HSP

PROPOSAL 1
ELECTION OF DIRECTORS

        The board has historically been divided into three classes, with one class of directors being elected for a three-year term at each annual meeting. There are currently three Class I seats, three Class II seats and five Class III seats. Prior to the 2013 annual meeting, each director was elected to hold office until the third annual meeting after the meeting at which such director was elected and until his or her successor was duly elected and qualified, or until his or her earlier resignation, removal or death.

        In May 2012, the shareholders approved amendments to Hospira's Restated Certificate of Incorporation to phase out the classification of the board of directors over a three-year period, with the phase-out being accomplished as follows:

(i)

the Class II directors elected at the 2012 annual meeting will serve out their current three-year term and will stand for re-election at the 2015 annual meeting for a one-year term;



(ii)

the Class III directors will stand for re-election at the 2013 annual meeting for a one-year term, and thereafter at the 2014 annual meeting for a one-year term; and



(iii)

the Class I directors elected at the 2011 annual meeting will serve out their current three-year term and will stand for re-election at the 2014 annual meeting for a one-year term.

        At and after the 2015 annual meeting, all directors will be elected to a one-year term and the board will no longer be classified.

        On July 25, 2012, as permitted under our bylaws, the board decided to appoint Dennis M. Fenton to Hospira's board as a Class III director with a term to expire at the 2013 annual meeting. Upon the recommendation of its governance and public policy committee, and consistent with the phase-out schedule described above, the board of directors has nominated Connie R. Curran, William G. Dempsey, Dennis M. Fenton, Heino von Prondzynski, and Mark F. Wheeler to be elected to hold office until the 2014 annual meeting. No nominations for directors were received from shareholders and no other candidates are eligible for election.

        If elected, each nominee will serve until the expiration of his or her term and his or her successor is elected and qualified or until his or her earlier resignation, removal or death. Each of the nominees is willing to serve if elected, and the board of directors has no reason to believe that any of the nominees will be unavailable for election, but if such a situation should arise, the proxy will be voted in accordance with the best judgment of the proxy holder for such person or persons as may be designated by the board of directors, unless the shareholder has directed otherwise.

         The board of directors recommends that the shareholders vote FOR the election of Connie R. Curran, William G. Dempsey, Dennis M. Fenton, Heino von Prondzynski, and Mark F. Wheeler to the board of directors for a one-year term until the 2014 annual meeting.

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OUR BOARD OF DIRECTORS

Nominees for Election at the 2013 Annual Meeting

         Connie R. Curran, RN, Ed.D , age 65, has served as our director since 2004. Dr. Curran has served as the president of Curran Associates, a healthcare consulting firm, since July 2006. She previously served as the Executive Director of C-Change, formerly the National Dialogue on Cancer, a health advocacy organization, from 2003 to July 2006. From 1995 to 2000, Dr. Curran served as President and Chief Executive Officer of CurranCare, LLC, a healthcare consulting company. Upon the acquisition of CurranCare by Cardinal Health Consulting Services in November 2000, Dr. Curran served as President of Cardinal Health Consulting Services, a consulting company with expertise in surgical services, hospital operations and case management and home care, until February 2002. Dr. Curran has previously served as Vice President of the American Hospital Association and Dean of the College of Nursing at the Medical College of Wisconsin. Dr. Curran also serves as a director of DeVry, Inc. Within the past 5 years, Dr. Curran also has served as a director of Volcano Corporation (from 2007 to 2011).

        Reasons for Nomination:     As the president or chief executive officer of healthcare consulting firms for several years, Dr. Curran has extensive leadership experience in the medical industry. She has had significant experience as an educator as the Dean of the College of Nursing at the Medical College of Wisconsin. In addition, she received a masters degree in medical surgical nursing from DePaul University. Dr. Curran also has significant experience serving on the boards and committees of other public companies. Dr. Curran's extensive medical background and experience, along with her healthcare consulting and success in executive leadership positions, make her well qualified to serve on the board and its committees.

         William G. Dempsey , age 61, has served as our director since 2011. Mr. Dempsey provided 25 years of service to Abbott Laboratories ("Abbott") (a global broad-based healthcare company), and in his last position at Abbott, from 2006 until his retirement in 2007, served as Executive Vice President, Global Pharmaceuticals. From 2003 to 2006, Mr. Dempsey served at Abbott as its Senior Vice President, Pharmaceutical Operations. From 1982 to 2003, Mr. Dempsey held several other senior management positions at Abbott. Mr. Dempsey currently serves on the board of Landauer Inc. and Nordion Inc.

        Reasons for Nomination:     Mr. Dempsey has 25 years of senior management experience at a large publicly traded healthcare company, including substantial experience overseeing the company's international operations, and its pharmaceutical, hospital and nutritional businesses. His substantial experience in healthcare, particularly in the international, pharmaceutical, and hospital areas, makes him well qualified to serve on the board and its committees.

         Dennis M. Fenton, age 61, has served as our director since 2012. Dr. Fenton is the owner and CEO of Fenton and Associates (biotechnology consulting). Prior to that, for over 25 years, Dr. Fenton held numerous positions, including executive roles in process development, manufacturing, sales and marketing, and research and development at Amgen, Inc., a biotechnology company. Most recently, from 2000 to 2008, he served as the Executive Vice President, Operations at Amgen. Dr. Fenton currently serves on the board of Dendreon Corporation, Kythera Biopharmaceuticals, and Xenoport. He also currently chairs the Scientific Advisory Board and acts as a board observer for Althea Technologies. Within the past five years, Dr. Fenton also has served as a director of Genzyme Corporation (from 2010 to 2011).

        Reasons for Nomination:     Dr. Fenton has over 25 years of experience at a large publicly-traded biotechnology company, including substantial management experience in operations, process development and research and development. Dr. Fenton also has experience serving on the boards and committees of other public companies. His substantial experience in healthcare, particularly in the

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operations, process development and research and development areas, make him well qualified to serve on the board and its committees.

         Heino von Prondzynski , age 63, has served as our director since 2009. Mr. v. Prondzynski served as chief executive officer of Roche Diagnostics and as a member of the executive committee of F. Hoffman-La Roche Ltd., a Swiss-based healthcare company that develops diagnostic and therapeutic products, from early 2000 to 2005, retiring from Roche at the end of 2006. From 1996 to 2000, Mr. v. Prondzynski held several executive positions at Chiron Corporation, a multinational biotechnology firm that develops biopharmaceuticals, vaccines, and blood testing products, and from 1976 to 1996 at Bayer AG, a German-based maker of healthcare products, specialty materials, and agricultural products. Mr. v. Prondzynski also serves on the board of Qiagen NV, Koninklijke Philips Electronics NV, and Epigenomics AG. Within the past five years, Mr. v. Prondzynski also has served as a director of Nobel Biocare Holding AG, Switzerland (from 2010 to 2011).

        Reasons for Nomination:     Mr. v. Prondzynski has substantial international leadership experience at several multinational healthcare companies with over 30 years of leadership and management experience in the healthcare field. Since those companies were headquartered abroad, his international experience is substantial. In addition, he has significant experience serving on the boards and committees at multinational companies. This substantial history of leadership positions at major international healthcare companies allows him to provide a global business perspective to his service on Hospira's board and its committees, and makes him well qualified to serve on the board and its committees.

         Mark F. Wheeler, M.D., M.P.H. , age 63, has served as our director since 2006. From September 2010 until June 2012, when he retired, Dr. Wheeler served as the System Vice President, CIO and CMIO for PeaceHealth, an integrated delivery network of hospitals in the Pacific Northwest. From January 2007 to September 2010, he served as the Director of Clinical Informatics for PeaceHealth. He previously served as Acting Vice President Engineering, Centricity Enterprise Business Unit of General Electric Company, a diversified technology, media and financial services company, from February 2006 to January 2007. He served as chief technical architect of IDX Systems Corporation ("IDX"), a healthcare information technology services provider, from 1997 until December 2005, when IDX was acquired by General Electric, and served on IDX's board of directors from 1999 through 2005.

        Reasons for Nomination:     For over 25 years, Dr. Wheeler worked in the medical research and development field, with a strong emphasis on software development related to medical products. Dr. Wheeler received an M.D. from Yale University and is a former practicing physician. Dr. Wheeler's substantial medical industry experience, particularly related to research and development, along with his medical background, make him well qualified to serve on the board and its committees.

Continuing Directors

Directors Whose Terms Expire in 2014

         Irving W. Bailey, II , age 71, has served as our director since 2004 and served as the lead director from 2007 to 2011. Mr. Bailey served as a Managing Director of Chrysalis Ventures, a private equity management firm, from June 2001 to January 2005, and has served as a Senior Advisor to Chrysalis Ventures since January 2005. Mr. Bailey served as President of Bailey Capital Corporation, a private equity management firm, from January 1998 to June 2001, and as Chief Executive Officer of Providian Corporation, an insurance and diversified financial services company, from 1988 to 1997. Mr. Bailey also serves as Vice Chairman of Aegon, N.V. and as a director of Computer Sciences Corporation.

        Reasons for Continued Service:     Mr. Bailey has extensive management experience in the financial services sector as the former chairman and chief executive officer of a major financial services company, and several years of experience in private equity management. Mr. Bailey also has extensive

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experience serving on the boards of multinational organizations, most notably, as a member of the board at an internationally based company and as a lead director. Mr. Bailey's strong management and lead director experience provides a valuable source of insight for the board and its committees. For these reasons, Mr. Bailey is well qualified to serve on the board and its committees.

         F. Michael Ball, age 57, joined Hospira as its Chief Executive Officer and as a director in March 2011. Mr. Ball joined Hospira after a 16-year career at Allergan, Inc., a multi-specialty healthcare company, where he held several senior leadership positions. More recently, from February 2006 until joining Hospira, Mr. Ball served as President of Allergan. From October 2003 to February 2006, Mr. Ball served as Executive Vice President and President, Pharmaceuticals of Allergan. Since 2000, Mr. Ball has served on the board of directors of STEC, Inc., a publicly traded manufacturer and marketer of computer memory and hard drive storage solutions.

        Reasons for Continued Service:     Mr. Ball brings more than 25 years of healthcare experience to Hospira, more recently serving in several senior management positions for 16 years at a publicly-traded, multi-specialty healthcare company. As the CEO, Mr. Ball has the primary responsibility for managing the company day-to-day and its business activities and operations. For these reasons, Mr. Ball is well qualified to serve on Hospira's board.

         Jacque J. Sokolov, M.D. , age 58, has served as our director since 2004. Dr. Sokolov has served since 1997 as the Chairman and Managing Partner of SSB Solutions, Inc., a national healthcare management consulting, project development and investment firm. From 1987 to 1992, Dr. Sokolov served as the Vice President of Healthcare for Southern California Edison. In 1992, Dr. Sokolov became CEO of Advanced Health Plans Inc., which was acquired in 1994 by Coastal Physicians Group Inc. From 1994 to 1997, Dr. Sokolov served as Chairman of the Board, Chairman of the Executive Committee, and Chairman of the Management Action Committee of Coastal Physician Group, Inc., which later became PhyAmerica Physician Group, Inc. Dr. Sokolov serves on the board of directors of MedCath and MyHealthDirect. He also serves as a director for the National Health Foundation, Phoenix Children's Hospital, and the White House Health Project.

        Reasons for Continued Service:     Dr. Sokolov has strong management experience in the healthcare field as a senior corporate officer and the chairman and chief executive officer of a national healthcare management, development and investment firm. Over the years, he was worked extensively with physicians, physician organizations, hospitals/health systems, health plans and pharmaceutical and medical device companies. He also has over 18 years of board experience at three public companies, including service as a chairman of the board, chairman of several committees, and as a member of the audit, governance, public policy and compensation committees. This experience and his understanding of the clinical/business models of healthcare make him well qualified to serve on the board and its committees.

Directors Whose Terms Expire in 2015

         Barbara L. Bowles , age 65, has served as our director since 2008. She recently founded and serves as president of the Landers Bowles Family Foundation, which is dedicated to providing charitable gifts primarily to educational entities in order to support disadvantaged high school and college students. She served as the Vice Chair of Profit Investment Management, an equity investment advisory firm, from January 2006 until retiring in December 2007. She was the founder and served as Chairman (2000 to 2006) and Chief Executive Officer (1989 to 2005) of the Kenwood Group, Inc., an equity investment firm until it was acquired by Profit Investment Management. From 1984 to 1989, Ms. Bowles was Corporate Vice President and Director, Investor Relations, for Kraft, Inc., a diversified packaged food and beverage company. Ms. Bowles serves as a director of Wisconsin Energy Corporation, Lurie Childrens Hospital, the Chicago Urban League, and the Museum of Science and Industry, Chicago. She is a trustee of Fisk University and also serves on the University of Chicago Booth School of Business

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Advisory Council. Within the past five years, Ms. Bowles has served as a director of Black & Decker Corporation (from 1993 to 2010).

        Reasons for Continued Service:     Ms. Bowles has extensive management and investment advisory experience as the founder, chairman and CEO of a Chicago-based investment advisory firm that managed pension funds for corporations, public institutions and endowments. She has also served as the chief investor relations officer at two large public companies. She has extensive experience serving on the boards of other public companies, including as a presiding director. Ms. Bowles' unique and diverse experiences make her well qualified to serve on the board and its committees.

         Roger W. Hale , age 69, has served as our director since 2006. He has served as Chairman of the Board and Chief Executive Officer of LG&E Energy Corporation, a diversified energy services company, from August 1990 until retiring in April 2001. Prior to joining LG&E Energy Corporation, he was Executive Vice President of BellSouth Corporation, a communications services company. From 1966 to 1986, Mr. Hale held several executive positions with AT&T Co., a communications services company, including Vice President, Southern Region from 1983 to 1986. Mr. Hale is also a director of Ashland, Inc. Within the past five years, Mr. Hale also has served as a director of H&R Block, Inc. (from 1991 to 2008).

        Reasons for Continued Service:     Mr. Hale has extensive experience leading international operations, as the chairman and chief executive officer at a diversified energy services company and as a senior-level executive at two communications services companies. He also has experience with serving on the board of three large multinational companies, including as a presiding director. He also has substantial experience serving on audit, compensation, finance and governance committees. This strong track record of management and leadership experiences provides a valuable source of insight for the board and its committees, and makes him well qualified to serve on the board and its committees.

         John C. Staley , age 71, has served as our director since 2004, and as the chair of our board of directors since January 2012. Mr. Staley served as the Managing Partner of the Lake Michigan Area of Ernst & Young LLP, a public accounting firm, a position that he held from 1985 to his retirement in June 2001. In addition, Mr. Staley serves as a director of Mattersight Corporation. Mr. Staley is also a member of, and the former Chairman of, the Board of Trustees of DePaul University. Within the past five years, Mr. Staley has also served as a director of Nicor Inc. (from 2008 to 2011).

        Reasons for Continued Service:     Mr. Staley worked for Ernst & Young for more than 35 years, including as a tax practice coordinator in the company's European headquarters, and for 16 years, as an Area Managing Partner with overall responsibility for the audit, tax and consulting practices. Based on that experience, Mr. Staley is an expert in the areas of accounting and auditing, and he provides the board with a valuable source of accounting insight. His experience serving on other boards and committees also makes him well qualified to serve on the board and its committees.

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CORPORATE GOVERNANCE

Board Leadership Structure

        Our board of directors is committed to adopting governance policies and practices that promote the most effective and ethical management of the company. In that regard, the board believes that it is important to retain maximum flexibility to determine the company's optimal leadership structure and to choose the best qualified person to serve in the offices of chief executive officer and chairman of the board. At this point in time, the board has determined that having an independent, non-executive chair is the optimal leadership structure for the company because it provides the board with independent leadership and allows Mr. Ball, the company's relatively new chief executive officer, to concentrate on the company's business operations. The independent directors elected Mr. Staley as the non-executive chair. As the non-executive chair, Mr. Staley is responsible for the following:

•

presiding at all meetings of the shareholders and board;



•

ensuring the board is fulfilling its roles and responsibilities as set forth in the company's corporate governance guidelines;



•

communicating with the independent directors between meetings, as appropriate;



•

presiding at all meetings of the independent directors, and taking the lead role in communicating any feedback to the chief executive officer;



•

assisting with the recruitment of board candidates, and with establishing committee memberships and committee chairs;



•

working with committee chairs, as necessary, to ensure committee work is conducted at the committee level and appropriately reported to the board;



•

recommending consultants and outside advisors to the board, as necessary or appropriate;



•

serving as a mentor to the chief executive officer and collaborating with the chief executive officer on setting board meeting schedules and agendas; and



•

assisting with the oversight of the annual performance evaluation of the board and the chief executive officer.

        In addition, the chair may call meetings of the board or the independent directors and may attend meetings of committees on which the chair is not a member. The chair will serve a two-year term, with the possibility of being elected for one additional term of two years. A full description of the chair's roles and responsibilities are included in our corporate governance guidelines, which are available in the investor relations section of our Web site at www.hospira.com .

Board's Role in Risk Oversight

        As stated in our corporate governance guidelines, our board is committed to overseeing the conduct of our company's business so that it is managed by its officers, managers and employees in the long term interests of shareholders. As part of that responsibility, our board regularly discusses the processes that are in place to safeguard our company's assets and mitigate the company's risk. The board's role in risk oversight is consistent with the company's leadership structure, with the chief executive officer and other members of senior management having responsibility for assessing and managing the company's risk exposure, and the board and its committees providing oversight in connection with these efforts. For example, our board reviews the company's enterprise risk management process, the major risks identified through that process, and management's related mitigation strategies. Throughout the year, our board and its committees receive updates, as necessary, on the identified risks and mitigation plans. In addition, each year, the board reviews the company's

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strategic direction and objectives, and reviews key operational issues or risks related to the long-term strategic plan. The board holds extensive meetings with senior management to discuss the company's long-term operating plans, including the issues and opportunities facing our company in light of industry developments. Throughout the year, the board continues to engage in dialogue with management related to the progress of these plans, including any significant operational issues or risks encountered by the company in executing the plans. Each of our board committees (audit, compensation, governance and public policy, and science, technology and quality) regularly meet and review the major risks and mitigation activities relating to their respective areas of responsibility and oversight.

Meetings

        Our board of directors held 6 meetings during 2012. Other than Dr. Fenton, no director attended fewer than 75% of the total number of meetings of the board of directors and the committees of the board of directors on which such director served. Dr. Fenton, a new director who joined the board in July 2012, was not able to attend 75% of the total number of meetings due to a death in the family that prevented him from participating in the October board and committee meetings. We have no formal policy on director attendance at our annual meetings but we encourage all of our directors to attend annual meetings. All of our directors serving at the time attended the 2012 annual meeting.

        Our independent directors generally meet in an executive session without management present at every regularly scheduled board meeting. As the chair during 2012, Mr. Staley presided at these executive sessions.

Independence

        The board annually determines the independence of directors. No director may qualify as independent unless the board of directors affirms that the director has no material relationship with us. As required by our corporate governance guidelines, the board will consider all relevant facts and circumstances in connection with that determination, including the following:

•

a director who is, or has been within the last three years, our employee, or whose immediate family member is, or has been within the last three years, our executive officer is not independent;



•

a director who receives, or whose immediate family member receives, more than $120,000 from us in direct compensation, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), and other than amounts received by an immediate family member for service as a non-executive employee, during any 12-month period in the last three years is not independent;



•

a director who, or whose immediate family member, is a current partner of a firm that is our internal or external auditor is not independent;



•

a director who is a current employee of a firm that is our internal or external auditor is not independent;



•

a director with an immediate family member who is a current employee of a firm that is our internal or external auditor and who personally worked on our (or a subsidiary's) audit is not independent;



•

a director who, or whose immediate family member, was within the last three years a partner or employee of a firm that is our internal or external auditor and personally worked on our audit during that time is not independent;

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•

a director who is employed, or whose immediate family member is employed, or has been employed in the last three years, as an executive officer of another company where any of our present executive officers at the same time serves or served on that company's compensation committee is not independent;



•

a director who is a current employee, or whose immediate family member is a current executive officer, of a company that makes payments to, or receives payments from, us for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company's consolidated gross revenues, is not independent; and



•

a director who is an executive officer of a charitable organization that receives charitable contributions (other than matching contributions) from us that are in excess of the greater of $1 million or 2% of such charitable organization's consolidated gross revenues is not independent.

        In February 2013, our board determined that Mr. Bailey, Ms. Bowles, Dr. Curran, Mr. Dempsey, Dr. Fenton, Mr. Hale, Dr. Sokolov, Mr. Staley, Mr. v. Prondzynski, and Dr. Wheeler are independent within the meaning of our director independence standards and the listing standards of the New York Stock Exchange. In making these independence determinations, the board was not aware of any disqualifying relationship under the above criteria and, additionally, was not aware of any other relationship between such director and Hospira that would affect his or her independence. Relationships considered by the board not to impair independence are described below.

        We sell products in the ordinary course of business to hospitals affiliated with PeaceHealth, Dr. Wheeler's former employer. Dr. Wheeler retired from PeaceHealth in June 2012. We do not believe that the business relationship is material to either party in amount or significance. Sales to PeaceHealth-affiliated hospitals represented less than 1% of Hospira's and PeaceHealth's net revenues. Dr. Wheeler is no longer employed at PeaceHealth, and was not an executive officer of PeaceHealth or the affiliated hospitals and was not compensated by us or PeaceHealth directly or indirectly as a result of such business. Accordingly, the board determined that he did not have a material interest in such business relationship and that such business relationship is not a material relationship with Dr. Wheeler.

        Our director independence standards are included in our corporate governance guidelines, which are available in the investor relations section of our Web site at www.hospira.com .

Committees of the Board of Directors

        Our board of directors has the following committees:

Audit Committee

        Ms. Bowles (chair), Mr. Bailey, Mr. Dempsey, Dr. Fenton and Dr. Wheeler serve on the audit committee. During 2012, the audit committee met 12 times. All members of the committee must be independent and must satisfy the audit committee member eligibility requirements of the New York Stock Exchange and the SEC. Our board determined that Ms. Bowles, Mr. Bailey, Mr. Dempsey, Dr. Fenton and Dr. Wheeler are financially literate and eligible to serve on the committee.

        Our board has designated Ms. Bowles and Mr. Bailey as "audit committee financial experts," within the meaning of the rules of the SEC.

        The primary functions of the committee include:

•

meeting periodically with our management, internal auditors and independent registered public accounting firm regarding our internal controls, accounting and financial reporting;

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•

appointing and evaluating the independent registered public accounting firm;



•

reviewing and discussing our financial statements and financial press releases with our management and independent registered public accounting firm;



•

reviewing and discussing our major financial risk exposures and the steps management has taken to monitor and control those exposures with our management, internal auditors, and independent registered public accounting firm; and



•

establishing procedures for the receipt, retention and treatment of complaints received by our company regarding accounting matters, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting matters.

        Both the independent registered public accounting firm and the internal auditors regularly meet privately with the audit committee and have unrestricted access to the audit committee.

        The audit committee is governed by a written charter, which is available on our Web site at www.hospira.com . The eligibility criteria for committee members are included in the charter. A copy of the report of the audit committee is on page 54.

Compensation Committee

        Mr. Hale (chair), Dr. Curran, Dr. Sokolov, and Mr. v. Prondzynski serve on the compensation committee. During 2012, the compensation committee met five times. All members of the compensation committee must be independent and must be "non-employee directors" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and "outside directors" for purposes of Section 162(m) of the Internal Revenue Code. Our board determined that Mr. Hale, Dr. Curran, Dr. Sokolov, and Mr. v. Prondzynski are eligible to serve on the committee.

        The primary functions of the committee include:

•

reviewing and determining the executive officers' compensation;



•

reviewing and, as it deems appropriate or as required by regulations, recommending to the board of directors, policies, practices and procedures relating to the compensation of our officers, other managerial employees and non-employee directors and the establishment and administration of our employee benefit plans; and



•

exercising authority under our employee equity incentive plan and management incentive plans. (The committee may delegate the responsibility to administer and make grants under these plans to management except to the extent such delegation would be inconsistent with applicable laws or regulations.)

        For a description of how the compensation committee administers our executive compensation program, please see "2012 Compensation Discussion and Analysis—Discussion of Compensation Program—General Administration" later in this proxy statement. The compensation committee has engaged Towers Watson as its independent compensation consultant. Towers Watson provides counsel and advice on executive and non-employee director compensation matters, including providing information regarding the peer groups against which performance and pay should be examined. For a further description of the services provided by Towers Watson, please see "2012 Compensation Discussion and Analysis—Discussion of Compensation Program—General Administration" later in this proxy statement.

        The compensation committee has adopted a policy that prohibits Towers Watson from performing any other services to the company other than the duties Towers Watson performs as the compensation committee's independent consultant. This is intended to strengthen the independence of Towers Watson and avoid any future conflicts of interest. However, in 2012, Towers Watson was allowed to provide

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limited employee communications related services in connection with changes to the company's annual cash incentive program and received approximately $9,000 for such services. For services rendered to the committee related to executive compensation, in 2012, the committee authorized payment to Towers Watson of approximately $300,741. The compensation committee assessed the independence of Towers Watson in 2012 pursuant to Securities and Exchange Commission rules and concluded that Towers Watson's work for the compensation committee does not raise any conflict of interest.

        The compensation committee is governed by a written charter, which is available on our Web site at www.hospira.com . The eligibility standards for committee members are included in the charter. A copy of the report of the compensation committee is on page 40.

Governance and Public Policy Committee

        Dr. Curran (chair), Ms. Bowles, Mr. Hale, and Mr. Staley serve on the governance and public policy committee. During 2012, the governance and public policy committee met five times. All members of the governance and public policy committee must be independent. Our board determined that Dr. Curran, Ms. Bowles, Mr. Hale, and Mr. Staley are eligible to serve on the committee.

        The functions of the committee include:

•

developing the general criteria for selecting members of the board of directors and assisting the board in identifying and attracting qualified candidates;



•

recommending to the board of directors the nominees for election as directors, considering the criteria described herein and any potential nominees recommended by our shareholders;



•

recommending to the board of directors persons to be elected as executive officers;



•

reviewing and assessing the adequacy of our corporate governance guidelines;



•

providing general oversight over certain compliance programs, policies and procedures; and



•

providing general oversight over certain company political and charitable activities.

        The process used by the committee to identify a nominee to our board of directors depends on the qualities being sought. Board members should have backgrounds that, when combined, provide a portfolio of experience and knowledge that will serve our governance and strategic needs. Candidates will be considered on the basis of a range of criteria, including broad-based business knowledge and relationships, and prominence and excellent reputations in their primary fields of endeavor, as well as a global business perspective and commitment to good corporate citizenship. Directors should have demonstrated experience and ability that is relevant to the board of directors' oversight role with respect to our business and affairs. The committee's criteria for the selection of, and qualifications desirable in, members of the board, are included in an outline for directorship qualifications, which is an exhibit to the company's corporate governance guidelines, which can be found on our Web site, www.hospira.com . As stated in that outline, among other attributes, our directors should have strong management experience, experience with multinational operations, or other desirable experience, such as experience with hospital products, hospital administration, medical or pharmaceutical products, medical research and development, finance or international business. It is also the committee's desire for the board to include a range of ages and a diversity of ethnicity, gender, experience, knowledge and geography. The committee defines diversity broadly and evaluates candidates not only on the attributes described above, but also considers whether the candidate enhances the current diversity of the board. The committee uses a skills and qualifications matrix, which includes several diversity characteristics, to ensure that the overall Board membership supports this diversity policy. In addition, as part of the annual self-evaluation process, the board and all of the committees assess whether or not the board and the committees have the appropriate diversity, as well as the appropriate experience, education and skills for the current issues facing the company.

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        Director candidates can be referred to the committee from a variety of sources, including by our officers, directors and shareholders. The committee has from time to time enlisted a third-party search firm to assist it in identifying and evaluating qualified candidates. The committee has the sole authority to engage director candidate search firms. In 2012, Dr. Fenton was added to Hospira's board. He was recommended by a third-party search firm hired by the committee to assist it in identifying qualified candidates.

        If the board determines to seek a new member and a candidate is referred to the committee, the committee will review the candidate's qualifications in light of the attributes being sought by the board. If the committee determines that a candidate's qualifications are potentially suitable for service on the board, the committee will conduct an investigation of the candidate's background. Typically, candidates are interviewed by one or more members of the committee, and our chair before being nominated for election to the board.

        A shareholder may recommend persons as potential nominees for director by submitting the names of such persons in writing to the chair of the governance and public policy committee or to our secretary. Recommendations should be accompanied by a statement of qualifications and confirmation of the person's willingness to serve. A nominee who is recommended by a shareholder following these procedures will receive the same consideration as other comparably qualified nominees. The committee will consider potential nominees recommended by shareholders, but has no obligation to recommend such candidates. The evaluation criteria are the same for each person considered for nomination to the board.

        The governance and public policy committee is governed by a written charter, which is available on our Web site at www.hospira.com . The eligibility standards for committee members are included in the charter.

Science, Technology and Quality Committee

        Dr. Wheeler (chair), Mr. Bailey, Mr. Ball, Ms. Bowles, Dr. Curran, Mr. Dempsey, Dr. Fenton, Mr. Hale, Dr. Sokolov, Mr. Staley, and Mr. v. Prondzynski serve on the science, technology and quality committee. The committee provides general oversight as to the strategic goals, objectives, and the direction of our research and development programs, including our product pipeline. The committee also oversees the company's product quality and safety initiatives. The committee met five times during 2012.

        The science, technology and quality committee is governed by a written charter, which is available on our Web site at www.hospira.com .

Director Share Ownership Guidelines

        Within five years after joining the board, each non-employee director is required to own and retain a minimum number of shares of Hospira common stock or deferred stock units equal to the lesser of i) 7,500 shares of Hospira common stock or ii) the number that is five times such director's annual retainer fees (currently $325,000). The director must maintain that minimum throughout his or her service on the board. For purposes of the ownership guidelines, common stock includes restricted stock, restricted stock units and deferred stock units awarded to non-employee directors. All non-employee directors have attained such minimum.

Communicating with the Board of Directors

        You may communicate with our board of directors by writing a letter to our chair. You may contact our independent directors by writing a letter to the chair of our audit committee (for accounting or disclosure matters), or any of our other independent directors.

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        The letter should be addressed to:

Director Communications
Hospira General Counsel and Secretary
Hospira, Inc.
275 North Field Drive
Department NLEG, Building H1
Lake Forest, Illinois 60045

        Our general counsel and secretary will review the communication and forward the communication to the addressee or, in the absence of an addressee, to the director or directors he believes to be most appropriate.

Corporate Governance Materials

        Our corporate governance guidelines, our code of business conduct and ethics, and the charters of our audit committee, compensation committee, governance and public policy committee, and science, technology and quality committee are available in the investor relations section of our Web site at www.hospira.com . We will provide a copy of any of these materials to any shareholder free of charge upon written request to:

Corporate Governance Material Request
Hospira General Counsel and Secretary
Hospira, Inc.
275 North Field Drive
Department NLEG, Building H1
Lake Forest, Illinois 60045

Compensation Risk Assessment

        Our management and compensation committee have evaluated our compensation policies and practices for all of our employees, including our executive and non-executive officers, to determine whether they create risks that are reasonably likely to have a material adverse effect on the company. We believe that our compensation programs do not encourage excessive risk taking and, thus, do not create risks that are reasonably likely to have a material adverse effect on the company for several reasons, including the following:

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Fixed vs. Variable Pay.   The balance between fixed and variable pay varies by job level. Corporate officers have a larger portion of their compensation in variable vehicles (such as performance-based annual bonuses, performance share units and stock options that vest over a three- or four-year period). These are designed to motivate performance and provide strong shareholder returns over the long-term. Officers, more than other employees, have a greater opportunity to influence long-term performance. Accordingly, at the general employee level, the greatest portion of compensation is fixed. The fixed component of compensation does not encourage risk taking because it is a fixed amount. The variable portion does not encourage excessive risk taking since that portion is based on multiple indicators of performance, thus diversifying the risk associated with any single performance indicator. Overall, the compensation mix for all of our employees is competitive to the market and provides a balanced mix between our fixed components, annual incentive, and equity awards.



•

Short-Term vs. Long-Term Variable Incentive Pay.   Again, the mix of short-term and long-term incentives is driven by the employee's role in the organization. Greater long-term incentives are provided to those roles that most directly impact the long-term strategy of the company, i.e., senior executives and officers. Our short-term incentive pay for all employees is based on the

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annual goal process, which is administered to motivate the results needed to achieve the approved business plan. In this process, the balance between risk and reward, both to participants and shareholders, is considered. Specific financial measures are considered as well as the necessity of achieving strategic objectives that contribute to the long-term success of the company and to shareholder value creation. In 2012, the compensation committee enhanced the short-term incentive program by utilizing a funding mechanism, under which payouts would not be funded under the program until the company achieved a certain threshold level of net income. Moreover, within the company, certain checks and balances exist in the conduct of the business, including audit, quality and financial approval processes that assist in managing business risk. Our long-term incentive pay for our officers and senior executives includes performance share units, which are earned based on a total shareholder return (TSR) measure over a three-year performance period relative to a designated peer group. This supports a longer-term orientation. Moreover, since the performance cycles overlap, one year's actions may impact three performance cycles, which further encourages a long-term focus.

•

Retirement Programs.   Our pension plan and supplemental pension plan were frozen as of December 31, 2004. Our other retirement programs are structured to be competitive with local practice, and provide a reasonable benefit which is comparable to the benefits provided to all other employees. Thus, we do not believe that our active retirement programs promote risky behaviors or strategies.



•

Recoupment Policy.   Our corporate officers are subject to a recovery policy, as described in the section captioned "2012 Compensation Discussion and Analysis—Other—Executive Compensation Recovery Policy."



•

Stock Ownership Guidelines.   In order to further align the interests of management with our shareholders, we have share retention and ownership guidelines for our senior management. These ownership guidelines are described in the section captioned "2012 Compensation Discussion and Analysis—Other—Executive Share Retention and Ownership Guidelines."

        Based on our analysis, we believe our compensation policies enhance our company's business interests by encouraging innovation and appropriate levels of risk taking. This analysis was supported by the compensation committee's independent consultant, Towers Watson. Additional information about our executive officer compensation practices and policies is included in the section captioned "2012 Compensation Discussion and Analysis."

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