy Statement and the accompanying proxy card because the Board of Directors of Biogen Idec Inc. (“Biogen Idec” or the “Company”) is soliciting your proxy to vote at our 2009 annual meeting of stockholders (the “Annual Meeting”) to be held at [     ] on [     ], 2009 at 9:00 a.m., local time. This Proxy Statement, along with the accompanying Notice of Annual Meeting of Stockholders, summarizes the purposes of the Annual Meeting and the information that you need to know to vote at the Annual Meeting.

 

Our 2008 Annual Report is being mailed with this Proxy Statement. The Notice of Annual Meeting, this Proxy Statement and our 2008 Annual Report are available online at http://investor.biogenidec.com.

 

The Company has received notice from certain entities affiliated with Carl C. Icahn, namely, Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Partners Master Fund II LP, Icahn Partners Master Fund III LP and High River Limited Partnership (collectively, the “Icahn Entities”) of their intention to nominate Alexander J. Denner, Richard C. Mulligan, Thomas F. Deuel and David Sidransky (collectively, the “Icahn Nominees”) for election to the Company’s Board of Directors at the Annual Meeting. The Icahn Entities have also indicated their intention to submit two proposals at the Annual Meeting (the “Icahn Proposals”). The first Icahn Proposal (the “Icahn Bylaw Proposal”) is to amend the Second Amended and Restated Bylaws of Biogen Idec (the “Bylaws”) in order to fix the number of directors at 13 and eliminate the power of the Board of Directors to fix the number of directors, as more fully described on page 19. The second Icahn Proposal (the “Icahn North Dakota Proposal”) is to request that the Board of Directors of Biogen Idec take the necessary steps to propose for stockholder approval that the Company reincorporate from Delaware to North Dakota and elect to be subject to the North Dakota Publicly Traded Corporations Act (the “North Dakota Law”), as more fully described beginning on page 20.

 

The Icahn Nominees have NOT been endorsed by our Board of Directors. We urge stockholders NOT to vote any proxy card that you may receive from the Icahn Entities. Our Board of Directors urges you to vote FOR our nominees for director, Lawrence C. Best, Alan B. Glassberg, Robert W. Pangia and William D. Young.

 

We are not responsible for the accuracy of any information provided by or relating to the Icahn Entities contained in any proxy solicitation materials filed or disseminated by, or on behalf of, the Icahn Entities or any other statements that the Icahn Entities may otherwise make. The Icahn Entities choose which stockholders receive their proxy solicitation materials.

 

Each share of our common stock that you own as of the close of business on the record date of [     ], 2009 (the “Record Date”) entitles you to one vote on each matter to be voted upon at the Annual Meeting. As of the Record Date, [     ] shares of common stock were outstanding and entitled to vote. We are mailing this Proxy Statement and the accompanying WHITE proxy card on or about [     ], 2009 to all stockholders of record as of the Record Date, entitled to notice of and to vote at the Annual Meeting. For 10 days prior to the Annual Meeting, a list of stockholders entitled to vote will be available for inspection at our executive offices located at 10 Cambridge Center, Cambridge, Massachusetts 02142. If you would like to review the list, please call our Investor Relations department at (617) 679-2812.

 

Please note that attendance at the Annual Meeting will be limited to stockholders of Biogen Idec as of the Record Date (or their authorized representatives). If your shares are held by a bank, broker or other nominee, please bring to the Annual Meeting your bank or broker statement evidencing your beneficial ownership of Biogen Idec stock to gain admission to the Annual Meeting. Stockholders who plan to attend the Annual Meeting must present valid photo identification. Stockholders of record will be verified against an official list available at the registration area. The

Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the Record Date.

 

Shares represented by valid proxies, received in time for the Annual Meeting and not revoked prior to the Annual Meeting, will be voted at the Annual Meeting. You can revoke your proxy and change your vote in the manner described on page 3 (under “How can I change my vote?”).

 

Our Board of Directors is asking for your proxy. Giving us your proxy means that you authorize us to vote your shares at the Annual Meeting in the manner you direct when you vote by telephone or by Internet by following the instructions on the WHITE proxy card or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. You may vote for all, some, or none of our director nominees. You may also vote for or against the other item(s) or abstain from voting. If you sign and return the enclosed WHITE proxy card but do not specify how to vote, we will vote your shares in favor of our director nominees, for the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm, for the amendments to our Bylaws to change the voting standard for the election of directors in uncontested elections from a plurality standard to a majority standard, against the Icahn Bylaw Proposal and against the Icahn North Dakota Proposal.

 

If your shares are held through a bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee.

 

It is important that your shares are represented at the Annual Meeting, whether or not you attend the Annual Meeting in person.

 

To make sure that your shares are represented, we urge you to vote as promptly as possible by telephone or by Internet by following the instructions on the WHITE proxy card or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided.

 

If you are a registered stockholder (also called a “record holder”), there are four ways to vote:

 

 

If your shares are held in a brokerage account in your broker’s name (this is called “street name”), please follow the voting instructions provided by your bank, broker or other nominee. In most cases, you may submit voting instructions by telephone or by Internet to your bank, broker or other nominee, or you can sign, date and return a WHITE voting instruction form to your bank, broker or other nominee. If you provide specific voting instructions by telephone, by Internet or by mail, your bank, broker or other nominee must vote your shares as you have directed.

 

At the Annual Meeting, we will pass out ballots to anyone who wishes to vote in person. If you hold your shares in “street name,” you must request a legal proxy from your bank, broker or other nominee to vote by ballot at the Annual Meeting.

 

The Icahn Entities have provided notice that they intend to nominate their own slate of four nominees for election as directors, submit the Icahn Proposals and solicit proxies for use at the Annual Meeting to vote in favor of their own slate in opposition to Item 1 above and in favor of the Icahn Proposals. You may receive proxy solicitation materials from the Icahn Entities, including an opposition proxy statement and proxy card. OUR BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY THE ICAHN ENTITIES. Even if you have previously signed a proxy card sent by the Icahn Entities, you have the right to change your vote by telephone or by Internet by following the instructions on the WHITE proxy card or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy card you vote will be counted. We urge you to disregard any proxy card sent to you by the Icahn Entities.

 

If you hold your shares in more than one account, you will receive a WHITE proxy card for each account. To ensure that all of your shares are voted, please use the WHITE proxy card to vote by telephone or by Internet or sign, date and return a WHITE proxy card for each account.

 

As previously noted, the Icahn Entities have provided notice that they intend to nominate their own slate of four nominees for election as directors at the Annual Meeting, submit the Icahn Proposals and solicit proxies for use at the Annual Meeting to vote in favor of their own slate in opposition to Item 1 above and in favor of the Icahn Proposals. As a result, you may receive proxy cards from both the Icahn Entities and Biogen Idec. To ensure stockholders have Biogen Idec’s latest proxy information and materials to vote, our Board of Directors expects to conduct multiple mailings prior to the date of the Annual Meeting, each of which will include a WHITE proxy card regardless of whether or not you have previously voted. Only the latest dated proxy card you vote will be counted.

 

OUR BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY THE ICAHN ENTITIES. Even if you have previously signed a proxy card sent by the Icahn Entities, you have the right to change your vote by re-voting by telephone or by Internet or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. A later dated proxy submitted to the Icahn Entities would also revoke a prior proxy granted to the Company. Only the latest dated proxy card you vote will be counted. We urge you to disregard any proxy card sent to you by the Icahn Entities.

 

If you have any questions, or need assistance voting, please contact our proxy solicitor:

 

Innisfree M&A Incorporated
Stockholders Call Toll Free: 877-750-5836
Banks and Brokers Call Collect: 212-750-5833

 

You may revoke your proxy and change your vote at any time before the Annual Meeting. You may do this by:

 

 

Only your latest vote, in whatever form, will be counted.

 

Under the rules that govern brokers who have record ownership of shares that they hold in “street name” for their clients who are the beneficial owners of the shares, brokers have the discretion to vote such shares on discretionary, or routine, matters but not on non-discretionary, or non-routine, matters. Broker non-votes generally occur when shares held by a broker nominee for a beneficial owner are not voted with respect to a proposal because the broker nominee has not received voting instructions from the beneficial owner and lacks discretionary authority to vote the shares. Brokers normally have discretion to vote on routine matters, such as uncontested director elections and ratification of independent registered public accounting firms, but not on non-routine matters, such as contested director elections or stockholder proposals (i.e. the Icahn Proposals). For brokerage accounts that are sent proxy materials by the Icahn Entities, all items on the proxy card will be considered non-routine matters. Thus, if you hold your shares in “street name” and the Icahn Entities provide you with proxy solicitation materials through your broker, your broker will not be able to vote your shares unless you provide instructions as to how your shares are to be voted. We urge you to provide instructions to your broker so that your votes may be counted on these important matters. You should vote your shares by following the instructions provided on the WHITE voting instruction form and returning your WHITE voting instruction form to your broker to ensure that your shares are voted on your behalf.

 

If you are a record holder and do not vote by telephone or by Internet or by signing and returning a proxy card, your shares will not be voted.

 

If you are the beneficial owner of shares held in “street name” by a bank, broker or other nominee, as the record holder of the shares, your bank, broker or other nominee is required to vote those shares in accordance with your instructions. We urge you to provide instructions to your bank, broker or other nominee so that your votes may be counted on these important matters. You should vote your shares by following the instructions provided on the WHITE voting instruction form and returning your WHITE voting instruction form to your bank, broker or other nominee to ensure that your shares are voted on your behalf.

 

If you do not give instructions to your broker, your broker will be entitled to vote your shares with respect to “discretionary” items but will not be permitted to vote your shares with respect to “non-discretionary” items (those shares are treated as “broker non-votes”). For those brokerage accounts not solicited by the Icahn Entities, Proposals 1, 2 and 3 are “discretionary” items and Proposals 4 and 5 are “non-discretionary” items. For those brokerage accounts solicited by the Icahn Entities, all items on the agenda will be considered “non-discretionary” items. Thus, if you hold your shares in “street name” and the Icahn Entities provide you with proxy solicitation materials through your broker, your broker will not be able to vote your shares unless you provide instructions as to how your shares are to be voted. We urge you to provide instructions to your broker so that your votes may be counted on these important matters. You should vote your shares by following the instructions provided on the WHITE voting instruction form and returning your WHITE voting instruction form to your bank, broker or other nominee to ensure that your shares are voted on your behalf.

 

A majority of our outstanding shares of common stock as of the Record Date must be present at the Annual Meeting to hold the Annual Meeting and conduct business. This is called a quorum. Shares voted in the manner described above (under “How do I vote?”) will be counted as present at the Annual Meeting. Shares that are present and entitled to vote on one or more of the matters to be voted upon are counted as present for establishing a quorum.

 

If a quorum is not present, we expect that the Annual Meeting will be adjourned until we obtain a quorum.

 

 

 

 

We do not know of any other matters that may come before the Annual Meeting. If any other matters are properly presented to the Annual Meeting, the persons named in the accompanying proxy card intend to vote, or otherwise act, in accordance with their judgment.

 

We will publish final voting results in our Quarterly Report on Form 10-Q for the [          ] quarter of 2009, which we plan to file with the Securities and Exchange Commission (“the SEC”) by [          ], 2009. You may request a copy of the Form 10-Q by writing to Investor Relations, Biogen Idec Inc., 14 Cambridge Center, Cambridge, Massachusetts 02142. You will also be able to find a copy on the Internet through the SEC’s electronic data system called EDGAR at www.sec.gov or through the Investor Relations section of our website at www.biogenidec.com.

 

Important Notice Regarding the Availability of Proxy Materials for Annual Meeting of Stockholders To Be Held at 9:00 a.m., local time, on [  ], 2009: The Notice of Annual Meeting, this Proxy Statement and our 2008 Annual Report are available online at http://investor.biogenidec.com.

 

Our Board of Directors currently consists of 13 members, divided into two classes of four and one class of five, each serving staggered three-year terms, as follows:

 

 

The terms of our Class 3 directors expire at this Annual Meeting. If re-elected, Messrs. Best, Pangia and Young and Dr. Glassberg will hold office until the annual meeting of stockholders in 2012 and until their successors are duly elected and qualified unless they resign or are removed.

 

If any of our nominees is unable to serve or for good cause will not serve on our Board of Directors, the shares represented by the enclosed WHITE proxy card will be voted for the election of such other person as may be nominated by our Board of Directors in full compliance with all applicable state and federal laws and regulations. We know of no reason why any nominee would be unable or for good cause unwilling to accept nomination or election. All nominees have consented to be named in this Proxy Statement and to serve if elected.

 

As described in detail below, our nominees have considerable professional and business expertise. Further, our nominees have a proven track record of serving the interests of all stockholders. The recommendation of our Board of Directors is based on its carefully considered judgment that the experience, record and qualifications of our nominees make them the best candidates to serve on our Board of Directors.

 

OUR BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF LAWRENCE C. BEST, ALAN B. GLASSBERG, ROBERT W. PANGIA AND WILLIAM D. YOUNG.

 

Information about our Directors

 

Prior to the merger with Biogen, Inc. in November 2003 (the “Merger”), we were known as IDEC Pharmaceuticals Corporation. References to “our” or “us” in the following biographical descriptions include Biogen Idec and the former IDEC Pharmaceuticals Corporation.

 

 

Corporate Governance Principles and Related Documents.  Our Corporate Governance Principles are posted on www.biogenidec.com in the “Company” section under “Corporate Governance.” Also posted on www.biogenidec.com under “Corporate Governance” are the charters of the Compensation and Management Development, Corporate Governance, Finance and Audit, and Transaction Committees of our Board of Directors and our Finance and Audit Committee Practices which describe the key practices utilized by the Finance and Audit Committee in undertaking its functions and responsibilities.

 

Director Independence

 

Board of Directors.  Our Board of Directors has determined that all of our directors and nominees for director, other than Mr. Mullen, our Chief Executive Officer and President, and Dr. Pickett, our President of Research and Development, satisfy the independence requirements of The NASDAQ Stock Market, Inc., or NASDAQ. Our independent directors also included Thomas F. Keller, who retired from our Board of Directors following our 2008 annual meeting of stockholders. In determining that Dr. Dekkers is independent, our Board of Directors considered that while Thermo Fisher Scientific is a supplier to Biogen Idec, the volume of business between the two companies amounts to less than 1% of the revenues of each company, and Dr. Dekkers owns less than 1% of the stock of Thermo Fisher Scientific. In determining that Dr. Glassberg is independent, our Board of Directors considered the fact that during 2006 Dr. Glassberg accepted a position as medical director at a company that is a potential competitor of the Company, but with which the Company has no transactions or arrangements. In determining that Dr. Papadopoulos is independent, our Board of Directors considered the fact that Dr. Papadopoulos is a director and co-founder of three companies that are potential competitors of the Company, but with which the Company has no transactions or arrangements, and that Dr. Papadopoulos is affiliated with three organizations that received payments for services or charitable contributions from Biogen Idec during the past three years that amounted to less than $200,000 each year. In determining that Dr. Sharp is independent, our Board of Directors evaluated a September 2006 transaction involving a collaboration agreement with Alnylam Pharmaceuticals, Inc. related to the discovery and development of RNAi therapeutics for the potential treatment of progressive multifocal leukoencephalopathy. Dr. Sharp is a founder and director of Alnylam Pharmaceuticals, but he is not an executive officer or significant stockholder. Dr. Sharp did not participate in our Board’s discussion and vote on the Alnylam Pharmaceuticals agreement, nor was he involved in the transaction on Alnylam Pharmaceutical’s behalf.

 

Committees.  The committees of our Board of Directors consist solely of independent directors, as defined by NASDAQ. The members of our Finance and Audit Committee also meet the additional SEC and NASDAQ independence and experience requirements applicable specifically to members of the Finance and Audit Committee. Our Board has identified Ms. Leaming and Mr. Best as our audit committee financial experts. In addition, all of the members of our Compensation and Management Development Committee are “non-employee directors”

within the meaning of the rules of Section 16 of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”), and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code. The composition of the committees is set forth below under “Information about our Board of Directors and its Committees — Composition of Committees and Information about Meetings.”

 

Meetings of Independent Directors; Independent Chairman.  Independent directors are required to meet without management present twice each year. Independent directors may also meet without management present at such other times as determined by our Chairman of the Board or if requested by at least two other directors. Mr. Ross, who is not an employee, has served as our Chairman of the Board since December 2005. In 2008, our independent directors met without management present nine times. Our Chairman of the Board presides at such meetings and performs such other functions as our Board of Directors may direct, including advising on the selection of committee chairs and advising management on the agenda of meetings of our Board of Directors. In the absence of a non-employee Chairman of the Board, the chair of our Corporate Governance Committee performs the functions otherwise assigned to the Chairman of the Board.

 

Committees

 

Our Board of Directors has four standing committees: a Compensation and Management Development Committee, a Corporate Governance Committee (includes nominating functions), a Finance and Audit Committee, and a Transaction Committee.

 

 

Composition of Committees and Information about Meetings

 

The composition of the standing committees of our Board of Directors as of April 1, 2009 and the number of times that each committee met in 2008 are set forth in the following table:

 

 

Our Board of Directors met 23 times in 2008. No director attended fewer than 75% of the total number of meetings of our Board of Directors and the committees on which he or she served during 2008.

 

Information About our Nominating Processes

 

Our Corporate Governance Committee is responsible for leading the search for individuals qualified to become members of our Board of Directors, including the review of candidates recommended by stockholders. Our Corporate Governance Committee has the authority to retain a search firm to assist in performing this role. Stockholders may recommend nominees for consideration by our Corporate Governance Committee by submitting the names and supporting information to: Biogen Idec Inc., Attention: Corporate Secretary, 14 Cambridge Center, Cambridge, Massachusetts 02142. Any such recommendation should include at a minimum the name(s) and address(es) of the stockholder(s) making the recommendation and appropriate biographical information for the proposed nominee(s). Candidates who are recommended by stockholders will be considered on the same basis as candidates from other sources. For all potential candidates, our Corporate Governance Committee will consider all factors it deems relevant, including at a minimum those listed under “Director Qualification Standards” on page 13. Director nominations are recommended by our Corporate Governance Committee to our Board of Directors and must be approved by a majority of independent directors.

 

In addition, our Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to our Board of Directors at an annual meeting of stockholders. In order to nominate a director candidate for election at our 2010 annual meeting of stockholders, a stockholder must give timely notice in writing to our Secretary at our principal executive offices and otherwise comply with the provisions of our Bylaws. To be timely, our Bylaws provide that we must have received a stockholder’s notice not less than 90 days and not more than 120 days in advance of the anniversary of the date our proxy statement was released to the stockholders in connection with the previous year’s annual meeting of stockholders. However, in the event that no annual meeting of stockholders was held in the previous year or the date of the annual meeting of stockholders has been changed by more than 30 days from the date contemplated at the time of the previous year’s proxy statement, we must receive a stockholder’s notice not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting of stockholders and not later than the close of business on the later of (i) the 90th day prior to such annual meeting of stockholders and (ii) the 10th day following the day on which public announcement of the date of such annual meeting of stockholders is first made. Information required by the Bylaws to be in the notice includes, among other things, the name, contact information and security ownership information

for the candidate and the person making the nomination, any voting commitment by the candidate, whether the person making the nomination is part of a group that intends to deliver a proxy statement or solicit proxies, and other information about the nominee that must be disclosed in proxy solicitations under Section 14 of the Securities Exchange Act and the related rules and regulations under that Section. Our Corporate Governance Committee may also require any proposed nominee to furnish such other information as may be reasonably required to determine the eligibility of such proposed nominee to serve as our director.

 

Director Qualification Standards

 

Our directors should possess the highest personal and professional ethics and integrity, understand and be aligned with our core values, and be committed to representing the long-term interests of our stockholders. Our directors must also be inquisitive and objective and have practical wisdom and mature judgment. We endeavor to have a Board of Directors representing diverse experience at strategic and policy-making levels in business, government, education, healthcare, science and technology, and the international marketplace.

 

Our directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serving on our Board of Directors for an extended period of time.

 

We ask directors who also serve in full-time positions with another company not to serve on more than two boards of public companies in addition to our Board of Directors (excluding their own company) and other directors not to serve on more than six boards of public companies in addition to ours.

 

Our Board of Directors does not believe that arbitrary term limits on directors’ service are appropriate, nor does it believe that directors should expect to be re-nominated. Regular evaluations are an important determinant for continued tenure. Our Corporate Governance Principles provide that directors should offer their resignation in the event of any significant change in their personal circumstances, including a change in their principal job responsibilities or any circumstances that may adversely affect their ability to carry out their duties and responsibilities effectively. Our directors are also expected to offer their resignation to the Board of Directors effective at the annual meeting of stockholders in the year of their 75th birthday.

 

Stockholder Communications to the Board

 

Generally, stockholders who have questions or concerns should contact our Investor Relations department at (617) 679-2812. However, stockholders who wish to address questions or concerns regarding our business directly with our Board of Directors, or any individual director, should direct questions in writing to Biogen Idec Inc., Attention: Corporate Secretary, 14 Cambridge Center, Cambridge, Massachusetts 02142 or by e-mail to stockholder.letter@biogenidec.com. Questions and concerns will be forwarded directly to the appropriate individual(s).

 

Attendance at Annual Meetings

 

We expect all of our directors and director nominees to attend our annual meetings of stockholders. All of our directors attended our 2008 annual meeting of stockholders.

 

Compensation Committee Interlocks and Insider Participation

 

During 2008, Messrs. Dekkers and Young, Dr. Glassberg and Ms. Schenk served on the Compensation and Management Development Committee and were independent directors during such service.

 

The Finance and Audit Committee’s role is to act on behalf of our Board of Directors in the oversight of all aspects of Biogen Idec’s financial reporting, internal control and audit functions. The Finance and Audit Committee has the sole authority and responsibility to select, evaluate, compensate and replace our independent registered public accounting firm. The roles and responsibilities of the Finance and Audit Committee are set forth in the Finance and Audit Committee’s written charter adopted by our Board of Directors, which is posted on

www.biogenidec.com in the “Company” section under “Corporate Governance.” Management has primary responsibility for the financial statements and the reporting process, including the systems of internal controls.

 

In fulfilling its oversight responsibilities, the Finance and Audit Committee reviewed and discussed with management the audited consolidated financial statements contained in Biogen Idec’s 2008 Annual Report on Form 10-K. The Finance and Audit Committee discussed with PricewaterhouseCoopers LLP, Biogen Idec’s independent registered public accounting firm, the overall scope and plans for its audit. The Finance and Audit Committee met with PricewaterhouseCoopers, with and without management present, to discuss the results of its examination, management’s response to any significant findings, its observations of Biogen Idec’s internal controls, the overall quality of Biogen Idec’s financial reporting, the selection, application and disclosure of critical accounting policies, new accounting developments and accounting-related disclosure, the key accounting judgments and assumptions made in preparing the financial statements and whether the financial statements would have materially changed had different judgments and assumptions been made, and other pertinent items related to Biogen Idec’s accounting, internal controls and financial reporting. The Finance and Audit Committee also discussed with representatives of Biogen Idec’s corporate internal audit staff their purpose and authority and their audit plan.

 

The Finance and Audit Committee also reviewed and discussed with PricewaterhouseCoopers the matters required to be discussed with the Finance and Audit Committee under generally accepted auditing standards (including Statement on Auditing Standards No. 61, as amended). In addition, the Finance and Audit Committee discussed with PricewaterhouseCoopers the independence of PricewaterhouseCoopers from management and Biogen Idec, including the written disclosures and letter concerning independence received from PricewaterhouseCoopers required by applicable requirements of the Public Company Accounting Oversight Board. The Finance and Audit Committee has determined that the provision of non-audit services to Biogen Idec by PricewaterhouseCoopers is compatible with its independence.

 

During 2008, the Finance and Audit Committee provided oversight and advice to management in connection with Biogen Idec’s system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. In connection with this oversight, the Finance and Audit Committee reviewed a report by management on the effectiveness of Biogen Idec’s internal control over financial reporting. The Finance and Audit Committee also reviewed PricewaterhouseCoopers’ Report of Independent Registered Public Accounting Firm included in Biogen Idec’s 2008 Annual Report on Form 10-K for the fiscal year ended December 31, 2008 related to its audit of the effectiveness of internal control over financial reporting.

 

In reliance on these reviews and discussions, the Finance and Audit Committee recommended to our Board of Directors that the audited consolidated financial statements be included in Biogen Idec’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 for filing with the SEC.

 

Submitted by the Finance and Audit Committee of the Board of Directors:

 

Nancy L. Leaming (Chair)

Lawrence C. Best

Robert W. Pangia

Brian S. Posner

 

Our Finance and Audit Committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009. PricewaterhouseCoopers served as our independent registered public accounting firm in connection with the audit for the fiscal year ended December 31, 2008. If our stockholders do not ratify the selection of PricewaterhouseCoopers as our independent registered public accounting firm, our Finance and Audit Committee will reconsider its selection. Representatives of PricewaterhouseCoopers will attend the Annual Meeting, have the opportunity to make a statement if they so desire, and be available to respond to appropriate questions.

 

The following table shows fees for professional audit services billed to us by PricewaterhouseCoopers for the audit of our annual consolidated financial statements for the years ended December 31, 2008 and December 31, 2007, and fees billed to us by PricewaterhouseCoopers for other services provided during 2008 and 2007:

 

 

Audit fees are fees for the audit of our 2008 and 2007 consolidated financial statements included in our Annual Reports on Form 10-K, reviews of consolidated financial statements included in our Quarterly Reports on Form 10-Q, review of the consolidated financial statements incorporated by reference into our Registration Statements on Form S-3 and Form S-8, and statutory audit fees in overseas jurisdictions.

 

Audit-related fees are fees that principally relate to assurance and related services that are reasonably related to the performance of the audits and reviews of our consolidated financial statements, including audits of employee benefit plan information.

 

Tax fees are fees for tax compliance, expatriate tax services and planning services.

 

All other fees are fees that principally relate to audit procedures performed in connection with one of our collaboration agreements, and educational resources.

 

Our Finance and Audit Committee has considered the provision of the non-audit services by PricewaterhouseCoopers described above and has determined that the provision of such services is compatible with maintaining PricewaterhouseCoopers’ independence.

 

Our Finance and Audit Committee has the sole authority to approve the scope of the audit and any audit-related services as well as all audit fees and terms. Our Finance and Audit Committee must pre-approve any audit and non-audit services provided by our independent registered public accounting firm. Our Finance and Audit Committee will not approve the engagement of the independent registered public accounting firm to perform any services that the independent registered public accounting firm would be prohibited from providing under applicable securities laws or NASDAQ requirements. In assessing whether to approve the use of our independent registered public accounting firm to provide permitted non-audit services, our Finance and Audit Committee tries to minimize relationships that could appear to impair the objectivity of our independent registered public accounting firm. Our Finance and Audit Committee will approve permitted non-audit services by our independent registered public accounting firm only when it will be more effective or economical to have such services provided by our independent registered public accounting firm than another firm.

The Finance and Audit Committee annually reviews and pre-approves the audit, audit-related, tax, and other permissible non-audit services that can be provided by the independent auditor. Any proposed services exceeding pre-set levels or amounts will require separate pre-approval by the Finance and Audit Committee, although the Chief Accounting Officer can approve up to an additional $50,000 in the aggregate per calendar year for categories of services that the Finance and Audit Committee has pre-approved. In addition, any pre-approved services for which no pre-approved cost level has been set or which would exceed the pre-approved cost by an amount that would cause the aggregate $50,000 amount to be exceeded must be separately pre-approved by the Finance and Audit Committee.

 

Our Finance and Audit Committee has delegated pre-approval authority for non-audit services to the chair of our Finance and Audit Committee within the guidelines discussed above. The chair of the Finance and Audit Committee is required to inform our Finance and Audit Committee of each decision to permit our independent registered public accounting firm to perform non-audit services at the next regularly scheduled Finance and Audit Committee meeting.

 

All of the services provided by PricewaterhouseCoopers during 2008 were pre-approved in accordance with this policy.

 

THE FINANCE AND AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2009.

 

APPROVAL OF BYLAW AMENDMENTS TO
IMPLEMENT MAJORITY VOTING IN UNCONTESTED DIRECTOR ELECTIONS

 

Our Board of Directors recommends that our stockholders approve our proposal to amend our Bylaws (1) to require that in uncontested elections directors will be elected by a majority vote, (2) to require each director to submit a conditional, irrevocable resignation that would become effective upon that director’s failure to receive the required number of votes for reelection, and (3) to require our Board of Directors to determine whether to accept or reject such a resignation within 90 days from the date of the certification of election results and to disclose publicly its decision. In contested elections, the voting standard would continue to be a plurality of votes cast.

 

Current Standard

 

Delaware law provides that, unless otherwise specified in a company’s certificate of incorporation or bylaws, directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Our Bylaws currently include this plurality standard for elections of directors by stockholders. Under this standard, director nominees with the most votes cast in their favor are elected, up to the number of directors to be elected at a meeting, notwithstanding any withheld votes.

 

Description of Proposed Amendments

 

The proposed amendments to our Bylaws are set forth in Appendix A to this Proxy Statement.

 

Our Board of Directors recommends that our Bylaws be amended to change the voting standard for the election of directors in uncontested elections from a plurality standard to a majority standard. Under the proposed majority standard, in order to be elected in an uncontested election, a director nominee must receive the affirmative vote of a majority of the votes cast in person or by proxy at the annual meeting of stockholders. Under Delaware law, an incumbent director who fails to receive the vote required for reelection “holds over,” or continues to serve as a director until his or her successor is elected and qualified, or until his or her earlier resignation or removal. To address the “hold over” issue, the proposed Bylaw amendments prohibit our Board of Directors from nominating as a candidate for director or appointing to our Board of Directors any person who has not agreed to tender, promptly following his or her election or appointment, an irrevocable resignation that would be effective upon the failure to receive the required number of votes for reelection at the next annual meeting of stockholders at which he or she faces reelection and our Board of Directors’ acceptance of such resignation. Under the proposed Bylaw amendments, our Board of Directors must determine whether to accept or reject the resignation within 90 days from the date of the certification of election results and must publicly disclose its decision. In contested elections (where the number of nominees exceeds the number of directors to be elected), the plurality standard would continue to apply and the nominees receiving the most votes would be elected.

 

If these amendments to the Bylaws are not approved, the existing plurality voting standard in the Bylaws will remain in effect.

 

Reasons for Recommendation

 

In recent years, stockholders of many public companies have urged that directors be required to receive a majority of the votes cast in favor of their election, rather than be elected under the plurality voting standard. Delaware law was recently changed to facilitate this trend toward the majority standard and provide a mechanism to address the “hold over” of incumbent directors who fail to obtain the votes necessary for reelection. In response, a number of public companies have adopted charter or bylaw provisions requiring a majority vote in uncontested elections, or a bylaw or policy requiring a director who does not receive such a majority to submit his or her resignation from the board of directors. Such a post-election resignation policy or bylaw is designed to address what happens to a director who failed to receive sufficient votes for reelection but who, under state law, would otherwise remain in office until his or her successor is elected at the next annual meeting of stockholders, or until his or her earlier resignation or removal.

In furtherance of our commitment to strong corporate governance and to ensuring that stockholders are afforded a meaningful role in the election of directors, our Board of Directors has approved and recommends that our stockholders vote in favor of the proposed amendments to our Bylaws, set forth in Appendix A to this Proxy Statement, to implement a majority voting standard in uncontested elections and to require conditional resignations from all directors.

 

Our Board of Directors is aware that the current plurality standard provides greater certainty that the annual election of directors by stockholders will result in a full Board of Directors, and that the proposed change to a majority voting standard would not have had any effect on our election of directors in the recent past because director nominees have received votes exceeding a majority of the votes cast by a substantial margin. However, our Board of Directors believes that a majority voting standard for uncontested elections will give stockholders a greater voice in and responsibility for the election of our directors. Our Board of Directors also recognizes that a majority voting standard will preclude the election of directors who do not have broad acceptance among our stockholders and may enhance each director’s accountability to our stockholders. As a result, our Board of Directors has determined that a majority voting standard for uncontested elections for directors would be in the best interest of the Company and our stockholders.

 

Effectiveness of Amendments

 

If approved, the amendments to our Bylaws would be effective immediately. The new majority voting standard would then be applicable to the election of our directors at the 2010 annual meeting of stockholders (if uncontested) and to any earlier uncontested election of directors occurring after these amendments become effective.

 

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENTS TO THE COMPANY’S BYLAWS TO IMPLEMENT MAJORITY VOTING IN UNCONTESTED DIRECTOR ELECTIONS.

 

THE ICAHN BYLAW PROPOSAL

 

On February 5, 2009, the Company received notice from the Icahn Entities, which together with Carl C. Icahn are the beneficial owners of 16,075,256 shares, or 5.6%, of the Company’s common stock as of such date, of their intention to present to the Company’s stockholders at the Annual Meeting the following proposal to amend our Bylaws:

 

 

Under Article V of our certificate of incorporation, no amendment or supplement to the Bylaws adopted by our Board of Directors can conflict with any amendment adopted by the stockholders. Therefore, if the Icahn Bylaw Proposal were adopted by the stockholders of the Company, our Board of Directors would no longer have authority to amend such provisions of the Bylaws and thus would no longer have the ability to fix the number of directors.

 

While the approval of the Icahn Bylaw Proposal would provide certainty to stockholders with respect to the number of directors on our Board of Directors, such approval would have several detrimental effects.

 

Under the current Bylaws of the Company, our Board of Directors has the flexibility to add or remove director positions if it determines that such addition or removal would be in the best interests of the Company and its stockholders. Recruiting qualified candidates is a challenging and time-consuming process, and our Board of Directors believes that it is in the best interests of the Company’s stockholders to retain the ability of our Board of Directors to either increase the size of our Board of Directors to add a highly-qualified candidate if such a candidate becomes available or decrease the size of our Board of Directors in a year when no such candidate is readily available.

 

For example, in July 2008 our Corporate Governance Committee identified Brian S. Posner as a highly qualified individual and recommended him for membership on our Board of Directors. Our Board of Directors considered the recommendation and determined that it was in the best interests of our stockholders to expand the size of our Board of Directors and to appoint Brian S. Posner to the resulting vacancy as a Class 1 Director. If the Icahn Bylaw Proposal were approved, our Board of Directors would not have the ability to add such a highly qualified candidate, even if our Board of Directors believed that doing so would be in the best interests of our stockholders. In addition, in the event that a member of our Board of Directors retires, resigns or is not re-elected, our Board of Directors could determine not to fill the resulting vacancy, depending on the availability of suitable candidates. However, if the Icahn Bylaw Proposal were approved, our Board of Directors would be forced to fill the vacancy regardless of the availability of qualified candidates.

 

Our Board of Directors believes that retaining the ability to increase or decrease the size of our Board of Directors or appoint any particular person to our Board of Directors, if appropriate, continues to be in the best interests of the Company’s stockholders.

 

If you return a signed WHITE proxy card without providing voting instructions, your shares will be voted against the Icahn Bylaw Proposal.

 

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE ICAHN BYLAW PROPOSAL.

 

THE ICAHN NORTH DAKOTA PROPOSAL

 

On February 5, 2009, the Company received notice from the Icahn Entities, which together with Carl C. Icahn are the beneficial owners of 16,075,256 shares, or 5.6%, of the Company’s Common Stock as of such date, of their intention to present to the Company’s stockholders at the Annual Meeting the following proposal to reincorporate in North Dakota and become subject to the North Dakota Law:

 

“RESOLVED, that the stockholders of the Corporation hereby request the Board of Directors of the Corporation to take all action as is necessary and appropriate to properly initiate and complete the process to change the Corporation’s jurisdiction of incorporation from Delaware to North Dakota and to become subject to the North Dakota Publicly Traded Corporations Act.”

 

In their notice, the Icahn Entities make unsubstantiated claims about the benefits of reincorporating in North Dakota without addressing any of the disadvantages. Our Board of Directors believes that it can continue to implement effective corporate governance principles without incurring the costs and disadvantages of reincorporating in North Dakota. Stockholders should be aware that none of the Icahn Entities are incorporated in North Dakota or subject to the North Dakota Law.

 

Our Board of Directors is dedicated to effective corporate governance and can implement sound governance measures without reincorporating the Company in North Dakota

 

Our Board of Directors seeks to follow best practices in corporate governance in a manner that is in the best interests of our business and stockholders. Our Board of Directors regularly reviews ongoing developments in corporate governance and implements changes to our policies and practices when it is prudent to do so. Several recent examples highlight our Board of Directors’ commitment to effective corporate governance and responsiveness to stockholder issues:

 

 

In addition to these recent corporate governance initiatives, our Board of Directors has for some time maintained other corporate governance practices consistent with the North Dakota Law. For example, the Company has had an independent Chairman of the Board separate from the Chief Executive Officer since December 2005. In addition, the Company’s stockholders have the ability to act by written consent. Furthermore, by virtue of being listed on NASDAQ, stockholder approval is required upon the issuance of voting equity greater than 20% of the Company’s outstanding common stock and our Board of Directors is prohibited from changing its size if a contested election is anticipated. All of these practices are consistent with the North Dakota Law and demonstrate that our Board of Directors is already committed to strong corporate governance.

 

The North Dakota Law is essentially a catalogue of corporate governance principles characterized by some commentators as “best practices.” There is no consensus, however, that all of the corporate governance principles mandated by the North Dakota Law are in fact best practices. Furthermore, the North Dakota Law would not provide our Board of Directors with any flexibility in determining which of its numerous governance measures the Company should adopt.

 

Our Board of Directors believes that the Company does not have to reincorporate in North Dakota in order to follow effective corporate governance principles.

 

Reincorporating involves substantial costs and disadvantages

 

There are substantial liabilities and expenses associated with reincorporation, which, in the current challenging economic environment, would be unnecessary and detrimental to our business. A reincorporation would require,

among other things, that we analyze all of the Company’s agreements and governmental permits in order to determine whether a reincorporation transaction would require the consent of third parties (including our collaboration partners) or applicable governmental agencies. We would not be certain to obtain any required consents. Although we have not undertaken the costly analysis of all of our agreements and permits at this time, we know that at a minimum a reincorporation transaction would require the consent of our lenders. Similarly, we know that we would have to prepare costly filings with the SEC. Furthermore, a reincorporation process would divert the time and attention of our Board of Directors and management from our business without any apparent commensurate benefits.

 

The North Dakota Law is untested and unpredictable

 

North Dakota is not a well-known jurisdiction for business corporations. The North Dakota Law was passed in April 2007 and there are no reported cases interpreting the North Dakota Law. Our Board of Directors notes that, as of the date of this Proxy Statement, there appear to be only two publicly-traded companies incorporated in North Dakota and neither has elected to be governed by the North Dakota Law, while more than 50% of all U.S. publicly traded companies are incorporated in Delaware. Of the Fortune 500 companies, over 60% are incorporated in Delaware; many of the rest of the Fortune 500 are incorporated in their home states and there are currently no Fortune 500 companies incorporated in North Dakota. Reincorporating in a jurisdiction that is largely unproven and unfamiliar may adversely affect investor interest, director recruitment and commercial relationships.

 

On the other hand, Delaware — the Company’s current jurisdiction of incorporation — is a proven and familiar jurisdiction for business corporations. The General Corporation Law of the State of Delaware is a well-developed, comprehensive and flexible corporate statute that can accommodate changing business circumstances and is responsive to the needs of stockholders. Delaware has an established and sophisticated legal infrastructure, including a separate court system devoted solely to corporate and business matters. That court system, and the large body of corporate law it has developed, provides companies and stockholders alike with a high degree of predictability over the broad range of legal issues facing business today. Our Board of Directors believes that the capital markets are familiar with the requirements and interpretations of Delaware corporate law and that the Company and our stockholders benefit from this familiarity.

 

For all the reasons stated above, any perceived gains do not outweigh the significant costs and uncertainties associated with the Company reincorporating in North Dakota.

 

If you return a signed WHITE proxy card without providing voting instructions, your shares will be voted against the Icahn North Dakota Proposal.

 

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE ICAHN NORTH DAKOTA PROPOSAL.

 

The following table and accompanying notes provide information about the beneficial ownership of our outstanding common stock as of March 30, 2009 by:

 

 

Except as otherwise noted, the persons identified have sole voting and investment power with respect to the shares of our common stock beneficially owned. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to the shares. Shares subject to exercisable options include options that are currently exercisable or exercisable within 60 days of March 30, 2009. Shares subject to restricted stock units, or RSUs, include RSUs that vest within 60 days of March 30, 2009.

 

 

 

Section 16(a) of the Securities Exchange Act requires our executive officers, directors and greater-than-ten-percent stockholders to file initial reports of ownership and changes of ownership. As a practical matter, we assist our directors and executive officers by monitoring transactions and completing and filing Section 16 forms on their behalf. Based solely on information provided to us by our directors and executive officers, we believe that, during 2008, all such parties complied with all applicable filing requirements.

 

Introduction and Corporate Governance

 

Our Compensation and Management Development Committee (which is referred to in this section of the proxy statement as the “Committee” or as the “Compensation Committee”) oversees and administers our executive compensation programs. The Committee’s complete roles and responsibilities are set forth in the written charter adopted by the Board of Directors, which can be found at www.biogenidec.com under “Corporate Governance.” The Board of Directors selected the following directors to serve on the Committee: William D. Young (Chair), Marijn E. Dekkers, Alan B. Glassberg and Lynn Schenk. Each of these individuals satisfies the independence requirements of NASDAQ.

 

The Committee meets at regularly scheduled times during the year and on an ad hoc basis as business needs necessitate. In 2008, the Committee met for five regularly scheduled meetings and held three ad hoc meetings. As part of his duties, the Committee Chair reports on Committee actions and recommendations to the Board of Directors. In addition to the assistance provided by Biogen Idec’s internal Compensation and Benefits group, the Committee has retained Watson Wyatt Worldwide (“Watson Wyatt”) as outside advisors to the Committee. Watson Wyatt reports directly to the Committee and provides guidance on matters including trends in executive and non-employee director compensation, the development of specific executive compensation programs and other matters as directed by the Committee. During 2008, a Watson Wyatt affiliate provided actuarial services with respect to our pension plan in Germany; this service was a continuation of a pre-existing business relationship between our German affiliate and a company that was acquired by Watson Wyatt. Other than this matter, Watson Wyatt does not provide any other services to Biogen Idec.

 

Highlights of Our 2008 Performance and Changes to Our 2009 Programs

 

Despite a challenging economic environment and a period of business uncertainty arising from activist stockholder activity during 2008, we significantly exceeded our 2008 performance goals, as detailed on page 31. Specifically, we achieved:

 

 

This high level of performance resulted in above-target payments under our Annual Cash Incentive Plan and 2008 Retention Bonus. Our goal-setting, performance and payment amounts are detailed in this report.

 

In 2009, we adopted share ownership requirements for our executive officers. We believe that share ownership requirements further strengthen the link our compensation programs create between our executives and our stockholders. This policy provides that each executive officer is to maintain share or share-equivalent holdings as shown in the following table:

 

		Share Requirement
CEO			75,000
President, Research & Development			18,000
Chief Operating Officer			18,000
Executive Vice Presidents			10,000

 

The policy became effective for all current executive officers upon its adoption; newly-elected executive officers will have two years from initial election to meet the requirement. All executive officers currently meet the share ownership requirement. The policy includes a provision to require net retention of shares for any executive officer who does not maintain share ownership at or above the policy requirements.

Beginning in 2009, we introduced performance-vested restricted stock units as a core component of our long-term incentive (LTI) program for all of our executives. The performance-based vesting of these awards, combined with our existing time-vested stock options and restricted stock units, is intended to reinforce the importance of achieving our revenue and earnings measures of Company financial performance. Use of performance-vested LTI awards is increasingly common and a recognized best practice for increasing the proportion of compensation that is considered “performance based,” while strengthening alignment of our compensation programs with stockholders’ interests.

 

Consistent with our compensation philosophy, we monitor external pay data and adjust our compensation opportunities to reflect our targeted competitive positioning. For 2009, our average base salary increase for all of our executive officers averaged less than 4%. This calculation is prior to Mr. Hamm’s promotion to Chief Operating Officer and Mr. Hasler’s resignation from that position, both of which were effective March 30, 2009. Based on market benchmark data, we increased the target annual cash incentive opportunities beginning in 2009 for our Chief Operating Officer (from 60% to 75% of annual base salary) and for our Executive Vice Presidents (from 50% to 55% of annual base salary); as a result, our target annual cash incentive opportunities are comparable to the median of our peer group. Based on market benchmark data, we reduced our 2009 LTI grant guidelines for executive officers from our 2008 levels; as a result, our targeted LTI grant values remain comparable to the 60th percentile of our peer group.

 

Executive Compensation Philosophy and Objectives

 

Our compensation program for the named executive officers (the individuals named in the Summary Compensation Table) is designed and implemented based on our pay-for-performance compensation philosophy. We place significant emphasis in all of our compensation programs on performance-based pay and on highly differentiated awards based on individual performance and potential to contribute to the long-term success of the Company. We want and need the best people to be excited and motivated to work at Biogen Idec and we believe our compensation program is a key factor in attracting and retaining this talent.

 

Our compensation, benefits and other workplace programs (our “total compensation program”) have been selected and designed to achieve the following objectives:

 

 

What is our compensation program designed to reward?

 

The compensation program rewards financial, strategic and operational performance that is achieved in a manner consistent with the Company’s policies and values. Our success in meeting our compensation objectives depends heavily on our performance management system.

 

How do goal-setting and performance assessment influence our compensation decisions?

 

Our compensation program rewards each executive based on the Company’s achievement of Company-wide goals and the executive’s achievement of specific individual goals and objectives. Each year, our executives’ goals are set to directly support achievement of our Company goals and our Board-approved business plan. The individual

and Company goals that we set and measure performance against each year, including both 2008 and 2009, can be grouped into the following categories:

 

 

The goals we set support our long range plan and reflect an appropriate degree of difficulty of goal attainment. In setting our long range plan and annual goals, we also consider analysts’ projections for our Company’s performance; analysts’ projections for our peers’ performance; the broader economic and industry picture; our past variance to targeted performance; our peers’ past performance on key financial and operational metrics; and our Board of Directors’ expectations. We set challenging goals for the Company and our executives. We select goals that support the interests of our stockholders and patients. We believe that our disciplined approach to goal selection, setting of targets and establishment of payout curves and evaluation of our performance results, combined with our system of internal controls, ensures that we are not encouraging excessive risk-taking or rewarding poor judgment by our executives. This approach is strengthened through Committee review and approval of our goals, targets, payout curves and performance results. We also mitigate risk through share ownership requirements, a cap on our annual cash incentive plan, multi-year vesting of LTI, the mix of types of LTI and our policy on recoupment of compensation.

 

Our performance management system is rigorous and integrates goal-setting, self-assessment and manager-based assessment of performance and leadership competencies. Results, and how those results are attained, are critically important. We hold our executive officers accountable for how they achieve their results, including leadership effectiveness, impact across the organization and performance and impact relative to the Company’s other executive officers. Based on our performance assessments, we develop a relative ranking of our executive officers and then assign overall performance ratings that are used for compensation decision-making. We significantly differentiate compensation based on the executive officers’ relative rankings and overall performance ratings to ensure that the highest rewards are delivered to our highest performers. For example, all payments under our Annual Cash Incentive Plan are determined based on both individual and Company performance.

Compensation Program Elements and Pay Level Determination

 

What is each element of compensation and why is it paid?

 

The Committee determines the elements of our compensation program and approves the targeted levels of competitiveness for each element. The compensation program elements and targeted competitiveness relative to our compensation peer group apply to all levels of employees, including our non-executives, executives and executive officers. The Committee has approved the following role and targeted competitiveness for each element of total compensation (discussed in detail beginning on page 29) to promote our pay-for-performance philosophy and compensation program objectives:

 

 

We do not offer a defined benefit pension to any employees, even though many of our pharmaceutical industry peers provide these benefits. We prefer an LTI program targeted above the median of our peer group rather than a defined benefit pension because it ties the value realized to our share price performance and makes the cost more predictable than the cost of a defined benefit pension.

 

Each year, the Committee reviews the current compensation program design for its alignment with and support of our pay-for-performance objectives, its overall efficiency and cost-effectiveness, and its design and overall value relative to our peers’ practices and general trends. The Committee also discusses program design recommendations and approves changes to ensure that each compensation element and the overall program design are aligned with their role and purpose.

 

While the general mix of the elements is considered in the design of our total compensation program, the Committee does not target a specific mix of value for our compensation elements in either the program design or pay decisions. To more closely tie their compensation to the Company’s overall performance, and to recognize their ability and obligation to affect that performance, our executive officers have more variability in their compensation than non-executives.

 

Our performance-driven approach creates a motivational aspect to our compensation programs, since base salary increases, annual incentive payments and long-term incentive grants are all performance-differentiated based on each executive officer’s overall performance rating and relative rank.

What factors are considered in determining the amounts of compensation?

 

Individual and Company performance, external competitiveness, employee retention, internal equity (the relationship of pay among the executive officers in the context of the criticality of each position) and our annual salary increase budget and LTI award guidelines are the key factors considered by the Committee in determining the amounts of compensation for each executive officer. Our practices and processes are highly consistent from year to year, as described in this section.

 

Each year, the Chief Executive Officer (CEO) prepares and discusses with the Committee a detailed assessment of each executive officer’s performance during the prior year and recommends compensation actions for each executive officer, including new base salaries, annual cash incentive payments and LTI awards.

 

To understand external competitiveness, the CEO and the Committee review a detailed report prepared by Biogen Idec’s Compensation and Benefits group with Watson Wyatt’s review as consultant to the Committee. The report compares the level of compensation of each executive officer other than the CEO relative to external data for comparable positions at our peers, by compensation element. The external data is drawn from compensation surveys and an analysis of our peers’ executive compensation disclosures. Separately, Watson Wyatt provides the Committee with a competitive analysis of CEO pay, a CEO compensation tally sheet and employment agreement analysis, and a CEO pay-for-performance analysis that compares annual cash incentive payments and potential LTI value relative to revenue, EPS and total shareholder return (TSR) performance at our Company and at each of our peers.

 

Based on these factors, the CEO makes recommendations to the Committee for compensation actions for each executive officer. The Committee considers all of the information presented, discusses the CEO’s recommendations with the CEO and with Watson Wyatt, and applies its judgment to determine the compensation for each executive officer. In consultation with Watson Wyatt, the Committee recommends a new base salary, an annual cash incentive payment and LTI grants for the CEO for approval by all independent (non-employee) directors. The actual compensation for each executive officer, including the CEO, may be above or below the targeted competitiveness for the position at any time depending on the above factors.

 

What external market peer group is used for compensation comparisons, and how is it established?

 

Each year, Watson Wyatt reviews our peer group for appropriateness, considering such factors as size (e.g., revenue and market capitalization), business comparability (e.g., research-based with multiple marketed products) and geographic scope of operations (e.g., global versus domestic-only presence). Our peer group includes biotechnology and pharmaceutical companies, as we compete with companies in both of these sectors to hire and retain our executives. Based on the 2008 peer group review, the Committee removed MedImmune from the peer group as a result of its acquisition by AstraZeneca in 2007. The following table presents the peer group approved in May 2008:

 

Biotechnology Peers		Pharmaceutical Peers
Amgen		Allergan
Celgene		Bristol-Myers Squibb
Cephalon		Eli Lilly & Co
Genentech		Forest Laboratories
Genzyme		Schering-Plough
Gilead Sciences		Sepracor
Millennium Pharmaceuticals		Wyeth

 

Our compensation decisions during 2008 were based on the peer group before the removal of MedImmune, as those decisions were made prior to MedImmune’s acquisition by Astra Zeneca. Beginning in 2009, we expect that Millennium Pharmaceuticals will no longer be part of our peer group as a result of its acquisition by Takeda Pharmaceuticals in 2008. If other peer group companies are acquired, they will remain in our peer group until the acquisition is complete.

For each of our peers, we analyze the Compensation Discussion and Analysis and other data filed during the prior year to identify those named executive officers whose positions are comparable to those held by our executive officers. We then compile and analyze the data for each comparable position relative to that for our executive officers. Our competitive analysis includes the rewards program structure and design, as well as the value of the compensation.

 

We also use the Towers Perrin U.S. CDB Pharmaceutical Executive Compensation Database (“Towers Perrin”) and the SIRS Executive Compensation Survey (“SIRS”) in analyzing the competitiveness of executives’ compensation. All of our peers except Sepracor participated in the Towers Perrin survey and all of our peers except Bristol-Myers Squibb and Eli Lilly participated in the SIRS survey. Benchmark compensation surveys are critical to assessing competitive practices and levels of compensation, as the data available in our peers’ public filings addresses only a limited number of our executive positions. We carefully selected these two benchmark compensation surveys based on the number of our peers that participate in the surveys, the number of positions reported by the surveys that are comparable to our executive positions and the standards under which the surveys are conducted, including data collection and analysis methodologies, provisions to ensure confidentiality and quality assurance practices.

 

While the Towers Perrin and SIRS benchmark compensation surveys report LTI data, differences between the surveys in methodology and reporting result in LTI data that is not comparable between the sources. As a result, we separately benchmark LTI practices and values via a survey sponsored in part by Biogen Idec and conducted in 2007 by Watson Wyatt. This survey provides us with robust data regarding long-term incentive practices and grant values among our peers and allows us to overcome the methodological differences between the Towers Perrin and SIRS surveys. All of our peers except Celgene, Bristol-Myers Squibb, Forest Laboratories and MedImmune participated in this survey in 2007. For purposes of LTI decisions during 2008, we relied on the data from the survey conducted in 2007.

 

Description of the structure of each element of compensation

 

Base salaries are set in the context of individual performance, external competitiveness, retention and internal equity

 

We pay our executive officers a base salary to provide a baseline level of compensation that is both competitive with the external market and commensurate with each employee’s past performance, experience, responsibilities and potential to contribute to our future success. While an executive officer’s contributions to Company performance are important in determining that executive’s base salary, overall Company performance does not influence our base salaries. We generally target our base salary structure around the median of our peers. In recommending and determining individual base salaries, the CEO and Committee consider the internal and external factors described in the previous section of this report. Base salary increases from 2007 to 2008 for our named executive officers averaged 7% and ranged from 3% to 11%. These increases were approved in February 2008 as part of our annual compensation planning process. At the end of 2008, the base salaries for our named executive officers were below the market median, except for Dr. Pickett, whose base salary was between the median and 75th percentile, consistent with the criticality of his role to the Company, Dr. Pickett’s depth of experience and the competitive requirements at the time he was hired by the Company.

 

Annual Cash Incentives motivate our executive officers to meet and exceed our short-term goals

 

We maintain an annual cash incentive plan as part of our performance-based compensation. Our annual incentive opportunities, which are expressed as a percentage of base salary, are targeted near the median of our peers. The Committee reviews our annual target incentive opportunities each year to ensure they are appropriately competitive. For 2007 and 2008, our target incentive opportunities remained unchanged as a percent of base salary.

 

Our named executive officers’ 2008 total cash compensation (which, for market comparison purposes, is 2008 base salary plus the actual cash incentive paid in 2008 for 2007 performance) was below the market median, except Dr. Pickett, whose total cash compensation was between the median and 75th percentile.

The Committee establishes and approves all Company goals for the annual cash incentive plan based on recommendations made by the CEO. Executive officers’ individual performance goals are jointly developed by the executive and Mr. Mullen and approved by the Committee. Mr. Mullen’s goals and year-end assessment are also approved by the Committee, with input from the other independent directors. In setting and approving the performance goals for the executive officers and for the Company, the Committee considers not only the alignment to our business plan and the degree of difficulty of attainment, but also the potential for the goals to encourage inappropriate risk-taking. The Committee has determined that the goals and how the goals are achieved do not put our patients, investors or the Company at risk.

 

For the 2008 annual cash incentive plan, we selected Company goals and assigned weights that reflected the Company’s established financial, strategic and operational objectives. In 2008, we assigned a total of 70% weight to financial goals and 30% to strategic and operational goals. These goals and weights reflected the importance of linking reward opportunities to both near-term and longer-term results and aligned management incentives with the enhancement of long-term stockholder value.

 

We consistently set our performance targets with reference to analyst consensus for Biogen Idec revenue and non-GAAP earnings per share (EPS), based on the most-current analyst reports at the time we set our targets. The following presents our targets relative to analyst consensus for the years 2006 through 2008.

 

 

For 2008, we exceeded the maximum performance levels set for our revenue and EPS goals, reflecting the significant focus and effort made by our executives and other employees. Our results also exceeded the highest Wall Street estimates for the Company at the time the Committee approved the 2008 annual cash incentive plan. We reached best case performance on two of our three product pipeline goals and performed just below target on the third pipeline goal. The following table shows the Company goals and weighting that the Committee set for 2008, and our degree of attainment of these goals.

2008 Annual Cash Incentive Plan Company Targets and Results

 

 

 

Notes to table:

 

 

 

We determine the individual cash incentive payments using the following calculation:

 

Company Multiplier x Individual Multiplier x Incentive Target (%) x Annual Base Salary

 

The plan provides for a range of payout from 0% to 150% for each Company goal and the Company Multiplier as a whole, and from 0% to 150% for the Individual Multiplier. If either the Company Multiplier or the Individual Multiplier is 0%, there is no payout. If maximum performance were achieved on both the Company Multiplier and an Individual Multiplier, a payout of 225% of target (150% x 150%) would be made. The Individual Multiplier reflects the assessment of the individual performance goals discussed earlier in this section; each executive’s Individual Multiplier thus reflects his or her overall performance rating and ranking as part of our performance assessment process.

 

Based on the results described above, a 143% Company Multiplier for the 2008 annual cash incentive plan was approved by the Committee. Based on performance against their individual goals, our named executive officers’ Individual Bonus Multipliers for 2008 ranged from 100% to 125%. The actual incentive payments are included in the Summary Compensation Table.

 

For 2008, in addition to our annual cash incentive plan, the Committee approved a special performance-based cash retention bonus program to assist the Company in retaining key employees through the period of business uncertainty arising from activist stockholder activity during 2008. Each of our executive officers other than the CEO was a participant in this program. The program provided an additional cash incentive opportunity based on the Company’s performance in 2008 relative to our revenue and EPS goals, which were given equal weight. The named executive officers participating in this program each had a target opportunity equal to their annual base salary as of December 31, 2008. The Committee approved the target opportunity levels based on its assessment of an appropriate design based in part on market trend information presented by management and Watson Wyatt. The actual amount of our retention payments could range from 0% if the Company did not achieve threshold results for revenue and EPS to 150% if the maximum performance level was achieved or exceeded on both goals.

Our performance relative to our 2008 revenue and EPS goals for the retention bonus program resulted in a Company Multiplier of 150%, as shown in the following table. The targets and results are the same as those detailed above for our annual cash incentive plan.

 

Retention Bonus Targets and Results

 

 

Each of our named executive officers other than Mr. Mullen earned a retention bonus equal to 150% of their annual base salary as of December 31, 2008.

 

The retention bonus program was highly effective in retaining critical employees during a challenging year and maintaining focus on delivering strong financial results.

 

Long-term Incentives align future earnings potential with stockholder interests

 

Our LTI grants are based on individual performance, with eligibility and grant value scaled with performance, and our grants provide reward opportunities that align compensation with stockholder interests and Company performance. Additionally, through multi-year vesting, our LTI grants reinforce our goal to retain top talent. Each year, the Committee determines the types of LTI to be awarded. In doing so, the Committee considers the effectiveness of each award type in achieving our compensation objectives (such as employee performance, retention, motivation and attraction), the needs of the business, competitive market practices, dilution and expense constraints, and tax and accounting implications. We currently grant equity-based LTI awards (that is, awards that are based on the common stock of the Company).

 

During 2007, the Committee evaluated various program designs for 2008 that were developed by management and reviewed by Watson Wyatt, serving as consultant to the Committee. Based on these recommendations, including a detailed review of competitive practice among our peers, the Committee approved a program that awarded stock options and restricted stock units to our executive officers. We typically grant LTI to all employees, including our executive officers, annually based on performance (our “annual merit grants”), upon hire and upon promotion. During 2008, the total grant date value of each award was divided evenly between stock options and restricted stock units. During 2008, Mr. Clancy also received a special grant of restricted stock units. In lieu of annual merit awards and consistent with the terms of his employment agreement, Dr. Pickett was granted performance-vested restricted stock units, which are described below.

 

We continue to grant stock options, as they promote alignment with our stockholders and qualify as performance-based pay under Section 162(m). Our stock option grants also promote retention because they vest annually over the four-year period following grant. We grant restricted stock units to reflect competitive practices and to align executives’ interests with those of stockholders while promoting retention by providing some level of value regardless of our stock price at any given time. Restricted stock units granted in conjunction with our 2008 annual merit grant vest annually over the three years following grant. In addition to their strong retention value, we believe that restricted stock units support an ownership mentality, which encourages our executives to act in a manner consistent with the long-term interests of the Company and its stockholders.

 

To help in assessing the external market, Biogen Idec sponsored (and Watson Wyatt administered) a custom survey of LTI in which most of our peers participated. To augment this data, the Committee reviewed publicly available data for our LTI compensation expense and aggregate share usage among Biogen Idec’s peers. Based on these external factors, as well as Company performance and analyses of accounting cost implications and employee retention, the Committee approved target LTI grant values for 2008 that were at the 60th percentile of our peers in terms of dollar value; this same competitive positioning has been maintained for 2009. The Committee’s decision to target LTI grant value at the 60th percentile reflects the importance of LTI as an element of our total compensation

program, the ability of our executive officers to positively impact stockholder value and the fact that, unlike many of our pharmaceutical peers, we do not maintain a defined benefit pension plan for our executives. The value realized from our LTI grants depends on our stock price, which is dependent on both our Company’s performance and external market factors.

 

Our LTI grant guidelines significantly differentiate LTI grants based on individual performance and position level. As in prior years, the 2008 LTI grant guidelines approved by the Committee were segmented by overall performance rating, ensuring that top performing employees receive noticeably larger grants than those with average performance. Specifically, our 2008 LTI grant guidelines for our middle-performing employees ranged from 75% to 125% of the target grant value, the guidelines for our highest-performing employees ranged from 130% to 200% of the target grant value, and LTI grant guidelines for our lower-performing employees ranged from 0% to 60% of the target grant value. This approach, which we continued in 2009, allows us to meaningfully reward and effectively retain those employees who have the demonstrated potential to make the greatest contributions to our long-term success and to differentiate their rewards from those received by other employees.

 

We follow a consistent annual grant pattern that follows the completion of our internal performance reviews and ranking, as well as our external analyses that include a review of peer equity practices and the results of the LTI custom survey described earlier. Since 2004, we have made our annual merit equity grant in February of each year, following our annual earnings release. The date of each annual merit grant is the date upon which the Committee approves the individual grants, with the exception of grants to the CEO, for whom grants require Board of Directors approval and are thus granted on the date of that approval. Other grants, such as those in connection with a new hire or promotion, are granted on the first trading day of the month following the date of hire or promotion. Our stock options have an exercise price equal to the closing price of Biogen Idec stock on the date of grant.

 

We employ performance-vested LTI when we believe it is the most appropriate approach for achieving our business objectives. Performance-vested restricted stock units are a key component of Dr. Pickett’s total equity awards, consistent with his specific goals of advancing our pipeline and research and development (R&D) efforts during the time from his hire through 2010. Dr. Pickett was granted the opportunity to earn up to 30,000 performance-vested restricted stock units for the 2008 calendar year, and has separate grants to earn up to 30,000 performance-vested restricted stock units in each of 2009 and 2010. Each year’s plan provides for a maximum vested award of 30,000 restricted stock units, with any unearned units in a given year forfeited.

Based on the CEO’s recommendations, in 2008 the Committee approved goals for Dr. Pickett’s performance grant which included pipeline goals and R&D organizational objectives. His results relative to these goals were approved by the Committee in 2009.

 

 

Based on attaining or exceeding most goals and the near-target performance with respect to registration studies, the CEO recommended, and the Committee approved, that Dr. Pickett receive 100% of the 30,000 performance-vested restricted stock units for the 2008 performance period. These 30,000 units vested on February 24, 2009, which was the date of Committee approval.

 

Benefits

 

In addition to participating in the benefit programs provided to all employees (for example, our employee stock purchase plan and medical, dental, vision, life and disability insurance), we provide some supplemental benefits to executives. These benefits include:

 

 

Retirement Plans

 

The Company does not maintain a pension plan or a defined benefit plan.

 

The Company maintains a Supplemental Savings Plan, or SSP, which covers our United States executive officers and other management employees in the United States. The SSP replaced our prior deferred compensation plan, as well as the Biogen, Inc. Voluntary Executive Supplemental Savings Plan. Employees whose base salary and annual cash incentives for the year exceed a specified limit under Section 401(a)(17) of the Internal Revenue Code ($230,000 in 2008) receive a Company-paid “restoration match” on the portion of their base salary and annual cash incentive that exceeds this limit; the restoration match equals six percent of this excess compensation. This feature is intended to replace the amount of matching employer contributions that the participant would otherwise have been eligible to receive under our 401(k) plan but for this limit. In addition, eligible employees may make voluntary contributions of up to 80% of their base salary and 100% of their annual cash incentives to the SSP, and thereby defer income taxes on such amounts until distribution is made from the SSP. The Company does not match these voluntary contributions to the SSP. Our SSP provides for immediate vesting of the restoration match, consistent with our immediate vesting of the Company match provided under our 401(k) plan

 

SSP accounts are maintained for each participant. Accounts include employee and employer contributions and reflect performance of “notional investments” selected by the employee, or on a default investment if the employee does not make a selection. These investment options include the mutual funds offered under our 401(k) plan, as well as a fixed rate option which earns a rate of return determined each year by the Company’s Retirement Committee. In 2008, this rate of return was 8%. The excess of the interest rate paid on the fixed rate option above 120% of the applicable federal long-term rate (compounded quarterly) earned by our named executive officers during 2008 is shown in the Summary Compensation Table. We fund the SSP liabilities informally through corporate owned life insurance (COLI), which we purchase with the formal consent of SSP participants. The premiums on the COLI policies are paid from employees’ deferred compensation contributions and thus do not require separate funding by the Company. COLI does not create tax liabilities for the Company at any time, so these policies are a cost-effective way to fund the SSP liabilities. We believe that the COLI policies will be sufficient to cover Plan liabilities through the projected payout date so the Plan will not require direct funding by the Company.

 

The Company maintains a defined contribution retirement plan for executive officers, management and other highly compensated employees of our Swiss affiliate, which included Mr. Hasler. This plan provided for defined contributions by both Mr. Hasler and the Company. Each year’s contributions were based on required contributions by the participant and employer that totaled 20% of Mr. Hasler’s salary and bonus. Mr. Hasler was required to pay approximately 6.7% of his earnings into his plan account each year; the Company paid an amount approximately equal to 13.3% of Mr. Hasler’s earnings into his plan account each year. This plan does not guarantee a fixed return on investments higher than the minimum set by the Swiss government.

 

Post-termination Compensation and Benefits

 

We have a program in place under which all of our executives receive severance benefits if they are terminated without cause (and, in the case of Messrs. Mullen and Pickett, if they terminate for good reason) or in the event of an Involuntary Employment Action (as defined in our 2008 Omnibus Equity Plan) following a corporate transaction or a change in control. The benefits they receive depend on their position (or, in the case of Messrs. Mullen and Pickett, are included in their employment agreements). We provide these arrangements because we believe that some severance arrangements, as well as protection in the event of a corporate transaction or change in control, are necessary to enable executives to maintain their focus on the business during a period when they otherwise might be distracted. The terms of these arrangements and the amounts payable under them are described below under “Potential Payments Upon Termination or Change in Control.”

Recoupment of Compensation

 

We maintain policies to recover compensation from our employees who engage in detrimental or competitive activity. Detrimental activity includes any action or failure to act that constitutes financial malfeasance that is materially injurious to the Company, violates our Code of Conduct, results in restatement of our earnings or financial results or results in a violation or breach of law or contract. Competitive activity includes any action or failure to act that violates non-disclosure, non-competition and/or non-solicitation agreements. Our 2008 Performance-Based Management Incentive Plan provides for the forfeiture and/or repayment of awards and our 2008 Omnibus Equity Plan also provides for the cancellation of LTI awards in these circumstances.

 

Amendments to Employment Agreements

 

In 2008, we amended Mr. Mullen’s and Dr. Pickett’s employment agreements for purposes of compliance with Section 409A of the Internal Revenue Code. The amendments, which were filed as Exhibits to our Form 10-K Annual Report for 2008, clarified definitions and processes to ensure that future payments would be either exempt from or in compliance with the Internal Revenue Code requirements for payment of deferred compensation.

 

Tax-Deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code limits to $1 million the amount a company may deduct for compensation paid to its CEO or any of its other three named executive officers (excluding the Chief Financial Officer). This limitation does not, however, apply to compensation meeting the definition of “qualifying performance-based compensation.”

 

Management regularly reviews the provisions of our plans and programs, monitors legal developments and works with the Committee to preserve Section 162(m) tax deductibility of compensation payments. Changes to preserve tax-deductibility are adopted to the extent reasonably practicable, consistent with our compensation policies and as determined to be in the best interests of Biogen Idec and its stockholders. Amounts of base salary above $1,000,000 and our time-vested restricted stock units are not deductible for our named executive officers. For 2008, our stock option grants, our annual cash incentive plan, our retention bonus program and Dr. Pickett’s performance-vested restricted stock unit grant were tax-deductible compensation under Section 162(m).

 

Maximum potential cash incentive awards under the 2008 annual cash incentive plan were determined for each named executive officer based on our non-GAAP net income for the year. The actual award to each executive was less than this maximum amount based on the degree of attainment of Company and individual performance goals set in the annual cash incentive plan described above. Dr. Pickett’s performance-vested restricted stock unit plan was similarly structured to ensure a maximum funded value was based on an objectively determined basis.

 

Under the management incentive plan approved by the Company’s stockholders in 2003, we limited tax-deductible performance-based incentive payments to $3,500,000 per executive per year. In 2008, we obtained stockholder approval of a new management incentive plan that permits us to continue to structure and provide performance-based awards that are tax-deductible. The 2008 MIP limits tax-deductible performance-based incentive payments to $6,000,000 per year for the Chief Executive Officer and $3,000,000 per year for each other executive.

 

Our new performance-vested restricted stock unit program has been designed to meet the Section 162(m) requirements for tax-deductible compensation, based on the provisions of the stockholder-approved 2008 Omnibus Equity Plan.

 

The Compensation and Management Development Committee (the “Committee”) furnishes the following report:

 

The Committee has reviewed and discussed the Compensation Discussion and Analysis with Biogen Idec management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

Submitted by,

 

William D. Young, Chairman

Marijn E. Dekkers

Alan B. Glassberg

Lynn Schenk

 

The following table shows the compensation paid to or earned by the named executive officers during the years ended December 31, 2006, December 31, 2007 and December 31, 2008, for the year(s) in which he was a named executive officer.

 

 

 

Notes to Summary Compensation Table

 

 

 

 

 

 

 

The following table shows additional information regarding all grants of plan-based awards made to our named executive officers for the year ended December 31, 2008.

 

 

 

Notes to 2008 Grants of Plan-Based Awards Table

 

 

 

The following table summarizes the equity awards that were outstanding as of December 31, 2008 for each of the named executive officers.