Johnson and Johnson: Investors for Opioid and Pharmaceutical Accountability File Executive Compensation Shareholder Proposal

Annual meeting: 4/28/22

Johnson & Johnson Chairman and CEO Alex Gorsky’s total disclosed compensation for 2021 was $26,741,959. The company has been on our list of Overpaid CEOs in six of the last eight years. In our most recent report Gorsky was ranked as the 22nd most overpaid CEO among S&P 500 companies and a regression analysis by HIP investor estimated that he received excess pay of $15,951,099.

Gorsky’s annual incentive/cash bonus increased year over year by 35 percent to $4,252,800 in 2021. The annual incentive paid out at 130 percent of target. The proxy statement reports that the Compensation Committee used its discretion to lower the payout from 141.2 percent of target. Shareholders may have some concern about how metrics were set. It appears that at least one of the metrics, free cash flow, was set below the actual achievement of prior year. Targets should inspire upward trends, not reward downward ones. 

Last year the company was the subject of a campaign to vote against compensation, as I wrote about here, led by the coalition of Investors for Opioid and Pharmaceutical Accountability (IOPA).

Over 43 percent of shareholders voted against the compensation package last year. The company reports that it “sought feedback on the results of our 2021 Say on Pay vote, including on the design of our executive compensation program as well as the Company's treatment of special items, including litigation, in executive compensation metrics. Our Lead Director and Chair of the Compensation & Benefits Committee participated in many of those meetings, including with 10 of our 15 largest investors.” However, on the core issue raised by shareholders the company did not take significant actions.

This year IOPA has filed a proposal calling on the company to stop excluding legal or compliance costs when adjusting metrics to calculate senior executive incentive compensation awards. The company says that based on our “shareholder feedback the Committee enhanced its process for reviewing and considering items excluded from non-GAAP performance measures for 2021 and future year.” But the verbs used – formalized, considered, disclosed – reflect the fact that no substantive action was taken.