TRENTON, N.J. — Johnson & Johnson raised compensation 8 percent last year for outgoing CEO William Weldon, despite a seemingly endless string of product recalls, mediocre 2011 results and ongoing lawsuits and government probes over some products and marketing practices.
Weldon, who will step down next month after a decade as CEO but remain chairman of the board for the time being, raked in total compensation valued at $23.4 million last year. That's up from $21.6 million in 2010. The total includes salary of $1.91 million and more than $20 million in stock awards, option awards, performance bonus and other compensation.
The health care giant, based in New Brunswick, N.J., disclosed the compensation package Wednesday in a Securities and Exchange Commission filing.
Weldon, 63, has been criticized for his handling of an astounding series of about 30 product recalls since 2009, covering everything from children's and adult Tylenol to defective hip implants and prescription drugs for HIV and seizures.
The recalls, mainly at the company's McNeil Consumer Healthcare unit, began in September 2009 and the latest was just last month. Reasons have included wrong levels of active ingredient, glass and metal shards in liquid medicines and nauseating odors in packaging.
Besides tarnishing the iconic company's image, the recalls have cost well over $1 billion in lost sales of recalled products, some not available in stores for a couple of years, plus hundreds of millions for factory upgrades and costs of fighting lawsuits brought by shareholders and some consumers. Meanwhile, J&J shares have dropped from nearly $72 in early 2009 to $48 after the recalls began, and have been stuck in the mid-60s for roughly the past year.
Johnson & Johnson also is attempting to negotiate a settlement with the federal government, widely expected to be well over $1 billion, over the marketing the powerful schizophrenia drug Risperdal for unapproved uses to patients who may have been harmed by it.
While the maker of everything from baby shampoo to biologic drugs still stresses its credo of putting patients, families and medical workers ahead of profits — displayed prominently at its headquarters — analysts and other critics have said that's no longer the case.
In the SEC filing, the company noted that only about 61 percent of votes cast last year were in support of the amounts of compensation for top executives in the company's first annual advisory vote on the issue That result "disappointed" the compensation committee, which then held telephone and in-person discussions with individual and institutional shareholders, employees and others about the company's executive compensation programs.
Still, the board ended up increasing Weldon's performance bonus to $14.34 million, from $12.04 million in 2010. All other compensation, which includes perks such as personal use of company aircraft, pension contributions and a home security system, increased to about $321,000 from about $254,000. Weldon did receive stock awards and option awards worth slightly less than the year before, according to the SEC filing.
The committee noted that last year J&J got three new medications approved in the U.S., launched numerous new medical devices, boosted sales in emerging markets and Japan, met other goals and boosted annual sales after an unprecedented two-year decline.
The Associated Press formula is designed to isolate the value that the company's board placed on the executive's total compensation package during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.
The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission, which reflect the size of the accounting charge taken for the executive's compensation in the previous fiscal year.
Weldon, who started at J&J in 1971 and spent his entire career there, will relinquish the CEO title on April 26, when the company has its annual meeting. He will be succeeded by Alex Gorsky, vice chairman and head of J&J's medical devices and diagnostics unit, its largest business by revenue. Gorsky also oversees 140 manufacturing facilities around the world.
The succession plan was announced Feb. 21, and it's unclear whether the company's board nudged Weldon to step aside or let him pick the time to do so.
Also at the annual meeting, stockholders will vote on several shareholder proposals. One would have an independent board member serve as chair of the board of directors instead of the CEO; the proposal, submitted by a union, noted Weldon ranked 188 out of 196 CEOs in a 2011 pay-for-performance survey.
Other proposals include having a binding vote to approve all political contributions, and eliminating use of animals wherever possible in training doctors and others to use the company's surgical and other equipment.
Linda A. Johnson can be followed at http://twitter.com/LindaJ_onPharma
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