AVNS DEF 14A Report ended April 27, 2017

Halyard Health, Inc.

Notice of Annual Meeting of Stockholders

TO BE HELD

April 27, 2017

Important Notice Regarding Availability of Proxy Materials for
the Stockholders Meeting to be held on April 27, 2017

This proxy statement along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, are available at www.proxyvote.com.

Halyard Health, Inc.

5405 Windward Parkway

Alpharetta, GA 30004

678-425-9273

At the annual meeting, stockholders will vote on the following matters:

1.  The election of the three nominees named in this proxy statement as directors for a three-year term;

2.  The ratification of the selection of Deloitte & Touche LLP as our independent auditors for 2017;

3.  A non-binding resolution to approve the compensation of our named executive officers; and

4.  Any other business that may properly come before the meeting or any adjournments of the meeting.

Our Board of Directors recommends that you vote your shares FOR each of proposals one through three.

If you were a stockholder of record at the close of business on the record date of March 3, 2017, you are eligible to vote at the meeting. Each share of our common stock that you own entitles you to one vote. Shares may not be voted cumulatively.

As of the record date, 46,681,798 shares of common stock were outstanding.

If your shares are held by a bank or brokerage firm, you are considered the “beneficial owner” of the shares held in “street name.” If your shares are held in street name, your bank or brokerage firm (the record holder of your shares) forwarded to you these proxy materials, along with a voting instruction card. As the beneficial owner, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions. If you do not give instructions to your bank or brokerage firm, it will nevertheless be entitled to vote your shares with respect to “routine” items, but it will not be permitted to vote your shares with respect to “non-routine” items. In the case of non-routine items, your shares will be considered “broker non-votes” on those proposals.

If you are the record holder of shares of our common stock as of the record date, you may vote by using the telephone or Internet, by completing and returning the enclosed proxy card by mail, or by voting in person at the meeting. To vote by telephone or Internet, see the instructions on the proxy card and have the proxy card available when you place your telephone call or access the Internet website. To vote your proxy by mail, or by voting in person at the meeting, mark your vote on the proxy card, then follow the instructions on the card to return it by mail.

If your shares are held in street name, please follow the instructions on the voting instruction card to vote your shares.

If you are the record holder of your shares and you attend the meeting, you may deliver your completed proxy card in person. Additionally, we will pass out written ballots to registered stockholders who wish to vote in person at the meeting. Beneficial owners of shares held in street name who wish to vote at the meeting will need to obtain a power of attorney or proxy from their record holder to do so.

If you return a completed and properly signed proxy card prior to the meeting, or if you vote by telephone or the Internet prior to the meeting, the persons named as proxies on the proxy card will vote your shares according to your directions. The voting results will be certified by independent Inspectors of Election.

If you are a stockholder of record and you sign and return your proxy card, or if you vote by using the telephone or Internet, but you do not specify how you want to vote your shares, the persons named as proxies on the proxy card will vote your shares as follows:

► FOR the election of directors named in this proxy statement;

► FOR ratification of the selection of our independent auditors; and

► FOR approval of the compensation of our named executive officers.

If any other matters are properly presented at the Annual Meeting for consideration, the persons named as proxies on the proxy card will vote as recommended by the Board of Directors or, if no recommendation is given, in their discretion.

Routine Matters. If your shares are held in street name and you do not instruct the broker on how to vote your shares, your broker may choose to leave your shares unvoted or to vote your shares on routine matters. “Proposal 2 — Ratification of Auditors” is the only routine matter on the agenda at this year’s Annual Meeting.

Non-Routine Matters. Without instructions from you on how to vote your shares, your broker cannot vote your shares on non-routine matters, including Proposals 1 and 3, resulting in what are known as “broker non-votes.” Broker non-votes will not be considered present or entitled to vote on non-routine matters and will also not be counted for the purpose of determining the number of votes cast on these proposals. Broker non-votes will not affect the outcome of any proposals considered at the Annual Meeting.

Election of Directors. “Withhold” votes for the election of directors will have no impact on the outcome of the vote. They will not be counted for the purpose of determining the number of votes cast or as votes “for” or “against” a nominee.

Other Proposals. Abstentions will be counted:

► in determining the total number of shares entitled to vote on a proposal, and

► as votes against a proposal

If you are a stockholder of record, there are several ways to revoke or change your vote:

► Mail a revised proxy card with a later date or a written notice of revocation with a later date to the Corporate Secretary of the Company (the revised proxy card or notice of revocation must be received by close of business on April 26, 2017). Use the following address: Halyard Health, Inc., Attn: Corporate Secretary, 5405 Windward Parkway, Suite 100 South, Alpharetta, GA 30004.

► Use the telephone voting procedures or Internet voting website (the revocation or change must be completed by 11:59 p.m. Eastern time on April 26, 2017).

► Attend the meeting and vote in person. Please note that attendance at the meeting will not revoke a proxy if you do not actually vote at the meeting.

If you hold your shares in street name, the above options for changing your vote or revoking your instructions do not apply and you must follow the instructions received from your bank or broker to change your vote or revoke your proxy.

There must be a quorum to conduct business at the Annual Meeting, which is established by having a majority of the outstanding shares of our common stock present in person or represented by proxy. If you vote, your shares will be included in the number of shares to establish the quorum. Abstentions (or “Withhold” votes for the elections of directors) or proxy cards returned without voting instructions and broker non-votes will be counted as present for the purpose of determining whether the quorum requirement is satisfied.

Election of Directors. In 2016, the Company adopted a “plurality-plus” voting policy for directors in uncontested elections. Under our “plurality-plus” voting policy, if any nominee for director receives a greater number of votes “withheld” than votes “for” such nominee in an uncontested election, he or she will promptly tender his or her resignation. The Governance Committee, without the participation of the director who tendered his or her resignation, will then take action to accept or reject the director’s resignation and submit its recommendation to the full Board of Directors. The full Board of Directors, without the participation of the director who tendered his or her resignation, will accept or reject the resignation within 90 days of the certification of the election results and, if it chooses not to accept the resignation, will promptly disclose its decision in a Form 8-K or similar filing with the SEC. Further details about our “plurality plus” policy are included in our Corporate Governance Policies, which are available in the Investors’ section of our website at www.halyardhealth.com.

Other Proposals or Matters. Approval requires the affirmative vote of a majority of shares that are present at the Annual Meeting in person or by proxy and entitled to vote on the proposal.

If you are a stockholder of record and you do not sign and return a proxy card or vote by telephone or the Internet, your shares will not count toward the quorum requirement and will not affect the outcome of any proposal at the Annual Meeting.

If you are a stockholder of record, you or a duly appointed representative may attend the Annual Meeting in person. Returning your proxy card will not affect your right to attend the Annual Meeting and to vote in person. If you do plan to attend, we ask that you inform us electronically, by telephone, or by checking the appropriate box on your proxy form. This will assist us with meeting preparations and help to expedite your admittance.

If your shares are not registered in your own name and you would like to attend the meeting, please ask the broker, trust, bank or other nominee that holds your shares to provide you with written proof of your share ownership as of the record date. This will enable you to gain admission to the meeting.

If you need directions to the meeting, please contact Stockholder Services by telephone at 678-425-9273 or by e-mail at stockholder.services@hyh.com. Please bring a driver’s license or other photo-identification with you to the meeting to facilitate admission to the meeting.

Our governance structure and processes are based on a number of important governance documents including our Code of Conduct, Certificate of Incorporation, Corporate Bylaws, Corporate Governance Policies and our Board Committee Charters. These documents, which are available in the Investor’s section of our website at www.halyardhealth.com, guide the Board and our management in the execution of their responsibilities.

The Company believes that there is a direct connection between good corporate governance and long-term, sustained business success, and we believe it is important to uphold sound governance practices. As such, the Board reviews its governance practices and documents on an ongoing basis, and it considers changing regulatory requirements, governance trends, and issues raised by our stockholders. After careful evaluation, we may periodically make governance changes in view of these matters to maintain current good governance practices and promote stockholder value.

We believe we are in compliance with all applicable corporate governance requirements of the New York Stock Exchange (“NYSE”), the SEC, the Sarbanes-Oxley Act of 2002 and the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that have become effective as of the date of this proxy statement.

The Board has established a leadership structure that allocates responsibilities between our Chairman of the Board and Chief Executive Officer and our Lead Director. The Board believes that this allocation provides for dynamic Board leadership while maintaining strong independence and oversight.

Consistent with this leadership structure, at least once a quarter our Lead Director, who is an independent director, chairs executive sessions of our non-management directors. Members of the Company’s senior management team do not attend these sessions.

Chairman and Chief Executive Officer Positions

Under current circumstances, it is the Board’s view that a combined Chairman and CEO, coupled with a predominantly independent board and a proactive, independent Lead Director, promotes candid discourse and responsible corporate governance. Combining these roles also helps maintain clear lines of accountability internally and allows the Company’s leadership to speak with a single voice externally. The Board retains the discretion to separate the Chairman and Chief Executive Officer roles at any time if it deems that to be in the best interest of our Company and stockholders.

Robert Abernathy serves as Chairman of the Board and Chief Executive Officer. After careful consideration, the Board believes that with the benefit of Mr. Abernathy’s thirty plus years of operational and management experience at Kimberly-Clark Corporation (“Kimberly-Clark”) and the Company, he has demonstrated the leadership and vision necessary to lead the Board and the Company in establishing and executing our global business strategies. He maintains an investor- focused perspective, and his leadership has delivered strong performance over an extended period of time. Mr. Abernathy serves in this combined role at the pleasure of the Board without an employment contract.

Lead Director

Ronald Dollens serves as our independent Lead Director. Our Corporate Governance Policies outline the significant role and responsibilities of the Lead Director, which include:

► Chairing the Executive Committee

► Chairing executive sessions at which non-management directors meet outside management’s presence, and providing feedback from such sessions to the Chief Executive Officer

► Coordinating the activities of the independent directors

► Providing input on agendas and schedules for Board meetings

► Leading the annual Board evaluation

► Leading (with the Chairman of the Compensation Committee) the Board’s review and discussion of the Chief Executive Officer’s performance

► Providing feedback to individual directors following their periodic evaluations

► Speaking on behalf of the Board and chairing Board meetings when the Chairman of the Board is unable to do so

► Acting as a direct conduit to the Board for stockholders, employees and others according to the Board’s policies

We believe our independent board helps ensure good corporate governance and strong internal controls.

Our Corporate Governance Policies, as adopted by the Board, provide independence standards consistent with the rules and regulations of the SEC and the listing standards of the NYSE. Our independence standards can be found in Section 17 of our Corporate Governance Policies.

The Governance Committee of the Board has determined that all directors and nominees, except for Robert E. Abernathy, are independent directors and meet the independence standards in our Corporate Governance Policies.

The Board of Directors met 7 times in 2016. All of the directors attended in excess of 75 percent of the total number of meetings of the Board and the committees on which they served.

Although we do not have a formal policy with respect to director attendance at annual meetings, all directors attended the 2016 Annual Meeting, and we expect that all directors, including those standing for election, will be in attendance at the Annual Meeting on April 27, 2017.

In 2016, the standing committees of the Board included the Audit Committee, Compensation Committee, Compliance Committee, Governance Committee, and Executive Committee. In compliance with applicable NYSE corporate governance listing standards, the Board has adopted Charters for all Committees except the Executive Committee.

Our Committee Charters are available in the Investors section of our website at www.halyardhealth.com.

As set forth in our Corporate Governance Policies, and in the charter of each individual committee, the Board’s committees all have the authority to retain independent advisors and consultants, with all costs paid by the Company.

Chairman: Heidi Kunz

Other members: Gary Blackford and Patrick O’Leary

The Board has determined that Ms. Kunz is an “audit committee financial expert” under SEC rules and regulations. In addition, all Audit Committee members satisfy the NYSE’s financial literacy requirements and qualify as independent directors under our Corporate Governance Policies.

No member of the Audit Committee serves on the audit committees of more than three public companies. Under our Audit Committee Charter and NYSE corporate governance listing standards, if a member were to serve on more than three such committees, the Board would then determine whether this situation impairs the member’s ability to serve effectively on our Audit Committee, and we would post information about this determination on the Investors section of our website at www.halyardhealth.com.

The Committee met 6 times in 2016, including once in joint session with the Compliance Committee.

The Committee’s principal functions, as specified in its Charter, include:

► Overseeing:

† the quality and integrity of our financial statements

† our compliance programs in coordination with our Compliance Committee

† our hedging strategies and policies

† the independence, qualification and performance of our independent auditors

† the performance of our internal auditors

► Selecting and engaging our independent auditors, subject to stockholder ratification

► Pre-approving all audit and non-audit services that our independent auditors provide

► Reviewing the scope of audits and audit findings, including any comments or recommendations of our independent auditors

► Establishing policies for our internal audit programs

► Overseeing our risk management program and receiving periodic reports from management on risk assessments, the risk management process, and issues related to the risks of managing our business

For additional information about the Audit Committee’s oversight activities with respect to our 2016 financial statements, see “Proposal 2. Ratification of Auditors — Audit Committee Report.”

Compensation Committee

Chairman: Julie Shimer

Other members: John Byrnes, William Hawkins, and Maria Sainz.

Each member of this Committee is an independent director. The Committee met 6 times in 2016.

The Committee’s principal functions, as specified in its Charter, include:

► Establishing and administering the policies governing annual compensation and long-term compensation, including stock option awards, restricted stock awards and restricted share unit awards, such that the policies are designed to align compensation with our overall business strategy and performance

► Setting, after an evaluation of his overall performance, the compensation level of the Chief Executive Officer

► Determining, in consultation with the Chief Executive Officer, compensation levels and performance targets for our executive officers

► Setting annual targets and certifying awards for corporate performance under our corporate incentive compensation plans

► Overseeing:

† leadership development for senior management and future senior management candidates

† a periodic review of our long-term and emergency succession planning for the Chief Executive Officer and other key officer positions, in conjunction with our Board

† key organizational effectiveness and engagement policies

► Annually reviewing our compensation policies and practices for the purpose of mitigating risks arising from these policies and practices that could reasonably have a material adverse effect on the Company

Roles of the Committee and the CEO in Compensation Decisions

Each year, the Committee reviews and sets the compensation of our executive officers, including our Chief Executive Officer. The Committee’s Charter does not permit the Committee to delegate to anyone the authority to establish any compensation policies or programs for the executive officers. With respect to officers that are not executive officers (our “non-executive officers”), our Chief Executive Officer has the authority to establish compensation programs and, subject to certain limits, to approve equity grants. However, only the Committee may make equity grants to our executive officers.

Our Chief Executive Officer makes a recommendation to the Committee each year on the appropriate target annual compensation for each of the other executive officers. The Committee makes the final determination of the target annual compensation for each executive officer, including our Chief Executive Officer. While our Chief Executive Officer and Chief Human Resources Officer typically each attend Committee meetings, none of the other executive officers is present during the portion of the Committee meetings when compensation for executive officers is set. In addition, neither our Chief Executive Officer nor our Chief Human Resources Officer is present during the portion of the Committee meetings when their compensation is set.

For additional information on the Committee’s processes and procedures for determining executive compensation, and for a detailed discussion of our compensation policies, see “Compensation Discussion and Analysis.”

Use of Compensation Consultants

The Committee’s Charter authorizes the Committee to retain advisors, including compensation consultants, to assist it in its work. The Committee believes that compensation consultants can provide important market information and perspectives that can help it determine compensation programs that best meet the objectives of our compensation policies. In selecting a consultant, the

Committee evaluates the independence of the firm as a whole and of the individual advisors who will be working with the Committee.

The Committee retains an independent executive compensation consultant who, according to the Committee’s written policy, provides services solely to the Committee and not to the Company. The Committee’s consultant has no other business relationship with the Company and receives no payments from the Company other than fees for services to the Committee. The consultant reports directly to the Committee and the Committee may replace the consultant or hire additional consultants at any time. The Committee has selected Meridian Compensation Partners, LLC as its independent consultant.

In 2016, the scope of activities for the Committee’s independent compensation consultant included:

► Conducting a review of the executive compensation peer group

► Reviewing and commenting on the Company’s executive compensation programs

► Conducting a risk assessment of the Company’s executive compensation programs

► Attending Committee meetings

► Periodically consulting with the Chairman of the Committee

Committee Assessment of Consultant Conflicts of Interest . The Committee has reviewed whether the work provided by Meridian Compensation Partners raises any conflict of interest. Factors considered by the Committee include: (1) whether other services are provided to the Company by the consultant; (2) what percentage of the consultant’s total revenue is made up of fees from the Company; (3) policies or procedures of the consultant that are designed to prevent a conflict of interest; (4) any business or personal relationships between individual consultants involved in the engagement and Committee members; (5) any shares of the Company stock owned by individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. Based on its review, the Committee does not believe that the compensation consultants that performed services to the Committee in 2016 have a conflict of interest with respect to the work performed for the Committee.

Committee Report

The Committee has reviewed the “Compensation Discussion and Analysis” section of this proxy statement and has recommended that it be included in this proxy statement. The Committee’s report is located at “Compensation Discussion and Analysis — Compensation Committee Report.”

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee during 2016 were Dr. Shimer, Messrs. Byrnes and Hawkins, and Ms. Sainz. None of the members of the Compensation Committee was, during 2016, a current or former officer or employee of the Company. Also, none of the members of the Compensation Committee had any relationship with the Company in 2016 requiring disclosure under Item 404 of Regulation S-K. For information about the Company’s policies on transactions with related parties, see “Transactions with Related Parties” later in this proxy statement. During 2016, none of our executive officers served as a member of the board of directors or compensation committee of any entity that had one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

Compliance Committee

Chairman: William Hawkins

Other Members: John Byrnes, Maria Sainz and Julie Shimer

Each member of this Committee is an independent director. The Committee met 6 times in 2016, including once in joint session with the Audit Committee.

The Committee’s principal functions, as specified in its Charter, include the following:

► Overseeing the Company’s compliance program in the areas of Code of Conduct, Conflicts of Interest, Consumer Protection, Ethics, Environment, Government Relations, Health and Safety, Customs and Export Controls, False Claims, Foreign Corrupt Practices Act and similar anti-bribery laws, Fraud and Abuse Laws including Anti-Kickback, Information Systems Security, Intellectual Property, Labor & Employment, Physical Security, Quality, Recalls, Regulatory, including FDA, Safety, Sunshine Act, and Transportation

► Overseeing the Company’s sustainability, corporate social responsibility and corporate citizenship matters

► Monitoring the Company’s efforts to implement programs, policies and procedures relating to compliance matters

► Overseeing the investigation of any significant instances of noncompliance with laws or the Company’s compliance program, policies or procedures, other than any instances involving financial noncompliance

► Reviewing the Company’s compliance risk assessment plan

► Identifying and investigating emerging compliance issues and trends which may affect the Company

Governance Committee

Chairman: Gary D. Blackford

Other Members: Heidi Kunz and Patrick O’Leary

Each member of this Committee is an independent director. The Committee met 5 times in 2016.

The Committee’s principal functions, as specified in its Charter, include the following:

► Overseeing the screening and recruitment of prospective Board members and making recommendations to the Board of Directors regarding specific director nominees, as well as overseeing the process for Board nominations

► Overseeing corporate governance matters, including developing and recommending to the Board changes to our Corporate Governance Policies

► Advising the Board on:

† Board organization, membership, function, performance and compensation

† committee structure and membership

† policies and positions regarding significant stockholder relations issues

► Reviewing director independence standards and making recommendations to the Board with respect to the determination of director independence

► Monitoring and recommending improvements to the Board’s practices and procedures

► Reviewing stockholder proposals and considering how to respond to them

The Committee, in accordance with its Charter and our Certificate of Incorporation, has established criteria and processes for director nominations, including those proposed by stockholders. Those criteria and processes are described in “Proposal 1. Election of Directors — Process and Criteria for Nominating Directors” and “Other Information — Stockholder Nominations for Board of Directors.”

Executive Committee

Chairman: Ron Dollens (Lead Independent Director)

Other Members: Robert Abernathy, Heidi Kunz, William Hawkins and Julie Shimer

The Committee did not meet in 2016.

The Committee’s principal function is to exercise, when necessary between Board meetings, the Board’s powers to direct our business and affairs. Accordingly, the Committee has no regularly scheduled meetings and it is expected that, each year, the Committee will meet infrequently or not at all.

Communicating
with Directors

Corporate Governance Policies . The Board of Directors has adopted Corporate Governance Policies. These policies guide the Company and the Board on matters of corporate governance, including: director responsibilities, Board committees and their Charters, director independence, director compensation and performance assessments, director orientation and education, director access to management, Board access to outside financial, business and legal advisors, and management development and succession planning. To see these policies, go to the Investors section of our website at www.halyardhealth.com.

Code of Conduct . The Company has a Code of Conduct that applies to all of our directors, executive officers and employees, including our Chief Executive Officer, Chief Financial Officer and Vice President and Controller. It is available in the Investors section of our website at www.halyardhealth.com. Any amendments to or waivers of our Code of Conduct applicable to our Chief Executive Officer, Chief Financial Officer or Vice President and Controller will also be posted at that location.

Board and Management Roles in Risk Oversight . The Board is responsible for providing risk oversight with respect to our operations. In connection with this oversight, the Board particularly focuses on our strategic and operational risks, as well as related risk mitigation. In addition, the Board reviews and oversees management’s response to key risks facing the Company.

The Board’s committees review particular risk areas to assist the Board in its overall risk oversight of the Company:

► The Audit Committee monitors risks relating to such matters as our internal controls, financial statement integrity and fraud risks, and related risk mitigation. In connection with this oversight, the Audit Committee receives regular reports from management on risk assessments, the risk management process, and issues related to the risks of managing our business. The Audit Committee also receives an annual enterprise risk management update, which discusses our key financial, strategic, operational and compliance risks.

► The Compensation Committee reviews the risk profile of our compensation policies and practices. This process includes a review of an assessment of our compensation programs, as described in “Compensation Discussion and Analysis — Analysis of Compensation-Related Risks.”

► The Compliance Committee monitors risks relating to certain compliance matters, such as those described in the section “Compliance Committee,” and recommends appropriate actions in response to those risks.

► The Governance Committee monitors risks relating to governance matters and recommends appropriate actions in response to those risks.

Complementing the Board’s overall risk oversight, our senior executive team identifies and monitors key enterprise-wide and business unit risks, providing the basis for the Board’s risk review and oversight process. Our senior management team is supported by management members from core business units and from our finance, treasury, information technology, global risk management, compliance and legal functions. Management identifies significant risks for review and updates our policies for risk management in areas such as hedging, foreign currency and country risks, product liability, property and casualty risks, and supplier and customer risks. The Board believes the allocation of risk management responsibilities described above supplements the Board’s leadership structure by allocating risk areas to an appropriate committee for oversight, allows for an orderly escalation of issues as necessary, and helps the Board satisfy its risk oversight responsibilities.

Whistleblower Procedures . The Audit Committee has established procedures for receiving, recording and addressing any complaints we receive regarding accounting, internal accounting controls or auditing matters, and for the confidential and anonymous submission, by our employees or others, of any concerns about our accounting or auditing practices. The Compliance Committee has adopted similar procedures for receiving, recording, and addressing any complaints we receive regarding compliance matters other than those addressed by the Audit Committee. The Audit Committee’s and Compliance Committee’s procedures are available in the Investor’s section of our website at www.halyardhealth.com. We also maintain a toll-free Code of Conduct telephone line and a website, each allowing our employees and others to voice their concerns anonymously.

Management Succession Planning . In conjunction with the Board, the Compensation Committee is responsible for periodically reviewing the long-term management development plans and succession plans for the Chief Executive Officer and other key officers, as well as the emergency succession plan for the Chief Executive Officer and other key officers if any of these officers unexpectedly becomes unable to perform his or her duties.

Disclosure Committee . We have established a Disclosure Committee to assist in fulfilling our obligations to maintain disclosure controls and procedures and to coordinate and oversee the process of preparing our periodic securities filings with the SEC. This committee is composed of members of management and is chaired by our Vice President and Controller.

No Executive Loans . We do not extend loans to our executive officers or directors and therefore do not have any such loans outstanding.

Charitable Contributions . The Governance Committee has adopted guidelines for the review and approval of charitable contributions by the Company to organizations or entities with which a director or an executive officer may be affiliated. We will disclose in the Investors section of our website at www.halyardhealth.com any contributions made by us to a tax-exempt organization under the following circumstances:

► An independent director serves as an executive officer of the tax-exempt organization; and

► If within the preceding three years, contributions in any single year from the Company to the organization exceeded the greater of $1 million or 2 percent of the tax-exempt organization’s consolidated gross revenues.

Our Board is divided into three classes, as required by our Certificate of Incorporation, with one class of directors elected each year for a three-year term. As of the date of this proxy statement, the Board of Directors consists of nine directors. Three of the directors have terms that expire at this year’s Annual Meeting (Class of 2017), three have terms that expire at next year’s Annual Meeting (Class of 2018), and three have terms that expire at the 2019 Annual Meeting (Class of 2019).

The three nominees standing for election at the Annual Meeting are being nominated to serve for a term to expire at the 2020 Annual Meeting of Stockholders (Class of 2020), and until their successors have been duly elected and qualified. All nominees have advised us that they will serve if elected; however, should any nominee become unable to serve, the Board may reduce the number of directors to be elected or select a substitute nominee. If the Board selects a substitute nominee, the shares represented by valid proxies will be voted for the substitute nominee, other than shares voted “Withhold” with respect to the original nominee.

Given the independent status of the nominees, if all nominees are elected at the Annual Meeting, eight of the nine directors on our Board will be independent directors.

The Board of Directors is responsible for approving candidates for Board membership. The Board has delegated the screening and recruitment process to the Governance Committee, in consultation with the Chairman of the Board and Chief Executive Officer and the Lead Director. The Committee therefore recommends to the Board any new appointments and nominees for election as directors at our annual meeting of stockholders. It also recommends nominees to fill any vacancies. As provided in our Certificate of Incorporation, the Board may elect a new director when a vacancy occurs between annual meetings of stockholders.

The Committee may receive recommendations for Board candidates from various sources, including our directors, management and stockholders. Stockholders may submit recommendations for Board candidates to the Chairman of the Governance Committee at Halyard Health, Inc., c/o Corporate Secretary, 5405 Windward Parkway, Suite 100 South, Alpharetta, GA 30004. Board candidates recommended by stockholders are evaluated using the same criteria as candidates recommended by other sources. For details on this process, see “Other Information — Stockholder Nominations for Board of Directors.” In addition, the Governance Committee may periodically retain a search firm to assist it in identifying and recruiting director candidates meeting the criteria specified by the Committee.

The Committee believes that the criteria for director nominees should foster effective corporate governance, support our strategies and businesses, take diversity into account and ensure that our directors, as a group, have an overall mix of the attributes needed for an effective Board. The criteria should also support the successful recruitment of qualified candidates.

Qualified candidates for director are those who, in the judgment of the Committee, possess all of the personal attributes and a sufficient mix of the experience attributes listed below to ensure effective service on the Board.

Financial acumen

Has good knowledge of business finance and financial statements

► Satisfies the financial literacy requirements of the NYSE

► Qualifies as an audit committee financial expert under the rules and regulations of the SEC

► Has an accounting, finance or banking background

General business experience

Possesses experience that will aid in judgments concerning business issues

► Has leadership experience as a chief or senior executive officer

► Has experience setting compensation

Industry knowledge

Possesses knowledge about our industries

► Has substantial knowledge of the healthcare industry, including with respect to caregiving, cost reimbursement or regulatory environment

► Has governance/public company board experience

Diversity of background and viewpoint

Brings to the Board an appropriate level of diversity

► Brings a diverse viewpoint that is representative of our customer, consumer, employee and stockholder base

► Provides a different perspective (stemming, for example, from an academic background or experience from outside the healthcare industries)

Special business experience

Possesses global management experience and experience with healthcare supplies and medical devices

► Has international experience

► Has a track record of successful innovation

► Has supply chain management expertise

The Governance Committee has reviewed the background of each of our current directors and their service on the Board in light of the personal and experience attributes described above. The Committee has determined that each director possesses all of the personal attributes as well as a sufficient mix of the experience attributes.

For details about each director’s specific experience attributes, see “The Nominees” and “Directors Continuing in Office” below.

Cash retainer: $70,000 annually, paid in four quarterly payments at the beginning of each quarter.

Restricted share units: Annual grant with a value of $140,000, awarded and valued on the first business day of the year

(1)    Amounts shown reflect the grant date fair value of those grants, determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 — Stock Compensation (“ASC Topic 718”) for restricted share unit awards granted pursuant to our 2016 Outside Directors’ Compensation Plan. See Note 10 to our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for 2016 for the assumptions used in valuing these restricted share units.

(2)   Each director received 4,274 restricted share units on January 4, 2016.

Using the following procedures, the Audit Committee pre-approves all audit and non-audit services provided by Deloitte to the Company:

„ Before the first face-to-face Audit Committee meeting of the year, our Vice President and Controller prepares a detailed memorandum regarding non-audit services to be provided by Deloitte during the year. This memorandum includes the services to be provided, the estimated cost of these services, reasons why it is appropriate to have Deloitte provide these services, and reasons why the requested service is not inconsistent with applicable auditor independence rules;

„ At the first face-to-face Audit Committee meeting each year, our Vice President and Controller presents a proposal, including fees, to engage Deloitte for audit and non-audit services; and

„ Before each subsequent meeting of the Audit Committee, our Vice President and Controller prepares an additional memorandum that includes updated information regarding the approved services and highlights any new audit and non-audit services to be provided by Deloitte. All new non-audit services to be provided are described in individual requests for services.

The Audit Committee reviews the requests presented in these proposals and memoranda and approves all services it finds acceptable.

To ensure prompt handling of unexpected matters, the Audit Committee has delegated to the Chairman of the Audit Committee the authority to amend or modify the list of audit and non-audit services and fees between meetings, as long as the additional or amended services do not affect Deloitte’s independence under applicable rules. Any actions taken under this authority are reported to the Audit Committee at its next meeting.

All Deloitte services and fees in 2016 were pre-approved by the Audit Committee or the Audit Committee Chairman.

Audit Committee Report

In accordance with its Charter adopted by the Board, the Audit Committee assists the Board in overseeing the quality and integrity of the Company’s accounting, auditing and financial reporting practices.

In discharging its oversight responsibility for the audit process, the Audit Committee obtained from the independent registered public accounting firm (the “auditors”) a formal written statement describing all relationships between the auditors and the Company that might bear on the auditors’ independence, as required by Public Company Accounting Oversight Board (“PCAOB”) Rule 3526, Communication with Audit Committees Concerning Independence , discussed with the auditors any relationships that may impact their objectivity and independence and satisfied itself as to the auditors’ independence. The Audit Committee also discussed with management, the internal auditors, and the auditors, the quality and adequacy of the Company’s internal controls and the internal audit function’s organization, responsibilities, budget and staffing. The Audit Committee reviewed with both the auditors and the internal auditors their audit plans, audit scope and identification of audit risks.

The Audit Committee discussed and reviewed with the auditors all communications required by the PCAOB’s auditing standards, including those required by PCAOB AS 16, “Communication with Audit Committees.” Also, with and without management present, it discussed and reviewed the results of the auditors’ examination of our financial statements.

Management is responsible for preparing the Company’s financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and for establishing and maintaining the Company’s internal control over financial reporting. The auditors have the responsibility for performing an independent audit of the Company’s financial statements, and expressing opinions on the conformity of the Company’s financial statements with GAAP. The Audit Committee discussed and reviewed the Company’s audited financial statements as of and for the fiscal year ending December 31, 2016, with management and the auditors.

Based on the above-mentioned review and discussions with management and the auditors, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, for filing with the SEC. The Audit Committee also has selected and recommended to the Company’s stockholders for ratification the reappointment of Deloitte as the independent registered public accounting firm for 2017.

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Heidi Kunz, Chairman

Patrick O’Leary

Gary Blackford

In the Compensation Discussion and Analysis that follows, we describe in detail our executive compensation program, including its objectives, policies and components. Our executive compensation program seeks to align the compensation of our executives with the objectives of our business plans and strategies. To this end, the Compensation Committee (the “Committee”) approved an executive compensation program for 2016 that was designed to achieve the following objectives:

„ Pay-for-Performance. Support a performance-oriented environment that rewards achievement of our financial and non-financial goals.

„ Focus on Long-Term Success. Reward executives for long-term strategic management and stockholder value enhancement.

„ Stockholder Alignment. Align the financial interest of our executives with those of our stockholders.

„ Quality of Talent. Attract and retain executives whose abilities are considered essential to our long-term success.

For a more detailed discussion of how our executive compensation program reflects these objectives, including information about the 2016 compensation of our named executive officers, see “Compensation Discussion and Analysis,” below.

We are asking our stockholders to support our executive compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our executives and the objectives, policies and practices described in this proxy statement. Accordingly, our stockholders are being asked to vote on the following non-binding resolution at the Annual Meeting:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved by the Company’s stockholders on an advisory basis.

The say-on-pay vote is advisory and is therefore not binding on the Company, the Committee or our Board. Nonetheless, the Committee and our Board value the opinions of our stockholders. Therefore, to the extent there is any significant vote against the executive compensation as disclosed in this proxy statement, the Committee and our Board will consider our stockholders’ concerns and will evaluate whether any actions are necessary to address those concerns.

This Compensation Discussion and Analysis (“CD&A”) is intended to provide investors with an understanding of the compensation policies and decisions regarding 2016 compensation for our named executive officers as well as information on 2017 compensation decisions as of the date of this proxy statement.

For 2016, our named executive officers were:

Pay for performance

Perform an annual compensation risk assessment

Utilize an independent compensation consultant

Require that change-in-control agreements contain a double trigger

Maintain share ownership guidelines

Maintain a clawback policy on incentive payments in case of financial restatement

Benchmark our compensation practices to ensure executive compensation is consistent with market

Cap short and long-term incentive payments at reasonable levels

RETIREMENT BENEFITS

Our named executive officers received contributions from the Company under the Halyard Health, Inc. 401(k) Plan (the “401(k) Plan”) and the Halyard Health, Inc. Supplemental Retirement 401(k) Plan (the “Supplemental 401(k) Plan”). The Company does not have a defined benefit pension plan in the United States, and none of our named executive officers participate in any Company defined benefit pension plans.

OTHER COMPENSATION

We believe the perquisites provided to our executive officers are minimal and well below the median of those provided by our peer group. In addition, the Company does not provide tax reimbursement or gross-ups for perquisites offered to executive officers, except for certain relocation benefits.

POST-TERMINATION BENEFITS

We maintain two severance plans that cover our executive officers: the Severance Pay Plan and the Executive Severance Plan. An executive officer may not receive severance payments under more than one severance plan. Benefits under these plans are payable only if the executive’s employment terminates under the conditions specified in the applicable plan. We believe that our severance plans are consistent with those maintained by our peer group companies and that they are therefore important for attracting and retaining executives who are critical to our long-term success and competitiveness. For more information about these severance plans and their terms, see “Potential Payments on Termination or Change of Control – Severance Benefits.”

Severance Pay Plan

Our Severance Pay Plan provides severance benefits to most of our U.S. hourly and salaried employees, including our named executive officers, who are involuntarily terminated under the circumstances described in the plan. The objective of this plan is to facilitate the employee’s transition to his or her next position, and it is not intended to serve as a reward for the employee’s past service.

Executive Severance Plan

Our Executive Severance Plan provides severance benefits to eligible executives, including our named executive officers, in the event of a qualified termination of employment (as defined in the plan) in connection with a change of control. For an eligible employee to receive a payment under this plan, two things must occur: there must be a change of control of the Company, and the executive must have been involuntarily terminated without cause or have resigned for good reason (as defined in the plan) within two years of the change of control (often referred to as a “double trigger”). The objective of this plan is to encourage the executive to stay with the Company in the event of a change of control transaction to ensure a smooth transition. Each of our named executive officers has entered into an agreement under the plan that expires on October 31, 2017.

In February 2017, the Committee approved the base salaries for our named executive officers, effective April 1, 2017:

In February 2017, the Committee also established objectives for 2017 annual cash incentives, which will be payable in 2018. The target payment amounts and range of possible payouts for 2017 are as follows:

As a matter of sound governance, we follow certain practices with respect to our executive officer compensation program. We regularly review and evaluate our executive officer compensation practices in light of regulatory developments, market standards and other considerations.

USE OF INDEPENDENT COMPENSATION CONSULTANT

The Committee engaged Meridian Compensation Partners LLC (“Meridian”) as its independent consultant to assist it in determining the appropriate executive officer compensation under our compensation policies described above. Consistent with the Committee’s policy in which its independent consultant may provide services only to the Committee, Meridian had no other business relationship with the Company and received no payments from us other than fees and expenses for services to the Committee. See “Corporate Governance—Compensation Committee” for information about the use of compensation consultants.

As described in detail above, a significant percentage of our executive officer compensation is incentive-based. The determination of the extent to which the incentive objectives are achieved is based in part on the Committee’s discretion and in part on our published financial results. The Committee has the right to reassess its determination of the performance awards if the financial statements on which it relied are restated. The Committee has the right to direct management to seek to recover from any executive officer any amounts determined to have been inappropriately received by the individual executive officer. In addition, under the Company’s Equity Participation Plan, the Committee may require awards with performance goals under the Plan to be subject to any policy we may adopt relating to the recovery of that award to the extent it is determined that performance goals relating to the awards were not actually achieved. Further, the Sarbanes-Oxley Act of 2002 mandates that the chief executive officer and the chief financial officer reimburse us for any bonus or other incentive-based or equity-based compensation paid to them in a year following the issuance of financial statements that are later required to be restated as a result of misconduct. The Committee intends to review and revise the incentive compensation clawback policy once the SEC issues final regulations on clawbacks under the Dodd-Frank legislation enacted in 2010.

We strongly believe that the financial interests of our executive officers should be aligned with those of our stockholders. Accordingly, the Committee has established the following stock ownership guidelines for our executive officers:

OTHER POLICES RELATING TO TRANSACTIONS IN COMPANY SECURITIES

We require all executive officers to pre-clear transactions involving our common stock (and other securities related to our common stock) with our Legal Department.

COMMITTEE EXERCISE OF DISCRETION TO REDUCE ANNUAL CASH INCENTIVE PAYMENT

In establishing performance goals and target levels under the annual cash incentive program, the Committee is exercising its discretion to limit the amount of the incentive payments, consistent with our pay-for-performance objective. In the absence of this exercise of discretion, our chief executive officer would be entitled to an award equal to four percent of our earnings before unusual items, and each of our other executive officers would be entitled to an award equal to two percent of our earnings before unusual items; however, the Committee has exercised its discretion to limit the amount of the incentive payments each year of the program, and this potential maximum award has never been paid to any of the executive officers.

CORPORATE TAX DEDUCTION FOR EXECUTIVE COMPENSATION

The United States income tax laws generally limit the deductibility of compensation paid to the chief executive officer and each of the three highest-paid executive officers (not including the chief financial officer) to $1,000,000 per annum. However, an exception exists for performance-based compensation that meets certain regulatory requirements. Several classes of our executive compensation, including option awards and portions of our long-term equity grants to executive officers, are designed to meet the requirements for deductibility. Other classes of our executive compensation, including portions of the long-term equity grants described above, may be subject to the $1,000,000 deductibility limit.

Compensation Committee Report

In accordance with its written charter adopted by the Board, the Compensation Committee of the Company has oversight of compensation policies designed to align executive officers’ compensation with our overall business strategy, values and management initiatives. In discharging its oversight responsibility, the Committee has retained an independent compensation consultant to advise the Committee regarding market and general compensation trends.

The Committee has reviewed and discussed the Compensation Discussion and Analysis with our management, which has the responsibility for preparing the Compensation Discussion and Analysis. Based upon this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2016.

COMPENSATION COMMITTEE OF

THE BOARD OF DIRECTORS

Julie Shimer, Chairman

John Byrnes

William Hawkins

Maria Sainz