Monday, April 9, 2012

Union Fights Hefty Compensation Pay For Exiting J&J CEO

Posted from Drug Watch

For the second consecutive year, a union is urging Johnson & Johnson shareholders to vote against an executive compensation proposal. At issue again is the pay for Chief Executive Officer Bill Weldon, who is expected to step down this month.

The American Federation of State, County and Municipal Employees, which owns about 20,000 Johnson & Johnson shares, says shareholders need to use their Say on Pay option to vote down compensation that is out of line with other executives’ pay — especially with all the trouble Johnson & Johnson faced during Weldon’s 10 years at the helm.

“The JNJ Board needs to get its hearing checked. After almost 40 percent of its shareholders voted against CEO pay last year, they are still not listening,” said AFSCME President Gerald W. McEntee.
Weldon’s total compensation in 2011 fell to $26.8 million from $28.7 million the previous year. This is largely due to the company’s struggles with recalls. Still, Weldon received a $3.1 million annual bonus for 2011, which is a 55 percent increase from 2010.

Johnson & Johnson has faced more than two dozen product recalls since September 2009, ranging from contaminated drugs to dangerously defective medical devices, such as the DePuy Orthpaedics’ hip implants and vaginal mesh implants. Most recently, the company recalled more than a half million bottles of infants’ Tylenol because of defective dosing system was too difficult to use.

AFSCME President Gerald McEntee
AFSCME President Gerald McEntee
And the problems that have plagued Johnson & Johnson under Weldon’s watch aren’t just recalls. The U.S. Food and Drug Administration (FDA) warned the company about false claims it made about its Listerine mouthwash in September 2010, saying it has not been proven to be effective in removing plaque or preventing gum disease. In April 2011, the SEC charged Johnson & Johnson with bribing doctors to prescribe its drugs and medical devices.

Consequently, consumer confidence has dropped and sales have suffered. The recalls have cost well over $1 billion in lost sales and triggered Senate and regulatory investigations.

“Bill Weldon does not deserve pay far above his peers after Johnson & Johnson’s reputation has been damaged and shareholder value destroyed on his watch,” said McEntee. “Excessive pay is a disease, and the prescription for investors is to just Vote No.”

Johnson & Johnson’s board defends its decision in a recent filing with the U.S Securities and Exchange Commission (SEC): “We significantly changed the architecture of the long-term incentive program – the largest component of compensation for our named executive officers; discontinued the use of cash-based long-term incentives that have been in place for over 60 years; and introduced Performance Share Units with payouts contingent on achievement of sales, earnings per share and total shareholder return goal.”

Shareholders will decide when they vote April 26.

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