Recalls? J&J CEO Still Scores 55% Bonus Hike
February 27th, 2012 // 1:36 pm @ jmpickett
Never mind the recalls, Johnson & Johnson ceo Bill Weldon worked hard at succession planning. Yes, folks, despite ongoing recalls and other gaffes that hurt the venerable J&J corporate reputation, Weldon received an annual bonus of $3.1 million for last year, which amounts to a 55 percent increase from the year before.
The J&J board also approved a 3 percent raise in base salary for 2012, to $1.97 million from $1.92 million. And Weldon was granted 628,911 stock options, which can be exercised at $65.37, along with additional equity-based compensation. J&J shares were trading earlier today for $64.45, according to a filing with the US Securities and Exchange Commission (see this).
The pay day was revealed just two days after the 63-year-old Weldon agreed to retire as ceo in April, ending his 10-year reign, although he will remain chairman for an unspecified period of time. His replacement is Alex Gorsky, 51, who currently oversees the medical device and diagnostics business (read here). Gorsky, by the way, will see his annual base salary increase to $1.2 million, from $880,600, when he becomes ceo in April.
Last year, Weldon received a $1.98 million bonus for his work in 2010, which amounted to a 45 percent from $3.6 million in 2009, although the J&J board cut his overall take home by 7 percent, to $28.7 million from $30.8 million, due to the fallout from the steady stream of manufacturing ills that resulted in the recall of tens of millions of products, from over-the-counter items to drugs and contact lens (back story).
You may recall that Weldon also presided recently over J&J while the health care giant suffered a consent decree with the FDA; highly publicized congressional hearings; government investigations; hundreds of job losses; the closure and retooling of a key plant; a reorganization of its consumer health unit; eroded consumer confidence; numerous lawsuits, and hundreds of millions of dollars in lost sales. There was also a foreign bribery scandal (look here). And J&J dropped to 7th place on the annual Corporate Reputation poll from Harris Interactive, its lowest-ever ranking (read here).
Nonetheless, investors have largely decided that the J&J ills have gotten so bad that the future must be brighter. Over the past year, the stock has jumped about 18 percent, which the board, of course, considered in determining his compensation. However, in early January 2010, when the recall mess began, J&J stock traded at about $60 and is now nearly $65, an 8 percent gain. Meanwhile, the Dow rose 22 percent during the same period. An 8 percent rise is nice, of course, and this did not include dividends. But it is also possible J&J stock might have performed better had so many setbacks not occurred.
[UPDATE: A J&J spokesman sends us this: “The Board’s Compensation & Benefits Committee evaluates Mr. Weldon and all the executive officers against a set of both financial and strategic objectives. These objectives and the committee’s assessments will be discussed in the company’s upcoming proxy statement, and are consistent with our long-standing pay-for-performance philosophy. As you note in your story, Mr. Weldon’s compensation decreased between 2009 and 2010 when the company faced significant challenges, and his base salary increased by 3 percent for 2012 as the company returned to operational sales growth.]
