2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 392 56 Executive Compensation 2 Represents full 2017 bonus target as the officer would receive an annual bonus payment for the performance period in which the termination occurs. 3 Assumes Mr. Martin’s salary and target bonus amounts as of his hire date (February 28, 2017) and that he participated in the defined contribution plan during 2017. 4 Represents the “in-the-money” value of unvested stock options, if applicable, the value of unvested RSUs and the target amount of PSUs based on the closing stock price of Baxter on December 29, 2017 ($64.64). CEO Pay Ratio As required by Section 953(b) of Dodd-Frank and the applicable rules of the SEC, the company is providing the following information about the relationship of the annual total compensation of its global employees and the annual total compensation of Mr. Almeida, Chairman, President and Chief Executive Officer (CEO). For the year ended December 31, 2017: • the median of the annual total compensation of all Baxter employees (other than Mr. Almeida and excluding former Claris employees) was $42,008; and • the annual total compensation of Mr. Almeida as reported in the “Total” column of the Summary Compensation Table in this Proxy Statement was $14,933,664. Based on this information, the ratio of Mr. Almeida’s annual total compensation for 2017 to the median of the annual total compensation of all Baxter employees is 355 to 1. The company believes this ratio is a reasonable estimate based on Baxter specific employee demographics and compensation and was calculated in accordance with applicable rules of the SEC. Baxter’s ratio may not be comparable to the ratio disclosed by its peer companies due to a number of factors, including the geographic distribution of its employees, the nature of the business (products or services) and whether the company manufactures its own products. The company used the methodology, material assumptions, adjustments and estimates as described in this section to identify the median of the annual total compensation of all Baxter employees, as well as to determine the annual total compensation of Baxter’s median employee (as defined in applicable rules of the SEC). As of November 1, 2017, Baxter’s employee population consisted of approximately 47,000 individuals. This number excludes approximately 1,600 employees of Claris, which the company acquired in July 2017. The company did not utilize any other exceptions permitted under applicable rules of the SEC when identifying the median employee. To identify the “median employee” from Baxter’s employee population, the company compared the amount of salary and target cash bonus for 2017 as reflected in Baxter’s human resources information system for the employees referenced above (but excluding Mr. Almeida). In making this determination, Baxter annualized the compensation of all employees who were hired in 2017 (other than Claris employees) but did not work for Baxter for the entire fiscal year. Using this approach, Baxter initially identified a subset of median individuals with the same salary and 2017 target bonus opportunity. Baxter then identified and calculated the elements of annual total compensation for 2017 for these individuals using the same methodology used to calculate Mr. Almeida’s total compensation. Finally, Baxter identified the exact median individual within the initial subset as it’s “median employee”, identified as a full-time, hourly employee located in the United States. Application of this approach resulted in annual total compensation (including overtime and the contributions made by the company to Baxter’s tax-qualified Section 401(k) plan) for such median employee of $42,008. | 2018 Annual Meeting of Stockholders and Proxy Statement BAXTER INTERNATIONAL INC.