2020 PROXY STATEMENT
And Notice of Annual Meeting of Shareholders
To be held on Wednesday, May 6, 2020

March 26, 2020

Dear Fellow Shareholder,
You are cordially invited to join us at the 2020 Annual Meeting of Shareholders of Philip Morris International Inc. (“PMI” or
the “Company”) to be held on Wednesday, May 6, 2020, at 9:00 a.m. Eastern Daylight Time (“EDT”). We are pleased to
introduce a virtual meeting format for the first time this year. Meaningful shareholder engagement is important to us, andwe believe that a virtual annual meeting conducted solely online through a live webcast could significantly improveshareholder attendance and participation that have declined significantly over the past five years. We believe that thisformat will facilitate participation of our shareholders worldwide, regardless of their resources, size or physical location,
while saving us and our shareholders time and travel expenses, and, importantly, reducing our environmental impact.
Shareholders will have the same rights and opportunities to participate in our virtual meeting as they would at an in-person
meeting. For full transparency, during the Q&A session, which will be publicly webcast, our shareholders will be able to ask
questions live, on a first-come, first-served basis. In addition, a full webcast replay will be posted to our Investor Relations
website at www.pmi.com/investors for one year following the meeting.
The meeting will be hosted online at www.virtualshareholdermeeting.com/PMI2020.
At this year’s meeting, we will vote on the election of ten directors, an advisory say-on-pay resolution approving executive
compensation, and the ratification of the selection of PricewaterhouseCoopers SA as the Company’s independent auditors.
There will also be a report on the Company’s business, and shareholders will have an opportunity to ask questions.
To participate, you will need to enter the 16-digit control number included on your proxy card, notice of Internet availabilityof proxy materials, or on the voting instruction form accompanying your proxy materials. For more detailed information, see
the instructions set forth in Question 4 on page 62 of this proxy statement.
You will note that Massimo Ferragamo and Stephen M. Wolf have decided not to stand for re-election at the Annual
Meeting and will retire from the Board of Directors. They have been exemplary Directors who have provided invaluable
service to our Company. Our heartfelt gratitude goes out to them for their years of dedicated commitment to our Company.
Your vote is important. We encourage you to sign and return your proxy card, or use telephone or Internet voting prior tothe meeting, so that your shares of common stock will be represented and voted at the meeting even if you do not attend.
Sincerely,

Sincerely,

LOUIS C. CAMILLERI
CHAIRMAN OF THE BOARD

ANDRÉ CALANTZOPOULOS
CHIEF EXECUTIVE OFFICER

For further information about the Annual Meeting, please call toll-free 1-866-713-8075.

PMI 2020 Proxy Statement • 1

PHILIP MORRIS INTERNATIONAL INC.
NOTICE OF 2020 VIRTUAL ANNUAL MEETING OF SHAREHOLDERS
Date and Time

9:00 a.m., Eastern Daylight Time on Wednesday, May 6, 2020.

Virtual Annual Meeting

There is no physical location for the shareholders to attend the 2020 Annual Shareholder Meeting.
Shareholders may instead participate online at www.virtualshareholdermeeting.com/PMI2020.
To participate, you will need to enter the 16-digit control number included on your proxycard, notice of Internet availability of proxy materials, or on the voting instruction form
accompanying your proxy materials.

Items of Business(1) To elect ten directors.
(2) To vote on an advisory resolution approving executive compensation.
(3) To ratify the selection of PricewaterhouseCoopers SA as independent auditors for theCompany for the fiscal year ending December 31, 2020.
(4) To transact other business properly coming before the meeting.

Who Can Vote

Only shareholders of record of shares of common stock at the close of business on
March 13, 2020 (the “Record Date”) are entitled to notice of and to vote at the meeting, orat any adjournments or postponements of the meeting. Each shareholder of record on the
Record Date is entitled to one vote for each share of common stock held. On March 13,
2020, there were 1,557,105,624 shares of common stock issued and outstanding.

Voting of Proxies andDeadline for Receipt

Your vote is important. All properly executed written proxies, and all properly completed
proxies submitted by telephone or Internet, that are delivered pursuant to this solicitation
will be voted at the meeting in accordance with the directions given in the proxy, unless theproxy is revoked before the meeting. Proxies submitted by telephone or Internet must be
received by 11:59 p.m., EDT, on May 5, 2020.

2019 Annual Report

A copy of our 2019 Annual Report is enclosed.

Date of MailingThis notice and the proxy statement are first being mailed to shareholders on or about
March 26, 2020.

Jerry Whitson
Deputy General Counsel and Corporate Secretary
March 26, 2020
WE URGE EACH SHAREHOLDER TO PROMPTLY SIGN AND RETURN THE ENCLOSED PROXY CARD OR TO USETELEPHONE OR INTERNET VOTING. SEE THE QUESTION AND ANSWER SECTION FOR INFORMATION ABOUT
VOTING BY TELEPHONE OR INTERNET, HOW TO REVOKE A PROXY, AND HOW TO VOTE YOUR SHARES OFCOMMON STOCK. IF YOU PLAN TO PARTICIPATE IN THE 2020 VIRTUAL ANNUAL MEETING OF SHAREHOLDERS,
PLEASE FOLLOW THE INSTRUCTIONS SET FORTH ON PAGE 62 IN RESPONSE TO QUESTION 4.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be heldon May 6, 2020: The Company’s Proxy Statement and 2019 Annual Report are available atwww.pmi.com/investors.

2 • PMI 2020 Proxy Statement

LETTER FROM THE BOARD OF DIRECTORS

Dear Fellow Shareholder,
While Philip Morris International Inc. (PMI) is widely known as a cigarette company, in 2016 it announced its new purpose:
to deliver a smoke-free future by focusing its resources on developing, scientifically substantiating and responsiblycommercializing smoke-free products that are less harmful than smoking, with the aim of completely replacing cigarettes assoon as possible. These innovative alternative products do not burn tobacco, do not create cigarette smoke and therefore
generate significantly lower levels of carcinogens and other toxic substances compared to cigarettes.
Building on the Board’s Letter to Shareholders in PMI’s 2017 Proxy Statement, we would like to reaffirm PMI’s purpose andacknowledge that, as the Company continues to transform its business and organization, its core effort to provide
smoke-free alternatives that are satisfying to today’s adult smokers—and to work hard to convince them to switch—will not
be enough. The Company needs to continue earning the trust and active cooperation of a host of stakeholders, from its
supply chain partners to regulators and public health authorities.
A smoke-free future is attainable, and the benefits it can bring to the people who would otherwise continue to smoke, andhence to global public health, are enormous. However, the Company cannot succeed alone. Together with governments andcivil society we can maximize this opportunity through a consensus that smoke-free alternatives, when subject to proper
government oversight and regulation, are part of sound tobacco policy.
The Quest for Better Alternatives for Adult Smokers
Smoking causes serious disease, and the best way to avoid the harms of smoking is never to start, or to quit. For decades,
tobacco control has focused on strict fiscal, marketing and other measures to deter initiation and to encourage cessation.
These must be continued. Nevertheless, while smoking prevalence rates continue to slowly decline, the World HealthOrganization projects that the estimated number of 1.1 billion people who smoke tobacco products today will remain largely
unchanged by 2025, reflecting population growth.
Nicotine, while addictive and not risk free, is not the primary cause of smoking-related disease. The primary cause is theharmful chemicals released or generated by the burning of tobacco and contained in the smoke. Eliminating combustion
from nicotine-containing products is the way to significantly reduce their toxicity. Thanks to rapid advances in science andtechnology, and strong PMI commitment, these products are now a reality.
Currently, PMI’s smoke-free portfolio comprises platforms that heat tobacco, vaporize nicotine-containing liquids oressentially contain only nicotine, all without combustion. Their development and manufacturing follow high standards ofquality and consistency. The scientific evaluation to substantiate their harm reduction potential compared to cigarettesmoking is based on rigorous pre-clinical and clinical assessments and sophisticated systems toxicology. The results are
publicly available, are peer-reviewed and have been submitted to numerous regulatory authorities, including the U.S. Foodand Drug Administration. The totality of the scientific evidence makes the Company confident that switching completely tothese products is likely to present less risk of harm than continuing to smoke. Post-market surveillance is necessary tocontinue building this confidence, and, over time, quantify the reduction in morbidity and mortality through epidemiology.
To be clear, these smoke-free alternatives are not risk free and should not be used by youth or non-smokers. For those
who use nicotine in any form it is best to quit completely. The Company must market them responsibly, so as to minimize
any unintended use, while maximizing the switching of adult smokers who would otherwise continue smoking.
IQOS Platform 1, a heat-not-burn tobacco product, was commercially launched in late 2015 and was very well received byadult smokers, with conversion rates exceeding 70 percent. This confirmed that the Company had the products and thescience to fulfill its ambition to completely replace cigarettes. In 2016, with the full support of the Board of Directors, theCompany announced its new purpose of delivering a smoke-free future. Since then the Company has fully aligned its
employees with this purpose, and swiftly shifted its organizational focus and resources to smoke-free alternatives. The
Company is essentially disrupting its traditional business from the inside out and is leading the industry in thisunprecedented transformation.

PMI 2020 Proxy Statement • 3

LETTER FROM THE BOARD OF DIRECTORS
While cigarette sales today remain the largest part of PMI’s business in most countries, this is changing rapidly. In 2019,
the Company’s smoke-free products were already commercialized in 52 markets and represented 18.7 percent of PMI’s
global revenue, 71 percent of its commercial expense and 98 percent of its R&D expenditure. As of December 31, 2019, of
the approximately 150 million people who regularly use the Company’s products, approximately 14 million already use
IQOS, of whom approximately 9.7 million have stopped smoking and switched to this product. The Company is actively
accelerating the decline of cigarette smoking beyond what can be achieved by traditional tobacco control measures alone.
Going forward, the Company is committed to providing less harmful alternatives to the hundreds of millions of adultsmokers who would otherwise continue to smoke, 80 percent of whom PMI estimates are looking for better alternatives.
The Company will do so through a research agenda to innovate and substantiate a portfolio of products that are affordable
and acceptable for these smokers in both developed and developing countries. While PMI will continue to responsibly sellcigarettes as long as there is a significant legitimate demand, it will continue focusing its commercial efforts toward raisingawareness of, and informing adult smokers in appropriate ways about, smoke-free products and the benefits of switchingversus continued smoking. The Company carefully monitors the results of its marketing to best ensure its smoke-free
products are not reaching non-smokers, youth, or people who have already quit nicotine use altogether.
Key Stakeholders to Deliver a Smoke-Free Future
PMI’s key stakeholder constituencies, which are fundamental to achieving its purpose and to the pace of its progress, will
be affected in different ways by PMI’s transformation. The Company will seek to engage and collaborate with relevant
stakeholders to speed the transformation while mitigating negative consequences.
PMI’s ability to accomplish its purpose depends on the skills, dedication and relentless efforts of its employees. The
Company’s focus on a smoke-free future has enhanced its ability to attract the new talent needed to support its
transformation. The Company compensates its employees fairly and provides important benefits. It supports them withenriching job experiences, training and education to help them develop new skills and maximize their employability in a
rapidly changing world. The Company treats employees with respect, dignity, care and fairness. It fosters diversity,
inclusion, equal opportunity and equal salary policies to ensure PMI’s workforce reflects modern society.
Regulators can decisively accelerate the industry’s transformation toward, and the speed at which adult smokers switch to,smoke-free products by implementing risk-proportionate regulations and taxation for all nicotine-containing products and byproviding smokers with accurate information. PMI is committed to engaging transparently with regulators, sharing its
scientific research and post-market data. The Company will be ready to support an industry-wide gradual phase-out ofcigarettes as soon as a majority of smokers in a country have switched to scientifically substantiated smoke-free products.
PMI believes that with the right regulatory encouragement and support from civil society, cigarette sales can end within 10
to 15 years in many countries.
The public health community is, unfortunately, polarized on the issue of smoke-free products. Without question, theirwork to discourage youth and non-smokers from starting to use any tobacco or nicotine product and to encourage
cessation should continue. At the same time, when better alternatives to cigarettes exist, the discussion should not be
whether they should be made available to the more than one billion men and women who smoke today, but how fast, andwithin what regulatory framework to maximize their adoption while minimizing unintended use. The Company is urging thisimportant stakeholder group to seize the immense opportunity that smoke-free products present for advancing public healthwithin the present generation of smokers. PMI asks the public health community to scrutinize its smoke-free products, toprovide feedback for improvement and to be open to considering that PMI’s purpose aligns with the societal goal to change
the health trajectories of the people who smoke.
People working in the Company’s supply chain around the world, including tobacco farmers, rely on PMI for a substantial
portion of their income. PMI deals fairly and ethically with its suppliers, and is dedicated to acting as a good partner to othercompanies, large and small, that help meet PMI’s missions. PMI recognizes that smoke-free products differ from cigarettes
and entail change for some of its supply chain partners, and PMI is ready to help them in this transition.

4 • PMI 2020 Proxy Statement

LETTER FROM THE BOARD OF DIRECTORSContinued engagement and partnerships with civil society remain essential to the Company’s success. PMI respects themany communities around the world where it operates. PMI works hard to protect the environment through sustainable
practices across its businesses and to address both existing social and environmental challenges, such as child labor in
tobacco growing, and emerging topics pertaining to its business transformation, such as helping tobacco farmers todiversify their crops. The scope, metrics and progress of these practices are outlined in PMI’s annual Sustainability Report,
published on PMI’s website.
The Company is confident of the business opportunity that smoke-free products bring. It is leading this new highly
promising category and is dedicated to ensuring its shareholders continue to receive strong and sustainable financial
returns over time, while recognizing the initial uncertainty that transforming the Company’s business model may bring. We
are aware of the growing investor movement in select geographies to exclude tobacco from portfolios, but we do notbelieve that exclusion will convince people who smoke to quit or to improve their lives. On the contrary, by investing in
PMI—a tobacco company that is aiming to end cigarette sales—and holding the Company accountable to its purpose andtargets, investors can combine positive societal impact with long-term financial returns. The Company welcomessuggestions, pressure and support from engagement with both current and potential investors.
Achieving PMI’s Purpose
The Company understands the need to continue to build legitimacy and trust by being honest, respectful, fair andtransparent, and by aligning actions with words across all areas of its business. To make the Company’s progress indelivering its smoke-free vision verifiable, it introduced a set of business transformation metrics, which it publishes every
year. As outlined previously, there has already been significant progress.
To assess the impact of PMI’s current and future value chains on society and the environment, the Company regularly
conducts sustainability materiality analyses and measures its performance through financial, environmental and social
metrics that are key to a sustainable corporate strategy.
The Compensation and Leadership Development Committee of the Board has ensured a strong link between executive
compensation and both short- and long-term performance toward achieving the Company’s smoke-free ambition. It ismanagement’s responsibility to ensure that the Company’s purpose is achieved through the appropriate structures,
systems, processes and people. The Board oversees management’s efforts to enhance shareholder value responsibly andsustainably over the long term in ways that are consistent with the Company’s purpose. Transparency and engagement
between the Board and management are paramount, and the relationship is excellent.
In conclusion, PMI is fully committed to its corporate purpose of delivering a smoke-free future.
André Calantzopoulos
Louis C. Camilleri
Werner Geissler
Lisa A. Hook

Jennifer Li
Jun Makihara
Kalpana Morparia

Lucio A. Noto
Frederik Paulsen
Robert B. Polet

PMI 2020 Proxy Statement • 5

TABLE OF CONTENTS
Compensation and Leadership Development
Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . .

42

Summary Compensation Table . . . . . . . . . . . . . . . .

43

All Other Compensation . . . . . . . . . . . . . . . . . . . . . .

44

Grants of Plan-Based Awards During 2019 . . . . . .

45

Outstanding Equity Awards as ofDecember 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . .

46

11

Stock Option Exercises and Stock Vested
During 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47

Board Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . .

14

Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48

Communications with the Board . . . . . . . . . . . . . . .

15

Non-Qualified Deferred Compensation . . . . . . . . . .

52

Strong Governance Practices . . . . . . . . . . . . . . . . .

15Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

Deferred Profit-Sharing and Benefit Equalization
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52

Process for Nominating Directors . . . . . . . . . . . . . .

16

Recommendations of the Board; Director
Attributes, Diversity, Refreshment and Tenure . . .

Employment Contracts, Termination of
Employment and Change in Control
Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53

16

Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55

Independence of Nominees . . . . . . . . . . . . . . . . . . .

17

Majority Vote Standard in Uncontested
Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Advisory Vote Approving Executive
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56

17

Audit Committee Matters . . . . . . . . . . . . . . . . . . . . . . .

57

Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . .

18

Compensation of Directors . . . . . . . . . . . . . . . . . . . . .

25

Ratification of the Selection of Independent
Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59

Stock Ownership Information . . . . . . . . . . . . . . . . . . .

27

Ownership of Equity Securities . . . . . . . . . . . . . . . .

27

Related Person Transactions and Code of
Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60Delinquent Section 16(a) Reports . . . . . . . . . . . . . .

28

Availability of Reports, Other Matters and 2021
Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61

Compensation Discussion and Analysis . . . . . . . . . . .

29

Exhibit A: Questions & Answers . . . . . . . . . . . . . . . . .

62

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . .

29

Exhibit B: Reconciliations . . . . . . . . . . . . . . . . . . . . . .

67

Additional Compensation Policies andProcesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

Proxy Statement Summary . . . . . . . . . . . . . . . . . . . . .

8

Board Operations and Governance . . . . . . . . . . . . . .

10

Board Responsibility and Meetings . . . . . . . . . . . . .

10Governance Guidelines, Policies and Codes . . . . .

10Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . .

10

Presiding Director . . . . . . . . . . . . . . . . . . . . . . . . . . .

10Committees of the Board . . . . . . . . . . . . . . . . . . . . .

6 • PMI 2020 Proxy Statement

GLOSSARY OF TERMS
Financial Terms:▪

Net revenues exclude excise taxes.

▪

Operating Income, or OI, is defined as gross profit minus operating expenses.

▪

Adjusted OI is defined as reported OI adjusted for asset impairment and exit costs and other special items.

▪

Operating Companies Income, or OCI, is defined as operating income, excluding general corporate expenses and theamortization of intangibles, plus equity income or (loss) in unconsolidated subsidiaries, net, and pension and other
employee benefit costs.

▪

Adjusted OCI is defined as reported OCI adjusted for asset impairment and exit costs and other special items.

▪

EPS stands for Earnings Per Share.

▪

Adjusted Diluted EPS is defined as reported diluted EPS adjusted for asset impairment and exit costs, tax items andother special items.

▪

Operating cash flow is defined as net cash provided by operating activities.

▪

Growth rates and comparisons presented on a “like-for-like” basis reflect pro forma 2018 results, which have beenadjusted for the deconsolidation of PMI’s Canadian subsidiary, Rothmans, Benson & Hedges, Inc. (RBH), effective
March 22, 2019 (the date of deconsolidation). For further details, see Item 8, Note 22. Deconsolidation of RBH to theconsolidated financial statements included in our 2019 Form 10-K.

Other Terms:▪

Reduced-risk products (“RRPs”) is the term we use to refer to products that present, are likely to present, or have thepotential to present less risk of harm to smokers who switch to these products versus continued smoking. We have arange of RRPs in various stages of development, scientific assessment and commercialization. Our RRPs aresmoke-free products that do not burn tobacco; they produce an aerosol that contains far lower quantities of harmful andpotentially harmful constituents than found in cigarette smoke.

▪

NEOs are Named Executive Officers and include our Chief Executive Officer, or CEO, our Chief Financial Officer, or
CFO, and the three other most highly compensated officers serving in 2019.

▪

PSUs are Performance Share Units.

▪

RSUs are Restricted Share Units and may be issued in the form of deferred share awards.

▪

TSR stands for Total Shareholder Return.

▪

In this proxy statement, “PMI,” the “Company,” “we,” “us,” and “our” refer to Philip Morris International Inc. and its
subsidiaries.

▪

Trademarks and service marks in this proxy statement are the registered property of, or licensed by, the subsidiaries ofPhilip Morris International Inc. and are italicized.

▪

“Platform 1” is the term we use to refer to our reduced-risk product that uses a precisely controlled heating device
incorporating our IQOS HeatControl technology, into which a specially designed and proprietary tobacco unit is inserted
and heated to generate an aerosol.

▪

The estimated number of people who have “stopped smoking and switched to IQOS” is defined as: for markets where
IQOS is the only heat-not-burn product, daily individual consumption of PMI heated tobacco units represents the totalityof their daily tobacco consumption in the past seven days; for markets where IQOS is one among other heat-not-burnproducts, daily individual consumption of heated tobacco units represents the totality of their daily tobacco consumption
in the past seven days, of which at least 70 percent are PMI heated tobacco units. The conversion rate in excess of 70
percent as of December 31, 2019 is calculated as a percentage of approximately 9.7 million of those who have stopped
smoking and switched to IQOS versus approximately 14 million “total IQOS users,” defined as the estimated number oflegal age (minimum 18 years) IQOS users that used PMI heated tobacco units for at least 5 percent of their daily
tobacco consumption over the past seven days.

PMI 2020 Proxy Statement • 7

PROXY STATEMENT SUMMARY
This proxy statement contains proposals to be voted on at our Annual Meeting and other information about our Company
and our corporate governance practices. We provide below a brief summary of certain information contained in this proxystatement. The summary does not contain all of the information you should consider. Please read the entire proxystatement carefully before voting.
2019 Business Performance Highlights
We delivered strong underlying results significantly exceeding each of our key performance metrics, reflecting robust
growth in our Platform 1 reduced-risk product and solid pricing in our combustible products portfolio. Our share of Top 30
OI markets also exceeded target, with Marlboro cigarette share, excluding China and the U.S., at its all-time high.
As further discussed on page 33, we accomplished all our strategic priorities and strategic enablers, achieving several
important milestones in our internal and external transformation. The most notable achievement was our ongoing progressin commercializing our Platform 1 product, reaching 52 markets by year-end, with excellent results in Russia and return to
growth in Japan. We made good progress in all other aspects of our RRP portfolio, including in the areas of scientificsubstantiation and product development across our four RRP platforms, engagement with public health communities,
consumer communication, and the regulatory and fiscal environment. Notably, in April 2019, the FDA determined that aversion of our Platform 1 product is appropriate for the protection of public health and authorized it for sale in the UnitedStates following the agency’s comprehensive assessment of our regulatory application. Later in the year, a subsidiary of
Altria Group, Inc., Philip Morris USA Inc., began commercialization of this version of our Platform 1 product in certain cities
in the U.S. under license from us.
2019 Performance Targets and Results

TargetAchieved
ResultShare of Top 30 OI
Markets(b)

16

18

15%

110

Net Revenues(c)

5.0%

6.4%

15%

141

Adjusted OI(d)

7.7%

11.2%

15%

148

Adjusted Diluted EPS(e)

8.0%

9.9%

20%

134

Operating Cash Flow(f)

15.8%

21.4%

20%

150

Strategic Priorities andEnablers Rating

--

--

15%

120

Growth Measure(a)PMI2019 Annual
Incentive Compensation
Performance Rating(1)Weight Performance
Rating

100
80
135
50
(1)

For a reconciliation of non-GAAP to GAAP financial measures see Exhibit B tothis proxy statement.
(b) Number of top 30 OI markets (reflecting the deconsolidation of RBH) in which
total share of heated tobacco units and cigarettes was growing or stable.
(c) Excluding excise taxes, currency and acquisitions, on a like-for-like basis.
(d) Excluding currency and acquisitions, on a like-for-like basis.
(e) Excluding currency, on a like-for-like basis.
(f) Net cash provided by operating activities, excluding currency, on a like-for-likebasis.
(a)8 • PMI 2020 Proxy Statement

See pages 33-34 for details.

150

PROXY STATEMENT SUMMARY
Investor OutreachThroughout the year, the Company engages in an extensive shareholder outreach program during which it seeks input on a
range of matters, including executive compensation and corporate governance. In 2019, we met with 59 of our top 100
institutional investors, representing 71% of our available global shareholder base (which excludes index and pension funds
that do not meet with management), to discuss our business and environmental, social and governance programs. In
addition to these regular Investor Relations engagements, we invited 83 of our largest shareholders (including theirgovernance and ESG decision makers), holding approximately 58% of our outstanding shares, to participate in individual
conference calls to discuss executive compensation and corporate governance. These engagements provided us with abetter understanding of our shareholders’ priorities, perspectives and positions. We reported the substance of theseengagements to our Compensation and Leadership Development Committee, our Nominating and Corporate GovernanceCommittee, and our entire Board of Directors.
Before deciding to hold this year’s annual meeting of shareholders in a virtual format, we solicited the views of our 85
largest shareholders; the responses were significantly positive.
Our Focus on Sustainability
As part of our continued focus on sustainability, the Board in 2018 added oversight of our sustainability strategies andperformance to the charter of the Board’s Nominating and Corporate Governance Committee. In 2019, we made the CDP
Climate A list for the sixth year in a row. In addition, PMI earned a position on the Water Security A List, a recognition of theCompany as a global leader in water security. PMI’s efforts on forest protection earned us a rating of A- by CDP Forests.
For the third year in a row, PMI was recognized as a Supplier Engagement Leader for its engagement with suppliers to
reduce their greenhouse gas emissions. We also improved our ranking in the 2019 SAM Corporate Sustainability
Assessment, an annual evaluation of companies’ sustainability practices. As one of our sustainability priorities, we willcontinue to address littering by raising awareness and encouraging behavior change to ensure proper disposal of cigarettebutts.
For additional information about our sustainability
www.pmi.com/sustainability/sustainability-report.

efforts,see

ourSustainability

Reportavailable

at

EQUAL-SALARY Certification
Last year, we became the first multinational company to receive a global EQUAL-SALARY certification from the
EQUAL-SALARY Foundation. This achievement is an important building block on the road to creating a more inclusive
gender-balanced workplace and continuing our reputation as a top employer.
2020 Shareholder Vote Recommendations
The Board of Directors makes the following recommendations to shareholders:

Item 1: Election of Directors
Item 2: Advisory Vote Approving Executive Compensation
Item 3: Ratification of the Selection of Independent Auditors for 2020

Board’s RecommendationPage

FOR each nominee
FOR
FOR

16
56
59

PMI 2020 Proxy Statement • 9

BOARD OPERATIONS AND GOVERNANCE
Board Responsibility and Meetings
The primary responsibility of the Board of Directors is tofoster the long-term success of the Company, consistent
with its statutory duty to shareholders. The Board has
responsibility for establishing broad corporate policies,
setting strategic direction, and overseeing management,
which is responsible for the day-to-day operations of theCompany. In fulfilling this role, each director must
exercise his or her good faith business judgment of thebest interests of the Company.

with regard to reviewing certain transactions in which
the Company is a participant and an officer, director or
nominee for director has, had or may have a direct orindirect material interest. All of these documents areavailable free of charge on the Company’s website,www.pmi.com/who-we-are/corporate-governance/overview,
and will be provided free of charge to any shareholder
requesting a copy by writing to the Corporate Secretary ofPhilip Morris International Inc. at Avenue de Rhodanie 50,1007 Lausanne, Switzerland.

The Board holds regular meetings, typically during themonths of February, March, May, June, September andDecember, and additional meetings when necessary. The
organizational meeting follows immediately after the
Annual Meeting of Shareholders. The Board held six
regular meetings in 2019. The Board meets in executive
session regularly with no members of management being
present. Directors are expected to attend Board
meetings, the Annual Meeting of Shareholders andmeetings of the Committees on which they serve, withthe understanding that on occasion a director may beunable to attend.

The information on the Company’s websites, including
the Company’s Sustainability Report referenced on
pages 5 and 9, is not, and shall not be deemed to be, apart of this proxy statement or incorporated into any otherfilings the Company makes with the U.S. Securities andExchange Commission.

During 2019, all nominees for director then in officeattended at least 75% of the aggregate number of meetingsof the Board and all Committees on which they served, andall nominee directors attended the 2019 Annual Meeting of
Shareholders.
The Board approves the Company’s annual budget eachyear and receives updates of the Company’s performanceagainst the budget throughout the year. The Board also
reviews and approves the Company’s three-year plan eachyear, typically in a two-day session. The Board regularly
receives presentations on the Company’s longer-term
objectives and plans.
Governance Guidelines, Policies and Codes
The Board has adopted Corporate Governance Guidelines
and a code of conduct known as the Guidebook for
Success, an interactive, plain language tool that describes
the fundamental beliefs and attributes that unite and guide
us in pursuing PMI’s goals, illustrates how to meet ourcommitments to these beliefs and attributes, and explains
why it is critical to do so. The Guidebook applies to all
employees, including the Company’s principal executive
officer, chief operating officer, principal financial officer, andprincipal accounting officer or controller. The Board has also
adopted a Code of Business Conduct and Ethics thatapplies to directors. The Board has also adopted a policy

10 • PMI 2020 Proxy Statement

Leadership Structure
The Board believes that no particular leadership structure isinherently superior to all others under all circumstances. It
determines from time to time the structure that best serves
the interests of the Company and its shareholders under thethen-prevailing circumstances. Currently, Louis C. Camilleri
serves as our Chairman, and André Calantzopoulos serves
as our Chief Executive Officer.
As Chairman, Mr. Camilleri facilitates communication
between the Board and management and assists the CEO
with long-term strategy. He presides at all meetings ofshareholders and of the Board and assists in the
preparation of agendas and materials for Board meetings,
working together with the Presiding Director, who approves
the agendas before they are disseminated to the Board.
Input is sought from all directors as to topics they wish toreview.
Presiding Director
The non-management directors elect at the annualorganizational meeting one independent director as the
Presiding Director. The Presiding Director’s responsibilities
are to:▪

preside over executive sessions of thenon-management directors and at all meetings at
which the Chairman is not present;▪

call meetings of the non-management directors as
he or she deems necessary;▪

serve as liaison between the Chief Executive Officer
and the non-management directors;

BOARD OPERATIONS AND GOVERNANCE▪

approve agendas and schedules for Board meetings;▪

advise the Chairman and the Chief Executive Officerof the Board’s informational needs and approveinformation sent to the Board;▪

together with the Chairman of the Compensation andLeadership Development Committee, communicate
goals and objectives to the Chief Executive Officer
and the results of the evaluation of his performance;and▪

be available for consultation and communication if
requested by major shareholders.

The Presiding Director is invited to attend all meetings ofCommittees of the Board. Lucio A. Noto currently serves
as the Presiding Director.
Committees of the Board
The Board has established various standing Committees
to assist with the performance of its responsibilities. These
Committees and their current members are listed below.
The Board designates the members of these Committees
and the Committee Chairs at its organizational meeting
following the Annual Meeting of Shareholders, based on
the recommendations of the Nominating and Corporate

Governance Committee. The Board has adopted written
charters for each of these Committees, and these charters
are available on the Company’s website at www.pmi.com/
who-we-are/corporate-governance/board-committees. The
Chair of each Committee develops the agenda for that
Committee and determines the frequency and length ofCommittee meetings. Each Committee meets as often as
it deems appropriate, and each has sole authority to retain
its own legal counsel, experts and consultants.
The Audit Committee, the Compensation and Leadership
Development Committee, and the Nominating andCorporate Governance Committee each consists entirely of
non-management directors, all of whom the Board has
determined are independent within the meaning of the
Securities Exchange Act of 1934, as amended (the“Exchange Act”). The Board has determined that all
members of the Audit Committee are financially literate andthat Lucio A. Noto is an “audit committee financial expert”
within the meaning set forth in the regulations of the
Securities and Exchange Commission. No member of the
Audit Committee, the Compensation and Leadership
Development Committee or the Nominating and Corporate
Governance Committee received any payments in 2019from Philip Morris International Inc. or its subsidiaries, otherthan compensation received as a director.

PMI 2020 Proxy Statement • 11

BOARD OPERATIONS AND GOVERNANCE
Committees and2019 Meetings
AUDIT
Meetings: 7

Current Members

Purpose, Authority and Responsibilities- Jennifer Li (Chair)- Massimo Ferragamo- Werner Geissler- Jun Makihara- Lucio A. Noto
- Stephen M. Wolf

Purpose: to assist the Board in its oversight of:▪ the integrity of the financial statements and financial reporting processes andsystems of internal control;▪ the qualifications, independence and performance of the independent auditors;▪ the internal audit function; and▪ the Company’s compliance with legal and regulatory requirements.
Authority and Responsibilities:▪ sole authority for appointing, compensating, retaining and overseeing the work of
the independent auditors;▪ evaluate the internal audit function;▪ evaluate the compliance function;▪ review financial risk assessment and management;▪ oversee cybersecurity risk assessment and management and compliance withprivacy regulation;▪ oversee the risk management of excessive or discriminatory taxation;▪ oversee the risk management of illicit trade;▪ oversee the risk management of manufacturing and supply chain disruption;▪ oversee the risk management of climate change, pandemics and natural disasters;▪ oversee the management of the risk that credibility and reputational issues may
stand in the way of promoting the benefits of RRPs as a necessary pillar of tobacco
control and impair their commercial success;▪ oversee the risk management of judicial and regulatory disregard for the rule oflaw; and▪ establish “whistleblower” procedures and review claims of improper conduct.

COMPENSATION
AND LEADERSHIPDEVELOPMENT
Meetings: 4- Werner Geissler (Chair)- Lisa A. Hook
- Lucio A. Noto
- Robert B. Polet- Stephen M. Wolf

Purpose:▪ discharge the Board’s responsibilities relating to executive compensation;▪ produce a report for inclusion in the proxy statement; and▪ review succession plans for the CEO and other senior executives.
Authority and Responsibilities:▪ review and approve the Company’s overall compensation philosophy and design;▪ review and approve corporate goals and objectives relevant to the compensation of
the CEO, evaluate his performance and determine and approve his compensation;▪ review and approve the compensation of all executive officers;▪ recommend to the Board compensation plans and administer and make awards
under such plans and review the cumulative effect of its actions;▪ monitor compliance by executives with our share ownership requirements;▪ review and assist with the development of executive succession plans, evaluate
and make recommendations to the Board regarding potential CEO candidates andevaluate and approve candidates to fill other senior executive positions;▪ oversee the management of risks related to compensation design and payout;▪ oversee the management of the risk that the Company is unable to attract andretain the necessary talent with the right degree of diversity, experience and skills
to achieve its ongoing business transformation;▪ review and discuss with management proposed disclosures regarding executive
compensation matters; and▪ recommend to the Board whether the Compensation Discussion and Analysis
should be accepted for inclusion in the proxy statement and annual report.

12 • PMI 2020 Proxy Statement

BOARD OPERATIONS AND GOVERNANCE
Committees and2019 Meetings
FINANCE
Meetings: 5

NOMINATING ANDCORPORATEGOVERNANCE
Meetings: 3

Current Members

Purpose, Authority and Responsibilities- Jun Makihara (Chair)- Massimo Ferragamo- Werner Geissler- Lisa A. Hook
- Jennifer Li- Kalpana Morparia- Lucio A. Noto
- Frederik Paulsen- Robert B. Polet- Stephen M. Wolf

Purpose, Authority and Responsibilities:▪ monitor the Company’s financial performance and condition;▪ oversee sources and uses of cash flow and capital structure;▪ advise the Board on dividends, share repurchases and other financial matters;▪ advise the Board on the Company’s long-term financing plans, short-term financing
plans and credit facilities;▪ oversee the management of the Company’s cash management function;▪ oversee the management of the Company’s pension plans, including funded status
and performance;▪ oversee the management of the Company’s investor relations and stock market
performance;▪ oversee the management of the risk that certain new market entrants may alienate
consumers from our RRP products through marketing campaigns and messaging
and inferior product satisfaction, while not relying on substantiated science andappropriate R&D protocols and standards;▪ oversee the management of the risks to the Company’s pricing strategies;▪ oversee the risk that failure to effectively implement or integrate business development
initiatives could impair the achievement of our strategic objectives;▪ oversee the management of the risks of currency exchange rate volatility andconvertibility; and▪ oversee the management of the risks of global macro-economic uncertainty.

- Kalpana Morparia (Chair)- Massimo Ferragamo- Jennifer Li- Lucio A. Noto
- Robert B. Polet- Stephen M. Wolf

Purpose:▪ identify qualified candidates for Board membership;▪ recommend nominees for election at the annual meeting;▪ advise the Board on corporate governance and sustainability matters; and▪ oversee self-evaluation of the Board and each Committee.
Authority and Responsibilities:▪ review qualifications of prospective candidates for director;▪ consider performance of incumbent directors;▪ oversee the Company’s sustainability strategies and performance and advise theBoard on sustainability matters;▪ make recommendations to the Board regarding director independence and thefunction, composition and structure of the Board and its Committees;▪ oversee the Company’s lobbying and trade association activities and expenditures;▪ oversee the management of the risk that credibility and reputational issues may
stand in the way of promoting the benefits of RRPs as a necessary pillar of tobacco
control and impair their commercial success;▪ recommend corporate governance guidelines; and▪ review director compensation.

PRODUCTINNOVATION AND
REGULATORYAFFAIRS
Meetings: 2- Frederik Paulsen (Chair)- Massimo Ferragamo- Werner Geissler- Lisa A. Hook
- Jun Makihara- Kalpana Morparia- Robert B. Polet- Stephen M. Wolf

Purpose:▪ oversee the research and development of new products and to improve existingproducts, with a particular focus on RRPs; and▪ monitor and review key legislative, regulatory and public policy issues and trends
related to the research and development of RRPs.
Authority and Responsibilities:▪ monitor the Company’s internal scientific research, including the Company’s efforts
to substantiate the risk-reduction potential of its RRPs through rigorous scientificmethodologies, as well as the external body of scientific research relevant to theCompany’s present and future RRPs;▪ monitor the Company’s development of innovative RRPs;▪ monitor the Company’s management of its intellectual property;▪ monitor evolving risks affecting the Company’s research and development, which
may include the risk that the regulatory environment will not differentiate between
combustible products and RRPs, will limit consumer access to RRPs or to accurate
information about their risks and benefits, and will limit the opportunity to switch
smokers to RRPs; and risks associated with changes in consumer perceptions andpreferences regarding RRPs; and▪ make recommendations to the Board regarding significant R&D projects andbudgets.

PMI 2020 Proxy Statement • 13

BOARD OPERATIONS AND GOVERNANCE
Board Risk Oversight
Risk oversight is conducted both by the Committees of the Board with respect to their areas of responsibility as well as by
the full Board. Management has identified and prioritized key enterprise risks based on four risk dimensions: the impact arisk could have on the organization if it occurs, the likelihood a risk will occur, the velocity with which a risk would affectthe organization if it occurs, and the interconnectivity of a risk with other risks. As part of the risk management process,the Company has established a Corporate Risk Governance Committee (“CRGC”) comprising the Chief Operating Officer,
the Chief Financial Officer, the Vice President and Controller, the Vice President, Corporate Audit, and the Vice President,
Chief Ethics & Compliance Officer. Ownership of each of the prioritized risks is assigned to a member of senior
management, and oversight of the management of each risk is assigned to a particular Board Committee or to the full
Board. Management reports on these risks to the appropriate Committee and to the full Board throughout the year. The risk
management oversight by each Committee is indicated in the chart on pages 12 and 13. The full Board oversees the
management of risks relating to the Company’s business plan and litigation, and it receives reports on risk management by
each Committee. The roles of the various components of risk assessment, management and oversight are shown below.
PMI Risk Assessment, Management and Oversight

Board
of
Directors

Audit Committee

Other Board
Committees

Senior Management Team
(SMT)

Corporate Risk Governance Committee(CRGC)

Market Leadership Teams and Global Functions

14 • PMI 2020 Proxy Statement

Responsible for oversight of risk management processes
Allocates oversight of management of specific risks to the appropriate
Board Committee

Provides oversight by reviewing the CRGC process and its results
Assesses risk appetite

Provide oversight of management of specific risks falling within eachCommittee’s sphere of expertise

Aligns on key strategic enterprise risks annually
Assigns ownership of strategic enterprise risks to individual SMT
members
Integrates risk assessment and management into long-range plan andbudget review process
Drives desired risk management culture through standard
measurement and terminology
Coordinates SMT strategic enterprise risk assessment
Coordinates integrated risk assessment for Internal Controls,
Compliance, Corporate Audit and other functions
Integrates key risks into the Internal Controls Chart of Controls
process

Own risk assessment and management for affiliate or function
Drive sustainability through integration of risk management into
existing business processes

BOARD OPERATIONS AND GOVERNANCE
Communications with the Board
Shareholders and other interested parties who wish tocommunicate with the Board may do so by writing to the
Presiding Director, Board of Directors of Philip MorrisInternational Inc., 120 Park Avenue, New York, New York
10017-5579. The non-management directors haveestablishedprocedures
forthehandlingofcommunications from shareholders and other interested
parties and directed the Corporate Secretary to act astheir agent in processing any communications received.
All communications that relate to matters that are within
the scope of the responsibilities of the Board and its
Committees are to be forwarded to the Presiding

Director. Communications that relate to matters that arewithin the responsibility of one of the Board Committees
are also to be forwarded to the Chair of the appropriate
Committee. Communications that relate to ordinary
business matters that are not within the scope of theBoard’s responsibilities, such as customer complaints,
are to be sent to the appropriate subsidiary. Solicitations,junk mail and obviously frivolous or inappropriate
communications are not to be forwarded, but will bemade available to any non-management director who
wishes to review them.

Strong Governance Practices
The Nominating and Corporate Governance Committee of the Board reviews our corporate governance practices regularly
and proposes modifications to our principles and other key governance practices as warranted for adoption by the Board.
The following summarizes our key principles and practices and refers you to the pages of this proxy statement where you
will find a more detailed discussion of various items:✓

Majority voting standard for uncontested
election of directors (page 17)✓

Rigorous share ownership requirements andanti-hedging and anti-pledging policies(page 40)✓

Proxy access by-laws (page 16)✓

Post-termination share holding requirement(page 40)✓

Non-management directors electPresiding Director annually (pages 10-11)✓

No tax gross-up on limited perquisites✓

Directors may be removed with orwithout cause✓

Double-trigger vesting policy on change incontrol (pages 53-54)✓

Non-management directors meet regularly
without management being present✓

Board committee oversight of politicalspending and lobbying (page 13)✓

No “poison pill” rights plan✓

Board committee oversight of sustainability
strategies and performance (page 13)✓

Board-adopted “clawback” policy (page 40)

PMI 2020 Proxy Statement • 15

ELECTION OF DIRECTORS
Process for Nominating Directors
The Nominating and Corporate Governance Committee
is responsible for identifying and evaluating candidates
for director and for recommending to the Board a slate of
nominees for election at the Annual Meeting of
Shareholders.
In evaluating the suitability of individuals for Board
membership, the Committee takes into account manyfactors. These include whether the individual meetsrequirements for independence; the individual’s general
understanding of the various disciplines relevant to thesuccess of a large publicly traded company in today’s global
business environment; the individual’s understanding of theCompany’s global business and markets; the individual’s
professional expertise and educational background; andother factors, including nationality and gender, that promote
diversity of views and experience. The Committee evaluates
each individual in the context of the Board as a whole, withthe objective of recommending a group of directors that canbest perpetuate the success of the business and represent
long-term shareholder interests through the exercise ofsound judgment, using its breadth of knowledge andexperience. In determining whether to recommend a
director for re-election, the Committee also considers the
director’s attendance at meetings and participation in andcontributions to the activities of the Board. The Committee
has not established any specific minimum qualification
standards for nominees to the Board, although from time totime the Committee may identify certain skills or attributes,
such as financial experience, global business experience,
consumer-centricity, digital transformation and scientificexpertise, as being particularly desirable to help meet
specific Board needs.
In identifying candidates for Board membership, theCommittee relies on suggestions and recommendations
from the Board, shareholders, management and others.
The Committee does not distinguish between nominees
recommended by shareholders and other nominees. From
time to time, the Committee also retains search firms toassist in identifying candidates for director, gathering
information about their background and experience, andacting as an intermediary with such candidates.
Shareholders wishing to suggest candidates to theCommittee for consideration as directors must submit awritten notice to the Corporate Secretary, who will provide
it to the Committee. Our by-laws set forth the procedures ashareholder must follow to nominate directors. These
procedures are summarized in this proxy statement under
the caption “2021 Annual Meeting.”

16 • PMI 2020 Proxy Statement

In addition, our by-laws permit an eligible shareholder orgroup of shareholders who have owned 3% or more of
PMI’s shares for at least three years to nominate andinclude in our proxy statement director candidates to
occupy up to 20% of the authorized Board seats.
Recommendations of the Board; Director Attributes,
Diversity, Refreshment and Tenure
It is proposed that ten directors be elected to hold office until
the next Annual Meeting of Shareholders and until theirsuccessors have been elected. The Nominating andCorporate Governance Committee has recommended to
the Board, and the Board has approved, the persons
named and, unless otherwise marked, a proxy will be voted
for such persons. Each of the nominees currently serves asa director and each was elected by the shareholders at the2019 Annual Meeting. The Board believes that theexperience, qualifications, attributes and skills of each of thenominees presented qualify them to deal with the complex
global, regulatory, business, and financial issues facing theCompany, and that the Board as a whole provides abreadth of knowledge, international experience, intellectual
rigor and willingness to face tough issues.
Our Board comprises a diverse group of individuals. Threenominees are women. Nine different nationalities are
represented, underscoring the global perspective of theBoard taken as a whole.
The Board has experienced a healthy level of director
refreshment since our spin-off in 2008. Two of the original
directors continue to serve on the Board. Of the remaining
members of the Board, one joined in 2010, two in 2011, one
in 2013, two in 2014, one in 2015, and one in 2018. The
average tenure of the Company’s nominees is 7.8 years. As
new Board members gain experience, the Board rotates its
various committee chairs.
Although it is not anticipated that any of the persons named
below will be unable or unwilling to stand for election, aproxy, in the event of such an occurrence, may be voted fora substitute designated by the Board. However, in lieu ofdesignating a substitute, the Board may amend theCompany’s by-laws to reduce the number of directors.

ELECTION OF DIRECTORS
Independence of Nominees
After receiving the recommendation of the Nominating andCorporate Governance Committee, the Board has
determined that each of the following nominees for director
is independent of, and has no material relationship with, theCompany: Werner Geissler, Lisa A. Hook, Jennifer Li, Jun
Makihara, Kalpana Morparia, Lucio A. Noto, Frederik
Paulsen, and Robert B. Polet. To assist it in making these
determinations, the Board has adopted categoricalstandards of director independence that are set forth in the
Corporate Governance Guidelines, which are available on
the Company’s website at www.pmi.com/who-we-are/corporate-governance/overview. Each of the above-named
nominees qualifies as independent under these standards.
In making the determination that Mr. Camilleri is notindependent, the Board considered the Company’s
relationship with Ferrari, which began in 1973, well before
Mr. Camilleri became CEO of Ferrari in 2018. The
Company’s Formula 1 sponsorship agreement and its
renewals have been negotiated on an arms-length basiswith executives of Ferrari prior to Mr. Camilleri’s
becoming CEO of Ferrari. At the time of the last renewal,
in early 2018, the Nominating and Corporate GovernanceCommittee reviewed the sponsorship as a Related
Person Transaction (see page 60) and determined that it
is in the best interests of the Company.
In making the affirmative determination that Ms. Morparia is
independent, the Board considered the fact that theCompany has routine commercial relationships with
J.P. Morgan Chase, Ms. Morparia’s employer. Payments by
the Company to J.P. Morgan Chase are immaterial and
Ms. Morparia has no direct or indirect material interest inthese routine commercial relationships. Ms. Morparia has
never represented J.P. Morgan Chase in connection with its
provision of services to the Company, and hercompensation is not affected by any banking relationshipbetween the Company and J.P. Morgan Chase.
Majority Vote Standard in Uncontested Elections
All directors are elected annually. The Company’s by-laws
provide that, where the number of nominees for director
does not exceed the number of directors to be elected,
directors shall be elected by a majority rather than by aplurality vote. Under applicable law, a director’s term
extends until his or her successor is duly elected andqualified. Thus, an incumbent director who fails to receive amajority vote would continue to serve as a holdover director.
To address that possibility, our Corporate Governance
Guidelines require a director who receives less than amajority of the votes cast to offer to resign. The Nominating
and Corporate Governance Committee would thenconsider, and recommend to the Board, whether to accept
or reject the offer.
The Board recommends a vote FOR each of
the nominees identified below.

PMI 2020 Proxy Statement • 17

ELECTION OF DIRECTORS
Director Nominees
Current Committee Membership

NomineeDirector
Since

Nationality

Product
Innovation
andRegulatory
Affairs

Independent

Audit

Compensationand Leadership
Development

✓

Chair

✓

✓

✓

✓

✓

FinanceAndré Calantzopoulos(CEO)

2013 Greece/Switzerland

Louis C. Camilleri(Chairman)

2008

UK

Werner Geissler

2015

Germany✓

Lisa A. Hook

2018

USA

✓

Jennifer Li

2010

China

✓

Chair

✓

Jun Makihara

2014

Japan

✓

✓

Chair

Kalpana Morparia

2011

India

✓

Lucio A. Noto
(Presiding Director)

2008

USA

✓

Frederik Paulsen

2014

Sweden✓Robert B. Polet2011

Netherlands✓

18 • PMI 2020 Proxy Statement

Nominating
andCorporate
Governance

✓

✓

✓

✓

✓

Chair

✓

✓

✓

✓

✓

✓

Chair

✓

✓

ELECTION OF DIRECTORS
Director Qualifications

Key attributes andskills of all Directors:

Our Board is a diverse, highly engaged group that provides strong, effective oversight of our Company. Both individually andcollectively, our directors have the qualifications, skills and experience needed to inform and oversee the Company’s long-term
strategic growth. Each director has senior executive experience, in many cases with large, complex organizations with significant
global operations. Several directors have leadership experience in the global consumer products sector, and others bringexpertise regarding information technology, cybersecurity, digital transformation, sustainability, and environmental, social andgovernance matters. These and the other skills and attributes discussed below are key considerations in evaluating thecomposition of our Board and inform our Board succession planning and director selection process.
✓ High Integrity✓ Strength of Character and Judgment✓ Intellectual/Analytical Skills✓ Proven Record of Success ✓ Corporate Governance Experience✓ Strategic Planning✓ Leadership✓ Talent Management/Succession Planning✓ Risk Assessment and Oversight✓ Understanding our Global
Business and Markets✓ Diversity of Perspectives

Mor

o
Not

Pau

Pole

t

Mak

lsen

a

Li

pari

a
ihar

Hoo

k

Geis

sler

i
iller
Cam

EXPERIENCE
Senior Executive
Tobacco Industry
Global Consumer-Centric Engagement
Operations
Information Technology and Privacy
Sustainability/Corporate Responsibility
Risk Assessment and Oversight
CFO or Banking
Civic Leadership
Global PharmaceuticalMarketing and Retail

Cala

ntzo

pou

los

Our director nominees’ individual experiences, qualifications, attributes and skills are highlighted in the following matrix.
The matrix is intended as a high-level summary and not an exhaustive list of each nominee’s skills or contributions to theBoard. Further biographical information about each director standing for re-election is set forth on the following pages.

✓
✓
✓
✓

✓
✓
✓
✓

✓

✓

✓

✓

✓

✓

✓

✓

✓
✓

✓
✓
✓

✓
✓

✓

✓

✓
✓

✓
✓
✓

✓

✓

✓

✓

✓

✓
✓

✓

✓
✓
✓
✓

✓
✓

✓
✓
✓

✓
✓
✓

✓
✓
✓

PMI 2020 Proxy Statement • 19

ELECTION OF DIRECTORS
Director Nominees

ANDRÉ CALANTZOPOULOS
Professional Experience:
Mr. Calantzopoulos became our Chief Executive Officer in May 2013. He served as our Chief
Operating Officer since our spin-off on March 28, 2008, and until becoming CEO.
Mr. Calantzopoulos served as PMI’s President and Chief Executive Officer between 2002 and thedate of our spin-off. He joined the Company in 1985 and worked extensively across Central
Europe, including as Managing Director of PM Poland and President of the EEMA Region.

Primary
Occupation:
Chief Executive
Officer

Director Qualifications:
Mr. Calantzopoulos’s intellect and all-encompassing knowledge of the Company serve him well as
CEO and as a member of the Board. He has played an instrumental role in numerous key
initiatives, leading the Company with his bold vision of a smoke-free future and through its related
evolution into a consumer-centric technology and science-driven business.

Director since:
2013
Age: 62

LOUIS C. CAMILLERI
Professional Experience:
Mr. Camilleri is our Chairman, having served as our Chairman and Chief Executive Officer from ourspin-off in 2008 until May 2013. Before our spin-off, Mr. Camilleri was Chairman and Chief
Executive Officer of Altria Group, Inc., positions he had held since 2002. From November 1996 to
April 2002, he served as Senior Vice President and Chief Financial Officer of Altria Group, Inc. He
had been employed continuously by Altria Group, Inc. and its subsidiaries (including Philip MorrisInternational Inc.) in various capacities since 1978. Mr. Camilleri became Chief Executive Officer of
Ferrari N.V. in 2018.
Other Directorships and Associations:
Mr. Camilleri is a director of Ferrari N.V. He previously served on the Board of Telmex International
Primary
SAB from 2009 to 2011. Mr. Camilleri was a director of Kraft Foods Inc. from 2001 to 2007 and its
Occupation:
Chairman from 2002 to 2007, and was a director of América Móvil, S.A.B. de C.V. from 2011 toChief Executive Officer, 2019.
Ferrari N.V.
Director Qualifications:
Director since:
Mr. Camilleri’s extensive and detailed knowledge of the Company and the tobacco industry and an
2008
incisive strategic view, combined with his transparency and open-mindedness, serve him well in
Age: 65
his ongoing role as Chairman of the Board.

20 • PMI 2020 Proxy Statement

ELECTION OF DIRECTORSWERNER GEISSLER
Professional Experience:
Mr. Geissler became an Operating Partner of Advent International in 2015. He previously served
as Vice Chairman and Special Advisor to the Chairman and CEO of Procter & Gamble until his
retirement in January 2015. He joined that company in 1979 and served in various capacities,
including President, Northeast Asia, from 2001 to 2004, Group President, Central and Eastern
Europe, Middle East and Africa, from 2004 to 2007, and Vice Chairman, Global Operations, from2007 to 2014.
Other Directorships and Associations:
Mr. Geissler is a director of the Goodyear Tire & Rubber Company.
Primary
Occupation:
Operating Partner,
Advent International
Director since:
2015
Age: 66

PMI Board Committees:
Mr. Geissler is Chair of the Compensation and Leadership Development Committee and a memberof the Audit, Finance, and Product Innovation and Regulatory Affairs Committees.
Director Qualifications:
Mr. Geissler has a keen knowledge of the global consumer products business, having served as asenior consumer products executive in many of the Company’s most important markets andregions. His deep senior executive experience serves him well as Chair of the Compensation andLeadership Development Committee.

LISA A. HOOK
Professional Experience:
Ms. Hook served as Chief Executive Officer of Neustar, Inc. from October 2010, as a member of its
Board from November 2010, and as President from January 2008. She retired from Neustar in July
2018. Ms. Hook served as President and Chief Executive Officer of Sunrocket, Inc. from 2006 to
2007, and held several executive-level posts at America Online, Inc. from 2001 to 2004.
Previously, she was a partner at Brera Capital Partners, a global private equity investment firm,managing director of Alpine Capital Group, LLC, an investment banking firm, an executive at Time
Warner, Inc., a legal advisor to the Chairman of the Federal Communications Commission, and asenior attorney at Viacom International, Inc.
Primary
Occupation:
Businesswoman
Director since:
2018
Age: 61

Other Directorships and Associations:Ms. Hook serves on the board of Fidelity National Information Services, Inc., a global leader inbanking and payment solutions, Ping Identity Holding Corp., a pioneer in digital identity solutions,and Unisys Corporation, a global information technology company. Ms. Hook served as Senior
Independent Director of RELX PLC and RELX NV, providers of information solutions, from 2006 to
2016. Previously, she served as a director of Covad Communications and Time Warner Telecom,
Inc. In 2012, she was appointed by President Obama to serve on the National Security
Telecommunications Advisory Committee.
PMI Board Committees:
Ms. Hook is a member of the Compensation and Leadership Development, Finance, and ProductInnovation and Regulatory Affairs Committees.
Director Qualifications:With her past experience as CEO of a company whose holistic understanding of digital identity is
key to deploying actionable insights that grow and guard many of the world’s largest corporations
and her extensive public board experience, Ms. Hook brings to the Board valuable insights in theareas of cybersecurity, data privacy, and digital transformation as the Company is transitioning to a
consumer-centric, highly digitalized business model.

PMI 2020 Proxy Statement • 21

ELECTION OF DIRECTORSJENNIFER LI
Professional Experience:
Ms. Li currently serves as Chief Executive Officer and Managing Partner, Changcheng Investment
Partners. Previously, she served as Chief Executive Officer and General Managing Director of Baidu
Capital. Ms. Li joined Baidu, Inc., the largest Internet search engine in China and the third-largest
independent search engine in the world, in 2008, as Chief Financial Officer, responsible for a wide
range of corporate functions, including Finance, Human Resources, International Operations,Marketing, Communications and Purchasing. From 1994 to 2008, she held a number of seniorfinance positions at various General Motors companies in China, Singapore, the United States andCanada, rising to Chief Financial Officer of GM’s business in China and Financial Controllerof the North American Operations of GMAC.
Primary
Occupation:
Chief Executive
Officer and Managing
Partner, Changcheng
Investment Partners
Director since:
2010
Age: 52

Other Directorships and Associations:Ms. Li is a director of Flex Ltd., ABB Ltd. and HSBC, Asia.
PMI Board Committees:
Ms. Li is the Chair of the Audit Committee and a member of the Finance and Nominating andCorporate Governance Committees.
Director Qualifications:Ms. Li draws upon her strong financial and accounting expertise as Chair of the Audit Committee,
and her experience in a fast-growing, high-tech business and Asian background strengthen the
Board’s depth and global perspective.

JUN MAKIHARA
Professional Experience:
Mr. Makihara was employed at Goldman, Sachs & Co. from 1981 to 2000, during which time he
was a General Partner for six years, working in New York, Los Angeles, and Tokyo. During his
tenure in Tokyo, he was co-head of the Investment Banking Group and the Japanese Equities
Group and also served as co-branch manager. Subsequently, he was Chairman of Neoteny Co.,
Ltd., a Japanese venture incubator, until 2015.
Other Directorships and Associations:
Mr. Makihara is a director of Monex Group, Inc. and Shinsei Bank, Ltd. He is a trustee of theProtestant Episcopal Cathedral Foundation in Washington, D.C. and a board member of the Japan
Society in New York. He also served on the board of RHJ International S.A. from 2005 to 2014.
Primary
Occupation:
Retired Businessman
Director since:
2014
Age: 62

PMI Board Committees:
Mr. Makihara is Chair of the Finance Committee and a member of the Audit and ProductInnovation and Regulatory Affairs Committees.
Director Qualifications:
Mr. Makihara brings his deep experience in finance to his position as Chair of the FinanceCommittee, and the Board benefits from his entrepreneurial spirit and a thorough knowledge ofbusiness in Asia, which is of great importance to the Company’s business.

22 • PMI 2020 Proxy Statement

ELECTION OF DIRECTORSKALPANA MORPARIA
Professional Experience:
Ms. Morparia assumed her current position in March 2019, having previously served as CEO of
South and South East Asia since April 2016, and CEO of J.P. Morgan India since 2008. She is amember of J.P. Morgan’s Asia Pacific Management Committee. Prior to joining J.P. Morgan India,
Ms. Morparia served as Joint Managing Director of ICICI Bank, India’s second-largest bank, from2001 to 2007 and the Vice Chair of ICICI’s insurance and asset management business from 2007
to 2008.
Other Directorships and Associations:Ms. Morparia is a director of Dr. Reddy’s Laboratories Ltd. and Hindustan Unilever Limited.
Primary
Occupation:
Chairman, South andSouth East Asia,
J.P. Morgan Chase
Director since:
2011
Age: 70

PMI Board Committees:
Ms. Morparia is Chair of the Nominating and Corporate Governance Committee and a member of
the Finance and Product Innovation and Regulatory Affairs Committees.
Director Qualifications:With her strong executive leadership experience in finance, and her deep knowledge of international
business, Ms. Morparia provides a keen perspective on economies in Asia, while her legal
background and deep experience in highly regulated industries serve her well as Chair of theNominating and Corporate Governance Committee.

LUCIO A. NOTO
Professional Experience:
Mr. Noto assumed his current position with Midstream Partners, LLC in March 2001. He retired asVice Chairman of ExxonMobil Corporation in January 2001, a position he had held since themerger of the Exxon and Mobil companies in November 1999. Before the merger, Mr. Noto was
Chairman and Chief Executive Officer of Mobil Corporation. Mr. Noto had been employed by Mobil
continuously since 1962.
Other Directorships and Associations:
Mr. Noto is a director of Penske Automotive Group, Inc. He also served on the boards of IBM from1995 to 2008, Altria Group, Inc. from 1998 to 2008, Shinsei Bank from 2005 to 2008, Commercial
International Bank from 2006 to 2009 and RHJ International S.A. from 2011 to 2015.
Primary
Occupation:
Managing Partner,
Midstream
Partners, LLC
Director since:
2008
Age: 81

PMI Board Committees:
Mr. Noto is the Presiding Director and a member of the Audit, Compensation and Leadership
Development, Finance, and Nominating and Corporate Governance Committees.
Director Qualifications:
As the former chief financial officer and chief executive officer of a large, multinational oil company,
together with his past governance experience serving on the boards and audit committees of anumber of major international companies, Mr. Noto brings an extensive knowledge of internal
controls and risk assessment to his role as a member of the Audit Committee and a strong“hands-on” approach as Presiding Director.

PMI 2020 Proxy Statement • 23

ELECTION OF DIRECTORSFREDERIK PAULSEN
Professional Experience:
Dr. Paulsen has been Chairman of the Ferring Group, a research-driven, specialty biopharmaceuticalgroup, since 1988, having joined that company in 1976.
Other Directorships and Associations:Dr. Paulsen is a member of the boards of MGIMO University in Moscow, Russia, and the Pro
Universitate of the Christian Albrechts University in Kiel, Germany, and a trustee of the Salk
Institute of Biological Research in La Jolla, California, USA.

Primary
Occupation:
Chairman,Ferring Group
Director since:
2014

PMI Board Committees:
Dr. Paulsen is Chair of the Product Innovation and Regulatory Affairs Committee and a member of
the Finance Committee.
Director Qualifications:Dr. Paulsen’s substantial experience as head of a successful multinational biopharmaceuticalgroup, together with his scientific background, bring a unique perspective to the Company’s criticalefforts to develop reduced-risk products.

Age: 69

ROBERT B. POLET
Professional Experience:
Mr. Polet is currently serving as Chairman of Rituals Cosmetics Enterprise B.V., and Chairman ofArica Holding B.V. He was Chairman of Safilo Group S.p.A. from 2011 to 2017, and President,
Chief Executive Officer and Chairman of the Management Board of the Gucci Group from 2004 to
2011. Previously, Mr. Polet spent 26 years in the Unilever Group in a variety of executive roles,
including President of Unilever’s Worldwide Ice Cream and Frozen Foods division, Chairman of
Unilever Malaysia, Chairman of Van den Bergh and Executive Vice President of Unilever’s
European Home and Personal Care division.
Other Directorships and Associations:
Mr. Polet is a director of Safilo Group S.p.A. and William Grant & Sons Limited.
Primary
Occupation:
Chairman,
Rituals Cosmetics
Enterprise B.V.
Chairman,
Arica Holding B.V.
Director since:
2011
Age: 64

PMI Board Committees:
Mr. Polet serves on the Compensation and Leadership Development, Finance, Nominating andCorporate Governance, and Product Innovation and Regulatory Affairs Committees.
Director Qualifications:
In his previous position, Mr. Polet was responsible for managing such global luxury brands as
Gucci, Bottega Veneta, Yves Saint Laurent, Boucheron, Balenciaga, Sergio Rossi, Alexander
McQueen and Stella McCartney. He brings to the Board his considerable entrepreneurial businessexperience in the global luxury business and his deep executive background running major
consumer packaged goods businesses, as well as his extensive knowledge of global markets.

24 • PMI 2020 Proxy Statement

COMPENSATION OF DIRECTORS
Compensation Philosophy
Directors who are full-time employees of the Company receive
no additional compensation for services as a director. The
Company’s philosophy is to provide competitive compensationnecessary to attract and retain high-quality non-employee
directors. The Board believes that a substantial portion of
director compensation should consist of equity-based
compensation to assist in aligning directors’ interests with theinterests of shareholders.

Directors’ Compensation

Compensation
At his request, Dr. Paulsen serves as a director withoutcompensation. The compensation of all other non-employee
directors is set forth in the accompanying chart.

PMI’s non-employee directors’ compensation for 2019was set at the following levels and, except as noted,
continues in effect for 2020:
Annual cash retainer:$125,000

Annual equity award:$175,000

Chairman’s incremental cash retainer:$400,000

Presiding Director cash retainer:$ 25,000*

Committee Chair cash retainer:$ 35,000

Committee member cash retainer:

None

Committee meeting fees:

None

Stock Options:

None* The cash retainer for the Presiding Director was increased to$35,000, effective January 1, 2020.

Share Retention Requirement
A non-employee director may not sell or otherwise dispose of PMI shares received pursuant to the annual share award(other than shares withheld from the grant to pay taxes) unless he or she continues after the disposition to own PMI shares
having an aggregate value of at least five times the then-current annual cash retainer. The Company’s anti-hedging andanti-pledging policies also apply to non-employee directors (see page 40).

PMI 2020 Proxy Statement • 25

COMPENSATION OF DIRECTORSThe following table presents the compensation received by the non-employee directors for fiscal year 2019.
Fees Earnedor Paid in Cash
($)

Stock
Awards($)

All Other
Compensation
($)

Total
($)

Louis C. Camilleri

525,000

175,000-

700,000

Massimo Ferragamo

125,000

175,000-

300,000

Werner Geissler

160,000

175,000-

335,000

Lisa A. Hook

125,000

175,000-

300,000

Jennifer Li

160,000

175,000-

335,000

Jun Makihara

160,000

175,000-

335,000

Kalpana Morparia

160,000

175,000-

335,000

Lucio A. Noto

150,000

175,000-

325,000

Name

-

-

-

-

Robert B. Polet

125,000

175,000-

300,000

Stephen M. Wolf

125,000

175,000-

300,000

Frederik Paulsen(a)(a)

At his request, Dr. Paulsen serves as a director without compensation.

Non-employee directors may also elect to defer the awardof shares of common stock and all or part of the annual
and Committee retainers. Deferred fee amounts are“credited” to an unfunded account and may be “invested”
in nine “investment choices,” including a PMI common
stock equivalent account. These “investment choices”
parallel the investment options offered to employees under
the PMI Deferred Profit-Sharing Plan and determine the“earnings” that are credited for bookkeeping purposes to a
non-employee director’s account.

26 • PMI 2020 Proxy Statement

The Company reimburses non-employee directors (otherthan Dr. Paulsen) for their reasonable expenses incurredin attending Board of Directors, Committee andshareholder meetings and other corporate functions,
including travel, meals and lodging. Non-employee
directors (other than Dr. Paulsen) also are covered bybusiness travel and accident insurance, which theCompany maintains for their benefit when they travel on
Company business, as well as group life insurance.

STOCK OWNERSHIP INFORMATION
Ownership of Equity Securities
The following table shows the number of shares of common stock beneficially owned as of March 13, 2020, by eachdirector, nominee for director and named executive officer, and the directors and executive officers of the Company as agroup. Unless otherwise indicated, each of the named individuals has sole voting and investment power with respect to theshares shown. The beneficial ownership of each director, nominee for director and executive officer, and of the directors,
nominees for director and executive officers as a group, is less than 1% of the outstanding shares.

Name

Amount andNature ofBeneficial
Ownership(1)André Calantzopoulos

832,385

Louis C. Camilleri

407,464

Massimo Ferragamo

7,461

Marc S. Firestone

208,177

Werner Geissler

65,212

Lisa A. Hook

4,515

Martin G. King

164,275

Jennifer Li

66,687

Jun Makihara

16,221

Kalpana Morparia

16,452

Lucio A. Noto

110,701

Jacek Olczak

275,238

Frederik Paulsen
Robert B. Polet—
17,981

Stephen M. Wolf

96,051

Miroslaw Zielinski

256,908

Group (36 persons)

3,437,262(1)

Includes shares of deferred stock as follows: Mr. Calantzopoulos, 147,140; Mr. Camilleri, 51,464; Mr. Ferragamo, 7,461; Mr. Firestone, 43,480;
Ms. Hook, 4,475; Mr. King, 20,740; Mr. Makihara, 12,861; Mr. Noto, 71,123; Mr. Olczak, 48,510; Mr. Wolf, 72,729; Mr. Zielinski, 36,980; and group,
803,953. Also includes 17,085 shares as to which beneficial ownership is disclaimed by Mr. Noto (shares held by spouse) and 22,196 shares held in
trust as to which he has not disclaimed beneficial ownership. Also includes 1,360 shares as to which beneficial ownership is disclaimed by
Mr. Makihara (shares held by spouse).

In addition to the shares shown in the table above, as of March 13, 2020, those directors who participate in the Company’s
director deferred fee program had the following PMI share equivalents allocated to their accounts: Mr. Ferragamo, 4,728;
Mr. Makihara, 10,738; Mr. Noto, 106,133; and Mr. Wolf, 33,906. See “Compensation of Directors” on page 26 for a
description of the deferred fee program for directors.

PMI 2020 Proxy Statement • 27

STOCK OWNERSHIP INFORMATION
The following table sets forth information regarding persons or groups known to the Company to be beneficial owners ofmore than 5% of the outstanding common stock.

Name and Address of Beneficial Owner

Number of Shares
Beneficially Owned

Percent of Common
Stock Outstanding on
March 13, 2020BlackRock, Inc.
55 East 52nd Street
New York, NY 10055

94,735,242(1)

6.08%

The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355

124,734,308(2)8.01%

According to a Schedule 13G/A, dated February 5, 2020, filed with the U.S. Securities and Exchange Commission on February 5, 2020, by BlackRock,Inc. presenting the number of shares as of December 31, 2019.
(2) According to a Schedule 13G/A, dated February 10, 2020, filed with the U.S. Securities and Exchange Commission on February 12, 2020, by The
Vanguard Group presenting the number of shares as of December 31, 2019.
(1)

Delinquent Section 16(a) Reports
The Company believes that during 2019 all reports for the Company’s executive officers and directors that were required tobe filed under Section 16 of the Exchange Act were filed on a timely basis, except that the award of 5,240 Restricted Share
Units on February 7, 2019 to Deepak Mishra, Chief Strategy Officer, and a sale of 11,000 shares of common stock on
October 18, 2019 by Werner Barth, Senior Vice President, Commercial, were inadvertently reported late.

28 • PMI 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Our Compensation Discussion and Analysis outlines the design of our executive compensation program components, theobjectives and principles upon which they are based, our 2019 performance and the resulting decisions of theCompensation and Leadership Development Committee to reflect that performance in setting compensation for our CEO
and the other named executive officers.
Compensation and Leadership Development Committee
The Compensation and Leadership Development Committee consists entirely of non-management directors, all of whom
our Board has determined are independent within the meaning of the listing standards of the New York Stock Exchange. Its
responsibilities are described below and set forth in the Compensation and Leadership Development Committee Charter,
which is available on the Company’s website at www.pmi.com/who-we-are/corporate-governance/overview. The membersof the Committee are: Werner Geissler (Chair), Lisa A. Hook, Lucio A. Noto, Robert B. Polet and Stephen M. Wolf. The
Committee met four times in 2019. The Chair of the Committee, in consultation with the other members, sets meeting
agendas. The Committee reports its actions and recommendations to the Board.
Program Design, Philosophy and Objectives
Our compensation and benefits program supports ourbusiness and financial objectives. Each component of ourprogram is designed to achieve one or more of thefollowing objectives:▪

to support our ability to attract, develop and retain
world-class leaders in a controversial industry;▪

to align the interests of executives and shareholders;▪

to reward performance against pre-defined objectives;▪

to support long-term business growth, superior
financial results, sustainability efforts, societalalignment and integrity of conduct;▪

to promote internal fairness and a disciplined
assessment of performance; and▪

to align executive incentives
management objectives.

with

our

risk

These objectives provide the framework for the various
components of compensation and benefits and take into
account the specific nature of our business. Together,
these elements form an aggregate package that is
intended to be appropriately competitive. The design ofthe overall package encompasses the following features:▪

a mix of fixed and “at-risk” compensation: thehigher the organizational level of the executive, thelower the fixed component of the overall
compensation and benefits package;▪

a mix of annual and long-term compensation andbenefits to appropriately reward the achievement ofboth annual and long-term goals and objectives;▪

a mix of cash and deferred equity compensationthat seeks to discourage actions that are solely driven
by the Company’s share price at any given time to thedetriment of PMI’s long-term strategic goals; and▪

an optimal balance of equity compensation
comprising both performance-based and time-based
awards, without using stock options, and withsignificant share ownership requirements, to align theinterests of executives and shareholders whileremaining mindful of the potentially dilutive nature ofequity compensation on shareholder value.

In 2015, the Committee substantially revamped our
executive compensation program. Our shareholders haveoverwhelmingly supported the new compensation
program, approving our 2019 say-on-pay proposal by avote of 95.93% and our 2017 Performance Incentive Plan
by a vote of 96.18%. Based on this support and its own
satisfaction with the current compensation program, theCommittee determined not to make any substantial
modifications to the program in 2020 except for the
replacement of certain metrics in the 2020 annual
incentive compensation performance matrix and theperformance metrics for the 2020-2022 PSU
performance cycle to better align the executive
compensation program with our transformation goals ofswitching adult smokers who would otherwise continue tosmoke to our RRPs. The 2020 annual incentive
compensation performance matrix includes theCompany’s environmental, social and governanceobjectives in one of the Company’s strategic priorities.
The Committee reviews local market and Peer Group(see page 39) data, but does not target total directcompensation at a specific percentile of the market.
Instead, the Committee sets total direct compensation atlevels that it believes necessary to attract and retain
talented executives in a controversial industry and remaincompetitive with other consumer product companies.

PMI 2020 Proxy Statement • 29

COMPENSATION DISCUSSION AND ANALYSIS
Components of Our Total Direct Compensation Program
The three components of total direct compensation arebase salary, annual performance-based variable cash
awards and variable equity awards. We also provide our
executives retirement benefits and limited perquisites.
Our total direct compensation program emphasizes
pay-for-performance, and the one component that is fixed

for a given year, base salary, constitutes the smallest
portion of executive compensation for salary grades 26
and above. See page 31 for the target compensation mix
of our NEOs in 2019. The key characteristics and key
objectives of each component of our compensation
program as it applies to our NEOs are as follows:

Component

Key Characteristics

Key Objective

Base Salary▪ Fixed component of compensation reflecting the scope ofthe executive’s role, performance and market pay
practices.

▪ Intended to provide sufficientcompetitive base pay to attract,develop and retain world-classleaders.

Incentive▪ Annual performance-based variable cash award forCompensation (IC) meeting or exceeding performance goals pre-establishedAwardsby the Committee.

▪ Intended to motivate executives tomeet or exceed our performancegoals and strategic objectives in agiven fiscal year.

▪ The Company’s incentive compensation business rating isdetermined by a fixed formula that measures the Company’s
results against performance targets pre-established andpre-weighted by the Committee (see pages 33-34). The final
award is determined by multiplying the executive’s basesalary by the IC performance rating and by the executive’s IC
target and individual performance rating.
Equity Awards▪ Long-term variable equity awards contribute to all six of theCommittee’s program design objectives while minimizing
share dilution and protecting against excessive risk taking.
▪ Amount of each award is determined by multiplying theexecutive’s base salary by the target percentage for thatsalary grade, and then by the executive’s individual
performance rating for the most recently completed year,
plus or minus ten percentage points.
– 60% of the February 2020 award was in the form of
PSUs that vest at the end of the 2020-2022
performance cycle in amounts that depend on the
degree to which pre-established and pre-weighted
performance goals are achieved or exceeded (seepages 35-37).
– 40% of the February 2020 award was in the form of
RSUs that vest at the end of the three-year cycle(assuming continued employment).

30 • PMI 2020 Proxy Statement▪ Intended to motivate our executives
to produce results that enhancesustainable shareholder value andstrengthen the Company over thelong term.

COMPENSATION DISCUSSION AND ANALYSIS
Target Compensation Mix
Other than the CEO, all of our NEOs are in salary grades 25 and 26. Our CEO is the only employee in salary grade 28, andno employee is in salary grade 27. The target compensation mix for 2019 and for 2020 is shown in the following chart:

Grade 28

Grade 26

Grade 25

11%

22%

20%

67%

25%

27%

27%

Base Salary

55%

46%

Annual Incentive Compensation

Equity Awards

In February 2020, the Committee granted PSUs for the 2020-2022 performance cycle and RSUs. It also establishedperformance targets for the 2020 annual incentive compensation awards that are payable in February 2021. Award targets as apercentage of base salary for our named executive officers are as follows:2020 Cash Incentive
Targetas % of Base Salary(1)2020-22 PSUs Target
as % of Base Salary(60% of total Equity Award)(2)2020 RSUs Target
as % of Base Salary(40% of total Equity Award)(3)André Calantzopoulos (CEO)

200%

360%

240%

Marc S. Firestone

125%

165%

110%

Martin G. King

100%

105%

70%

Jacek Olczak

125%

165%

110%

Miroslaw Zielinski

125%

165%

110%

Possible award range is between 0% and 225% of target.
Possible award grant range is between 0% and 150% of target; between 0% and 200% of PSUs granted may vest, depending on performance versus
criteria established at the time of grant.
(3) Possible award grant range is between 0% and 150% of target.
(1)(2)

PMI 2020 Proxy Statement • 31

COMPENSATION DISCUSSION AND ANALYSIS
Use of Equity Awards Versus Stock Options: Equity
awards are made in the form of RSUs and PSUs, rather
than stock options, because these forms of awards:▪

establish a relationship between our cost and the value
ultimately delivered to our executives that is more direct
and more visible than is the case with stock options; and▪

require the use of substantially fewer shares than stock
options to deliver equivalent value, resulting in an annual
Company run rate (the sum of all director stock awards

32 • PMI 2020 Proxy Statement

and RSUs granted during the period, plus the number of
all PSUs vested during the period, divided by theweighted average number of shares outstanding during
the period) in 2019 of 0.13% and a total 2019 year-end
overhang (number of unvested RSUs plus unvested
PSUs at target as a percentage of all shares outstandingat year-end) of 0.33%.
Our run rate and overhang each compares favorably tothose of our Peer Group.

COMPENSATION DISCUSSION AND ANALYSIS
2019 Company Performance and Targets
The Committee determined the 2019 cash incentive
award performance rating based on 2019 results versus
performance metrics pre-established by the Committee
and defined on page 34. Each of the financial targets set
by the Committee reflected appropriately ambitious
performance goals.
2019 Results: We delivered strong underlying results
significantly exceeding each of our key performance
metrics, reflecting robust growth in our Platform 1
reduced-risk product and solid pricing in our combustible
products portfolio. Our share of Top 30 OI markets also
exceeded target.
Share of Top 30 OI Markets: We registered a growing or
stable market share in 18 of our Top 30 OI markets,
above our target of 16 markets. Our total cigarette andHTU market share, excluding China and the U.S., grew
by 0.1 percentage point. Marlboro’s share of the cigarettemarket was at an all-time high at 10.0%, excluding China
and the U.S., and Marlboro remains the number one
global brand. Importantly, our total market share in
Russia and Japan grew by 1.8 and 0.5 percentage
points, respectively, from 2018.
Net Revenues*: Net revenues of $29.8 billion reflected
constant currency growth of 6.4%, significantly above ourambitious target of 5.0%. This result was driven primarily
by higher heated tobacco unit shipment volumes,
coupled with strong combustible tobacco pricing.
Adjusted OI*: Adjusted OI of $11.8 billion reflected
constant currency growth of 11.2%, well above our targetof 7.7% growth, driven by net revenue growth, coupledwith the favorable impact of our cost-savings initiatives
and increasing leverage of existing RRP infrastructure bya growing volume and user base.

Strategic Priorities:▪

Grow current RRP platforms to scale by building a
superior portfolio across segments, IQOS brand equity, aquality consumer experience across digital and physicaltouchpoints at scale, and geographic expansion;▪

Maintain leadership in our conventional business, netofcannibalization, through continued branddevelopment and selective innovation;▪

Develop our long-term product portfolio and launch an
ecosystem portfolio of products and services to fulfill
broader needs of our adult RRP consumers;▪

Build global societal support for RRPs throughadvocacy and obtain regulatory and fiscal measuresthat allow adult smokers to learn about, and convert
to, our RRPs faster;▪

Achieve cost and cash leadership by improving
productivity to reinvest in RRP expansion; and▪

Reduce time-to-market for product launches andimprove supply chain agility to drive excellent
consumer service.

Strategic Enablers:▪

Consumer centricity: roll out a consumer-centricorganization,
consumerjourneyframework,measurement of consumer satisfaction and rapid
feedback loops into product and service development;▪

Digitalized consumer engagement: roll out a digitalconsumer engagement platform across markets torapidly scale awareness, engagement, conversion
and customer care;▪

People, culture, ways of working and organization:
evolve the organization and ways of working to
attract, retain, manage and reward top talent, andincrease agility by adopting a project-basedorganization, agile working methods and zero-basedorganization principles; and▪

Real-time communication: develop a real-timecommunication engine to engage with adultconsumers, key opinion leaders and regulators toshape the dialogue in real time.

Adjusted Diluted EPS*: Our 9.9% adjusted diluted EPS
growth, excluding currency, surpassed our target of 8.0%.
Operating Cash Flow*: Operating cash flow, excluding
currency, increased 21.4%, well above our target of 15.8%.
The Committee also rated our performance on thefollowing six key strategic priorities and four enablers that
the Committee pre-set in February 2019, based on aratings range of 0-70 if they were missed, 80-120 if they
were mostly or all accomplished, and 130-150 if they
were mostly or all exceeded:

As a result of this evaluation, the Committee concluded
that the Company had accomplished all of its strategic
objectives and it assigned a strategic priorities andenablers rating of 120.

* On a like-for-like basis.
PMI 2020 Proxy Statement • 33

COMPENSATION DISCUSSION AND ANALYSISIC Performance Rating: The Committee employed the following pre-established matrix that assigned a rating of 100
correlating to attaining the targeted performance. Ratings for each factor can range from 0 to 150. The percentages
indicated for net revenues, adjusted OI, adjusted diluted EPS, and operating cash flow represent growth versus 2018
results on a currency-neutral, like-for-like basis. Actual results are shown in the blue boxes.
2019 IC Performance Versus Target
TargetRating:0 ... 30 ... 60

70

80

90

100

110

120

130

134

140

141

148

150

<7

11

12

14

16

18

20

22

24

25

3.8%

4.1%

5.0%

5.4%

5.7%

6.0%

6.3% 6.4%

7.4%

9.3%

9.8%

11.2% 11.5%

9.7% 9.9% 10.2%

12.1%

Growth Measure(a)Market Share (Top 30
OI(b) Markets)
Net Revenues(c)7<2.5% 2.5%

10

3.1% 3.5%

Adjusted OI(d)<3.8% 3.8%

4.9% 5.4%

5.9%

6.4%

7.7%

8.4%

8.8%

Adjusted Diluted EPS(e)<4.0% 4.0%

5.0% 5.6%

6.1%

6.7%

8.0%

8.7%

9.2%

Operating Cash Flow(f) <5.5% 5.5%
Strategic Priorities andEnablers

8.0% 9.3% 10.6% 11.8% 15.8% 16.6% 17.1% 17.7%< Key initiatives missed >0 - 70< Mostly all accomplished >80 - 120

18.2%

20.3% 21.4%< Majority / all exceeded >130 - 150

For a reconciliation of non-GAAP to the most directly comparable GAAP financial measures see Exhibit B to this proxy statement.
Number of Top 30 OI markets (reflecting the deconsolidation of RBH) in which total share of the heated tobacco units and cigarettes was growing or stable.
(c) Excluding excise taxes, currency and acquisitions, on a like-for-like basis.
(d) Excluding currency and acquisitions, on a like-for-like basis.
(e) Excluding currency, on a like-for-like basis.
(f) Net cash provided by operating activities, excluding currency, on a like-for-like basis.
(a)(b)

Our performance rating for each factor was weighted in accordance with the pre-established formula shown below to produce anoverall IC performance rating of 135.
2019 IC Performance Rating
Growth Measure

Performance
RatingWeightWeighted Performance
RatingMarket Share (Top 30 OI Markets)

110

15%

17

Net Revenues

141

15%

21

Adjusted OI

148

15%

22

Adjusted Diluted EPS

134

20%

27

Operating Cash Flow

150

20%

30

Strategic Priorities and Enablers

120

15%

18

Based on its performance against the pre-established targets,
the Company earned an IC performance rating for 2019 of:

34 • PMI 2020 Proxy Statement

2019

135

vs.

2018

80

vs.

2017

100

COMPENSATION DISCUSSION AND ANALYSISIn addition to certifying the IC performance rating, the Committee rated each executive officer’s personal performance
during 2019. Individual ratings can range from 0% to 150%. To assure a disciplined, fair and equitable assessment,
individual performance ratings were calibrated to reflect each executive’s contribution to the overall results of the Company.
Application of the following formula then determined the cash incentive award for each named executive officer in 2019.
Incentive Compensation Award Formula
IC
Award

=

Base
SalaryX

Individual
Target %(varies bygrade)X

IC
Performance
Rating(0%-150%)

X

Individual
Rating(0%-150%)2020 Incentive Compensation (IC) Awards: For 2020, the Committee retained four of the five performance metrics usedin 2019 and replaced the adjusted diluted EPS metric with shipment volume from our RRPs and any other non-combustible
products in order to more closely align the performance factors with the Company’s transformation. The Committee also set
performance targets for those metrics. Each of the 2020 financial performance targets reflects the Company’s 2020 budget
approved by the Board, with a performance factor of 100 equating to achieving budgeted results. To measure theCompany’s performance, the Committee also established six key strategic priorities and four strategic enablers reflecting
the Company’s transformation goals, one of which includes our environmental, social and governance objectives. The fullrange of potential results is reflected in a pre-established matrix that will generate an overall IC performance rating for2020. In addition to pre-establishing a formula for grading our results against the performance factors, the Committee
pre-established the weights for each factor.
Long-Term Equity Awards: The Committee establishes the equity award target opportunity for our CEO and each other
NEO based on Company targets by salary grade, which are unchanged from the levels established in 2014, and theindividual’s performance rating for this award. The Committee grants the individual 60% of the award opportunity in theform of performance-based PSUs and 40% in the form of time-based RSUs.
Equity Award Grant Formula
EquityAward
TargetOpportunity(60% PSU &40% RSU)=

Base
SalaryX

Individual
Target %(varies bygrade)

X

Individual
Rating(0%-150%)

PSU Performance Metrics: In February 2017, the Committee established three metrics for determining the number of
PSUs that would vest at the end of the 2017-2019 performance cycle. The first measure, weighted 50%, was theCompany’s Total Shareholder Return during the three-year cycle relative to the Peer Group and on an absolute basis. The
second measure, weighted 30%, was the Company’s currency-neutral compound annual adjusted operating companies
income growth rate over the cycle, excluding acquisitions. The final measure, weighted 20%, was the Company’s
performance against its transformation metric, defined as RRP shipment volume target during the last year of theperformance cycle.
The aggregate of the weighted performance factors for the three metrics determined the percentage of PSUs that vested at
the end of the three-year performance cycle. Each vested PSU entitles the participant to one share of common stock. An
aggregate weighted PSU performance factor of 100 would result in the targeted number of PSUs being vested. The
minimum percentage of PSUs that would vest was zero, while the maximum was twice the targeted number.
TSR Performance Factor. The TSR performance factor, which determined 50% of the PSU payout, was calculated basedon the Company’s three-year rolling TSR versus the Company’s Peer Group (see page 39). To adjust for market volatility,
the TSR calculations are based on the average of the 20 trading days immediately before the start of the performance cycle
and the last 20 trading days of the performance cycle. To reflect that several members of the Peer Group are primarily

PMI 2020 Proxy Statement • 35

COMPENSATION DISCUSSION AND ANALYSIS
listed on foreign stock exchanges and report their financial results in different currencies, the Company measures the TSRs
for those companies by using the price performance of their publicly traded American Depository Receipts (“U.S. ADRs”).
The use of U.S. ADRs avoids the need to adjust the TSRs of non-U.S. Peers to reflect currency changes, and increases
transparency by enabling shareholders to directly observe such TSRs. In addition to evaluating our relative TSR, if theCompany’s absolute TSR for a performance cycle is zero or less, the Committee will cap the TSR performance factor attarget or less. This approach would limit rewards for a performance cycle in which we performed in line with, or better than,
the Peer Group, but shareholders did not realize a positive return. The TSR performance factor for the 2017-2019
performance cycle was calculated relative to the Peer Group in accordance with the following schedule:
PMI TSR as a Percentile ofPeer Group
ResultPerformance Factor

Below 25th percentile

Below Threshold

0%

Threshold25th percentile

50%

Target50th percentile

100%

85th percentile and above

200%

Maximum

ActualRating35th percentile

70%

Adjusted Currency-Neutral Operating Companies Income Growth Performance Factor. The adjusted operating companies
income growth performance factor for the 2017-2019 performance cycle, which determined 30% of the PSU performancefactor, was the compound annual growth rate of the Company’s adjusted operating companies income (excluding currency
and acquisitions) as shown below:
Three-Year Adjusted OCI CAGR
(excluding currency and acquisitions)*
ResultPerformance Factor

Below Threshold

<4%

0%

Threshold4%50%

Target

8%

100%

≥11%

200%

Maximum

ActualRating6.1%

76%* On a like-for-like basis. For a reconciliation of non-GAAP to GAAP financial measures see Exhibit B of this proxy statement.

Transformation Performance Factor. The transformation performance factor for the 2017-2019 performance cycle, which
determined 20% of the PSU performance factor, was defined as RRP unit shipment volume in 2019, as shown below:
RRP Shipment Volume*(billions of units)
ResultPerformance Factor

Below Threshold

<60.0

0%

Threshold

60.0

50%

Target80.0

100%≥110.0200%

Maximum

ActualRating59.8

0%* Includes heated tobacco units, e-vapor products and other RRPs.

Performance Rating for 2017-2019 PSU Cycle. The overall performance rating for the 2017-2019 PSU award cycle was
58%, which the Committee rounded to 60%.

36 • PMI 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS
2020-2022 PSU Performance Cycle. In order to more closely align the performance factors with the Company’stransformation goals, the Committee established the following performance metrics at what it believes are appropriately
ambitious levels that reflect the Board-approved three-year plan. It retained the TSR performance factor defined in thesame way as shown on the previous page for the 2017-2019 PSU Performance Cycle, except that the maximum
performance factor of 200% would be achieved at the 80th percentile relative to the Peer Group. The second measure is theCompany’s currency-neutral compound annual adjusted diluted EPS growth rate over the 2020-2022 PSU Performance
Cycle, with 0% for growth below 5%, 50% for growth at the threshold level of 5%, 100% for growth at the target level of 8%,
and 200% for growth at or above 10.5%. The final measure is the Company’s performance against its transformation
metric, defined as net revenues from our RRPs and any other non-combustible products as a percentage of the Company’s
total net revenues, in the last year of the performance cycle, with performance factors of 0% for a ratio below 25.5%, 50%
for a ratio at the threshold level of 25.5%, 100% for a ratio at the target level of 30.5%, and 200% for a ratio at or above
35.5%.
The Committee measures performance on these metrics consistent with the way the Company communicates its results,
which may include adjustments.
The Committee weighted the 2020-2022 performance factors as follows: TSR, 40%; Adjusted Currency-Neutral Compound
Annual Diluted EPS Growth, 30%; and Transformation, 30%.
PSU Vesting Mechanics. At the end of the three-year performance cycle, the Company’s performance factor for each of thethree metrics will be calculated and then weighted, resulting in an overall PSU performance factor from 0-200%. This
percentage will be applied to the executive’s target PSU award to determine the number of shares of common stock to beissued to the executive.
The Committee may adjust the PSU performance metrics if appropriate to reflect significant unplanned acquisitions or
dispositions.

PMI 2020 Proxy Statement • 37

COMPENSATION DISCUSSION AND ANALYSIS
2019 Individual Performance and Compensation Decisions
The 2019 performance ratings of each named executive
officer reflect the fact that the Company performed
significantly above our ambitious financial growth targets
and accomplished all our strategic priorities and enablers.
André Calantzopoulos, Chief Executive Officer: The
Committee assigned Mr. Calantzopoulos an individual
performance rating for 2019 of 130% for the incentive
compensation award and a rating of 125% for the equity
award. As a result, Mr. Calantzopoulos received anannual incentive compensation award of CHF 5,310,830,
or $5,449,496 based on the conversion rate on the dateof the award. Mr. Calantzopoulos’s equity award was split
into 53,730 RSUs and 80,600 PSUs.
Mr. Calantzopoulos’s performance rating for the incentive
compensation award reflects the Committee’s view that
under his leadership, the Company achieved excellent
results that significantly exceeded each of our performance
metrics despite increasing complexity in the regulatoryenvironment and intensifying competition, particularly, in
Korea and Japan. The Company also made excellent
progress on its strategic initiatives as described on page 33.
Notably, Mr. Calantzopoulos’s rating reflects that in April
2019, the FDA determined that a version of our Platform 1
product is appropriate for the protection of public health andauthorized it for sale in the U.S.
Mr. Calantzopoulos’s individual performance rating forthe equity award reflects the fact that the Company
achieved crucial milestones towards delivering a smokefree future on many fronts: product development,commercialization, geographic expansion of our
Platform 1 product, scientific substantiation, third-party
engagement, as well as the regulatory and fiscal
environment. Mr. Calantzopoulos’s equity rating also
reflects his decisive leadership in the Company’s external
and internal transformation to an organization that isconsumer-centric and digitally driven and well on the way
to a future built on smoke-free products.
Effective April 1, 2020, the Committee increased
Mr. Calantzopoulos’s base salary from CHF 1,513,057 to
CHF 1,570,010 ($1,611,003 based on the conversion
rate on the date of the Committee’s decision).
Mr. Calantzopoulos’s base salary was last increased inearly 2017.
Other Named Executive Officers:
Marc S. Firestone: Mr. Firestone served as President,
External Affairs and General Counsel in 2019. His
incentive compensation and equity awards were eachbased on an individual performance rating of 110% andrecognize his widespread contributions to the Company’s
results and inspiring leadership of our External Affairs
Department, which includes our legal function. These
ratings reflect his critical role in numerous regulatory,
litigation and compliance strategic initiatives, notably his
contribution to our continued progress in the regulatory
and fiscal framework for RRPs, as well as his insightful
guidance of our external affairs initiatives and our strong
compliance culture.
Martin G. King:* Mr. King served as Chief Financial
Officer in 2019. His incentive compensation and equity
awards were each based on an individual performance
rating of 95%. These ratings recognize Mr. King’s
leadership and contributions to the management of ourbalance sheet, and the continued focus on processchange optimization in the context of our RRP business
transformation, as well as effective productivity and costsavings initiatives across the organization. He assured
timely and transparent communication of our strategies
and results to the investment community and played an
important role in the implementation of numerous crossfunctional strategic initiatives.
Jacek Olczak: Mr. Olczak served as our Chief Operating
Officer in 2019. His incentive compensation and equity
awards were each based on an individual performance
rating of 125%. These ratings reflect his leading role in the
Company’s transformation and the superior performance of
our Regions and markets, particularly, in his commitment to
consumer centricity, digitalized consumer engagement, andmanufacturing optimization, while remaining focused on thegrowth of our brand portfolio and the seamless deployment
and results of the Platform 1 product in 52 markets
worldwide. The awards also reflect his invaluable
contributions to the strategic direction of the Company andour external engagement to obtain RRP-specific regulatory
regimes.
Miroslaw Zielinski: Mr. Zielinski served as our President,
Science & Innovation for the first half of 2019, and as ourChief New Ventures Officer for the second half. His
incentive compensation and equity awards were eachbased on an individual performance rating of 105%. These
ratings reflect his key strategic contributions to thesignificant progress in scientific substantiation of our RRP
platforms, the implementation of highly innovative solutions
for the improvement of the consumer journey, and thedevelopment of an ecosystem portfolio of products andservices for adult RRP consumers.

* On February 28, 2020, Emmanuel Babeau was appointed to succeed Martin G. King as Chief Financial Officer, effective May 1, 2020. Mr. King willassume the role of CEO, PMI America, effective May 1, 2020.
38 • PMI 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS
Additional Compensation Policies and Processes
Peer Group: The Committee uses a single customized peer group both to benchmark its compensation programs and tocompare its TSR when calculating the Company’s PSU performance factor. The following 19 companies, selected in 2015
on the basis of their global presence, focus on consumer products, and similarity to the Company in terms of net revenues
and market capitalization, constitute our Peer Group*:
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪

Altria Group, Inc.
Anheuser-Busch InBev SA/NV
British American Tobacco p.l.c.
The Coca-Cola Company
Colgate-Palmolive Co.
Diageo plc
Heineken N.V.
Imperial Brands PLC
Japan Tobacco Inc.
Johnson & Johnson

▪
▪
▪
▪
▪
▪
▪
▪
▪

Kimberly-Clark Corporation
The Kraft Heinz Company
McDonald’s Corp.
Mondelēz International, Inc.
Nestlé S.A.
PepsiCo, Inc.
The Procter & Gamble Company
Roche Holding AG
Unilever NV and PLC*Reynolds American Inc. was removed from the Peer Group following its acquisition by British American
Tobacco p.l.c. on July 25, 2017.

PMI 2020 Proxy Statement • 39

COMPENSATION DISCUSSION AND ANALYSIS
Factors Mitigating Against Possible Adverse
Consequences of Our Compensation Program:
Several elements of our compensation program protect
against the possibility that compensation incentives mightcause employees to take risks that could materiallyadversely affect the Company. First, we do not havedifferent incentive compensation award programs forparticular business units or functions. Our annual
incentive compensation and equity awards apply to
management employees worldwide, and the award pools
for each of those programs are based on company-wide
performance measures that cannot be unduly influenced
by a particular business unit or group. Second, allemployees are rated on the same scale within general
guidelines set by the Committee. These ratings are
based on individual performance criteria so that noparticular group of employees will all receive the samerating. Third, both the company-wide and the individual
performance measures are subject to maximum levels
that limit the amount of awards.
Furthermore, with respect to the long-term equity
component of our compensation program, RSUs generally
vest only after three years from the date of grant, and
PSUs generally vest to the extent pre-established targets
are achieved over a three-year performance cycle. In
addition, our executives are subject to share ownership
requirements and comprehensive anti-hedging, antipledging and clawback policies described in the following
four sections.
Share Ownership Requirements: The Company setsshare ownership requirements for executives at levels
that are among the highest for publicly owned
companies. As unvested PSUs, which comprise 60% of
our named executive officers’ equity award, do not counttowards the ownership requirement, and to further alignwith market practice, the Committee changed therequired ownership levels as follows:
NEOs

Multiple of base salary
2020
2019

Salary grade 28
Salary grade 27
Salary grade 26
Salary grade 25

10 times
6 times
5 times
3 times

15 times
9 times
6 times
5 times

Executives are required to meet their ownership levels
within five years of joining PMI or within three years of apromotion. The Committee reviews each executive officer’s
compliance with the requirements on an annual basis. As of
December 31, 2019, all of our named executive officers met
or exceeded the applicable requirements.

40 • PMI 2020 Proxy Statement

The Company also imposes share retention requirements
on non-employee directors. (See page 25).
Post-Termination Share Holding Period: In addition tothese longstanding and rigorous share ownership
requirements, the Committee has determined that if any
equity award held by an executive officer under the 2017
Performance Incentive Plan vests on an accelerated
basis upon such officer’s termination of employment for
any reason other than death or disability, the sharesacquired must be held for at least one year following
such termination.
Anti-Hedging and Anti-Pledging Policies: The
Company’s anti-hedging policy prohibits directors,
executive officers and other designated employees frompurchasing any financial instrument or otherwise
engaging in any transaction that is designed to hedge oroffset any decrease in the market value of theCompany’s shares held by them directly or indirectly,
including prepaid variable forward contracts, equity
swaps, collars and exchange funds, and othertransactions with comparable economic consequences.
The foregoing does not prohibit trading in broad-based
index funds.
Directors, executive officers and designated employees
are also prohibited from engaging in short sales related
to the Company’s shares.
The Company’s anti-pledging policy prohibits directors
and executive officers from pledging the Company’s
shares, including holding shares in a margin account.
Clawback Policy Regarding the Adjustment or
Recovery of Compensation: Under our Board-approved
policy and as set forth in each named executive officer’s
equity award agreement, if the Board or an appropriate
Committee of the Board determines that, as a result offraud, misconduct, a restatement of our financial
statements, or a significant write-off not in the ordinary
course affecting our financial statements, an executive
has received more compensation than would haveotherwise been paid, the Board or Committee shall takeaction as it deems necessary or appropriate to address
the events that gave rise to the fraud, misconduct,
write-off or restatement and to prevent its recurrence.
Such action may include, to the extent permitted byapplicable law, requiring partial or full reimbursement of
any incentive compensation paid to the executive,
causing the partial or full cancellation of equity awards,
adjusting the future compensation of such executive, anddismissing or taking legal action against the executive, inCOMPENSATION DISCUSSION AND ANALYSIS
each case as the Board or Committee determines to bein the best interests of the Company.
Role of the Committee in Executive Compensation: The
role of the Committee is to discharge the Board’s
responsibilities relating to executive compensation matters.
In this regard, the Committee is responsible for thedevelopment and administration of our executive
compensation and benefits program, in furtherance of which
the Committee has the authority and responsibility to:▪

▪

▪

review and approve corporate goals and objectives
relevant to the compensation of the CEO, to evaluate
the performance of the CEO in light of these goals
and objectives, and determine and approve thecompensation of the CEO based on this evaluation;
set senior executive compensation and makerecommendations to the Board with respect toincentive compensation plans and equity-based plans,
administer and make awards under such plans andreview the cumulative effect of its actions;review and approve compensation of all executive
officers;▪

oversee the management of risks
compensation design and payout;▪

monitor compliance by executives with the Company’s
share ownership requirements; and▪

review and assist the Board with the development ofexecutive succession plans.

relatedRole of Compensation Consultants: During 2019, theCommittee retained the services of Frederic W. Cook &Co., an independent compensation consulting firm, toadvise the Committee with respect to the compensationof the CEO and other executives. In addition, Cookprovided the Committee with input into the design of ourcompensation and benefit programs and evolving
regulatory and executive compensation market trends.
Consistent with the requirements of its charter, theCommittee has reviewed and considered:▪

the services the senior advisor of the Cook consulting
team performed for the Committee during 2019;▪

the fees paid by the Company as a percentage ofFrederic W. Cook & Co.’s total revenue;▪

the senior advisor’s ownership of the Company’s
stock (he has no such ownership);▪

the conflicts of interest policies and procedures ofFrederic W. Cook & Co.;▪

the relationships among PMI, its executive officers
and the Committee members, and Frederic W.
Cook & Co.; and▪

the quality and objectivity of the services provided to
the Committee.

toIn fulfilling these duties, the Committee is supported by
our Global Head of People & Culture and his department,
the Committee’s executive compensation consultant andother outside legal, financial and compensation counsel,
where appropriate.
Role of the CEO in Executive Compensation: Our CEO
makes recommendations to the Committee with respect tothe compensation of executive officers other than himself.
The Committee reviews and discusses the compensation ofthese officers with the CEO, and the Committee makes the
final compensation decisions with respect to these executive
officers. The CEO makes no recommendation and has norole in setting any aspect of his own compensation; he does
not attend any Committee meetings when any element of hiscompensation is discussed.

Other than obtaining advice on executive and director
compensation, the Company has no relationship with thesenior advisor or his firm, and the Committee regards
them as independent.
Compensation and Leadership Development Committee
Interlocks and Insider Participation: No member of theCommittee at any time during 2019 had any relationship with
the Company that would be required to be disclosed as arelated person transaction or as a compensation committee
interlock.
Policy with Respect to Qualifying Compensation for
Deductibility: Our ability to deduct compensation paid toindividual officers who are covered by Section 162(m) of
the U.S. Internal Revenue Code is generally limited to$1.0 million annually. However, we do not expect any
impact from Section 162(m) because none of our covered
officers is currently or is expected to be on our U.S.
payroll.

PMI 2020 Proxy Statement • 41

COMPENSATION DISCUSSION AND ANALYSIS

Compensation and Leadership Development Committee Report
The Compensation and Leadership Development Committee has reviewed and discussed the Compensation Discussion
and Analysis contained on pages 29 through 55 of this proxy statement with management. Based on its review anddiscussions with management, the Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in this proxy statement.
Compensation and Leadership Development Committee:
Werner Geissler, Chair
Lisa A. Hook
Lucio A. Noto
Robert B. Polet
Stephen M. Wolf
The information contained in the report above shall not be deemed to be “soliciting material” or to be “filed” with the
Securities and Exchange Commission or subject to Regulation 14A or 14C or the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended, nor shall such information be incorporated by reference into any future
filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except tothe extent specifically incorporated by reference therein.

42 • PMI 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS
Summary Compensation Table
The following table sets forth information concerning the cash and non-cash compensation awarded by PMI to our named
executive officers: the Chief Executive Officer, Chief Financial Officer and the three most highly compensated officers
serving as executive officers on December 31, 2019. These amounts are based on the compensation earned by theseofficers while employed by PMI for each year.
Non-Equity
Change inIncentive Plan
PensionAll Other
Total(3)
Compensation
Value(4)Compensation(5) Compensation
($)
($)
($)
($)

Name and Principal Position

Year

($)

Stock
Awards(2)($)

André Calantzopoulos,
Chief Executive Officer

20191,525,542

9,752,500

5,491,500

2018

1,549,551

11,704,916

2,336,771

2017

1,530,834

11,243,223

3,258,558

Marc S. Firestone,
President, External Affairs& General Counsel

2019

1,027,386

3,013,478

1,957,802

2018

1,043,393

3,617,432

2017

1,031,766

3,491,027

Martin G. King,
Chief Financial Officer

2019853,3882018
2017

Salary(1)Jacek Olczak,
Chief Operating Officer

Miroslaw Zielinski,
Chief New Ventures Officer

5,303,609

51,90922,125,060

285,598

57,39915,934,235

2,759,467

185,419

18,977,501

1,339,733

29,534

7,367,933

1,088,204

454,061

29,412

6,232,502

1,503,702

798,471

23,391

6,848,357

1,362,354

1,120,587

3,086,363

191,964

6,614,656

866,819

1,907,983

583,824

306,511

196,074

3,861,211

856,111

1,833,565

996,575

2,170,869

511,613

6,368,733

2019

1,168,771

3,156,689

2,617,361

5,097,025

15,55812,055,404

2018

1,047,291

3,453,956

1,036,385

515,035

17,6436,070,310

2017

987,485

3,474,914

1,435,894

1,415,464

17,6207,331,377

2019954,0072,260,309

1,731,403

3,156,660

17,8008,120,179

2018

969,022

3,351,990

816,155

194,717

5,879

5,337,763

2017

958,037

2,323,443

1,393,139

1,487,607

5,185

6,167,411

The 2019 base salaries are converted to U.S. dollars using an average conversion rate for 2019 of $1.00 = 0.9939 CHF. Average conversion rates for2018 and 2017 were $1.00 = 0.9785 CHF and 0.9849 CHF, respectively. Year-to-year variations in the salaries and other amounts reported for ourofficers result in part from year-to-year variations in exchange rates.
(2) The amounts shown in this column represent stock awards granted in February of each year based on the prior year’s performance, with the aggregate
grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. The number of shares awarded in 2019, together with the
grant date values of each award, is disclosed in the Grants of Plan-Based Awards During 2019 table on page 45.
The assumptions used in the calculation of the grant date fair value of PSUs awarded in 2019 under the 2017 Performance Incentive Plan are
described in Item 8, Note 9. Stock Plans to the consolidated financial statements contained in our 2019 Form 10-K. The table below provides the grant
date fair value of PSUs awarded in 2019 for each of our NEOs, assuming the maximum level performance is achieved.
(1)

Name

2019 PSUs Maximum
Value at 200%($)

André Calantzopoulos

11,892,028

Marc S. Firestone

3,674,052

Martin G. King1,660,961

Jacek Olczak

3,849,313

Miroslaw Zielinski

2,755,941

The 2019, 2018 and 2017 annual incentive compensation awards are converted to U.S. dollars using year-end conversion rates of $1.00 = 0.9671 CHF,
0.9842 CHF and 0.9751 CHF, respectively.
(4) The amounts shown reflect the change in the present value of benefits under the pension plans listed in the Pension Benefits table. The higher increases
in present pension value in 2019 were mainly driven by the mandated use of lower interest rates to discount projected future benefits and the impact of
exchange rates between USD and CHF. Excluding the impact of lower interest rates (by using 2018 interest rate assumptions), Mr. Calantzopoulos’s
2019 change in pension value would have been $3,107,616 and his total compensation would have been $19,929,067.
(5) Details of All Other Compensation for each of the named executive officers appear on the following page.
(3)

PMI 2020 Proxy Statement • 43

COMPENSATION DISCUSSION AND ANALYSISAll Other Compensation
Personal
Use ofCompany
Aircraft(b)($)

Car
Expenses(c)($)

TaxPreparation
Services(d)($)

Totals($)

Name and Principal Position

Year

International
Assignments(a)($)

André Calantzopoulos,
Chief Executive Officer

2019
2018
2017

-

30,11036,026
149,936

20,29019,84033,960

1,509
1,533
1,523

51,90957,399185,419

Marc S. Firestone,
President, External Affairs& General Counsel

2019
2018
2017

-

-

19,724
17,83013,492

9,810
11,582
9,899

29,534
29,412
23,391

Martin G. King,
Chief Financial Officer

2019
2018
2017

159,328
169,667
480,576-

18,55026,40731,037

14,086-

191,964
196,074
511,613

Jacek Olczak,
Chief Operating Officer

2019
2018
2017

-

-

15,55817,643
17,620-15,55817,643
17,620Miroslaw Zielinski,
Chief New Ventures Officer

2019
2018
2017

-

-

14,279
1,967
1,268

3,521
3,912
3,917

17,8005,879
5,185

The amounts shown include payments or reimbursements made pursuant to PMI’s Long-Term Assignment Guidelines, which are designed to facilitate
the relocation of employees to positions in other countries by covering expenses over and above those that the employees would have incurred had
they remained in their home countries. International assignments and relocations provide a key means for the Company to meet its global employee
development and resource needs, and the Long-Term Assignment Guidelines ensure that employees have the necessary financial support to help
meet cost differences associated with these assignments. The Long-Term Assignment Guidelines cover housing, home leave, relocation, education
expenses and tax equalization, as well as other program allowances. Currently, there are approximately 690 participants in the program.
(b) The amounts shown are the incremental cost of personal use of Company aircraft to PMI and include the cost of trip-related crew hotels and meals,
in-flight food and beverages, landing and ground handling fees, hourly maintenance contract costs, hangar or aircraft parking costs, fuel costs based on
the average annual cost of fuel per hour flown, and other smaller variable costs. Fixed costs that would be incurred in any event to operate Company
aircraft (e.g., aircraft purchase costs, depreciation, maintenance not related to personal trips, and flight crew salaries) are not included.
Mr. Calantzopoulos is responsible for his own taxes on any imputed taxable income resulting from personal use of Company aircraft.
(c) Amounts shown for Mr. Calantzopoulos include the incremental cost of personal use of driver services that PMI provided for reasons of security andpersonal safety. With respect to Messrs. Calantzopoulos, Firestone, King, Olczak, and Zielinski, amounts include the cost, amortized over a five-year
period, of a vehicle, including insurance, maintenance, repairs and taxes. Executives are responsible for their own taxes on any imputed taxable
income resulting from car expenses.
(d) The tax preparation services are pursuant to PMI policies that apply to all Swiss payroll-based management employees.
(a)

The following are the specific amounts paid by the Company under the Long-Term Assignment Guidelines:

Name and Principal Position

Year

Housing
($)

Home
Leave
($)

Martin G. King,
Chief Financial Officer

2019
2018
2017

364,796

18,300

Relocation($)

Tax
Equalization(a)
($)

4,322
154,449
26,806

151,310-

Other
ProgramAllowances(b)
($)
3,696
15,21870,674

Totals($)
159,328
169,667
480,576

Amounts that were paid or incurred in currency other than U.S. dollars are converted to U.S. dollars using average conversion rate for 2019of $1.00 = 0.9939 CHF.
(a) The tax equalization payments made pursuant to PMI’s Long-Term Assignment Guidelines are to ensure that an assignee’s income tax liability isapproximately the same as if he or she had not accepted a long-term international assignment. Payments for tax equalization often occur in years
following the actual tax year. The Company has covered the excess taxes on behalf of Mr. King pursuant to our assignment tax principle.
(b) Other Program Allowances include tax preparation services paid by the Company under the Long-Term Assignment Guidelines.

44 • PMI 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS
Grants of Plan-Based Awards During 2019
Estimated Possible Payouts
Under Non-Equity
Annual Incentive Plan(1)

Grant
Date

Threshold($)

2019
2/7/2019
2/7/2019

0Marc S. Firestone,
President, External Affairs& General Counsel

2019
2/7/2019
2/7/2019

0

Martin G. King,
Chief Financial Officer

2019
2/7/2019
2/7/2019

02019
2/7/2019
2/7/2019

02019
2/7/2019
2/7/2019

0

Name and Principal Position

André Calantzopoulos,
Chief Executive Officer

Jacek Olczak,
Chief Operating Officer
Miroslaw Zielinski,
Chief New Ventures Officer

Target($)

Maximum($)

Estimated Future Payouts
Under Equity
Incentive Plan(2)Threshold(#)

Target(#)

All Other
StockAwards: Grant Date
Number of Fair Value
Sharesofof Stock or
Stock
(3)
Maximum UnitsAwards(#)(#)($)

36,98073,960147,920

3,129,060 7,040,385
49,3105,946,014
3,806,486

15,2401,837,026
1,176,452

6,890

830,480
531,874

15,9601,924,656
1,232,033

11,4301,377,970
882,339

1,318,382 2,966,360
11,42522,85045,700873,750 1,965,938
5,165

10,33020,6601,551,029 3,489,815
11,97023,94047,8801,221,447 2,748,256
8,570

17,14034,280The estimated possible payouts are converted to U.S. dollars using the conversion rate on December 31, 2019, of $1.00 = 0.9671 CHF. The numbersin these columns represent the range of potential cash awards as of the time of the grant. Actual awards paid under these plans for 2019 are found in
the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
(2) On February 7, 2019, each of our named executive officers received 60% of his targeted equity award in the form of PSUs. The target number of PSUs
awarded was based on the grant date fair market value, determined by using the average of the high and the low trading prices of PMI stock on thatdate of $77.195. The closing price of PMI stock on that date was $76.73. These equity awards are scheduled to vest on February 16, 2022, to theextent performance goals pre-established and pre-weighted by the Committee are achieved. For the 2019-2021 performance cycle the performancegoals are based on TSR, compound annual adjusted OI growth rate and RRP volume. Dividend equivalents will be payable at vesting only on theearned shares.
The numbers in these columns represent the potential number of PSUs that can vest at three different levels of performance. Threshold assumes
achievement of a threshold performance level for each of the three pre-established performance goals resulting in the vesting of 50% of the target
number of PSUs. The vesting percentage can be zero if none of the threshold levels is achieved.
(3) On February 7, 2019, each of our named executive officers received 40% of his targeted equity award in the form of RSUs. The number of RSUs
awarded was based on the grant date fair market value, determined by using the average of the high and the low trading prices of PMI stock on thatdate of $77.195. The closing price of PMI stock on that date was $76.73. These equity awards are scheduled to vest on February 16, 2022. Dividend
equivalents are payable on a quarterly basis throughout the vesting restriction period.
On February 6, 2020, the following named executive officers received equity awards that will vest (subject to the conditions of the awards) on
February 15, 2023, as follows: Mr. Calantzopoulos, 53,730 RSUs, 80,600 PSUs; Mr. Firestone, 14,610 RSUs, 21,920 PSUs; Mr. King, 6,660 RSUs,
9,980 PSUs; Mr. Olczak, 19,540 RSUs, 29,300 PSUs; and Mr. Zielinski, 12,920 RSUs, 19,380 PSUs. The amount of these awards was determinedbased on 2019 individual performance and targeted award levels by salary grade and then split between PSUs (60%) and RSUs (40%).
(1)

PMI 2020 Proxy Statement • 45

COMPENSATION DISCUSSION AND ANALYSIS
Outstanding Equity Awards as of December 31, 2019

Stock Award
Grant Date(1)Name and Principal Position

André Calantzopoulos,
Chief Executive Officer

2/7/2019
2/7/2019
2/8/2018
2/8/2018
2/2/2017
2/2/2017

Marc S. Firestone,
President, External Affairs & General Counsel

Martin G. King,
Chief Financial Officer

2/7/2019
2/7/2019
2/8/2018
2/8/2018
2/2/2017
2/2/2017

Jacek Olczak,
Chief Operating Officer

2/7/2019
2/7/2019
2/8/2018
2/8/2018
2/2/2017
2/2/2017

Miroslaw Zielinski,
Chief New Ventures Officer(1)

2/7/2019
2/7/2019
2/8/2018
2/8/2018
2/2/2017
2/2/2017

2/7/2019
2/7/2019
2/8/2018
2/8/2018
2/2/2017
2/2/2017

Stock Awards
RSUs
PSUs
Number ofMarket Value
Number ofMarket or Payout
Units thatof Units that
Unearned Units Value of Unearned
Have notHave notthat Have not
Units that Have
Vested(1)(2)
Vested(3)Vested(1)(2)(4)
not Vested(3)
(#)
($)
(#)
($)

49,3104,195,788

44,1003,752,469

41,8703,562,718

15,2401,296,772

13,6301,159,777

13,0001,106,170

6,890

586,270

7,190

611,797

6,830

581,165

15,9601,358,036

13,0101,107,021

12,9401,101,065

11,430972,579

12,6301,074,687

8,650

736,02973,9606,293,256

66,1405,627,853

62,8005,343,652

22,8501,944,307

20,4401,739,240

19,5001,659,255

10,330878,980

10,780917,270

10,240871,322

23,9402,037,055

19,5201,660,957

19,4101,651,597

17,1401,458,443

18,9401,611,605

12,9801,104,468

These awards vest according to the following schedule:
Grant Date

Grant Type

Vesting Schedule

2/7/2019

PSU

2/7/2019
2/8/2018

RSU
PSU

2/8/2018
2/2/2017

RSU
PSU

2/2/2017

RSU

Award vests between 0-200% on 2/16/2022 upon certification of the achievementof performance goals pre-established by the Committee.
100% of award vests on 2/16/2022.
Award vests between 0-200% on 2/17/2021 upon certification of the achievementof performance goals pre-established by the Committee.
100% of award vests on 2/17/2021.
Award vested at 60% on 2/19/2020 based upon certification of the achievementof performance goals pre-established by the Committee.
100% of award vested on 2/19/2020.

Upon normal retirement or upon separation from employment by mutual agreement after reaching age 58, outstanding RSUs will vest immediately,while outstanding PSUs will vest at the end of the relevant three-year performance cycle to the extent performance goals are met. Upon death or
disability, all outstanding RSUs will vest and all outstanding PSUs will vest at 100% of target. In all other cases, the extent of vesting or forfeiture will be
subject to the Committee’s discretion.
(Notes continued on next page)46 • PMI 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS(Notes continued...)Dividend equivalents paid in 2019 on outstanding RSUs for each of our named executive officers were as follows: Mr. Calantzopoulos, $614,908;
Mr. Firestone, $189,008; Mr. King, $94,882; Mr. Olczak, $188,997; and Mr. Zielinski, $146,483. Dividend equivalents paid in 2019 on vested PSUs foreach of our named executive officers were as follows: Mr. Calantzopoulos, $733,924; Mr. Firestone, $208,897; Mr. King, $99,696; Mr. Olczak,$217,472; and Mr. Zielinski, $139,781. Any variations in the amounts reported previously result from the impact of the exchange rate between USD and
CHF.
(3) Based on the closing market price of PMI common stock on December 31, 2019, of $85.09.
(4) Amount assumes target performance goals are achieved. The actual number of units that vest will range between 0% and 200% depending on actual
performance during the performance cycle.
(2)

Stock Option Exercises (1) and Stock Vested During 2019
Stock Awards
Number of
SharesAcquired on
Vesting(#)

Value
Realized on
Vesting($)

André Calantzopoulos,
Chief Executive Officer

104,192

8,813,080

Marc S. Firestone,
President, External Affairs & General Counsel

29,6562,508,453

Martin G. King,
Chief Financial Officer

14,1601,197,724

Jacek Olczak,
Chief Operating Officer

30,8702,611,139

Miroslaw Zielinski,
Chief New Ventures Officer

19,844

1,678,505

Name and Principal Position(1)

The Company does not issue stock options.

On February 19, 2020, vesting restrictions lapsed for the following RSUs granted in 2017: Mr. Calantzopoulos, 41,870
shares; Mr. Firestone, 13,000 shares; Mr. King, 6,830 shares; Mr. Olczak, 12,940 shares; and Mr. Zielinski, 8,650 shares.
On February 19, 2020, the PSUs granted in 2017 to each of the named executive officers vested at an overall performancefactor of 60% (as certified by the Committee) as follows: Mr. Calantzopoulos, 37,680 shares; Mr. Firestone, 11,700 shares;
Mr. King, 6,144 shares; Mr Olczak, 11,646 shares; and Mr. Zielinski, 7,788 shares.
Dividend equivalents paid in 2020 on vested PSUs for each of our named executive officers were as follows:
Mr. Calantzopoulos, $502,274; Mr. Firestone, $155,961; Mr. King, $81,900; Mr. Olczak, $155,241; and Mr. Zielinski,$103,814.

PMI 2020 Proxy Statement • 47

COMPENSATION DISCUSSION AND ANALYSIS
Pension Benefits
The Pension Benefits table and the Non-Qualified Deferred Compensation table below generally reflect amounts
accumulated as a result of the NEOs’ service over their full careers with us, our prior parent company and affiliates. The
increments related to 2019 are reflected in the Change in Pension Value column of the Summary Compensation Table on
page 43. Our plans providing pension benefits are described below in the Pension Benefits table, and our defined
contribution plans are described in the Non-Qualified Deferred Compensation table on page 52.

Name and Principal Position

Plan Name

Number ofYears ofPresent Value Payments
Credited of Accumulated During Last
Service(1)Benefits(2)(3)
Fiscal Year
(#)
($)
($)

André Calantzopoulos,
Chief Executive Officer

Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland

38.00
14.92
14.00

21,125,746
3,521,996
9,034,148-

Marc S. Firestone,
President, External Affairs& General Counsel

Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland

7.75
6.92
7.75

3,520,984
350,035
1,329,233-

Martin G. King,
Chief Financial Officer

Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland
Retirement Plan for Salaried Employees
Benefit Equalization Plan (BEP)

14.58
13.92
11.00
14.00
14.00

5,690,097
955,910
1,453,391
1,021,702
6,238,477-

Jacek Olczak,
Chief Operating Officer

Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland

30.00
13.92
11.00

12,805,922
986,495
4,941,296-

Miroslaw Zielinski,
Chief New Ventures Officer

Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland

34.00
14.92
14.00

13,577,651
1,578,929
2,700,282-

As of December 31, 2019, each named executive officer’s total years of service with PMI or its affiliates were as follows: Mr. Calantzopoulos, 34.92
years; Mr. Firestone, 7.71 years; Mr. King, 28.58 years; Mr. Olczak, 26.79 years; and Mr. Zielinski, 28.33 years. The years shown in this column are theyears credited under the named plan for purposes of benefit accrual. Additional years may count for purposes of vesting or early retirement eligibility.
Differences between each named executive officer’s total service and the credited service shown for each plan result from transfers between entities
sponsoring various plans. Mr. King’s credited service under the U.S. plans reflects his prior service as a U.S. payroll-based employee. While suchcredited service is now frozen, he continues to earn eligibility and vesting service and increases in his benefit due to increases in his compensation as aresult of his continued service with PMI. The Pension Fund of Philip Morris in Switzerland allows employees to purchase additional service credit with
contributions from their own funds, and Messrs. Calantzopoulos, Olczak, and Zielinski have purchased 3.08, 15.67, and 13.83 years, respectively,
without any Company contribution.
(2) The amounts shown in this column for pension plans in Switzerland are based on a 60% joint and survivor annuity commencing at age 62 (the earliest
date on which, assuming continued employment, the individual would be eligible for benefits that are not reduced for early commencement) and thefollowing actuarial assumptions: discount rate 0.15%, mortality table LPP 2015 (fully generational) for expected improvements in mortality and interest
rate on account balances of 3.2%. Present value amounts in Swiss francs are converted to U.S. dollars using the conversion rate on December 31,
2019, of $1.00 = 0.9671 CHF.
The amounts shown in this column for Mr. King’s U.S. pension benefits are based on a single life annuity (or, for the BEP, a lump sum payment) using
the same assumptions applied for year-end 2019 financial disclosure under FASB ASC Topic 715 (discount rate 3.30%, BEP lump sum rate 2.80%,
mortality table fully generational Pri-2012 with MP2019 projection and IRS 2021 table for the BEP lump sum), except that in accordance with SEC
requirements, benefits are assumed to commence at the earliest date on which, assuming continued employment, the individual would be eligible forbenefits that are not reduced for early commencement.
Like all present value amounts, the amounts shown in this column change as the interest rate used to discount projected future benefits is adjusted,with lower interest rates producing higher present values and higher interest rates producing lower present values.
(Notes continued on next page)(1)

48 • PMI 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS(3)(Notes continued...)In addition to the benefits reflected in this column, we generally provide a survivor income benefit allowance, or SIB allowance, to the surviving spouseand children of U.S. payroll-based employees who die while covered by our Retirement Plan for Salaried Employees. Following the death of a retiree
who was married at the time of retirement and whose retirement benefits are being paid as a single life annuity, the surviving spouse becomes entitledto a SIB allowance commencing four years after the retiree’s death, in an amount equal to the amount the spouse would have received if the participant
had elected to receive monthly payments under the Retirement Plan in the form of a 50% joint and survivor annuity. The present value of the
post-retirement SIB benefits for Mr. King, assuming his spouse survives him, is $52,720. There is no SIB allowance under the BEP because the BEP
benefit is only available as a lump sum.
The surviving spouse of a participant who dies prior to retirement and prior to age 61 becomes entitled to receive 25% of the base salary of thedeceased employee commencing four years after the participant’s death, provided the spouse has not remarried, and continuing until the deceased
employee would have reached age 65. At that time, the surviving spouse receives the same survivor benefit he or she would have received if thedeceased employee continued to work until age 65 earning the same base salary as in effect at the time of death. These benefits are reduced by any
death benefits payable from the Retirement Plan. If there is no surviving spouse, SIB allowances for each child equal 10% of the base salary of thedeceased employee (to a maximum of 30% of base salary), become payable monthly beginning four years after the employee’s death, and continue
until the child reaches age 25 if a full-time student (age 19 if not).

PMI 2020 Proxy Statement • 49

COMPENSATION DISCUSSION AND ANALYSIS
Retirement Plans for U.S. Payroll-Based Employees
Pensions for our U.S. payroll-based employees arepayable from the tax-qualified Retirement Plan andnon-qualified supplemental plans. These plans recognize
the employees’ prior service with companies with which
we were previously affiliated.
Mr. King, who is a former U.S. payroll-based employee, has
accrued benefits under the tax-qualified Retirement Plan andthe non-qualified supplemental Benefit Equalization Plan
(BEP). The provisions of these two plans are described
below.
The BEP provides both supplemental pension benefits
and supplemental deferred profit-sharing benefits. The
provisions of the BEP relating to deferred profit-sharing
benefits are described following the Non-QualifiedDeferred Compensation table.
Retirement Plan for Salaried Employees
The tax-qualified Retirement Plan is a non-contributory
plan maintained for the benefit of our U.S. payroll-basedsalaried employees hired before January 1, 2009.
Subject to tax law limits, the pension formula generally
applicable under the Retirement Plan provides for lifetime
benefits following termination of employment equal to(a) 1.75% of the employee’s average compensation (thesum of annual salary and annual incentive compensation
award in the 60 consecutive months during theemployee’s last 120 months of service that, when divided
by five, produces the highest average), minus (b) 0.30%
of such compensation up to the applicable Social
Security-covered compensation amount, times (c) yearsof credited service (up to a maximum of 35). Social
Security-covered compensation is generally an amountequal to the average of the Social Security taxable wage
bases for the 35-year period that ends in the year theparticipant reaches age 65. The resulting benefit isexpressed as a single life annuity payable commencing
at normal retirement age.
Employees who terminate employment before age 55
with vested benefits may commence receiving paymentof their accrued pensions after attaining age 55, with
reductions for early commencement of 6% for each year
by which commencement precedes age 65. For an
employee who terminates employment after age 55, thereduction for early commencement is generally 6% foreach year by which commencement precedes age 60. If
an employee has 30 years of service and is age 55 orolder, or is 60 or older with 5 years of service, the annuity
immediately payable on early retirement is 100% of thatpayable at normal retirement age.

50 • PMI 2020 Proxy Statement

Benefit Equalization Plan (BEP)
The tax law applicable to the funded tax-qualified
Retirement Plan limits the annual compensation that can betaken into account in determining the five-year averagecompensation under the plan. As a result of this and certain
other tax limits, only a portion of the benefits calculated
under the Retirement Plan formula can be paid to affected
employees from the Retirement Plan. To compensate forthe loss of these benefits under the funded tax-qualified
plan, eligible employees accrue supplemental benefits
under non-qualified plans. Generally, the supplemental
pension benefits accrued under the BEP equal thedifference between (a) the pension benefits determined
under the Retirement Plan provisions described above,
disregarding the tax law limits, and (b) the benefits that canbe provided from the Retirement Plan after taking the tax
law limits into account.
Retirement Plans for Swiss Payroll-Based Employees
Pensions for our Swiss payroll-based employees arepayable from a funded defined benefit pension plan andincentive compensation (IC) pension plan qualifying forfavorable treatment under Swiss law. To the extent that
Swiss tax or other limitations do not allow paying the full
pension under the qualified plans, the balance is expected
to be payable under a supplemental pension plan.
Pension Fund of Philip Morris in Switzerland
With limited exceptions, all Swiss payroll-based employees
over 25 years of age become immediately covered by thePension Fund of Philip Morris in Switzerland, a broad-based
contributory-funded plan providing defined retirement,
disability and death benefits up to limits prescribed under
Swiss law. Retirement benefits are expressed as an annuity
at normal retirement age equal to 1.8% of the participant’s
five-year average pensionable salary (base salary minus
two-thirds of the maximum social security benefits of CHF
28,440 in 2019) multiplied by years of credited service (to amaximum of 40 to 41 years, depending on the employee’s
date of birth). Effective April 1, 2015, employees between theages of 25 and 34 contribute 6% of their pensionable salaryto the Fund, and the contribution increases to 7% for
employees between the ages of 35 and 54 and 8% for
employees between the ages of 55 and 65. Subject to certain
conditions, participants may elect to receive pension benefits
entirely or partially in a lump sum. For determining lump sum
values, a discount rate of 4% and the LPP 2015 mortality
table are used. The LPP mortality table is a commonly usedmortality table in Switzerland. For an employee whocompletes 30 years of service and retires at age 62, thistranslates into payments equivalent to a pension of 54% of
five years’ annual average pensionable salary. For an

COMPENSATION DISCUSSION AND ANALYSIS
employee with 40 years of credited service at age 65, this“replacement ratio” is approximately 72% of averagesalary. Participants may retire and commence benefits as
early as age 58; however, for each year that retirement
precedes age 62, the 1.8% multiplier used to calculate
the amount of the retirement pension is reduced by
0.06% (at age 58 the multiplier is 1.56%). Swiss law
permits participants in a pension plan to make additional
voluntary contributions to the pension plan tocompensate for missing years of credited service.
If an employee terminates employment with us before
age 58, the lump sum value of the pension calculatedusing the termination lump sum factors is transferred
either to a new pension fund or to a blocked bankaccount until early retirement age is reached. An
employee who is age 50 or over upon termination of
employment can elect, under certain conditions, toremain in the plan as an external member. In this case,neither the employee nor the employer can contributeany further funds. At the age of 58, the former employee
must then elect to take retirement in the form of anannuity, a lump sum or a mix of both.
IC Pension Plan of Philip Morris in Switzerland
Swiss payroll-based employees in salary grades 14 andabove who are eligible to participate in the annual incentive
compensation award program described above are also
eligible to participate in the IC Pension Plan of Philip Morrisin Switzerland, a funded plan which, for the named
executive officers, provides for participant contributions of
up to 1.5% of pensionable salary (as defined above),subject to maximum Swiss pension law limits, and an equalmatching contribution from the employer. As with thepension plan, participants may make additional voluntary
contributions subject to certain terms and conditions.
Benefits ultimately received depend on interest rates set
by the Pension Board of the plan (which consists ofmembers appointed by the employer and an equal
number selected by participants in the plan) and arepayable in a lump sum or as an annuity. The plan
guarantees that there is no loss of principal on either theemployee contributions or the Company match. In 2019,the assets of the funds had a positive performance of
18.6%, and 13.0% was credited on plan balances.

If an employee terminates employment with theCompany before age 58, the employee’s account value
is transferred to either a new pension fund or to a
blocked bank account until early retirement age isreached. An employee who is age 50 or over upon
termination of employment can elect under certain
conditions to remain in the plan as an external member.
In this case, neither the employee nor the employer cancontribute any further funds to the plan although interest
does accrue on the account balance. At the age of 58,
the former employee must then elect to take retirementin the form of an annuity, a lump sum payment or a mixof both.
Supplemental Plan of Philip Morris in Switzerland
For some Swiss payroll-based employees, including ourNEOs, the laws and regulations applicable to the Pension
Fund of Philip Morris in Switzerland and the IC Pension
Plan of Philip Morris in Switzerland limit the benefits thatcan be provided under those plans. For these
employees, we maintain a Supplemental Plan underwhich an amount is calculated and deposited annually ina Swiss foundation to make up for the difference between
the full pension an employee would have received hadthese plans not been subject to such limitations(assuming the employee becomes entitled to benefits
from the Supplemental Plan). However, the annual
deposits do not serve to increase the amount that anindividual would have received absent such limits. In
determining the amount of the annual deposit, theactuarial assumptions used are the same as thosedescribed above for the Pension Fund of Philip Morris in
Switzerland.
In the event of a Supplemental Plan participant’s
termination of employment from the Company, if theFoundation Board determines in its sole discretion thathe or she is entitled to a benefit, the Supplemental Planbenefit is paid in a lump sum at the time that benefits first
become payable to the participant under the Pension
Fund of Philip Morris in Switzerland and the IC Pension
Plan of Philip Morris in Switzerland. As the Supplemental
Plan is not a tax-qualified plan, the benefits from thisplan, when paid, are adjusted for the loss of favorable
tax-qualified plan treatment.

PMI 2020 Proxy Statement • 51

COMPENSATION DISCUSSION AND ANALYSIS
Non-Qualified Deferred Compensation

Name and Principal Position

Plan Name

Martin G. King,
Chief Financial Officer

Benefit Equalization Plan (BEP),
Deferred Profit-Sharing(1)

Executive
Registrant
Contributions Contributionsin 2019
in 2019
($)
($)

0

0

Aggregate
Aggregate Aggregate
Balance as ofEarnings Withdrawals/ December 31,
in 2019(1)Distribution
2019
($)
($)
($)

462

0

21,080

The amount in this column consists of amounts credited as earnings for 2019 on account balances attributable to the prior participation under thedefined contribution portion of the BEP. This amount does not constitute above-market earnings and, accordingly, is not included in amounts reported
in the Summary Compensation Table on page 43.

Deferred Profit-Sharing and Benefit Equalization Plan
For U.S. payroll-based employees, we provide non-qualified
defined contribution benefits supplementing the benefits
provided under our tax-qualified Deferred Profit-Sharing
Plan for Salaried Employees, or DPS. Under the DPS,
contributions are made on behalf of each participant foreach year. Currently, none of our named executive officers
is eligible for DPS contributions.
As is the case for the Retirement Plan, the applicable
U.S. tax law limits the amount of compensation($280,000 for 2019) that can be taken into account under
the tax-qualified DPS for any year and imposes otherlimits on the amounts that can be allocated to individuals
under the DPS. A DPS participant whose salary was
more than the compensation limit or who was otherwise
affected by tax law limits is entitled to a supplemental
profit-sharing benefit in an amount generally equal to the52 • PMI 2020 Proxy Statement

additional benefits the participant would have received
under the DPS but for the application of the tax law limits.
The funds accumulated in the DPS portion of BEP for
Mr. King reflect the contributions while he was a U.S.
payroll-based employee.
The DPS fund used as an earnings measure under thisportion of the BEP is invested in a variety of high-quality
fixed-income instruments with strong credit ratings and,for 2019, produced earnings at a rate of approximately
2.2%. Participants typically receive their supplemental
profit-sharing benefits upon termination of employment ina lump sum or, if elected in advance, as a deferred lumpsum payment or in installments over a number of years
not to exceed their life expectancy.

COMPENSATION DISCUSSION AND ANALYSIS
Employment Contracts, Termination of Employment and Change in Control Arrangements
Our Swiss payroll-based executive officers are covered bycontracts, which do not include change in control
provisions. As a general matter, PMI has not utilized
special employment contracts for its named executive
officers. In exceptional circumstances, the Committee may
approve employment contracts with provisions tailored tosuch circumstances. For example, the employment
contract with Mr. Babeau, our new Chief Financial Officer
as of May 1, 2020, entitles him to severance if his
employment is terminated without cause. Depending on
the timing of such termination, Mr. Babeau would beentitled to a lump sum cash payment of up to two times hisbase salary and incentive compensation award (which
could be prorated). His RSUs will vest fully and PSUs willvest on a prorated basis as scheduled and certified by theCommittee. Any severance under the contract isconditioned on a 24-month non-compete obligation. As of
May 1, 2020, Mr. King will be entitled to severance if his
employment is terminated without cause. Mr. King would
be entitled to a lump sum cash payment determined basedon his years of service, equivalent to 18 months of hisbase salary, plus his prorated incentive compensation
award. Mr. King’s RSUs will vest fully, and his PSUs willvest as scheduled and certified by the Committee. In
addition, Mr. King would be entitled to a lump sum cash
payment equivalent to 18 months of his base salary uponcompliance with a 24-month non-competition period
following the termination date. Severance under thesecontracts is subject to the provisions described in theproxy statement under the section “Clawback Policy
Regarding the Adjustment or Recovery of Compensation,”and cause is defined in our 2017 Performance IncentivePlan, filed with the SEC on March 23, 2017 as Exhibit B to
the proxy statement.
Our 2018 and 2019 equity compensation awards were
granted under the 2017 Performance Incentive Plan. That
plan includes a double-trigger feature. Under the plan,
outstanding equity awards will not accelerate or vest if theentity acquiring PMI agrees to replace the award with atime-based equity award of equivalent value. For thispurpose, the value of outstanding PSUs would bedetermined based on actual performance through thedate of the change in control if more than one-half of theperformance cycle has elapsed and such performance isdeterminable. Otherwise, the value of the outstanding
PSUs will be based on the assumption that target
performance had been achieved. If outstanding equity
awards are not replaced, the outstanding RSUs would

fully vest, and the value of outstanding PSUs would bedetermined as set forth above and both be payable
immediately in cash. Fully earned but unpaid annual
incentive compensation awards would become payable.
If outstanding equity awards are replaced as describedabove but, within two years after the change in control,
the employee’s employment is terminated involuntarilyand other than for cause or the employee terminates
employment for good reason, the replacement awards
would fully vest.
Under PMI’s 2017 Performance Incentive Plan, a change
in control occurs: (i) upon an acquisition of 20% or moreof either PMI’s common stock or the voting power of
PMI’s voting securities, excluding certain acquisitions
involving PMI or its affiliates or where PMI’s beneficial
owners continue to meet certain ownership thresholds;(ii) when members of the PMI Board as of the effective
date of PMI’s 2017 Performance Incentive Plan, or
thereafter nominated or elected by such members, cease
to constitute a majority of the PMI Board; (iii) upon certain
reorganizations, mergers, share exchanges andconsolidations involving PMI; or (iv) upon the liquidation
or dissolution, or sale of substantially all of the assets of
PMI, with limited exceptions.
Our 2017 equity compensation awards were granted
under PMI’s 2012 Performance Incentive Plan, which
also includes a double-trigger feature. Under that plan,
the changes to vest or pay applicable awards occur
immediately upon a change in control only if the entity
acquiring PMI does not agree to assume or replace theawards. In addition, if the acquiring entity agrees toassume or replace the awards, but an employee’s
employment is terminated involuntarily and other than forcause or the employee terminates employment for goodreason within two years after the change in control, theapplicable awards will become vested or be payable
upon the employee’s termination of employment asfollows:▪

the restrictions on outstanding RSUs would lapse;▪

outstanding PSUs would vest on a pro-rata basis attarget and be payable in cash;▪

unless otherwise determined by the Compensation andLeadership Development Committee, equity awards
would be cashed out at the change in control price; andPMI 2020 Proxy Statement • 53

COMPENSATION DISCUSSION AND ANALYSIS▪

fully earned but unpaid annual incentive compensation
awards would become payable.

The definition of change in control in the 2012 Plan issimilar to that in the 2017 Plan.
The amounts in the accompanying table are estimates of
the amounts that would have become payable on achange in control of PMI, calculated as if a change incontrol occurred on December 31, 2019, applying certain
assumptions. For outstanding equity awards granted
under the 2012 Performance Incentive Plan, we haveassumed that the awards become vested and payable asof December 31, 2019, either because the acquirer did
not assume or replace the awards or because theemployee’s employment was involuntarily terminated. For
outstanding equity awards granted under the 2017
Performance Incentive Plan and annual cash incentive
awards, we have assumed that the outstanding awards
became vested and payable as of December 31, 2019,because they were not replaced by the acquirer or
employment was involuntarily terminated.

Name

Unvested
PSUs(1)($)

Completed2019 Annual
Incentive
Compensation
UnvestedAward
RSUs(1)
Cycle(2)
($)
($)

Total
($)

André Calantzopoulos 17,264,761

11,510,975

3,129,060

31,904,796

Marc S. Firestone

5,342,802

3,562,719

1,318,382

10,223,903

Martin G. King2,667,572

1,779,232

873,750

5,320,554

Jacek Olczak

5,349,609

3,566,122

1,551,029

10,466,760

Miroslaw Zielinski

4,174,516

2,783,295

1,221,447

8,179,258

Assumes the change in control price is equal to the closing market
price of PMI on December 31, 2019, of $85.09. The value of unvested
PSUs granted under the 2012 Performance Incentive Plan assumes
target number of shares awarded prorated for the amount of time
lapsed in the performance cycle. The value of unvested PSUs granted
under the 2017 Performance Incentive Plan assumes target numberof shares awarded (because less than half of the performance cycle
had lapsed or actual performance was not determinable).
(2) Assumes target award payable under our annual incentive
compensation award program for a full year. Amounts are converted
to U.S. dollars using the conversion rate on December 31, 2019, of$1.00 = 0.9671 CHF.
(1)

54 • PMI 2020 Proxy Statement

Benefits payable under PMI’s qualified pension andprofit-sharing plans and supplemental plans are discussed
above. None of those plans provides PMI’s executive
officers with an additional enhancement, early vesting orother benefit in the event of a change in control or
termination of employment, except for certain plan
provisions applicable to all plan participants that ensurevesting and continuation of profit-sharing contributions forthe year of a change in control and the following two years.
Mr. King is already fully vested under these plans. Similarly,
no enhanced provisions apply to the above-named
executive officers with respect to continued medical, life
insurance or other insurance coverage following terminationof employment, whether or not in connection with a change
in control.
Involuntary Separation Without Cause
In the event of involuntary separation without cause, aseverance payment is typically determined as a multiple ofmonthly base salary. The amount of severance paid varies
based on a number of factors, including the circumstancesof the termination and the executive’s years of service.
Conditions to accelerated vesting of equity awards are set
out in the applicable award agreements and summarized on
page 46. Severance is typically conditioned on our named
executive officers’ agreement not to compete with theCompany.
Voluntary Early Retirement or Retirement
In the event of voluntary early retirement or retirement, aretirement allowance is typically determined based on theannual base salary midpoint for the executive’s grade. The
amount varies based on a number of factors, including thecircumstances of retirement and the executive’s years ofservice.

COMPENSATION DISCUSSION AND ANALYSIS
Pay Ratio
About Our Workforce
At December 31, 2019, we employed approximately
73,500 people worldwide. As our manufacturing andsales activities are outside of the U.S., 99.8% of ouremployees (or approximately 73,400) are located outsideof the U.S. Approximately 63% of our employees arelocated in non-OECD countries, which tend to be lesser
developed countries with lower wages than OECD
countries. Approximately 34% of our workforce is inIndonesia. The national average annual net salary isapproximately $2,400 in that country.(1) Approximately
63% of our overall workforce is covered by collective
labor agreements, and approximately 70% of ourworkforce in non-OECD countries is covered by collective
labor agreements.
Our Pay Ratio
Given our global footprint, and in accordance with theregulatory guidance, we have determined that the
cost-of-living adjusted ratio based on the purchasing
power parity index (or PPP) reflects the differences in theliving and economic conditions of approximately 90
countries where our employees reside.(2) The PPP
conversion factor represents the number of units of local
currency that can buy a basket of goods that 1 CHF
would buy in Switzerland, where our CEO resides. The
total PPP-adjusted compensation for our median
employee residing in Indonesia is approximately CHF
53,756.(3) Comparing this employee’s total PPP-adjustedcompensation to the total compensation of our CEO in
2019, our adjusted pay ratio is 396:1.(4)Had we not used the PPP adjustment, our median
employee’s total 2019 compensation would have been
approximately $19,134. Comparing this employee’s totalcompensation to the total compensation of our CEO set
forth in the Summary Compensation Table on page 43,

the ratio would be 1,156:1. For reference, the ratio of the
CEO’s total compensation to that of our median
employee in Switzerland is 61:1. At December 31, 2019,
we employed approximately 3,500 people in Switzerland,
including approximately 330 in our factory and 820 in our
R&D facility in Neuchâtel. In addition, the ratio of ourCEO’s total compensation to the average totalcompensation of our other NEOs for 2019, was 2.6:1.
PMI as an Employer
We are the first multinational company to receive a global
EQUAL-SALARY certification from the EQUAL-SALARY
Foundation.
This year, the Top Employer Institute recognized us as a
Global Top Employer for the fourth consecutive year andfor the first time in Asia/Pacific. The Top Employer
Institute also granted us a Top Employer certification in
59 countries worldwide, including Indonesia.
(1)

http://www.bi.go.id/sdds/default.asp#RealSector.

(2)

The PPP conversion factor is described at http://data.worldbank.org.
The PPP indices are publicly available in the jurisdictions where our
employees reside, with limited exceptions.

(3)This represents the median of the total compensation of all
employees. As there was no significant change in our employee
population, or compensation arrangements, this median employee(selected in October 2017) is the same as the one described in our
2018 proxy statement, filed with the U.S. Securities and Exchange
Commission on March 29, 2018.

(4)

To identify a median employee in the above calculations, weanalyzed base salary information because that is the only pay
element applied consistently throughout our global workforce.

PMI 2020 Proxy Statement • 55

ADVISORY VOTE APPROVING EXECUTIVE COMPENSATIONThe Compensation Discussion and Analysis section
discusses in detail how our compensation programs support
our business and financial objectives, how they work andare administered under the direction of our independent
Compensation and Leadership Development Committee,
and how the Committee’s decisions concerning the 2019
compensation of our executive officers were directly tied toour performance.
Pursuant to Section 14A of the Exchange Act, we areasking our shareholders to indicate their support for our
named executive officer compensation as described in thisproxy statement. This annual say-on-pay vote gives ourshareholders the opportunity to express their views on ourNEOs’ compensation at each Annual Meeting of
Shareholders. This vote is not intended to address any
specific item of compensation, but rather the overall
compensation of our named executive officers and thephilosophy, policies and practices described in this proxystatement. Accordingly, we will ask our shareholders to vote

“FOR” the following resolution at the Annual Meeting:
RESOLVED, that the Company’s shareholders
approve, on an advisory basis, the compensation of
the named executive officers, as disclosed in the
Company’s Proxy Statement for the 2020 Annual
Meeting of Shareholders pursuant to thecompensation disclosure rules of the Securities andExchange Commission, including the Compensation
Discussion
andAnalysis,theSummary
Compensation Table and the other related tables
and disclosure.
This say-on-pay vote is advisory and, therefore, notbinding on the Company, the Compensation andLeadership Development Committee or the Board of
Directors. The Board and the Committee value theopinions of our shareholders and will review the voting
results when making future decisions regarding executive
compensation.

The Board recommends a vote FOR the resolution approving the compensation of
our named executive officers.

56 • PMI 2020 Proxy Statement

AUDIT COMMITTEE MATTERS
Audit Committee Report for the Year Ended
December 31, 2019
To Our Shareholders:Management has the primary responsibility for the financial
statements and the reporting process, including the systems
of internal accounting control. The Audit Committeemonitors the Company’s financial reporting processes andsystems of internal accounting control, the independence
and the performance of the independent auditors, and theperformance of the internal auditors. The Audit Committee
has the sole authority for appointing, compensating andoverseeing the work of the independent auditors.
The Audit Committee has received representations frommanagement that the Company’s consolidated financial
statements were prepared in accordance with accounting
principles generally accepted in the United States ofAmerica, and the Audit Committee has reviewed anddiscussed the consolidated financial statements withmanagement and the independent auditors. The Audit
Committee has discussed with the independent auditors,
including in executive sessions without the presence ofmanagement, the independent auditors’ evaluation of theaccounting principles, practices and judgments applied
by management, the adequacy of the Company’s
financial reporting processes, controls and procedures,and the Audit Committee has discussed any items
required to be communicated to it by the independent
auditors in accordance with regulations promulgated by
the U.S. Securities and Exchange Commission, thePublic Company Accounting Oversight Board and theIndependence Standards Board.
The Audit Committee has received from the independent
auditors written disclosures and a letter required byapplicable requirements of the Public Company
Accounting Oversight Board regarding the independentaccountant’s communications with the Audit Committee
concerning their independence and has discussed with
the independent auditors the auditors’ independence
from the Company and its management. The Audit
Committee has pre-approved all audit and permissible
non-audit services provided by the independent auditors
and the fees for those services. As part of this process,the Audit Committee has reviewed the audit fees of the
independent auditors. It has also reviewed non-audit
services and fees to assure compliance with regulations
prohibiting the independent auditors from performing
specified services that might impair their independence,as well as compliance with the Company’s and the Audit
Committee’s policies.
The Audit Committee discussed with the Company’s
internal auditors and independent auditors the overall
scope of and plans for their respective audits. The Audit
Committee has met with the internal auditors and the
independent auditors, separately and together, with andwithout management present, to discuss the Company’s
financial reporting processes and internal control overfinancial reporting and overall control environment. The
Audit Committee has reviewed significant audit findings
prepared by the independent auditors and those preparedby the internal auditors, together with management’s
responses.
In reliance on the reviews and discussions referred toabove, the Audit Committee recommended to the Boardof Directors the inclusion of the audited consolidated
financial statements in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2019.
Audit Committee:
Jennifer Li, Chair
Massimo Ferragamo
Werner Geissler
Jun Makihara
Lucio A. Noto
Stephen M. Wolf
The information contained in the report above shall not
be deemed to be “soliciting material” or to be “filed” with
the Securities and Exchange Commission or subject toRegulation 14A or 14C or the liabilities of Section 18 of
the Securities Exchange Act of 1934, as amended, norshall such information be incorporated by reference into
any future filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as
amended, except to the extent specifically incorporated
by reference therein.

PMI 2020 Proxy Statement • 57

AUDIT COMMITTEE MATTERS
Independent Auditors’ Fees
Aggregate fees, including out-of-pocket expenses, paid to our independent auditors, PricewaterhouseCoopers SA,
consisted of the following (in millions):

Audit Fees(1)

2019

2018

$20.46$19.33

Audit-Related Fees(2)

0.69

1.01

Tax Fees(3)

3.59

3.51

All Other Fees(4)

2.10

1.60

$26.84$25.45TOTAL

Fees and expenses associated with professional services in connection with (i) the audit of the Company’s consolidated financial statements andinternal control over financial reporting, including statutory audits of the financial statements of the Company’s affiliates; (ii) reviews of the Company’s
unaudited condensed consolidated interim financial statements; (iii) reviews of documents filed with the Securities and Exchange Commission; and (iv)audit procedures in connection with transactions, financings and system implementations.
(2) Fees and expenses for professional services for audit-related services, which include due diligence related to acquisitions and divestitures, employee
benefit plan audits, accounting consultations and procedures relating to various other audit and special reports.
(3) Fees and expenses for professional services in connection with U.S. and foreign tax compliance assistance, consultation and advice on various foreign
tax matters, transfer pricing documentation for compliance purposes and advice relating to customs and duties compliance matters.
(4) Fees and expenses for professional services relating to market analysis and other professional services, including in connection with sustainability
reporting, equal salary certification and project assurance assessments.
(1)

Pre-Approval Policy
The Audit Committee’s policy is to pre-approve all audit
and permissible non-audit services provided by the
independent auditors. These services may include audit
services, audit-related services, tax services and otherservices. Pre-approval is detailed as to the particularservice or category of service and is subject to a specificbudget. The Audit Committee requires the independent
auditors to report on the actual fees charged for eachcategory of service at Audit Committee meetings
throughout the year.

58 • PMI 2020 Proxy Statement

During the year, circumstances may arise when it may
become necessary to engage the independent auditors for
additional services not contemplated in the original
pre-approval. In those instances, the Audit Committee
requires specific pre-approval before engaging theindependent auditors. The Audit Committee has delegatedpre-approval authority to the Chair of the Audit Committee
for those instances when pre-approval is needed prior to ascheduled Audit Committee meeting. The Chair of the
Audit Committee must report on such approvals at thenext scheduled Audit Committee meeting.

RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORSThe Audit Committee has selected PricewaterhouseCoopers
SA (“PwC”) as the Company’s independent auditors for the
fiscal year ending December 31, 2020, and has directed thatmanagement submit the selection of independent auditors toshareholders for ratification at the Annual Meeting.
Representatives of PwC are expected to attend the Virtual
Annual Meeting, will have an opportunity to make astatement if they so desire and will be available to respond to
appropriate questions.

▪

The Audit Committee’s belief that PwC has thecapability and expertise and professionals in the many
countries that are necessary to conduct a quality auditof our worldwide business;▪

The Audit Committee reviews and evaluates the leadpartner and senior auditors on the account andselects the incoming lead partner when the outgoinglead partner rotates off the account;In determining to reappoint PwC, the Audit Committee
considered a number of factors, including the following:▪

External data relating to audit quality and performance,
including the Public Company Accounting Oversight
Board’s reports on PwC and its peer firms; and▪

The appropriateness of PwC’s fees.

▪

PwC has served as the Company’s independent
auditors since we became an independent company
in 2008;▪

The results of the Audit Committee’s evaluation of
PwC’s qualifications, performance, independence andquality control procedures;▪

The Audit Committee’s belief that PwC’s deep
knowledge of the Company and the Company’s
information technology and systems platforms better
equips it to focus the audit work where it is mostneeded, enhances the quality of risk-based reviews,
and enables it to design and implement a superior
audit plan and to effectively test for control
weaknesses;

Shareholder ratification of the selection of PwC as theCompany’s independent auditors is not required by theCompany’s by-laws or otherwise. However, we aresubmitting the selection of PwC to the shareholders for
ratification as a matter of good corporate practice. If theshareholders fail to ratify the selection, the Audit
Committee will reconsider whether or not to retain PwC.
Even if the selection is ratified, the Audit Committee in its
discretion may direct the appointment of a different
independent audit firm at any time during the year if it isdetermined that such a change would be in the bestinterests of the Company and its shareholders.

The Board recommends a vote FOR the ratification of the selection ofPricewaterhouseCoopers SA as the Company’s independent auditors.

PMI 2020 Proxy Statement • 59

RELATED PERSON TRANSACTIONS AND CODE OF CONDUCTThe Board has adopted a policy, which is available on the
Company’s
website,atwww.pmi.com/who-we-are/corporate-governance/overview, that requires our executive
officers, directors and nominees for director to promptly
notify the Corporate Secretary in writing of any transactionin which (i) the amount exceeds $120,000; (ii) the Company
is, was or is proposed to be a participant; and (iii) such
person or such person’s immediate family members(“Related Persons”) has, had or may have a direct orindirect material interest (a “Related Person Transaction”).
The Corporate Secretary, in consultation with outside
counsel, to the extent appropriate, shall determine whether
a potential transaction with a Related Person constitutes a
Related Person Transaction requiring review under thepolicy (including whether the Company or the Related
Person has a material interest, based on a review of all
facts and circumstances). If the Corporate Secretary
determines that the proposed transaction constitutes a
Related Person Transaction or it would be beneficial tofurther review the transaction, then, in either case, thetransaction will be referred to the CEO or the Nominating
and Corporate Governance Committee of the Board. In
deciding whether to approve or ratify the Related Person
Transaction, the reviewer is required to consider all relevantfacts and circumstances. Based on the review of such facts
and circumstances, the reviewer will approve, ratify ordisapprove the Related Person Transaction. The reviewer
will approve or ratify a Related Person Transaction only if it

60 • PMI 2020 Proxy Statement

is determined that the transaction is not opposed to the bestinterests of the Company. All determinations by the CEO
and Corporate Secretary must be reported to theCommittee at its next meeting. In addition to this policy, theCode of Business Conduct and Ethics for Directors (the“Director Code”), which is available on our website, atwww.pmi.com/who-we-are/corporate-governance/overview,has specific provisions addressing actual and potential
conflicts of interest. The Director Code specifies: “Ourdirectors have an obligation to act in the best interest of theCompany. All directors should endeavor to avoid situations
that present a potential or actual conflict between theirinterest and the interest of the Company.” The Director
Code defines conflict of interest to include any instance inwhich (i) a person’s private interest interferes in any way, oreven appears to interfere, with the interest of the Company,
including its subsidiaries and affiliates; (ii) a director or adirector’s family member takes an action or has an interest
that may make it difficult for that director to perform his or
her work objectively and effectively; and (iii) a director (or hisor her family member) receives improper personal benefits
as a result of the director’s position in the Company.
Similarly, our policies require all officers and employeesof the Company to avoid situations where the officer’s or
employee’s personal, financial or political activities havethe potential of interfering with his or her loyalty andobjectivity to the Company.

AVAILABILITY OF REPORTS, OTHER MATTERS AND 2021 ANNUAL MEETINGAVAILABILITY OF FORM 10-K AND ANNUAL REPORTTO SHAREHOLDERS
We are required to provide an Annual Report toshareholders who receive this proxy statement. We will
also provide copies of the Annual Report to brokers,
dealers, banks, voting trustees and their nominees for the
benefit of their beneficial owners of record. Additional
copies of the Annual Report, along with copies of our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, are available without charge toshareholders upon written request to the Company’s
Corporate Secretary at Avenue de Rhodanie 50, 1007
Lausanne, Switzerland. You may review the Company’s
filings with the U.S. Securities and Exchange
Commission by visiting our website at www.pmi.com/
investor-relations/overview. The information on our
websites, including our Sustainability Report referenced
on pages 5 and 9, is not, and shall not be deemed to be,a part of this report or incorporated into any other filings
we make with the SEC.
OTHER MATTERSManagement knows of no other business that will bepresented to the meeting for a vote. If other mattersproperly come before the meeting, the persons named as
proxies will vote on them in accordance with their best
judgment.
The cost of this solicitation of proxies will be paid by us.
In addition to the use of the mail, some of the officers andregular employees of the Company may solicit proxies bytelephone and will request brokerage houses, banks andother custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of common
stock held of record by such persons. We will reimburse
such persons for expenses incurred in forwarding such
soliciting material. It is contemplated that additional
solicitation of proxies will be made in the same manner
under the engagement and direction of D.F. King & Co.,
Inc., 48 Wall Street, New York, NY 10005, at an
anticipated cost of $24,000, plus reimbursement ofout-of-pocket expenses.

2021 ANNUAL MEETING
Shareholders wishing to suggest candidates to theNominating and Corporate Governance Committee forconsideration as directors must submit a written notice to
the Corporate Secretary of the Company. Our by-laws
set forth the procedures a shareholder must follow tonominate directors or to bring other business before
shareholder meetings. For a shareholder to nominate acandidate for director at the 2021 Annual Meeting,presently anticipated to be held on May 5, 2021, notice ofthe nomination must be received by the Company
between October 27 and November 26, 2020. The noticemust describe various matters regarding the nominee,
including name, address, occupation and shares held.
The Nominating and Corporate Governance Committee
will consider any nominee properly presented by ashareholder and will make a recommendation to theBoard. After full consideration by the Board, theshareholder presenting the nomination will be notified of
the Board’s conclusion. For a shareholder to bring othermatters before the 2021 Annual Meeting and to include amatter in the Company’s proxy statement and proxy forthat meeting, notice must be received by the Company
between October 27 and November 26, 2020. The noticemust include a description of the proposed business, thereasons therefor and other specified matters. In eachcase, the notice must be timely given to the Corporate
Secretary of the Company, whose address is Avenue deRhodanie 50, 1007 Lausanne, Switzerland. Any
shareholder desiring a copy of the Company’s by-laws(which are posted on our website at www.pmi.com/
who-we-are/corporate-governance/overview)
willbefurnished one without charge upon written request to the
Corporate Secretary.

Jerry Whitson
Deputy General Counsel and Corporate Secretary
March 26, 2020

PMI 2020 Proxy Statement • 61

EXHIBIT A: QUESTIONS & ANSWERS
1.

WHAT IS A PROXY?

It is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you
designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. André
Calantzopoulos, Louis C. Camilleri and Jerry Whitson have each been designated as proxies for the 2020 Annual Meetingof Shareholders.
2.

WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN?

The Record Date for the 2020 Annual Meeting of Shareholders is March 13, 2020. The Record Date is established by the
Board of Directors as required by Virginia law. Shareholders of record (registered shareholders and street name holders) at
the close of business on the Record Date are entitled to:3.

a)receive notice of the meeting; andb)vote at the meeting and any adjournments or postponements of the meeting.

WHAT IS THE DIFFERENCE BETWEEN A REGISTERED SHAREHOLDER AND A SHAREHOLDER WHO HOLDSSTOCK IN STREET NAME?

If your shares of stock are registered in your name on the books and records of our transfer agent, Computershare, you area registered shareholder.
If your shares of stock are held for you in the name of a broker or bank, then your shares are held in street name. The
organization holding your shares of stock is considered the shareholder of record for purposes of voting at the Annual
Meeting. The answer to Question 17 describes brokers’ discretionary voting authority and when your broker or bank ispermitted to vote your shares of stock without instruction from you.
4.

HOW CAN I PARTICIPATE IN THE VIRTUAL ANNUAL MEETING?

This year, we will host our first virtual Annual Meeting, which will be held online via a live webcast at 9:00 a.m. EDT on
Wednesday, May 6, 2020. There will be no physical location for shareholders to attend. Instead, shareholders may
participate online at www.virtualshareholdermeeting.com/PMI2020. We encourage you to access the Annual Meeting prior
to the start time. Online access will be available starting at 8:30 a.m. EDT on May 6, 2020.
To participate in the Annual Meeting, including to vote your shares electronically and ask questions live during theMeeting, you will need to enter the 16-digit control number included on your proxy card, notice of Internet
availability of proxy materials, or on the voting instruction form accompanying your proxy materials. If you wish to
ask questions during the Q&A session, you must follow instructions set forth in response to Question 5.
The virtual meeting platform is fully supported across browsers (Microsoft Edge, Internet Explorer, Firefox, Chrome andSafari) and devices (desktops, laptops, tablets and cell phones), if running the most updated version of applicable softwareand plugins. Participants should ensure that they have a strong Internet connection wherever they intend to participate in
the Annual Meeting.
We will have technicians ready to assist you with any technical difficulties you may have accessing and participating in thevirtual meeting. If you encounter any difficulties during the check-in or throughout the course of the meeting, please call
1-855-449-0991 toll free (from within the United States or Canada), or 1-720-378-5962 (from outside the United States or
Canada). Technical support will be available starting at 8:30 a.m. EDT on May 6, 2020.
For further information about the virtual Annual Meeting, please call toll-free 1-866-713-8075.

62 • PMI 2020 Proxy Statement

EXHIBIT A: QUESTIONS & ANSWERS
5.

MAY SHAREHOLDERS ASK QUESTIONS AT THE MEETING?

Yes. In fact, we encourage questions from our shareholders. For full transparency, during the Q&A session, which will be
publicly webcast, our shareholders will be able to ask questions live, on a first-come, first-served basis.
The Q&A session will follow the conclusion of the formal meeting.
Shareholders of record who have accessed the virtual annual meeting as described in the instructions set forth in response
to Question 4, may ask questions live during the Q&A session of the meeting by calling the number posted on the virtual
annual meeting webpage under the section “Questions.” In order to ask a question, you will be required to provide your16-digit control number to the operator. Because this is a meeting of shareholders, only shareholders of record with a valid
control number will be allowed to ask questions at our virtual annual meeting.
In order to provide an opportunity for everyone who wishes to speak, shareholders will be limited to two minutes.
Shareholders may speak a second time only after all others who wish to speak have had their turn. When speaking,shareholders must direct questions and comments to the Chairman and confine their remarks to matters that relate directly
to the business of the meeting.
We reserve the right to reject redundant questions or questions that we deem profane or otherwise inappropriate. The
meeting is not to be used as a forum to discuss personal grievances, business disputes or to present general political,
social or economic views that are not directly related to the business of the meeting.
A full webcast replay will be posted to our Investor Relations website at www.pmi.com/investors for one year following themeeting.
6.

WHAT ARE THE BENEFITS OF THE VIRTUAL ANNUAL MEETING?

Meaningful shareholder engagement is important to us, and we believe that a virtual annual meeting conducted solely
online through a live webcast could significantly improve shareholder attendance and participation that have declined
significantly over the past five years. We believe that this format will facilitate participation of our shareholders worldwide,
regardless of their resources, size or physical location, while saving us and our shareholders time and travel expenses,
and, importantly, reducing our environmental impact.
Shareholders will have the same rights and opportunities to participate in our virtual annual meeting as they would at an
in-person meeting. For full transparency, during the Q&A session, which will be publicly webcast, shareholders with a valid
control number will be able to ask questions live, on a first-come, first-served basis. In addition, a full webcast replay will be
posted to our Investor Relations website at www.pmi.com/investors for one year following the meeting.
If you plan to participate in our 2020 Annual Meeting of Shareholders, you must follow the instructions set forth in response
to Question 4.
If you wish to ask questions during the Q&A session, you must follow the instructions set forth in response to Question 5.

PMI 2020 Proxy Statement • 63

EXHIBIT A: QUESTIONS & ANSWERS
7.

8.

WHAT ARE THE DIFFERENT METHODS THAT I CAN USE TO VOTE MY SHARES OF COMMON STOCK?
a)

In Writing: All shareholders of record can vote by mailing their completed and signed proxy card (in the case ofregistered shareholders) or their completed and signed voting instruction form (in the case of street name holders).

b)

By Telephone and Internet Proxy: All shareholders of record also can vote their shares of common stock bytouch-tone telephone using the telephone number on the proxy card, or by Internet, using the procedures andinstructions described on the proxy card and other enclosures. Street name holders of record may vote by
telephone or Internet if their brokers or banks make those methods available. If that is the case, each broker orbank will enclose instructions with the proxy statement. The telephone and Internet voting procedures, including
the use of control numbers, are designed to authenticate shareholders’ identities, to allow shareholders to votetheir shares, and to confirm that their instructions have been properly recorded. Proxies submitted by Internet or
telephone must be received by 11:59 p.m., EDT, on May 5, 2020.

c)

In Person at the Virtual Annual Meeting: All shareholders of record may vote at the virtual meeting online atwww.virtualshareholdermeeting.com/PMI2020. If you wish to vote at our virtual annual meeting of shareholders,
you must follow the instructions set forth in response to Question 4. You may vote until the Chairman declares thepolls closed. Shareholders participating in the virtual annual meeting are considered to be attending the meeting“in person.”

HOW CAN I REVOKE A PROXY?

You can revoke a proxy prior to the completion of voting at the meeting by:

9.

a)giving written notice to the Corporate Secretary of the Company;b)delivering a later-dated proxy; orc)voting at the virtual meeting.

ARE VOTES CONFIDENTIAL? WHO COUNTS THE VOTES?

We have established and will maintain a practice of holding the votes of individual shareholders in confidence except:(a) as necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; (b) incase of a contested proxy solicitation; (c) if a shareholder makes a written comment on the proxy card or otherwise
communicates his or her vote to management; or (d) to allow the independent inspectors of election to certify the results ofthe vote. We will retain an independent tabulator to receive and tabulate the proxies and independent inspectors of election
to certify the results.
10. WHAT ARE THE CHOICES WHEN VOTING ON DIRECTOR NOMINEES, AND WHAT VOTE IS NEEDED TO ELECTDIRECTORS?
Shareholders may:a)vote in favor of a nominee;b)vote against a nominee; orc)abstain from voting on a nominee.

Directors will be elected by a majority of the votes cast, which will occur if the number of votes cast “FOR” a director
nominee exceeds the number of votes “AGAINST” that nominee. See “Election of Directors – Majority Vote Standard in
Uncontested Elections” on page 17.
The Board recommends a vote “FOR” all of the nominees.

64 • PMI 2020 Proxy Statement

EXHIBIT A: QUESTIONS & ANSWERS
11. WHAT ARE THE CHOICES WHEN VOTING ON THE ADVISORY SAY-ON-PAY RESOLUTION APPROVING THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS?
Shareholders may:a)vote in favor of the resolution;b)vote against the resolution; orc)abstain from voting on the resolution.

The resolution will be approved if the votes cast “FOR” exceed the votes cast “AGAINST.”The Board recommends a vote “FOR” this resolution.
The advisory vote on this matter is non-binding. However, the Board of Directors and the Compensation and Leadership
Development Committee value the opinions of our shareholders and will consider the outcome of the vote when making
future executive compensation decisions.
12. WHAT ARE THE CHOICES WHEN VOTING ON THE RATIFICATION OF THE SELECTION OF
PRICEWATERHOUSECOOPERS SA AS THE COMPANY’S INDEPENDENT AUDITORS, AND WHAT VOTE IS
NEEDED TO RATIFY THEIR SELECTION?
Shareholders may:a)vote in favor of the ratification;b)vote against the ratification; orc)abstain from voting on the ratification.

The selection of the independent auditors will be ratified if the votes cast “FOR” exceed the votes cast “AGAINST.”The Board recommends a vote “FOR” this proposal.
13. WHAT IF A SHAREHOLDER DOES NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING A PROXY?
Shareholders should specify their choice for each matter on the enclosed proxy. If no specific instructions are given,
proxies that are signed and returned will be voted “FOR” the election of all director nominees, “FOR” the advisory
say-on-pay resolution approving the compensation of our named executive officers, and “FOR” the proposal to ratify theselection of PricewaterhouseCoopers SA as the Company’s independent auditors.
14. WHO IS ENTITLED TO VOTE?
You may vote if you owned stock as of the close of business on March 13, 2020. Each share of common stock is entitled to
one vote. As of March 13, 2020, the Company had 1,557,105,624 shares of common stock outstanding.
15. HOW DO I VOTE IF I PARTICIPATE IN THE DIVIDEND REINVESTMENT PLAN?
The proxy card you have received includes your dividend reinvestment plan shares. You may vote your shares through theInternet, by telephone or by mail, all as described on the enclosed proxy card.

PMI 2020 Proxy Statement • 65

EXHIBIT A: QUESTIONS & ANSWERS
16. WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
It means that you have multiple accounts with brokers and/or our transfer agent. Please vote all of these shares. We
recommend that you contact your broker and/or our transfer agent to consolidate as many accounts as possible under thesame name and address. Our transfer agent is Computershare Trust Company, N.A., P.O. Box 505005, Louisville, KY
40233-5005 or you can reach Computershare at 1-877-745-9350 (from within the United States or Canada) or
1-781-575-4310 (from outside the United States or Canada), or via e-mail at pmi@computershare.com.
17. WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?
If you are a street name holder of shares, you should have received a voting instruction form with the proxy statement sentfrom your broker or bank. Your shares held in street name may be voted only on certain “routine” matters when you do notprovide your broker or bank with voting instructions. For example, the ratification of the selection of PricewaterhouseCoopers
SA as independent auditors of the Company is considered a “routine” matter for which brokers or banks may vote uninstructedshares. When a proposal is not a “routine” matter (such as the election of director nominees and say-on-pay advisory votes)
and the broker or bank has not received voting instructions from the street name holder with respect to that proposal, thatbroker or bank cannot vote the shares on that proposal. This is called a broker non-vote. Therefore, it is important that you
provide instructions to your broker or bank with respect to your vote on these “non-routine” matters.
18. ARE ABSTENTIONS AND BROKER NON-VOTES COUNTED?
Abstentions will not be included in the vote totals for any matter. Broker non-votes will not be included in vote totals and will
not affect the outcome of the vote.
19. HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
Your shares are counted as present at the meeting if you attend the virtual meeting and vote in person during the virtual
annual meeting or if you properly return a proxy by Internet, telephone or mail. In order for us to conduct our meeting, amajority of our outstanding shares of common stock as of March 13, 2020 must be present in person at the virtual annual
meeting or by proxy. This is referred to as a quorum. Abstentions and shares of record held by a broker, bank or otheragent (“Broker Shares”) that are voted on any matter are included in determining the number of votes present. Broker
Shares that are not voted on any matter will not be included in determining whether a quorum is present.

66 • PMI 2020 Proxy Statement

EXHIBIT B: RECONCILIATIONSPHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
and Adjusted Diluted EPS, excluding Currency
For the Years Ended December 31,(Unaudited)
2019

2018

% Change

Reported Diluted EPS
Adjustments:
Asset impairment and exit costs
Canadian tobacco litigation-related expense
Loss on deconsolidation of RBH
Russia excise and VAT audit charge
Fair value adjustment for equity security investments
Tax items$ 4.61$ 5.08(9.3)%

0.23
0.09
0.12
0.20
(0.02)(0.04)

0.02

Adjusted Diluted EPS
Less: Currency$ 5.19(0.13)$ 5.101.8%

Adjusted Diluted EPS, excluding Currency$ 5.32$ 5.10

4.3%

PMI 2020 Proxy Statement • 67

EXHIBIT B: RECONCILIATIONS
Adjustments for the Impact of RBH, excluding Currency
For the Years Ended December 31,($ in millions, except per share data)(Unaudited)
2019

2018

$ 29,805$ 29,625(742)(1)0.6 %29,805(937)

28,883 (2)3.2 %Net Revenues, excluding currency$ 30,742$ 28,883 (2)6.4 %Operating Income
Less:
Asset impairment and exit costs
Canadian tobacco litigation-related expense
Loss on deconsolidation of RBH
Russia excise and VAT audit charge$ 10,531$ 11,377(7.4)%

(422)
(194)
(239)
(374)

-

Adjusted Operating Income
Operating Income attributable to RBH$ 11,760$ 11,377(542)(1)

3.4 %Adjusted Operating Income
Less: Currency$ 11,760 $ 10,835 (2)
(293)

8.5 %

Adjusted Operating Income, excluding currency$ 12,053$ 10,835 (2)11.2 %

Adjusted Diluted EPS(3)Net earnings attributable to RBH

$

5.19

$

5.10
(0.26)(1)

1.8 %Adjusted Diluted EPS
Less: Currency$

5.19 $(0.13)

4.84 (2)7.2 %Adjusted Diluted EPS, excluding currency

$

5.32

$

4.84 (2)9.9 %Net cash provided by operating activities(4)Net cash provided by operating activities attributable to RBH$ 10,090$

9,478(366)(1)

6.5 %Net cash provided by operating activities(4)Less: Currency$ 10,090 $(972)

9,112 (2)10.7 %Net cash provided by operating activities, excluding currency$ 11,062

9,112 (2)21.4 %Net Revenues
Net Revenues attributable to RBH
Net Revenues
Less: Currency$% Change

Represents the impact attributable to RBH from March 22, 2018 through end of period date
Pro forma(3) For the calculation, see “Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Diluted EPS, excluding Currency” in this section(4) Operating cash flow
(1)
(2)

Note: Financials attributable to RBH include Duty Free sales in Canada

68 • PMI 2020 Proxy Statement

EXHIBIT B: RECONCILIATIONS
Reconciliation of Operating Income to Adjusted Operating Companies Income,excluding Currency and Acquisitions
For the Years Ended December 31,($ in millions)(Unaudited)
2017

2016

Operating Income
Less: Asset Impairment & Exit Costs and Others$ 11,581-$ 10,903-

6.2 %Adjusted Operating Income
Pension and Other Employee Benefit Costs
Equity Income/(Loss) in Unconsolidated Subsidiaries, net
Less: General Corporate Expenses
Less: Amortization of Intangibles$ 11,581
(78)
59
(164)
(88)

$ 10,903
(88)
94
(161)
(74)

6.2 %

Adjusted Operating Companies Income
Less: Currency$ 11,814(155)$ 11,144

6.0 %Adjusted Operating Companies Income, excluding Currency
Less: Acquisitions$ 11,969-$ 11,144

7.4 %Adjusted Operating Companies Income, excluding Currency & Acquisitions$ 11,969$ 11,144

7.4 %

2018

2017

Operating Income
Less: Asset Impairment & Exit Costs and Others$ 11,377-$ 11,581-(1.8)%

Adjusted Operating Income
Pension and Other Employee Benefit Costs
Equity Income/(Loss) in Unconsolidated Subsidiaries, net
Less: General Corporate Expenses
Less: Amortization of Intangibles$ 11,377
(41)
65
(126)
(82)

$ 11,581
(78)
59
(164)
(88)

(1.8)%

Adjusted Operating Companies Income
Less: Currency$ 11,609(216)$ 11,814(1.7)%

Adjusted Operating Companies Income, excluding Currency
Less: Acquisitions$ 11,825-$ 11,814

0.1 %Adjusted Operating Companies Income, excluding Currency & Acquisitions$ 11,825$ 11,814

0.1 %

2019

2018

Operating Income
Less: Asset Impairment & Exit Costs and Others$ 10,531(1,229)(1)$ 11,377-(7.4)%

Adjusted Operating Income
Pension and Other Employee Benefit Costs
Equity Income/(Loss) in Unconsolidated Subsidiaries, net
Less: General Corporate Expenses
Less: Amortization of Intangibles$ 11,760
(89)
95
(164)
(66)

$ 11,377
(41)
65
(126)
(82)

3.4 %

Adjusted Operating Companies Income
Adjusted OCI attributable to RBH$ 11,996$ 11,609
(549)

3.3 %

Adjusted Operating Companies Income
Less: Currency$ 11,996(302)$ 11,060 (2)8.5 %Adjusted Operating Companies Income, excluding Currency
Less: Acquisitions$ 12,298-$ 11,060 (2)11.2 %

Adjusted Operating Companies Income, excluding Currency & Acquisitions$ 12,298$ 11,060 (2)11.2 %

Three-Year Adjusted OCI CAGR, excluding Currency & Acquisitions% Change% Change% Change

6.1 %Includes asset impairment and exit costs ($422 million), the Canadian tobacco litigation-related expense ($194 million), the loss on deconsolidation of
RBH ($239 million) and the Russia excise and VAT audit charge ($374 million)(2) Pro forma(1)

PMI 2020 Proxy Statement • 69

2020 PROXY STATEMENT
And Notice of Annual Meeting of Shareholders
To be held on Wednesday, May 6, 2020

Printed on Recycled Paper