def14a
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed by the
Registrant x
Filed by a
Party other than the
Registrant o
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appropriate box:
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o Preliminary
Proxy Statement
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o Confidential,
for the Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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JOHNSON
& JOHNSON
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than Registrant)
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Aggregate
number of securities to which transaction applies:
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price or other underlying value of transaction computed pursuant
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0-11(a)(2) and identify the filing for which the offsetting fee
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registration statement number, or the Form or Schedule and the
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Form,
Schedule or Registration Statement No.:
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Notice
of Annual Meeting
and Proxy
Statement
March 16, 2011
The Annual Meeting of Shareholders of Johnson & Johnson
will be held on Thursday, April 28, 2011 at 10:00 a.m.
at the Hyatt Regency Hotel, Two Albany Street, New Brunswick,
New Jersey, to:
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1.
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Elect the Directors as named in the Proxy Statement;
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2.
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Ratify the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm for
2011;
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3.
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Conduct advisory votes related to executive compensation; and
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4.
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Transact such other business, including action on three
shareholder proposals, as may properly come before the meeting,
and any adjournment or postponement.
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Shareholders are cordially invited to attend the meeting. If
you plan to attend the meeting, please note our Admission Card
procedures:
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If you are a registered shareholder, there is a box on the proxy
card that you should mark to request an Admission Card if you
plan to attend.
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If you are a registered shareholder and vote via the Internet or
by telephone, there will be applicable instructions to follow
when voting to indicate if you would like to receive an
Admission Card.
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If your shares are held in the name of a bank, broker or other
holder of record and you plan to attend, you must request an
Admission Card by writing to the Office of the Corporate
Secretary, Johnson & Johnson,
One Johnson & Johnson Plaza, New Brunswick, New
Jersey 08933. Evidence of your stock ownership, which you can
obtain from the bank, broker or other holder of record, must
accompany your letter.
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If you are unable to attend the meeting, you will be able to
view and listen to the meeting via the Internet. The Company
will broadcast the meeting as a live webcast through the
Johnson & Johnson website. The webcast will remain
available for replay for three months following the meeting.
Visit the Johnson & Johnson Investor Relations website
at www.investor.jnj.com and click on Webcasts
& Presentations for details.
By order of the Board of Directors,
Douglas K. Chia
Secretary
YOU CAN VOTE IN ONE OF FOUR WAYS:
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(1)
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Visit the website listed on your proxy card to vote
via the Internet;
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(2)
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Call the telephone number on your proxy card to vote by
telephone;
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(3)
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Sign, date and return your proxy card in the enclosed envelope
to vote by mail; or
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(4)
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Attend the meeting in person.
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Important Notice
Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be held on April 28, 2011: The Proxy
Statement and Annual Report to Shareholders are available at
www.investor.jnj.com/annual-reports.cfm.
TABLE OF
CONTENTS
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GENERAL
INFORMATION
Shareholders Entitled to
Vote. Shareholders of record of the
Common Stock of the Company at the close of business on
March 1, 2011, are entitled to notice of and to vote at the
Annual Meeting of Shareholders and at any and all adjournments
or postponements of the meeting. Each share entitles its owner
to one vote. The holders of a majority of the shares entitled to
vote at the meeting must be present in person or represented by
proxy in order to constitute a quorum for all matters to come
before the meeting. On the record date there were
2,740,285,802 shares outstanding.
Each matter to be submitted to the shareholders, including the
election of Directors, requires the affirmative vote of a
majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a
particular matter, only those cast For or
Against are included. Abstentions and broker
non-votes are counted only for purposes of determining whether a
quorum is present at the meeting.
How to
Vote. Shareholders of record (that is,
shareholders who hold their shares in their own name) can vote
any one of four ways:
(1) Via the Internet: Go to the website listed
on your proxy card to vote via the Internet. You will need to
follow the instructions on your proxy card and the website. If
you vote via the Internet, you may incur telephone and Internet
access charges.
(2) By Telephone: Call the telephone number on
your proxy card to vote by telephone. You will need to follow
the instructions on your proxy card and the voice prompts.
(3) By Mail: Sign, date and return your proxy
card in the enclosed postage-paid envelope. If you sign and
return your proxy card but do not give voting instructions, the
shares represented by that proxy will be voted as recommended by
the Board of Directors.
(4) In Person: Attend the Annual Meeting, or
send a personal representative with an appropriate proxy, to
vote by ballot.
If you vote via the Internet or by telephone, your electronic
vote authorizes the named proxies in the same manner as if you
signed, dated and returned your proxy card. If you vote via
the Internet or by telephone, do not return your proxy card.
If your shares are held in street name (that is, in
the name of a bank, broker or other holder of record), you will
receive instructions from the holder of record that you must
follow in order for your shares to be voted. Internet and/or
telephone voting also will be offered to shareholders owning
shares through most banks and brokers.
Changing Your
Vote. You may change your vote at any
time before the proxy is exercised. For shareholders of record,
if you voted by mail, you may revoke your proxy at any time
before it is voted by executing and delivering a timely and
valid later-dated proxy, by voting by ballot at the meeting or
by giving written notice to the Secretary. If you voted via the
Internet or by telephone you may also change your vote with a
timely and valid later Internet or telephone vote, as the case
may be, or by voting by ballot at the meeting. Attendance at the
meeting will not have the effect of revoking a proxy unless
(i) you give proper written notice of revocation to the
Secretary before the proxy is exercised or (ii) you vote by
ballot at the meeting.
If your shares are held in street name, you must follow the
specific voting directions provided to you by your bank, broker
or other holder of record to change or revoke any instructions
you have already provided. Alternatively, obtain a proxy from
your bank, broker or other holder of record and bring it with
you to hand in with a ballot in order to be able to vote your
shares at the meeting.
Effect of Not Casting Your
Vote. If you hold your shares in street
name it is critical that you cast your vote if you want it to
count in the election of Directors (Item 1 of this Proxy
Statement). In the past, if you held your shares in street name
and you did not indicate how you wanted your shares voted in the
election of Directors, your bank or broker was allowed to vote
those shares on your behalf in the election of
1
Directors, as they felt appropriate. Recent changes in
regulation were made to take away the ability of your bank or
broker to vote your uninstructed shares in the election of
Directors on a discretionary basis. Thus, if you hold your
shares in street name and you do not instruct your bank or
broker how to vote in the election of Directors, no votes will
be cast on your behalf. Your bank or broker will, however,
continue to have discretion to vote any uninstructed shares on
the ratification of the appointment of the Companys
independent registered public accounting firm (Item 2 of
this Proxy Statement). They will not have discretion to vote
uninstructed shares on advisory votes related to executive
compensation (Items 3 and 4 of this Proxy Statement) or
shareholder proposals (Items 5, 6, 7 and 8 of this Proxy
Statement). If you are a shareholder of record and you do not
cast your vote, no votes will be cast on your behalf on any of
the items of business at the Annual Meeting.
Proxy
Solicitation. The accompanying proxy is
solicited by the Board of Directors of the Company. This Proxy
Statement is being mailed to the shareholders on or about
March 16, 2011 concurrently with the mailing of the
Companys 2010 Annual Report to Shareholders. In addition
to this solicitation by mail, several regular employees of the
Company may solicit proxies in person or by telephone. The
Company has also retained the firm of Georgeson Inc. to aid in
the solicitation of brokers, banks and institutional and other
shareholders for a fee of approximately $15,500, plus
reimbursement of expenses. All costs of the solicitation of
proxies will be borne by the Company. On the accompanying proxy,
a shareholder may substitute the name of another person in place
of those persons presently named as proxies. In order to vote, a
substitute must present adequate identification to the Secretary
before the voting occurs.
Electronic Access to Proxy Materials and
Annual Report. This Proxy Statement and
the Companys 2010 Annual Report are available on the
Companys website at
www.investor.jnj.com/annual-reports.cfm.
Instead of receiving paper copies of next years Proxy
Statement and Annual Report by mail, shareholders can elect to
receive an e-mail message that will provide a link to those
documents on the Internet. By opting to access your proxy
materials via the Internet, you will:
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gain faster access to your proxy materials;
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save the Company the cost of producing and mailing documents to
you;
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reduce the amount of mail you receive; and
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help preserve environmental resources.
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Johnson & Johnson shareholders who have enrolled in
the electronic access service previously will receive their
materials online this year.
Shareholders of record may enroll in the electronic proxy and
Annual Report access service for future Annual Meetings of
Shareholders by registering online at
www.computershare-na.com/green. If you vote via the
Internet, simply follow the prompts that will link you to that
website. Street name shareholders who wish to enroll for
electronic access may register for online delivery of materials
by going to
http://enroll.icsdelivery.com/jnj.
Reduce Duplicate
Mailings. The Company is required to
provide an Annual Report to all shareholders who receive this
Proxy Statement. If you are a shareholder of record and have
more than one account in your name, or at the same address as
other shareholders of record, you may authorize the Company to
discontinue duplicate mailings of future Annual Reports
(commonly referred to as householding). To do so,
mark the designated box on each proxy card for which you wish to
discontinue receiving an Annual Report. If you are voting via
the Internet or by telephone, you can either follow the prompts
when you vote or give the Company instructions to discontinue
duplicate mailings of future Annual Reports. Street name
shareholders who wish to discontinue receiving duplicate
mailings of future Annual Reports should review the information
provided in the proxy materials mailed to them by their bank or
broker.
Johnson & Johnson Employee Savings
Plans. If you are an employee of a
Johnson & Johnson company and hold shares in one of the
Companys employee savings plans, you will receive one
proxy card that covers those shares held for you in your savings
plan, as well as any other shares registered in
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your own name (but, not shares held in street name). If you vote
via the Internet, by telephone or by mail, as described above,
by 5:00 p.m. (Eastern) on April 26, 2011, the Trustee
of your savings plan will vote your shares as you have directed
(your voting instructions will be kept confidential from the
Company). It is important that you direct the Trustee how to
vote your shares. In accordance with the terms of the
Johnson & Johnson Savings Plan and the
Johnson & Johnson Puerto Rico Retirement Savings Plan,
if you hold shares in either plan and do not vote, the plan
Trustee will vote your shares in direct proportion to the shares
held in that plan for which votes will be cast. If you hold
shares in any other Johnson & Johnson employee savings
plan, including the Johnson & Johnson Savings Plan for
Union Represented Employees, and do not vote, the plan Trustee
will not vote your shares. Participants in the
Johnson & Johnson employee savings plans may attend
the Annual Meeting. However, shares held in those plans can only
be voted as described in this paragraph, and cannot be voted at
the meeting.
In addition, under the terms of the Companys By-Laws, a
shareholder who intends to present an item of business at the
2012 Annual Meeting of Shareholders (other than a proposal
submitted for inclusion in the Companys proxy materials)
must provide written notice of such business to the Company,
which must be received by the Company on or before
November 16, 2011.
Proposals and other items of business should be directed to the
attention of the Secretary at the principal office of the
Company, One Johnson & Johnson Plaza,
New Brunswick, New Jersey 08933.
ITEM
1: ELECTION OF DIRECTORS
Director Nomination Process. The
Nominating & Corporate Governance Committee of the Board of
Directors reviews possible candidates for the Board and
recommends the nominees for Directors to the Board for approval.
The Board has adopted General Criteria for Nomination to the
Board of Directors, which, as part of the Principles of
Corporate Governance, are posted on the Companys website
at www.investor.jnj.com/governance/policies.cfm. These
criteria describe specific traits, abilities and experience that
the Nominating & Corporate Governance Committee and the
Board look for in determining candidates for election to the
Board, including:
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the highest ethical character and shared values with the
Companys Credo;
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reputation consistent with the Companys image and
reputation;
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accomplishment within a candidates respective field, with
superior credentials and recognition;
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active and former chief executive officers of public companies
and leaders of major complex organizations, including
scientific, government, educational and other non-profit
institutions;
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widely recognized leaders in the fields of medicine or
biological sciences, including those who have received the most
prestigious awards and honors in their fields;
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relevant expertise and experience and the ability to offer
advice and guidance to the Chief Executive Officer
(CEO) based on that expertise and experience;
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independence, without the appearance of any conflict in serving
as a Director, and able to represent all shareholders of the
Company;
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ability to exercise sound business judgment; and
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diversity reflecting gender, ethnic background and professional
experience.
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The Nominating & Corporate Governance Committee
annually considers the size, composition and needs of the Board
in light of these criteria and accordingly considers and
recommends candidates for membership on the Board.
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The Nominating & Corporate Governance Committee considers
suggestions from many sources, including shareholders, regarding
possible candidates for Directors. Such suggestions, together
with appropriate biographical information, should be submitted
to the Secretary at the principal office of the Company at
One Johnson & Johnson Plaza, Room WH 2136,
New Brunswick, New Jersey 08933. Possible candidates suggested
by shareholders are evaluated by the Nominating &
Corporate Governance Committee in the same manner as other
possible candidates.
Nominees. There are
11 nominees for election as Directors of the Company to
hold office until the next Annual Meeting and until their
successors have been duly elected and qualified.
If the enclosed proxy is properly executed and received in time
for the meeting, it is the intention of the persons named in the
proxy to vote the shares represented thereby For or
Against the persons nominated for election as
Directors, or Abstain from voting, as instructed.
See Corporate GovernanceMajority Vote Standard in
Uncontested Director Elections on page 19 of this
Proxy Statement. If any nominee should refuse or be unable to
serve, an event which is not anticipated, the proxy will be
voted for such person as shall be designated by the Board of
Directors to replace such nominee or, in lieu thereof, the Board
of Directors may reduce the number of Directors.
Except for Ian E. L. Davis, who was appointed to the Board
in July 2010, all of the nominees were elected to the Board at
the last Annual Meeting. All of the nominees are currently
serving as Directors of the Company. Mr. Davis was
initially identified as a potential nominee by the Chairman/CEO
and recommended for nomination by the Nominating &
Corporate Governance Committee.
Following are summaries of the background, business experience
and descriptions of the principal occupations of the nominees.
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Mary Sue Coleman, Ph.D., President, University of Michigan
Dr. Coleman, 67, was elected to the Board of Directors in 2003 and is a member of the Audit Committee and the Science & Technology Advisory Committee. She has served as President of the University of Michigan since August 2002, after having served as President of the University of Iowa from 1995 to July 2002. In addition to her current position as President, Dr. Coleman is a professor of biological chemistry in the University of Michigan Medical School and a professor of chemistry in the University of Michigan College of Literature, Science and the Arts. Prior to 1995, Dr. Coleman served as Provost and Vice President for Academic Affairs at the University of New Mexico, Vice Chancellor for Graduate Studies & Research and Associate Provost and Dean of Research at the University of North Carolina at Chapel Hill, and a member of the biochemistry faculty and an administrator at the Cancer Center of the University of Kentucky in Lexington. Elected to the National Academy of Sciences Institute of Medicine in 1997, Dr. Coleman is a Fellow of the American Academy of Arts and Sciences and the American Association for the Advancement of Science. Dr. Coleman is a Trustee of the John S. and James L. Knight Foundation and the Gerald R. Ford Foundation. Having served as President of two of the nations largest and most prestigious public universities and having a long and decorated career in the sciences, Dr. Coleman brings to the Companys Board a unique point of view regarding organizational management and academic research vital to a company competing in science-based industries.
Other Public Company Board Service: Meredith Corporation (1997 to present)
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James G. Cullen, Retired President and Chief Operating Officer, Bell Atlantic Corporation
Mr. Cullen, 68, was elected to the Board of Directors in 1995 and is the Presiding Director of the Board, Chairman of the Audit Committee and a member of the Nominating & Corporate Governance Committee. Mr. Cullen retired as President and Chief Operating Officer of Bell Atlantic Corporation (communications) in 2000. He had assumed those positions in 1998, after having been Vice Chairman since 1995 and, prior to that, President since 1993. He was President and Chief Executive Officer of Bell Atlantic-New Jersey, Inc. from 1989 to 1993. He is a Director of Eisenhower Medical Center. With years of demonstrated managerial ability as CEO and COO of a large telecommunications company, and as the current independent, non-executive Chairman of the Board of Directors of Agilent Technologies, Inc. and NeuStar, Inc., Mr. Cullen brings to the Companys Board a wealth of knowledge of organizational and operational management as well as board leadership experience essential to a large public company.
Other Public Company Board Service: Agilent Technologies, Inc. (2000 to present; Non-Executive Chairman since 2005), NeuStar, Inc. (2005 to present; Non-Executive Chairman since 2010), Prudential Financial, Inc. (2001 to present)
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Ian E. L. Davis, Senior Advisor, Apax Partners; Former Chairman and Worldwide Managing Director, McKinsey & Company
Mr. Davis, 60, was appointed to the Board of Directors in July 2010 and is a member of the Audit Committee and the Public Policy Advisory Committee. Mr. Davis is currently a Senior Advisor at Apax Partners, a private equity advisory firm. Mr. Davis retired from McKinsey & Company (management consulting) in 2010 as a Senior Partner, having served as Chairman and Worldwide Managing Director from 2003 until 2009. In his more than 30 years at McKinsey, he served as a consultant to a range of global organizations across the public, private and not-for-profit sectors. Prior to becoming Chairman and Worldwide Managing Director, he was Managing Partner of McKinseys practice in the United Kingdom and Ireland. His experience includes oversight for McKinsey clients and services in Asia, Europe, the Middle East and Africa, as well as an expertise in the consumer products and retail industries. Mr. Davis is a Director of Teach for All, a global network of independent social enterprises working to expand educational opportunities in their nations; a non-executive Director of global energy group, BP plc.; a non-executive member of the UKs Cabinet Office Board and serves on the International Advisory Committee of the King Abdullah Petroleum Studies and Research Centre. Having served as Chairman and Worldwide Managing Director of one of the worlds leading management consulting firms, and as a consultant to a range of global organizations across the public, private and not-for-profit sectors, Mr. Davis brings considerable global experience, management insight and business knowledge to the Companys Board.
Other Public Company Board Service: BP plc (2010 to present)
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Michael M. E. Johns, M.D., Chancellor, Emory University
Dr. Johns, 69, was elected to the Board of Directors in 2005 and is a member of the Compensation & Benefits Committee and the Science & Technology Advisory Committee. He has served since October 2007 as Chancellor of Emory University. From 1996 to 2007, Dr. Johns served as Executive Vice President for Health Affairs and Chief Executive Officer of the Robert W. Woodruff Health Sciences Center of Emory University. As the Executive Vice President for Health Affairs, he oversaw Emory Universitys widespread academic and clinical programs in health sciences and led strategic planning initiatives for both patient care and research. In addition, from 1996 to 2007, he served as the Chairman of the Board of Emory Healthcare, the largest health care system in Georgia. From 1990 to 1996, Dr. Johns served as Dean of the Johns Hopkins School of Medicine and Vice President of the Medical Faculty at Johns Hopkins University. Dr. Johns is Past Chair of the Council of Teaching Hospitals, a fellow of the American Association for the Advancement of Science and a member of the Institute of Medicine. He is a member of the editorial board of the Journal of the American Medical Association (JAMA) and chairs the Publication Committee of the journal Academic Medicine. Having served in numerous senior leadership positions at some of the nations most prestigious academic institutions, hospitals and health care systems, Dr. Johns provides a valuable combination of experience at the highest levels of both patient care and medical research, as well as organizational management skills and public health policy expertise, making him an integral board member of a company in the health care industry.
Other Public Company Board Service: AMN Healthcare Services, Inc. (2008 to present), Genuine Parts Company (2000 to present)
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Susan L. Lindquist, Ph.D., Member and Former Director, Whitehead Institute for Biomedical Research; Professor of Biology, Massachusetts Institute of Technology
Dr. Lindquist, 61, was elected to the Board of Directors in 2004 and is a member of the Science & Technology Advisory Committee and the Public Policy Advisory Committee. She is a member of the Whitehead Institute, a non-profit, independent research and educational institution, a Professor of Biology at the Massachusetts Institute of Technology and an Investigator of the Howard Hughes Medical Institute. Dr. Lindquist served as Director of the Whitehead Institute from 2001 to 2004. Previously she was affiliated with the University of Chicago where she was the Albert D. Lasker Professor of Medical Sciences in the Department of Molecular Genetics and Cell Biology. Dr. Lindquist was elected to the American Academy of Arts and Sciences in 1996, the National Academy of Sciences in 1997, the American Philosophical Society in 2003 and the Institute of Medicine in 2006. She received the Novartis/Drew Award for Biomedical Research in 2000, the Dickson Prize in Medicine in 2002, the Sigma Xi William Procter Prize for Academic Achievement in 2006, the Nevada Silver Medal for Scientific Achievement in 2007, the Genetics Society of America Medal and the Centennial Medal of the Harvard University Graduate School of Arts and Sciences in 2008. In 2010, she received the Mendel Medal from the Genetics Society (UK), The Delbrück Medal from Bayer Schering, and the National Medal of Science (USA). She is a member of the Scientific Advisory Boards of the Stowers Institute for Medical Research and the Institut für Molekulare Biotechnologie GmbH. She is also a Co-Founder of FoldRx Pharmaceuticals, Inc., a subsidiary of Pfizer Inc. From her long and decorated career in scientific research and her global reputation as a pioneer in biomedical innovation, Dr. Lindquist brings to the Companys Board an incomparable perspective on the intersection of academic and commercial medical research critical to a company in the health care industry.
Other Public Company Board Service: None
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Anne M. Mulcahy, Former Chairman and Chief Executive Officer, Xerox Corporation
Ms. Mulcahy, 58, was appointed to the Board of Directors in 2009 and is a member of the Compensation & Benefits Committee and the Nominating & Corporate Governance Committee. Ms. Mulcahy was both Chairman and Chief Executive Officer of Xerox Corporation (business equipment and services) until July 2009, when she retired as CEO after eight years in the position. Prior to serving as CEO, Ms. Mulcahy was President and Chief Operating Officer of Xerox. She has also served as President of Xeroxs General Markets Operations, which created and sold products for reseller, dealer and retail channels. During a career at Xerox that began in 1976, Ms. Mulcahy also served as Vice President for Human Resources with responsibility for compensation, benefits, human resource strategy, labor relations, management development and employee training; and Vice President and Staff Officer for Customer Operations, covering South America and Central America, Europe, Asia and Africa, and China. Ms. Mulcahy has been a U.S. Board Chair of Save the Children since March 2010. Having served as Chairman and CEO of a large, global manufacturing and services company with one of the worlds most recognized brands and track record for innovation, Ms. Mulcahy presents valuable insight into organizational and operational management issues crucial to a large public company, as well as a strong reputation for leadership in business innovation and talent development.
Other Public Company Board Service: Target Corporation (1997 to present), The Washington Post Company (2008 to present)
Recent Past Public Company Board Service: Citigroup Inc. (2004 to 2009), Federal National Mortgage Association (2000-2004), Xerox Corporation (2000 to 2010)
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Leo F. Mullin, Retired Chairman and Chief Executive Officer, Delta Air Lines, Inc.
Mr. Mullin, 68, was elected to the Board of Directors in 1999 and is a member of the Audit Committee and Chairman of the Public Policy Advisory Committee. Mr. Mullin currently serves as a Senior Advisor, on a part-time basis, to Goldman Sachs Capital Partners, a private equity fund group. Mr. Mullin retired as Chief Executive Officer of Delta Air Lines, Inc. in December 2003 and Chairman in April 2004, after having served as Chief Executive Officer of Delta since 1997 and Chairman since 1999. Mr. Mullin was Vice Chairman of Unicom Corporation and its principal subsidiary, Commonwealth Edison Company, from 1995 to 1997. He was an executive of First Chicago Corporation from 1981 to 1995, serving as that companys President and Chief Operating Officer from 1993 to 1995, and as Chairman and Chief Executive Officer of American National Bank, a subsidiary of First Chicago Corporation, from 1991 to 1993. He is a Board member and immediate past Board Chairman of the Juvenile Diabetes Research Foundation (JDRF) and served as interim Chief Executive Officer of JDRF from July through December 2008. Mr. Mullins depth and breadth of exposure to complex issues from having served as Chairman and CEO of one of the nations largest airlines, and his long and distinguished career in the banking industry, make him a skilled advisor who provides critical insight into organizational and operational management, global business and financial matters.
Other Public Company Board Service: ACE Limited (2007 to present), Education Management Corporation (2009 to present)
Recent Past Public Company Board Service: Bell South Corporation (1998 to 2006), Delta Air Lines, Inc. (1997 to 2004; Executive Chairman 1999 to 2004)
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7
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William D. Perez, Senior Advisor, Greenhill & Co., Inc.; Retired President and Chief Executive Officer, Wm. Wrigley Jr. Company
Mr. Perez, 63, was elected to the Board of Directors in 2007 and is Chairman of the Nominating & Corporate Governance Committee and a member of the Compensation & Benefits Committee. Mr. Perez is currently a Senior Advisor at Greenhill & Co., Inc., (investment banking). Mr. Perez served as President and Chief Executive Officer for the Wm. Wrigley Jr. Company (confectionary and chewing gum) from 2006 to 2008. Before joining Wrigley, Mr. Perez served as President and Chief Executive Officer of Nike, Inc. Previously, he spent 34 years with S.C. Johnson & Son, Inc., including eight years as its President and Chief Executive Officer. Mr. Perez is a Trustee for Cornell University and Northwestern Memorial Hospital. With his experience as CEO of several large, consumer-focused companies across a wide variety of industries, Mr. Perez contributes to the Companys Board significant organizational and operational management skills, combined with a wealth of experience in global, consumer-oriented businesses vital to a large public company in the consumer products space.
Other Public Company Board Service: Campbell Soup Company (2009 to present), Whirlpool Corporation (2009 to present)
Recent Past Public Company Board Service: Kellogg Company (2000 to 2006), Nike, Inc. (2004 to 2006), Wm. Wrigley Jr. Company (2006 to 2008)
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Charles Prince, Senior Counselor, Albright Capital Management LLC; Retired Chairman and Chief Executive Officer, Citigroup Inc.
Mr. Prince, 61, was elected to the Board of Directors in 2006 and is Chairman of the Compensation & Benefits Committee and a member of the Nominating & Corporate Governance Committee. Mr. Prince is currently a Senior Counselor for Albright Capital Management LLC, a Washington, D.C., based investment firm. Mr. Prince served as Chief Executive Officer of Citigroup Inc. (financial services) from 2003 to 2007 and as Chairman from 2006 to 2007. Previously he served as Chairman and Chief Executive Officer of Citigroups Global Corporate and Investment Bank from 2002 to 2003, Chief Operating Officer from 2001 to 2002, and Chief Administrative Officer from 2000 to 2001. Mr. Prince began his career as an attorney at U.S. Steel Corporation in 1975, and in 1979 joined Commercial Credit Company (a predecessor company to Citigroup) where he held various management positions until 1995, when he was named Executive Vice President. Mr. Prince is a member of the Council on Foreign Relations and The Business Council. Having served as Chairman and CEO of the nations largest and most diversified financial institution, Mr. Prince brings to the Companys Board a strong mix of organizational and operational management skills combined with well-developed legal, global business and financial acumen critical to a large public company.
Other Public Company Board Service: Xerox Corporation (2008 to present)
Recent Past Public Company Board Service: Citigroup Inc. (2003 to 2007; Executive Chairman 2006 to 2007)
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8
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David Satcher, M.D., Ph.D., Director, Center of Excellence on Health Disparities, Director, Satcher Health Leadership Institute and Poussaint-Satcher-Cosby Chair in Mental Health, Morehouse School of Medicine
Dr. Satcher, 70, was elected to the Board of Directors in 2002 and is Chairman of the Science & Technology Advisory Committee and a member of the Public Policy Advisory Committee. Dr. Satcher assumed his current post at Morehouse School of Medicine in 2004 and served as the Schools Interim President from 2004 until 2006 and Director of the Schools National Center for Primary Care from 2002 through 2004. In 2002, Dr. Satcher completed his four-year term as the 16th Surgeon General of the United States. He also served as the U.S. Assistant Secretary for Health from 1998 to 2001. From 1993 to 1998, Dr. Satcher served as Director of the Centers for Disease Control and Prevention and Administrator of the Agency for Toxic Substances and Disease Registry. Dr. Satcher served as President of Meharry Medical College in Nashville, Tennessee from 1982 to 1993. Dr. Satcher is a fellow of the American Academy of Family Physicians, the American College of Preventive Medicine and the American College of Physicians. He has received numerous honorary degrees and awards, including the Jimmy and Rosalynn Carter Award for Humanitarian Contributions to the Health of Humankind, the New York Academy of Medicine Lifetime Achievement Award and the National Association of Mental Illness Distinguished Service Award. Dr. Satcher serves on the boards of Action for Healthy Kids, Community Foundation of Greater Atlanta, Kaiser Family Foundation, Save the Children and the United Way of Atlanta. With his long and decorated career in the field of public health policy, including service as Surgeon General of the United States, as well as his valuable experience in medical academia and patient care, Dr. Satcher provides unparalleled experience and vision for a company in the health care industry.
Other Public Company Board Service: MetLife, Inc. (2007 to present)
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William C. Weldon, Chairman, Board of Directors and Chief Executive Officer; Chairman, Executive Committee
Mr. Weldon, 62, was elected to the Board of Directors and named Vice Chairman of the Board in 2001 and assumed his current responsibilities in 2002. Mr. Weldon joined the Company in 1971, and served in several sales, marketing and international management positions before becoming President of the Companys affiliate, Ethicon Endo-Surgery, Inc. in 1992 and Company Group Chairman of Ethicon Endo-Surgery in 1995. He was appointed to the Executive Committee and named Worldwide Chairman, Pharmaceuticals Group, in 1998. Mr. Weldon is a member of The Business Council, the Business Roundtable, the Executive Committee of the Health Leadership Council, and the Sullivan Alliance to Transform Americas Health Profession. He is a Trustee of Quinnipiac University and serves on the Liberty Science Center Chairmans Advisory Council. Mr. Weldon also serves as Chairman of the CEO Roundtable on Cancer. Having started his career at the Company in 1971 and been promoted to positions of increasing responsibility across business segments, culminating with his appointment as Chairman/CEO in 2002, Mr. Weldon brings vast knowledge of the Companys business, structure, history and culture to the Board and the Chairman position. Mr. Weldon continues to be one of the longest-tenured and most well-respected CEOs in the healthcare industry.
Other Public Company Board Service: J.P. Morgan Chase & Co. (2005 to present)
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9
Other Information. U.S. Securities and
Exchange Commission (SEC) regulations require the
Company to describe certain legal proceedings, including
bankruptcy and insolvency filings, involving nominees for the
Board of Directors or companies of which a nominee was an
executive officer. Mr. Mullin retired as Chief Executive
Officer of Delta Air Lines, Inc. in December 2003 and Chairman
in April 2004. In September 2005, Delta Air Lines voluntarily
filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. The Nominating & Corporate Governance
Committee of the Board of Directors does not believe that this
proceeding is material to an evaluation of
Mr. Mullins ability to serve as a Director.
The Board of Directors recommends a vote FOR the election of
each of the above-named nominees.
10
STOCK OWNERSHIP
AND SECTION 16 COMPLIANCE
The following table sets forth information regarding beneficial
ownership of the Companys Common Stock for each Director;
the Companys Chief Executive Officer, Chief Financial
Officer and the three other most highly compensated executive
officers named in the tables in the section Executive and
Director Compensation on pages 46 to 58 of this Proxy
Statement (each a Named Executive Officer); and by
all Directors and executive officers as a group. Each of the
individuals/groups listed below is the owner of less than 1% of
the Companys outstanding shares. Because they serve as
co-trustees
of two trusts which hold stock for the benefit of others,
Messrs. Weldon and Deyo are deemed to control
an additional 7,237,129 shares of the Companys stock
in which they have no economic interest. In addition to such
shares, the Directors and executive officers as a group
own/control a total of 986,928 shares. In the aggregate,
these 8,224,057 shares represent less than 1% of the shares
outstanding. All stock ownership is as of March 1, 2011
(except shares held in the Companys Savings Plans, which
are included as of January 31, 2011).
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Number of
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Common Stock
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Shares Under
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|
Common
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Equivalent
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Exercisable
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Name
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|
Shares(1)
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Units(2)
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Options(3)
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Dominic J. Caruso
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42,375
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9,109
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254,706
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Mary Sue Coleman
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12,809
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12,977
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7,600
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James G. Cullen
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6,622
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30,710
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18,650
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Ian E. L. Davis
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2,650
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Russell C. Deyo
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174,060
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828,598
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Colleen A. Goggins
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115,836
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17,614
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839,791
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Michael M. E. Johns
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12,387
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10,387
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Susan L. Lindquist
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12,606
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11,137
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7,600
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Sherilyn S. McCoy
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73,901
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237,558
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Anne M. Mulcahy
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4,246
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Leo F. Mullin
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20,496
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9,894
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18,650
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William D. Perez
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21,579
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4,826
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Charles Prince
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19,902
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5,181
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David Satcher
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11,987
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6,395
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13,900
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William C. Weldon
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448,548
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3,209,071
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All Directors and executive officers as a group(17)
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986,928
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118,230
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5,436,124
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(1)
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The shares described as owned are shares of the
Companys Common Stock directly or indirectly owned by each
listed person and by members of his or her household and are
held individually, jointly or pursuant to a trust arrangement.
The Directors and executive officers disclaim beneficial
ownership of an aggregate of 66,224 of these shares,
including 15,550 shares listed as owned by Mr. Deyo,
17,292 shares listed as owned by Ms. McCoy, 800 shares
listed as owned by Mr. Prince, and 32,582 shares
listed as owned by Mr. Weldon.
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(2)
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Includes Common Stock equivalent units credited to Non-Employee
Directors under the Companys Deferred Fee Plan for
Non-Employee Directors and Common Stock equivalent units
credited to the executive officers under the Companys
Executive Income Deferral Plan.
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(3)
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Includes shares under options exercisable on March 1, 2011
and options that become exercisable within 60 days
thereafter.
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11
As of March 9, 2011, the following are the only persons
known to the Company to be the beneficial owner of five percent
or more of any class of the Companys voting securities:
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Amount and Nature
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Name and Address of
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of Beneficial
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Title of Class
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Beneficial Owner
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Ownership
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Percent of Class
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Common Stock
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BlackRock, Inc.
40 East 52nd Street
New York, NY 10022
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141,306,342
shares(1)
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5.15%(1)
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State Street Corporation
State Street Financial Center
One Lincoln Street
Boston, MA 02111
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138,223,181 shares(2)
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5.0%(2)
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(1)
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Based solely on an Amendment to Schedule 13G filed with the
SEC on February 4, 2011, BlackRock, Inc.
(BlackRock) reported aggregate beneficial ownership
of approximately 5.15%, or 141,306,342 shares, of
Johnson & Johnson Common Stock as of December 31,
2010. BlackRock reported that it possessed sole voting and
dispositive power of 141,306,342 shares. BlackRock also
reported that it did not possess shared voting or dispositive
power over any shares beneficially owned.
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(2)
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Based solely on a Schedule 13G filed with the SEC on
February 11, 2011, State Street Corporation, acting in
various fiduciary capacities (State Street),
reported aggregate beneficial ownership of approximately 5.0%,
or 138,223,181 shares, of Johnson & Johnson
Common Stock as of December 31, 2010. State Street reported
that it possessed sole voting power of 0 shares, shared
voting power of 138,223,181 shares, and shared dispositive
power of 138,223,181 shares. State Street also reported
that it did not possess sole dispositive power over any shares
beneficially owned.
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Certain of the Companys U.S. and international
employee savings and retirement plans have retained BlackRock
and its affiliates to provide investment management services.
Certain of the Companys U.S. and international
employee savings and retirement plans have retained State Street
and its affiliates to provide certain banking services,
including trustee, custodial, investment management,
administrative, and ancillary investment services.
Section 16(a)
Beneficial Ownership Reporting Compliance
The Company believes that during 2010 all reports for the
Companys executive officers and Directors that were
required to be filed under Section 16 of the Securities
Exchange Act of 1934 were filed on a timely basis, except for
one transaction by Mr. Russell C. Deyo was not filed
on a timely basis. The report was subsequently filed.
12
CORPORATE
GOVERNANCE
Director Independence. The Board of
Directors has determined that the following Directors,
comprising all of the Non-Employee Directors, are
independent under the listing standards of the New
York Stock Exchange (NYSE) and the Companys
Standards of Independence: Dr. Coleman, Mr. Cullen,
Mr. Davis, Dr. Johns, Dr. Lindquist,
Ms. Mulcahy, Mr. Mullin, Mr. Perez,
Mr. Prince and Dr. Satcher. In addition,
Mr. Arnold G. Langbo, who served as a Director until April
2010, was independent during his 2010 service period. In order
to assist the Board in making this determination, the Board has
adopted Standards of Independence as part of the Companys
Principles of Corporate Governance, which can be found on the
Companys website at
www.investor.jnj.com/governance/policies.cfm. These
Standards identify, among other things, material business,
charitable and other relationships that could interfere with a
Directors ability to exercise independent judgment.
As highly accomplished individuals in their respective
industries, fields and communities, the Non-Employee Directors
are affiliated with numerous corporations, educational
institutions, hospitals, museums and charities, as well as civic
organizations and professional associations, many of which have
business, charitable or other relationships with the Company.
The Board considered each of these relationships in light of the
Standards of Independence and determined that none of these
relationships conflict with the interests of the Company or
would impair the relevant Non-Employee Directors
independence or judgment. The following table describes the
relationships that were considered in making this determination.
The nature of the transactions, relationships and arrangements
summarized in the table below, and the role of each of the
Directors at their respective institutions, were such that none
of the Non-Employee Directors had any direct business
relationships with the Company in 2010 or received any direct
personal benefit from any of these transactions, relationships
or arrangements.
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Type of
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Transaction,
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2010
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Type of
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|
|
Relationship to
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|
|
Relationship or
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|
Aggregate
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Director
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|
|
Organization
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|
|
Organization
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|
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Organization
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Arrangement
|
|
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Magnitude
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M. S. Coleman
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|
University of Michigan
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Educational institution
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Executive officer
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Sales of health care products and services; educational and
research grants
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<1%
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M. M. E. Johns
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Emory University
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Educational institution
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Employee
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Sales of health care products and services; educational and
research grants and fellowships
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<1%
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|
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|
|
|
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S. L. Lindquist
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Massachusetts Institute of Technology
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Educational institution
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Employee
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Tuition; educational and research sponsorships, fellowships and
grants
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<1%
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L. F. Mullin
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Juvenile Diabetes Research Foundation
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Charity
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Director
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|
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Charitable contributions
|
|
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<1%
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|
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D. Satcher
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Morehouse School of Medicine
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Educational institution
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Employee
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|
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Educational and research fellowships and grants; conference
exhibit fees
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<1%; <$1 million
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13
All of the transactions, relationships and arrangements of the
type listed above were entered into, and payments were made or
received, by the Company in the ordinary course of business and
on competitive terms. Aggregate payments to each of the relevant
organizations did not exceed the greater of $1 million or
1% of that organizations consolidated gross revenues for
2008, 2009 or 2010. The Companys transactions with, or
discretionary charitable contributions to, each of the relevant
organizations (not including gifts made under the Companys
matching gifts program) did not exceed the greater of
$1 million or 1% of that organizations consolidated
gross revenues for 2008, 2009 or 2010.
In the event of Board-level discussions pertaining to a
potential transaction, relationship or arrangement involving an
organization with which a Director is affiliated, that Director
would be expected to recuse him or herself from the deliberation
and decision-making process.
Board Meetings. During 2010, the Board
of Directors held seven regularly scheduled and two special
meetings. Each Director attended at least 75% of the total
regularly scheduled and special meetings of the Board of
Directors and the committees on which he or she served. A
discussion of the role of the Board of Directors in the
Companys strategic planning process can be found on the
Companys website at
www.investor.jnj.com/governance/strategic-planning.cfm.
Annual Meeting Attendance. It has been
the longstanding practice of the Company for all Directors to
attend the Annual Meeting of Shareholders. All Directors who
were elected to the Board at the 2010 Annual Meeting were in
attendance.
Board Leadership Structure. The current
Board Chairman is also the current Company CEO. In addition, the
independent Directors have designated an independent lead
director, or Presiding Director. The independent Directors
believe that the Companys current model of the combined
Chairman/CEO role in conjunction with the Presiding Director
position is the appropriate leadership structure for
Johnson & Johnson at this time. The independent
Directors believe that each of the possible leadership
structures for a board has its particular pros and cons, which
must be considered in the context of the specific circumstances,
culture and challenges facing a company, and that such
consideration falls squarely on the shoulders of a
companys board and necessitates a diversity of views and
experiences. The combined Chairman/CEO model is a leadership
model that has served our shareholders well for many
generations, through numerous economic cycles and through a
succession of effective leaders. The Nominating &
Corporate Governance Committee and the other independent
Directors periodically review this structure to ensure it is
still appropriate for the Company.
In 2002, the Board created the position of independent Presiding
Director and established policies to ensure that each of the
Boards standing Audit Committee, Compensation &
Benefits Committee and Nominating & Corporate
Governance Committee consists solely of independent Directors,
including the committee chairmen.
The Presiding Director is designated annually by
the independent Directors. The independent Directors have
selected Mr. Cullen to serve as the designated Presiding
Director for 2011. Among the duties and responsibilities of the
Presiding Director, as described in the Companys
Principles of Corporate Governance and as embedded in the
Companys processes, are the following:
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Agenda and Schedule for Board Meetings. The
Presiding Director reviews in advance the schedule of Board and
committee meetings and participates in setting the agenda for
each Board meeting in order to ensure that the interests and
requirements of shareholders, the independent Directors and
other stakeholders are appropriately addressed.
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Executive Sessions. The Presiding Director has
called and chaired, and has the authority to call and
schedule, Executive Sessions of the independent Directors,
which are held on a regular basis.
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Communication with Management. After each
Executive Session of the independent Directors, the Presiding
Director communicates with the Chairman/CEO to provide feedback
and also to effectuate the decisions and recommendations of the
independent Directors. In addition, the Presiding Director
|
14
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acts as intermediary between the Non-Employee Directors and
management on a regular basis and when special circumstances
exist or communication out of the ordinary course is necessary.
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Chairman/CEO Performance Evaluation. The
Presiding Director is a key participant in the annual
performance evaluation of the Chairman/CEO and the other
executive officers.
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Communication with Shareholders and
Employees. Under the Boards guidelines for
handling shareholder and employee communications to the Board,
the Presiding Director is advised promptly of any communications
directed to the Board or any member of the Board that allege
misconduct on the part of Company management, or raise legal,
ethical or compliance concerns about Company policies or
practices.
|
In addition, the Presiding Director is regularly apprised of
inquires from shareholders and involved in correspondence
responding to these inquiries.
The independent Directors believe the combined Chairman/CEO
position, together with the Presiding Director, has certain
advantages over other board leadership structures that continue
to best meet the Companys current needs, including:
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Efficient communication between management and the Board;
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Clear delineation of the Presiding Directors and other
independent Directors oversight role from the
Chairman/CEOs and other managements day-to-day
operational role;
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Clarity for the Companys key stakeholders on corporate
leadership and accountability; and
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The Board Chairman possessing the best knowledge of the
Companys strategy, operations and financial condition and,
in turn, the ability to communicate that to external
stakeholders.
|
As discussed in Item 1: Election of Directors
on pages 3 to 10 of this Proxy Statement, the independent
Directors come from a variety of organizational backgrounds with
direct experience with a wide range of leadership and management
structures. The makeup of the Companys Board puts it in a
very strong position to evaluate the pros and cons of the
various types of board leadership structures and to ultimately
decide which one will work in the best interests of the
Companys stakeholders, as they are defined in Our Credo.
The independent Directors, through the Nominating &
Corporate Governance Committee, will continue to periodically
review the Boards leadership structure in a serious and
open-minded fashion, especially in the context of future
succession plans.
Standing Board Committees. The Board of
Directors has a standing Audit Committee,
Compensation & Benefits Committee and Nominating
& Corporate Governance Committee, each composed entirely of
Non-Employee Directors determined to be independent
under the listing standards of the NYSE and the Companys
Standards of Independence. Under their written charters adopted
by the Board, each of these committees is authorized and assured
of appropriate funding to retain and consult with external
advisors, consultants and counsel. In addition, the Board has a
standing Public Policy Advisory Committee, Science &
Technology Advisory Committee, and Finance Committee, each
composed of independent Directors and members of management.
15
The following table shows the Directors who are currently
members or chairmen of each of the standing Board Committees and
the number of meetings each committee held in 2010.
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Nominating &
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Science &
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Compensation &
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Corporate
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Public Policy
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Technology
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Director
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Audit
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Benefits
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Governance
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Advisory
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Advisory
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Finance
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M. S.
Coleman(1)
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Member
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Member
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J. G.
Cullen(1)(2)
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Chairman
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Member
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Member
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I. E. L.
Davis(1)
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Member
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Member
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M. M. E.
Johns(1)
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Member
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Member
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S. L.
Lindquist(1)
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Member
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Member
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A. M.
Mulcahy(1)
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Member
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Member
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L. F.
Mullin(1)
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Member
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Chairman
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W. D.
Perez(1)
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Member
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Chairman
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C.
Prince(1)
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Chairman
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Member
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D.
Satcher(1)
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Member
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Chairman
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W. C. Weldon
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Chairman
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Number of meetings in 2010
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4(3)
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5
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4
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4
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4
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0
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(1) |
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Determined to be
independent under the listing standards of the NYSE
and the Companys Standards of Independence.
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(2) |
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Designated as an audit
committee financial expert for purposes of
Section 407 of the Sarbanes-Oxley Act.
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(3) |
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Plus teleconferences held prior to
each release of quarterly earnings (four in total).
|
The Audit Committee assists the Board by providing
oversight of financial management and the independent auditors
and ensuring that management is maintaining an adequate system
of internal control such that there is reasonable assurance that
assets are safeguarded and that financial reports are properly
prepared; that there is consistent application of generally
accepted accounting principles; and that there is compliance
with managements policies and procedures. In addition, the
Audit Committee assists the Board in oversight of legal
compliance programs. In performing these functions, the Audit
Committee meets periodically with the independent auditors,
management, and internal auditors (including in private
sessions) to review their work and confirm that they are
properly discharging their respective responsibilities. In
addition, the Audit Committee recommends the independent
auditors for appointment by the Board of Directors. A copy of
the charter of the Audit Committee is available on the
Companys website at
www.investor.jnj.com/governance/materials.cfm.
Any employee or other person who wishes to contact the Audit
Committee to report fiscal improprieties or complaints about
internal accounting control or other accounting or auditing
matters can do so by writing to them c/o Johnson & Johnson,
One Johnson & Johnson Plaza, Room WH 2136, New Brunswick,
NJ 08933 or by using the online submission form at
www.investor.jnj.com/governance/communication.cfm. Such
reports may be made anonymously.
The Board has designated Mr. Cullen, the Chairman of the
Audit Committee and an independent Director, as an audit
committee financial expert under the rules and regulations
of the SEC for purposes of Section 407 of the
Sarbanes-Oxley Act of 2002 after determining that he meets the
requirements for such designation. This determination was based
on Mr. Cullens experience while President and Chief
Executive Officer of Bell Atlantic Enterprises, New Jersey Bell
and President and Chief Operating Officer of Bell Atlantic
Corporation, where he actively supervised persons performing the
functions of principal financial officer, principal accounting
officer and controller.
The primary function of the Compensation &
Benefits Committee is to discharge the Boards
duties and responsibilities relating to compensation of the
Companys Non-Employee Directors and executive officers and
oversee the design and management of the various pension,
long-term incentive, savings, health and welfare plans that
cover the Companys employees.
16
The Compensation & Benefits Committees duties
and responsibilities under its charter with respect to the
compensation of the Companys Directors and executive
officers include:
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recommending to the Board the Chairman/CEOs compensation
based on the independent Directors annual evaluation of
his or her performance;
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reviewing and providing oversight of the development of the
Companys compensation philosophy and composition of the
group of peer companies used for comparison of executive
compensation;
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approving the establishment of competitive targets versus the
group of peer companies used for comparison of executive
compensation and all equity-based plans requiring shareholder
approval;
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reviewing the eligibility criteria and award guidelines for the
corporate-wide compensation programs in which the executive
officers participate;
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reviewing and approving compensation decisions recommended by
the Chairman/CEO for the Companys other executive
officers, including setting base salaries, annual performance
bonuses, long-term incentive awards, severance benefits and
perquisites; and
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reviewing and approving compensation for the Non-Employee
Directors.
|
The Compensation & Benefits Committee has retained a
compensation consultant from Frederic W. Cook & Co., Inc.
for matters related to executive officer and Director
compensation. Frederic W. Cook & Co., Inc. does not provide
any other services to the Company. The compensation consultant
reports directly to the Committee. For further discussion of the
role of the Compensation & Benefits Committee in the
executive compensation decision-making process, and for a
description of the nature and scope of the consultants
assignment, see the section entitled Compensation
Discussion and Analysis Section I
Governance on pages 23 and 24 of this Proxy Statement.
The Compensation & Benefits Committee also reviews the
compensation philosophy and policies of the Management
Compensation Committee (the MCC), a non-Board
committee composed of Mr. Weldon (Chairman/CEO),
Mr. Caruso (Chief Financial Officer) and Mr. Peter M.
Fasolo (Worldwide Vice President, Human Resources), which, under
delegation from the Compensation & Benefits Committee,
determines management compensation and establishes perquisites
and other compensation policies for employees (except for
executive officers of the Company). The Compensation &
Benefits Committee is also responsible for the oversight of the
Companys performance bonus and long-term incentive plans
and is the approving authority for management recommendations
with respect to performance bonuses and long-term incentive
awards under those plans. A copy of the charter of the
Compensation & Benefits Committee can be found on the
Companys website at
www.investor.jnj.com/governance/materials.cfm.
The Nominating & Corporate Governance
Committee is responsible for overseeing matters of
corporate governance, including the evaluation of the
performance and practices of the Board of Directors. The
Nominating & Corporate Governance Committee also oversees
the process for performance evaluations of the committees of the
Board. It is also within the charter of the Nominating &
Corporate Governance Committee to review the Companys
executive succession plans and executive resources, review and
recommend director orientation and continuing orientation
programs for Board members and consider questions of possible
conflicts of interest, as such questions arise. In addition, the
Nominating & Corporate Governance Committee reviews
possible candidates for the Board, as discussed above on
pages 3 and 4 of this Proxy Statement, and recommends the
nominees for Directors to the Board for approval. A copy of the
charter of the Nominating & Corporate Governance Committee
can be found on the Companys website at
www.investor.jnj.com/governance/materials.cfm.
The Public Policy Advisory Committee consists of
independent Directors, one of the Companys Vice Chairmen,
Executive Committee, and the Vice Presidents for Corporate
Affairs, Johnson & Johnson Supply Chain, and Government
Affairs and Policy. The Public Policy Advisory Committee reviews
the Companys policies, programs and practices on public
health issues regarding the environment and the health and
safety of employees. The Public Policy Advisory Committee also
reviews the Companys
17
governmental affairs and other public policy issues facing the
Company. The Public Policy Advisory Committee advises and makes
recommendations to the Board on these issues as appropriate.
The Science & Technology Advisory Committee
is composed of independent Directors and the
Companys Vice President, Science and Technology. It
assists the Board in monitoring the overall strategy, direction
and effectiveness of the Companys research and development
organization; in monitoring the effectiveness of the scientific
aspects of the Companys product safety processes; in
overseeing major business development activities as they relate
to the acquisition of new science or technology; and in
identifying and comprehending significant emerging science and
technology policy issues and trends that may impact the
Companys overall business strategy.
The Finance Committee is composed of the Chairman
and Presiding Director of the Board. The Committee exercises the
authority of the Board during the intervals between Board
meetings. The Finance Committee generally does not hold formal
meetings and instead acts from time-to-time between Board
meetings by unanimous written consent in lieu of a meeting, as
needed. Any such action is taken pursuant to specific advance
delegation by the Board or is later ratified by the Board.
Special Committees. The Board also has
the authority to appoint such additional committees as it may
from time-to-time determine. A Special Committee
was appointed by the Board in 2010 to investigate and
evaluate demands made by certain shareholders and claims
asserted in certain shareholder derivative suits. The Special
Committee will recommend to the Board what actions, if any,
should be taken by the Company on behalf of the shareholders.
The current members of the Special Committee are
Messrs. Perez and Prince, Dr. Johns and
Ms. Mulcahy. The Chairman of the Special Committee is
Mr. Prince.
Executive Sessions. Each of the Audit,
Compensation & Benefits and Nominating &
Corporate Governance Committees met at least twice during 2010
in Executive Sessions without members of management present. The
independent Directors met seven times during 2010 in Executive
Sessions, without the Chairman/CEO or any other member of
management present, at which the Presiding Director acted as
Chairman.
Board Oversight of Risk Management. The
Board believes that overseeing how management manages the
various risks the Company faces is one of its most important
responsibilities to the Companys stakeholders. The
Companys enterprise risk management framework reflects a
collaborative process, whereby the Companys Board of
Directors, management and other personnel apply a common risk
management approach to strategy setting and other decisions
across the enterprise that is designed to identify potential
events that may affect the entity and manage the associated
risks and opportunities.
In carrying out this critical responsibility, the Board meets at
regular intervals with key members of management with primary
responsibility for risk management in their respective areas of
responsibility. The subject matter of these meetings can
generally be grouped into the following categories and risk
areas:
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Strategy: Business Vitality; Strategic
Planning; Talent Management; Reputation; Sustainability;
Diversity
|
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Reporting: Financial Results;
Finance/Accounting; Internal Audit; Independent Audit; Tax;
Treasury
|
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|
Compliance: Law/Legal Proceedings;
Legislative/Regulatory Environment; Health Care Compliance;
Foreign Corrupt Practices Act; Environment, Health &
Safety; Privacy; Quality; Product Safety/Scientific Issues
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|
Operations: Supply Chain (including
Manufacturing/Business Continuity Planning); Security (including
security of products, sites, personnel, and information);
Research & Development
|
The Board also receives regular reports on aspects of the
Companys risk management from senior representatives of
the Companys independent auditor.
18
In addition, the Audit Committee (the current Chairman of which
is also the independent Presiding Director) meets in private
sessions with the Chief Financial Officer; General Counsel;
Chief Compliance Officer; Vice President of Corporate
Internal Audit; and representatives of the Companys
independent auditor at the conclusion of every
regularly-scheduled meeting, where aspects of risk management
are discussed.
The Board believes that, in light of the interrelated nature of
the Companys risks, oversight of risk management is
ultimately the responsibility of the full Board.
Communication with the
Board. Shareholders, employees and others may
contact the Board or any of the Companys Directors
(including the Presiding Director) by writing to them c/o
Johnson & Johnson, One Johnson &
Johnson Plaza, Room WH 2136, New Brunswick,
NJ 08933. Shareholders, employees and others may also
contact the Board or any of the Non-Employee Directors by using
the online submission form on the Companys website at
www.investor.jnj.com/governance/communication.cfm.
General comments to the Company (including complaints or
questions about a product) should be sent by accessing
https://secure-www.jnj.com/wps/wcm/jsp/contactus.jsp.
The Companys process for handling communications to the
Board or the individual Directors has been approved by the
independent Directors and can be found at
www.investor.jnj.com/governance/communication.cfm.
Corporate Governance
Materials. Shareholders can see the
Companys Restated Certificate of Incorporation, By-Laws,
Principles of Corporate Governance, Charters of the Audit
Committee, Compensation & Benefits Committee and Nominating
& Corporate Governance Committee, Policy on Business
Conduct for employees and Code of Business Conduct & Ethics
for Members of the Board of Directors and Executive Officers on
the Companys website at
www.investor.jnj.com/governance/materials.cfm. Copies of
these documents, as well as additional copies of this Proxy
Statement, are available to shareholders, without charge, upon
request to the Secretary at the Companys principal address.
Majority Vote Standard in Uncontested Director
Elections. The Companys
By-Laws
require that, in uncontested elections (those where the number
of nominees does not exceed the number of Directors to be
elected), Director nominees receive the affirmative vote of a
majority of the votes cast in order to be elected to the Board
of Directors of the Company. The majority standard applies only
to uncontested Director elections. Ballots for uncontested
elections, including the election of Directors at the 2011
Annual Meeting, will allow shareholders to vote For
or Against each nominee and also will allow
shareholders to Abstain from voting on any nominee.
In accordance with New Jersey law, abstentions will have no
effect in determining whether the required majority vote has
been obtained.
Under the Companys By-Laws and in accordance with New
Jersey law, a Directors term extends until his or her
successor is duly elected and qualified, or until he or she
resigns or is removed from office with cause by a majority vote
of shareholders entitled to vote. Thus, an incumbent Director
who fails to receive the required vote for re-election at the
Companys Annual Meeting of Shareholders would continue
serving as a Director (sometimes referred to as a holdover
director), generally until the next meeting of
shareholders. In order to address the situation where an
incumbent Director receives more votes Against his
or her re-election than votes For his or her
re-election in an uncontested election, the Boards
Director Resignation Policy for Incumbent Directors in
Uncontested Elections would require that Director to promptly
tender an offer of his or her resignation following
certification of the shareholder vote. The Nominating &
Corporate Governance Committee and the Board would then consider
and take appropriate action on such offer of resignation in
accordance with the Policy.
Contested Director elections (those where the number of Director
nominees exceeds the number of Directors to be elected) would be
governed by the plurality standard under New Jersey law. Ballots
for contested elections would allow shareholders to vote
For each nominee or Withhold from voting
on any nominee, as is typically the practice under the plurality
standard. The Director Resignation Policy for Incumbent
Directors in Uncontested Elections would not apply to contested
elections.
The Companys By-Laws and Principles of Corporate
Governance, including the Director Resignation Policy for
Incumbent Directors in Uncontested Elections, can be found on
the Companys website at
www.investor.jnj.com/governance/materials.cfm.
19
TRANSACTIONS WITH
RELATED PERSONS
For the period beginning January 1, 2010 and ending
March 1, 2011, there were no transactions, or currently
proposed transactions, in which the Company was or is to be a
participant and the amount involved exceeds $120,000, and in
which any related person had or will have a direct or indirect
material interest.
Policies and Procedures. The Companys
written Policy on Transactions With Related Persons requires the
approval or ratification by the Nominating & Corporate
Governance Committee for any transaction or series of
transactions exceeding $120,000 in which the Company is a
participant and any related person has a material interest
(other than solely as a result of being a director or trustee or
less than 10% owner of another entity). Related persons would
include the Companys Directors and executive officers and
their immediate family members and persons sharing their
households. It would also include persons controlling more than
5% of the Companys outstanding Common Stock.
Under the Companys Principles of Corporate Governance and
Code of Business Conduct & Ethics for Members of the
Board of Directors and Executive Officers, all Directors and
executive officers of the Company have a duty to report to the
Chairman, Vice Chairman or the Presiding Director potential
conflicts of interest, including transactions with related
persons. Management also has established procedures for
monitoring transactions that could be subject to approval or
ratification under the Policy on Transactions With Related
Persons.
Once a related person transaction has been identified, the
Nominating & Corporate Governance Committee will review all
of the relevant facts and circumstances and approve or
disapprove of the entry into the transaction. The Committee will
take into account, among other factors, whether the transaction
is on terms no more favorable than terms generally available to
an unaffiliated third party under the same or similar
circumstances and the extent of the related persons
interest in the transaction.
If advance Committee approval of a transaction is not feasible,
the transaction will be considered for ratification at the
Committees next regularly scheduled meeting. If a
transaction relates to a member of the Committee, that member
will not participate in the Committees deliberations. In
addition, the Committee Chairman (or, if the transaction relates
to the Committee Chairman, the Presiding Director) may
pre-approve or ratify any related person transactions involving
up to $1 million.
The following types of transactions have been deemed by the
Committee to be pre-approved or ratified, even if the aggregate
amount involved will exceed $120,000:
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compensation paid by the Company for service as a Director or
executive officer of the Company;
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transactions with other companies where the related
persons only relationship is as a non-executive employee,
less than 10% equity owner, or limited partner, and the
transaction does not exceed the greater of $1 million or 2%
of that companys annual revenues;
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contributions by the Company to charitable organizations where
the related person is an employee and the transaction does not
exceed the lesser of $500,000 or 2% of the charitable
organizations annual receipts;
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transactions where the related persons only interest is as
a holder of Company stock and all holders receive proportional
benefits, such as the payment of regular quarterly dividends;
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transactions involving competitive bids;
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transactions where the rates or charges are regulated by law or
government authority; and
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transactions involving bank depositary, transfer agent,
registrar, trustee, or party performing similar banking services.
|
20
COMPENSATION
COMMITTEE REPORT
The Compensation & Benefits Committee of the Board of
Directors has reviewed and discussed the section of this Proxy
Statement entitled Compensation Discussion and
Analysis with management. Based on this review and
discussion, the Committee has recommended to the Board that the
section entitled Compensation Discussion and
Analysis, as it appears on pages 21 through 45, be
included in this Proxy Statement and incorporated by reference
into the Companys Annual Report on Form 10-K for the
fiscal year ended January 2, 2011.
Mr. Charles Prince, Chairman
Dr. Michael M. E. Johns
Ms. Anne M. Mulcahy
Mr. William D. Perez
COMPENSATION
DISCUSSION AND ANALYSIS
EXECUTIVE
SUMMARY
For 2010, the Compensation & Benefits Committee of the
Board of Directors (the Committee) evaluated the
performance of the Company and its executive officers with
respect to:
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Financial metrics, including:
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Sales
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Earnings
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Cash Flow
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Total Shareholder Return
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Leadership measures, including:
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Retention of Key Talent
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Leadership Pipeline Strength
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Employee Engagement
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Long-Term Growth measures, including:
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Innovative Products
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Robust Pipelines
|
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Global Presence
|
In addition to these performance indicators, the Committee also
reviewed the Companys progress with respect to Reputation
and the Healthcare Environment.
In 2010, the Companys performance was mixed. In some areas
the Company met or exceeded objectives, while in other areas it
fell short of its goals. Among the successes for the year were:
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Earnings per share (excluding special items) met objectives
|
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Free Cash Flow exceeded objectives
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Total Shareholder Return generally met or exceeded peer indices
over the past 3 and 5 years
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Senior leadership succession planning advanced significantly
|
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|
The overall product pipeline strengthened, especially in the
Pharmaceuticals and Medical Devices & Diagnostics
businesses
|
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Emerging markets growth continued to be strong
|
21
Disappointments for the year included:
|
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|
|
Significant recalls during 2010, primarily at McNeil Consumer
Healthcare, negatively impacted both the Companys
reputation and revenue
|
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|
Operational sales declined
year-on-year
and fell below target
|
In order to recognize the mix of short-term performance
successes and disappointments, as well as the Companys
strengthened positioning for the long-term, the Committee
lowered the annual performance bonus amounts for 2010 and
provided competitive long-term incentives tied to the future
growth of the Company. The Committee:
|
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|
|
Significantly reduced the Chairman/CEOs bonus
year-on-year
by $1,624,000 (or 45%);
|
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|
Lowered the planned annual performance bonuses for all executive
officers, management, and other bonus-eligible employees
worldwide by 10%; and
|
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|
Provided competitive long-term incentives to motivate long-term
performance.
|
INTRODUCTION
Maintaining a long-term perspective is a core element of the
Companys business strategy, which allows management to
focus on shaping the Companys future. This long-term focus
means placing greater emphasis on researching new products and
technologies that will enable future growth and looking at
investments that will deliver long-term shareholder value. This
strategy encourages employees to take calculated risks that
capitalize on anticipated changes in all segments of health care
and meet patient and customer needs. The structure of the
Companys compensation program is key to motivating the
Companys employees to see the bigger picture and take the
time to consider the future state of the Company when they
conduct business on a day-to-day basis.
The Companys executive compensation philosophy, laid out
in Section II, is grounded in the concept of attracting and
retaining global business leaders who can drive financial and
strategic growth objectives intended to build long-term
shareholder value. As explained more below, the Companys
compensation programs have a long-term focus and are designed
with the guiding principles of: Competitiveness, Pay for
Performance, Accountability for Short- and Long-Term Performance
and Alignment to Shareholders Interests.
Section III describes how the Companys executive
officers were compensated for their performance in 2010. Pay for
performance is an essential element of the Companys
guiding principles, and the executive officers are assessed on
their performance against long-term strategic objectives as well
as annual business goals. In alignment with the Companys
Credo values, it is important that the Company recognize its
executive officers not only for the results they achieve, but
also for the manner in which they achieve them. More information
on the Companys pay for performance philosophy can be
found in Sections II and III. Additional information on the
Companys business results can be found in the
Companys 2010 Annual Report under the Managements
Discussion and Analysis section.
Set out below is the Compensation Discussion and Analysis (the
CD&A), which is a discussion of the
Companys executive compensation programs and an analysis
of the compensation of the Named Executive Officers for 2010.
The CD&A has been organized into four sections:
Section I:
Governance
This section details the roles and responsibilities of the
parties involved in the decision-making processes related to the
development of the Companys executive compensation
programs, as well as the individual performance assessments and
determinations of compensation for the Named Executive Officers.
22
Section II:
Compensation Framework and Pay Components
This section provides an overview of the Companys
executive compensation programs, including how compensation
targets are set, what compensation programs are offered and how
those programs work. It is important for anyone reading this
Proxy Statement to understand the programs along with the
program mechanics before reviewing the performance assessments
and compensation awards for the Named Executive Officers.
Section III:
Performance Assessments and Compensation Decisions
This section summarizes how executive compensation decisions are
made, including the individual performance assessment process
and the importance of the Companys pay for performance
philosophy. The performance assessments of the Named Executive
Officers, along with the resulting compensation decisions for
the most recent performance year, are discussed in detail in
this section.
Section IV:
Additional Information Concerning Executive
Compensation
This section provides general information on the status of
executive employment agreements and
change-in-control
arrangements at the Company, along with a description of the
Companys Stock Ownership Guidelines and Executive
Compensation Recoupment Policy.
This CD&A demonstrates the emphasis the Company places on
its guiding principles especially accountability for
long-term performance when developing the
Companys executive compensation programs, setting
financial performance goals and strategic objectives, and
ultimately, in assessing the executive officers
performance against these goals and objectives.
SECTION I
GOVERNANCE
The Committee is responsible for the executive compensation
program design and decision-making process, with input from the
Management Compensation Committee (the MCC), which
determines the philosophy and design of general management
compensation programs and policies. The Committee currently, and
for 2010, comprises four Directors who meet the independence
requirements of the NYSE (Messrs. Prince and Perez,
Dr. Johns and Ms. Mulcahy). For 2010, the MCC
comprised the Companys Chairman/CEO (Mr. Weldon),
Chief Financial Officer (the CFO) (Dominic J.
Caruso), and Vice President, Human Resources and General Counsel
(Russell C. Deyo). For 2011, the MCC comprises the
Companys Chairman/CEO, CFO, and Worldwide Vice President,
Human Resources (Peter M. Fasolo).
It is important for anyone reading this Proxy Statement to
understand the elements of compensation that are addressed by
the Committee each year and how they are reported. Each year,
based on the performance assessments of the executive officers,
the Committee determines the salary rate for the upcoming year,
the performance bonus earned for the prior years
performance, and long-term incentive awards that are granted in
the first quarter of the year for each executive officer.
Decisions regarding these elements are discussed in
Section III and the amounts for 2010 are summarized on the
tables on pages 43 and 44. By contrast, most of the amounts
reported in the table captioned Summary Compensation
Table on page 46 are the result of decisions in prior
years, earnings from prior long-term incentive awards, or
participation in long-standing programs. The Committee believes
that the tables on pages 43 and 44 best summarize the
actions taken on the Named Executive Officers compensation
for the 2010 performance year.
The Committee retains the services of a compensation consultant
from Frederic W. Cook & Co., Inc. to advise it on the
performance of its responsibilities. Since that consultant was
retained, and on an ongoing basis, the Committees
independent compensation consultant has provided, and will
provide, services to that Committee, and has not, and will not,
perform any other service for the Company.
23
The following table summarizes the roles of each of the key
participants in the executive compensation decision-making
process.
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Compensation & Benefits Committee
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Acts on behalf of the Board by setting the
principles that serve to guide the design of the Companys
compensation and benefits programs
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Provides oversight of the development of the
compensation philosophy and composition of the Executive Peer
Group used for market comparison and approves the setting of
competitive compensation target levels
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Ensures that compensation programs and principles
are designed to link executive pay with individual performance
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Recommends to the Board the Chairman/CEOs
compensation based on the evaluation of his or her performance
by the independent members of the Board of Directors
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Reviews and approves compensation decisions
recommended by the Chairman/CEO for each of the other executive
officers, including base salary levels, annual performance
bonuses, long-term incentive awards, severance benefits and
perquisites
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|
Reviews the eligibility criteria and award
guidelines for the corporate-wide compensation programs in which
the executive officers participate
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|
Reviews the design and management of the various
pension, savings, health and welfare plans covering employees of
the Johnson & Johnson companies
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Management Compensation Committee
|
|
|
Determines management compensation and establishes
perquisites and other compensation policies for employees
(except for executive officers), under delegation from the
Compensation & Benefits Committee
|
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Independent Members of the Board of Directors
|
|
|
Participate in the performance assessment process
for the Chairman/CEO
|
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|
Approve the Chairman/CEOs compensation
|
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|
Chairman/CEO
|
|
|
Reviews and presents to the Committee the
performance assessments and compensation recommendations for
each of the other executive officers
|
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|
|
Independent Compensation Consultant
|
|
|
Reports directly to the Committee and participates
in Committee meetings
|
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|
|
Informs the Committee on market trends, regulatory
issues and developments and how they may impact the
Companys executive compensation programs
|
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|
On behalf of the Committee:
|
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|
|
|
|
|
Reviews the Companys compensation
strategy and executive compensation programs for alignment with
the Companys strategic business objectives
|
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|
Participates in the design of executive
compensation programs to ensure the linkage between pay and
performance
|
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|
|
|
|
|
Reviews market data and advises the
Committee on setting the Chairman/CEOs pay
|
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|
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|
Reviews the annual compensation of the
other executive officers as recommended by the Chairman/CEO
|
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|
24
SECTION II
COMPENSATION FRAMEWORK AND PAY COMPONENTS
Executive
Compensation Philosophy
Guiding
Principles
Johnson & Johnsons executive compensation
programs are designed to achieve the Companys goal of
attracting, developing and retaining global business leaders who
can drive financial and strategic growth objectives that are
intended to build long-term shareholder value. The primary
components of executive compensation include base salary, annual
performance bonus and long-term incentives. Compensation levels
are set to reflect competitive market practices, as well as
Company and individual performance. The Committee has
established the following guiding principles for the design of
the Companys compensation programs:
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Competitiveness All components of
compensation should be set competitively as compared against
appropriate peer companies so that the Company can continue to
attract, retain and motivate high performing executives in an
environment where companies are increasingly competing for high
caliber talent.
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|
Pay for Performance All components of
compensation should be tied to the performance of the individual
executive officer and his or her specific business unit or
function and the Company overall.
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|
Credo Values The manner in which financial
and strategic objectives are achieved is important. While not
always quantifiable, the manner in which employees achieve
results should also be a key element of the individual
performance review process. During the performance review
process, the Companys set of core values
trustworthiness, respect, responsibility, fairness, caring and
citizenship as set forth in Our Credo, should be
used to assess how objectives are achieved.
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Accountability for Short- and Long-Term Performance
Annual performance bonuses and long-term
incentives should reward an appropriate balance of short-and
long-term financial and strategic business results, with an
emphasis on managing the business for the long term.
|
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|
Alignment to Shareholders Interests
Annual performance bonuses and long-term
incentives should align the interests of individual executive
officers with the long-term interests of the Companys
shareholders.
|
Importance of
Credo Values
For more than 65 years, the Johnson & Johnson
Credo has guided the actions of the Company and its executive
officers in fulfilling their responsibilities to the
Companys customers, employees, communities, and
shareholders. In assessing the executive officers
contributions to the Companys performance, the Committee
not only looks to results-oriented measures of performance, but
also considers how those results were achieved
whether the decisions and actions leading to the results were
consistent with the values embodied in the Credo and
the long-term impact of an executive officers decisions.
Credo-based behavior is not something that can be precisely
measured; thus, there is no formula for how Credo-based behavior
can, or will, impact an executives compensation. The
Committee and the Chairman/CEO use their judgment and experience
to evaluate whether an executives actions were aligned
with the Companys Credo values.
Reducing the
Possibility for Excessive Risk-Taking
The Companys executive compensation program, which is
reviewed and approved by the Committee, is designed to motivate
and reward the executive officers for their performance during
the fiscal year and over the long term and for taking
appropriate risks toward achieving the long-term financial and
strategic growth objectives of the Company. The following
characteristics of the Companys executive compensation
program work to reduce the possibility of the executive
officers, either individually or as a
25
group, making excessively-risky business decisions that could
maximize short-term results at the expense of long-term value:
|
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|
Balanced Mix of Pay Components: The target
compensation mix is not overly weighted toward annual incentive
awards and represents a balance of cash, long-term equity-based
compensation vesting over three years and long-term
performance-based units vesting over five years.
|
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|
Balanced Approach to Performance-Based Awards:
|
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|
|
Performance targets are tied to several financial metrics,
including operational sales growth, free cash flow, earnings per
share (EPS) growth, and long-term total shareholder
return.
|
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|
Performance-based awards are based on the achievement of
strategic and leadership objectives in addition to financial
metrics.
|
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|
Performance Period and Vesting Schedules: The
performance period and vesting schedules for long-term
incentives overlap and, therefore, reduce the motivation to
maximize performance in any one period. Restricted Share Units
(RSUs) and Stock Options vest three years from the
grant date. Certificates of Long-Term Performance
(CLPs) vest 20% per year over 5 years.
|
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|
Capped Incentive Awards: Salary increases,
annual performance bonuses, and long-term incentive awards are
capped at 200% of target.
|
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|
Stock Ownership Guidelines: The guidelines
require the Chairman/CEO to directly or indirectly own equity in
the Company of five times salary and other executive officers to
own equity of three times salary and to retain this equity
throughout their tenure. This policy is described below under
Section IV Additional Information
Concerning Executive Compensation.
|
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|
Executive Compensation Recoupment Policy: The
policy gives the Board the authority to recoup executive
officers past compensation in the event of a material
restatement of the Companys financial results. This policy
is discussed in more detail below under
Section IV Additional Information
Concerning Executive Compensation.
|
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|
No Employment or
Change-in-Control
Arrangements: None of the executive officers have
in place any employment or
change-in-control
arrangements that would result in guaranteed payouts. This is
discussed in more detail below under
Section IV Additional Information
Concerning Executive Compensation.
|
Executive Peer
Group
The Committee considers relevant market pay practices when
setting executive compensation to ensure the Companys
ability to recruit and retain high performing talent. In
assessing market competitiveness, the compensation of the
Companys executive officers is reviewed against executive
compensation at a designated set of companies (the
Executive Peer Group). The Executive Peer Group,
which is reviewed by the Committee on an annual basis, consists
of companies that generally:
|
|
|
|
|
are similar to the Company in terms of certain factors,
including one or more of the following: size (i.e.,
revenue, net income, market capitalization), industry, gross
margin, global presence and research and development investment;
|
|
|
|
have executive officer positions that are comparable to the
Companys in terms of breadth, complexity and scope of
responsibilities; and
|
|
|
|
compete with the Company for executive talent.
|
The Executive Peer Group is not identical to the Companys
Competitor Composite, against which Company and business segment
financial performance is compared. This is because the
Companys businesses typically compete with companies that
are much smaller than the Company as a whole, or even as
compared to each of the three individual business segments. The
Company typically competes for executive talent with companies
that fit the criteria described in the bullet points above. A
description of the
26
Competitor Composite and how it is used for compensation
purposes can be found in Section III
Performance Assessment and Compensation Decisions
Measuring Success: Individual Performance Assessment on
pages 34 and 35 of this Proxy Statement. In addition, the
Executive Peer Group does not include companies headquartered
outside the United States and companies in industries whose
compensation programs are not comparable to that of the Company,
such as the financial services or oil and gas industries.
The following table lists the companies in the 2010 Executive
Peer Group and their business characteristics, along with
Johnson & Johnsons rankings among these
companies, based on financial data reported by each company for
the most recent four fiscal quarters. Market capitalization is
calculated as of December 31, 2010.
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Global
|
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|
Innovation
|
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|
Net
|
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|
Market
|
|
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|
Gross
|
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Presence
|
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Emphasis
|
Company
|
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|
Revenue
|
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|
Income
|
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|
Cap
|
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Common
|
|
|
Margin
|
|
|
(International >
|
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|
Business
|
|
|
(R&D
³
5%
|
(Ticker Symbol)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
(Billions)
|
|
|
Industry
|
|
|
(>40%)
|
|
|
33% of Sales)
|
|
|
Complexity
|
|
|
of Sales)
|
3M Company (MMM)
|
|
|
|
$26,662
|
|
|
|
|
$4,085
|
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|
|
$62
|
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ü
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|
|
ü
|
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|
ü
|
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|
ü
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ü
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|
Abbott Laboratories (ABT)
|
|
|
|
35,167
|
|
|
|
|
4,626
|
|
|
|
|
74
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
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ü
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ü
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|
The Boeing Company (BA)
|
|
|
|
64,306
|
|
|
|
|
3,307
|
|
|
|
|
48
|
|
|
|
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|
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ü
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ü
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ü
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|
|
|
Bristol-Myers Squibb Company (BMY)
|
|
|
|
19,484
|
|
|
|
|
3,102
|
|
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|
|
45
|
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ü
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ü
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ü
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ü
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ü
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|
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|
Cisco Systems, Inc. (CSCO)
|
|
|
|
42,361
|
|
|
|
|
7,578
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
ü
|
|
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|
|
ü
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ü
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ü
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|
The
Coca-Cola
Company (KO)
|
|
|
|
35,119
|
|
|
|
|
11,809
|
|
|
|
|
153
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
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ü
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|
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|
Eli Lilly & Co.* (LLY)
|
|
|
|
23,076
|
|
|
|
|
5,070
|
|
|
|
|
40
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
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ü
|
|
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|
ü
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|
|
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|
|
General Electric Company (GE)
|
|
|
|
150,211
|
|
|
|
|
11,644
|
|
|
|
|
195
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
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|
ü
|
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ü
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|
|
|
|
Hewlett-Packard Company (HPQ)
|
|
|
|
127,158
|
|
|
|
|
9,116
|
|
|
|
|
92
|
|
|
|
|
ü
|
|
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|
|
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ü
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ü
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|
Honeywell International Inc. (HON)
|
|
|
|
33,370
|
|
|
|
|
2,035
|
|
|
|
|
41
|
|
|
|
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ü
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ü
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|
Intel Corporation* (INTC)
|
|
|
|
43,623
|
|
|
|
|
11,672
|
|
|
|
|
117
|
|
|
|
|
|
|
|
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|
ü
|
|
|
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ü
|
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ü
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|
|
|
|
|
|
International Business Machines Corporation (IBM)
|
|
|
|
99,870
|
|
|
|
|
14,833
|
|
|
|
|
182
|
|
|
|
|
|
|
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|
ü
|
|
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ü
|
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ü
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ü
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|
|
|
|
|
Merck & Co., Inc. (MRK)
|
|
|
|
45,987
|
|
|
|
|
861
|
|
|
|
|
111
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
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|
ü
|
|
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ü
|
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ü
|
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|
|
|
|
|
PepsiCo, Inc. (PEP)
|
|
|
|
57,838
|
|
|
|
|
6,320
|
|
|
|
|
104
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
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|
|
|
|
|
|
Pfizer Inc. (PFE)
|
|
|
|
67,809
|
|
|
|
|
8,257
|
|
|
|
|
140
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
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ü
|
|
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ü
|
|
|
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|
|
|
|
|
|
|
|
The Procter & Gamble Company (PG)
|
|
|
|
79,573
|
|
|
|
|
11,184
|
|
|
|
|
180
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
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ü
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ü
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United Technologies Corporation (UTX)
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54,326
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4,373
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73
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Johnson & Johnson (JNJ)
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$61,587
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$13,334
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$170
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Johnson & Johnsons Ranking
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7th highest
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2nd highest
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4th highest
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* |
Added to the Executive Peer Group in 2010.
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Setting
Compensation Targets Emphasizing the Long
Term
Compensation targets are set to ensure the Company can compete
for talent in the competitive marketplace and to maintain
compensation equity and balance among positions with like
responsibilities. Neither individual nor Company performance is
a factor in setting compensation targets, however, they are key
drivers in determining actual compensation awards.
An annual review of publicly available information and executive
compensation surveys is conducted to determine current Executive
Peer Group pay levels. For each executive officer position,
50th and 75th percentile target and actual pay data is
gathered. This data, along with guidance from the
Committees independent compensation consultant, provides
the Committee with an overall picture of how existing targets
compare to the Executive Peer Group. The Committee also compares
compensation targets across positions to determine whether the
targets are both internally equitable and externally competitive.
27
The Companys target pay philosophy positions total
compensation for its executive officers between the 50th and
75th percentiles of the Executive Peer Group. Actual
compensation, in any given year, may fall outside that range
based on a variety of factors, including individual performance,
additional responsibilities and length of tenure in a particular
position. The Company places more of an emphasis on long-term
incentives than salaries and annual performance bonus in order
to reinforce the link between the executive officers
earnings opportunity and managing the Company for long-term
growth.
28
Components of
Executive Compensation
The following table summarizes the major components of the
Companys executive compensation programs.
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Component
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Purpose
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Key Characteristics
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Base Salary
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Reinforces the guiding principle of Competitiveness
Salary (merit) increases reinforce Pay for Performance guiding principle
Recognizes individual work experience and level of responsibility
Recognizes individual performance and maintains internal parity among those performing like jobs
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Fixed compensation
Increases predominantly driven by individual performance in last performance year, subject to budgetary constraints
Used to calculate other components of compensation
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Annual Performance
Bonus
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Reinforces
the guiding principles of Pay for Performance, Accountability
for Short- and Long-Term Performance, Competitiveness, and
Alignment to Shareholders Interests
Communicates
the annual priorities and key objectives of the business
Motivates
attainment of short-term goals for the applicable performance
period
Functions
as variable pay that can fluctuate based on individual
performance, which includes business unit/function and Company
performance
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Variable
compensation tied to individual performance in last performance
year
Bonus
targets are set as a percent of base salary
Awards
paid 15% in stock and 85% in cash for executive officers
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Long-Term
Incentives
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Stock Options &
Restricted Share Units
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Reinforces
the guiding principles of Accountability for Long-Term
Performance, Pay for Performance, Competitiveness, and Alignment
to Shareholders Interests
Motivates
attainment of long-term goals and support of the Companys
overall business priorities
Facilitates
executive equity ownership, thereby aligning executives
interests with those of shareholders
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Variable compensation provided to reward performance over the long-term
Vests 100% 3 years from grant date
Stock options expire 10 years from grant date
No dividend equivalents earned
Awards granted 75% in stock options and 25% in RSUs for executive officers
An executives previous option and RSU grants and total equity ownership are not considered when making annual option and RSU grants
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Certificates of Long-Term
Performance
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Reinforces
the guiding principles of Accountability for Long-Term
Performance, Pay for Performance, Competitiveness, and Alignment
to Shareholders Interests over time
Aligns
employee interests with the long-term operational growth of the
Company
Encourages
long-term commitment to the Company
Provides
a measure of overall Company performance that is not subject to
short-term market volatility
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Variable,
deferred compensation
Vested
CLP units are payable at the earlier of: ten years after date of
grant, or at termination (including retirement)
Dividend
equivalents are paid on vested CLP units
Dividend
equivalent yield aligned with shareholders (i.e., the same yield
as the Common Stock with a one-year lag)
Units
vest 20% per year
Granted
annually based on performance
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29
In furtherance of the Companys Pay for Performance guiding
principle, an individual has the opportunity to earn from 0 to 2
times the applicable target for each compensation component
based on his or her individual performance. This broad range
allows for meaningful differentiation based on performance.
However, the Company must also manage to a total available
budget for each compensation component across all employees.
Because the total available budget for a component is equal to
the sum of all employees awards at target, higher awards
for some employees must be offset by lower awards for others.
Pay Mix at
Target
The Committee does not establish a set pay mix for the executive
officers. However, as discussed above in
Setting Compensation Targets, the
Companys compensation program does emphasize long-term
compensation versus short-term compensation.
The pay mix at target for the Chairman/CEO and other executive
officers in 2010 is displayed below. Actual salary levels,
annual performance bonus awards and long-term incentive awards
will vary based on an individuals experience,
responsibilities, performance and business unit/function results.
CLPs 37% CLPs 33%Options/RSUs
37% Long term incentives 74% Options/RSUs 34% Long term
incentives 87% Annual Perf Bonus 16% Annual Perf Bonus 18% Base
Salary 10% Base Salary 15%
Base
Salary
Base salary is fixed compensation designed to reinforce the
guiding principle of Competitiveness. Annual salary increases
are predominately driven by individual performance in the last
performance year and are subject to budgetary constraints. The
salary increase budget is determined based on a review of salary
increase survey data. The 2011 salary increase (merit) budget in
the U.S. is 3.0% and the opportunity range is 0% to 6.0%.
Annual base salaries for executive officers are reviewed and
approved by the Committee in the first quarter of each year for
performance in the prior year. The Committee reviews individual
performance and considers the recommendations provided by the
Chairman/CEO to assist it in determining appropriate salaries
for executive officers other than the Chairman/CEO.
Annual
Performance Bonus
The annual performance bonus is variable compensation driven by
individual performance in the last performance year, and is
designed to reinforce the guiding principles of Pay for
Performance, Accountability for Short- and Long-Term
Performance, Competitiveness, and Alignment to
30
Shareholders Interests. To assess individual performance,
the Chairman/CEO considers both overall company performance and
business
unit/function
performance for each of the executive officers. Please refer to
Section III Performance Assessment and
Compensation Decisions below for more detail on the
Companys individual performance assessment process.
Bonus targets are established as a percent of base salary, using
the process described above under Setting
Compensation Targets. Bonus targets and maximums are
disclosed in Columns F and G of the Grants of Plan-Based
Awards 2010 table on page 51 of this Proxy
Statement. Under the Executive Incentive Plan (the
EIP), annual performance bonuses are approved and
paid in the first quarter of each year for performance in the
prior year. For the executive officers, awards are paid 15% in
stock and 85% in cash.
The EIP, which was approved by the shareholders and is intended
to comply with Section 162(m) of the U.S. Internal
Revenue Code of 1986, as amended (the IRC), allows
the Company to take a tax deduction for incentive bonus payments
made pursuant to the EIP to certain officers earning in excess
of $1 million. The Chairman/CEO and the other executive officers
participate in the EIP. Under the EIP, payments of annual
performance bonuses to executive officers are prohibited unless
Consolidated Earnings, as shown on the audited consolidated
statement of income of the Company, are positive. Individual
bonuses cannot exceed 0.08% of Consolidated Net Earnings for the
Chairman/CEO and any Vice Chairman and 0.04% of Consolidated Net
Earnings for the other executive officers.
Long-Term
Incentives
The Companys long-term incentives are variable
compensation designed to reinforce the guiding principles of
Accountability for Long-Term Performance, Pay for Performance,
Competitiveness, and Alignment to Shareholders Interests.
Stock options and RSUs emphasize our commitment to total
shareholder return. CLPs and Certificates of Long-Term
Compensation (CLCs) keep our executives focused on
the long-term operational performance of the Company while also
encouraging dividend growth. Long-term incentive targets are
established using the process described above under
Setting Compensation Targets. Once
targets are in place, actual awards are determined based solely
on individual performance. Please refer to
Section III Performance Assessment and
Compensation Decisions below for more details on the
individual performance assessment process. Participation in
these programs is targeted to management-level employees,
including the executive officers, who have an ability to impact
the Companys long-term results. For these employees,
long-term incentives make up a significant portion of their
total compensation.
Stock Options and
Restricted Share Units
Annual stock option and RSU awards are approved and granted in
the first quarter of each year at the same time that the
Committee reviews and approves all components of year-end
compensation. For executive officers, stock options and RSUs are
granted with an award mix of 75% stock options and 25% RSUs.
Stock options are granted with an exercise price equal to the
fair market value of the Companys Common Stock on the
grant date (calculated as the average of the high and low stock
prices on the NYSE on that date). Stock options and RSUs vest
100% on the third anniversary of the grant date. Stock options
and RSUs do not earn dividend equivalents. Stock options expire
ten years from the grant date.
Annual stock option and RSU awards for 2009 were granted on
February 8, 2010, and annual awards for 2010 were granted
on January 10, 2011. Interim stock option and RSU awards
are made to new employees during the fiscal year on a fixed
quarterly schedule: February 1, May 1, August 1 and
November 1. The actual grant date is based on when
employment commences and all administrative requirements are
met. The Company does not issue stock options with accelerated
ownership features. In addition, the Company has not re-priced
or re-issued stock options when the stock price has declined to
a level below the grant price.
31
Certificates of
Long-Term Performance
The Certificates of Long-Term Performance Plan (the CLP
Plan), established in 2009, is the successor to the
Certificates of Long-Term Compensation Plan (the CLC
Plan). The CLP Plan, like the predecessor CLC Plan (which
was established in 1947 and originally referred to as the
Certificates of Extra Compensation Plan) reflects the
Companys commitment to the principle of managing the
business for the long-term.
CLPs are cash-based performance units whose vested value is paid
out upon the earlier of: 10 years from the date of grant,
or termination for any reason, including retirement. Dividend
equivalents are paid quarterly on all vested units. One of the
hallmarks of the CLP Plan is that the unit value and dividends
are based on the Companys operating performance and are
not subject to short-term market volatility that is associated
with equity-based incentives.
The CLP
Plan:
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Reinforces for the participants the guiding principles of
Accountability for Long-Term Performance, Pay for Performance,
Competitiveness, and Alignment to Shareholders Interests
over time
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Aligns the participants interests with the long-term
operational growth of the Company
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Provides a measure of overall Company performance that is not
subject to short-term market volatility
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Creates a valuable competitive advantage in recruiting and
retaining key talent
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Unit Valuation. The CLP core unit value equals
the Companys
5-year
average EPS. The Companys
5-year
average EPS is calculated by dividing the
5-year
average reported net income by the
5-year
average basic shares outstanding. The CLP core unit value is
determined annually as of the fiscal year-end and is approved by
the Board of Directors.
Dividend Equivalents. Dividend equivalents are
paid quarterly on vested CLPs on the same date that the cash
dividend is paid on the Common Stock. No dividend equivalents
are paid on unvested CLPs. In alignment with shareholder
dividends, CLP dividend equivalents provide the same yield as
the Common Stock with a one-year lag. The dividend equivalent
amounts are set at the beginning of each year. The total
dividend equivalents for a year equals the core unit value at
the beginning of the year multiplied by the prior-years
dividend yield on the Common Stock. Dividend equivalents are an
important aspect of an executive officers compensation
package and help reinforce the importance of sustaining and
increasing dividends.
Determination of Grants. The number of CLPs
that are granted to a participant as part of his or her annual
compensation review is determined by the individual performance
of that employee during the year. Employees have an opportunity
to earn a grant of 0% to 200% of their target award. Awards are
planned in U.S. dollars and award values are divided by the
defined present value per CLP on the date of grant to determine
the number of CLPs granted. The number of CLPs is rounded to the
nearest 5 CLPs (because the awards vest 20% per year). See
page 43 Section III Performance
Assessment and Compensation Decisions Executive
Compensation Decisions 2011 Award Values for
Individual Pay Components for the defined CLP present
value on the January 10, 2011 grant date.
Payment of Unit Value. CLPs vest 20% per year
over 5 years. The value of a participants vested CLPs
will be paid out at the earlier of: (A) 10 years from
the date of grant; or (B) termination, for any reason,
including retirement.
Certificates of
Long-Term Compensation
CLCs, formerly known as Certificates of Extra Compensation, have
been replaced by CLPs effective with grants awarded in 2010.
CLCs were granted in 2009 and prior years, and those CLCs will
continue to be held by, and paid out to, employees who received
them for the duration of, and in accordance with the
32
terms of, those CLCs. CLCs are cash-based performance units that
executive officers are required to hold for the length of their
career at the Company. Dividend equivalents are paid quarterly
on all CLCs.
Unit Valuation. The CLC unit value is
determined annually as of the fiscal year-end based on a formula
applied to business performance and is approved by the Board of
Directors.
Growth in EPS is the key driver of the value of a CLC. Half of
the CLC unit value formula, Earnings-Power Value per Share,
grows at about the same rate as
5-year
average EPS. The other half of the formula, Net Asset Value per
Share, grows largely due to retained earnings per share, which
is the portion of EPS not distributed to shareholders.
The CLC unit value formula is an average of two components: Net
Asset Value per Share and Earnings-Power Value per Share. Net
Asset Value per Share (also known as book value per share)
represents assets minus liabilities per share of Common Stock.
Earnings-Power Value per Share is the average five-year adjusted
net earnings per share multiplied by 12.5, a fixed price to
earnings multiple that has been consistently applied since the
inception of the program. Net Asset Value per Share and
Earnings-Power Value per Share are adjusted for in-process
research and development.
Payment of Unit Value. The value of a
participants vested CLCs is paid when the participant
leaves the Company based on the CLC unit value at that time. For
CLCs vested in 2005 or later, the vested value will be paid out
in a single lump sum shortly after termination. For CLCs vested
prior to 2005, eligible retiring employees may elect to defer
payment for up to 10 years and then receive payment in a
single lump sum or up to 15 annual installments.
Dividend Equivalents. Dividend equivalents are
paid on each CLC granted, both vested and unvested. The value of
the dividend equivalent is equal to the value of the cash
dividend paid on a share of the Companys Common Stock.
Executive
Perquisites & Other Benefits
The Company-paid employee benefits for the executive officers
are the same as those provided to all other non-union
U.S. employees, with the exception of the Executive Life
Insurance Program, which is provided to employees eligible for
awards under the CLP Plan. The Executive Life Insurance premiums
paid for executive officers are disclosed in the table under
All Other Compensation (Column H) on pages 49
and 50 of this Proxy Statement.
In addition to the benefits offered to all employees, certain
executives are provided additional benefits that are intended
for business purposes. In some cases, these benefits may be used
for personal consumption, which would then be considered part of
an executive officers total compensation and would be
treated as taxable income under the applicable tax laws. In
2010, executive perquisites included: access to the Company
aircraft for personal travel, access to Company cars and drivers
for commutation and other personal transportation, and
reimbursement of home security system monitoring fees.
SECTION III
PERFORMANCE ASSESSMENT AND COMPENSATION DECISIONS
Measuring
Success: Individual Performance Assessment
The Companys formal individual performance assessment
process is designed to:
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Foster a pay for performance culture
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Encourage the achievement of long-term strategic plans and
annual business plans
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Engage, encourage and motivate executives to work toward their
highest level of performance while adhering to the values
embodied in Our Credo
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Accelerate and facilitate the development and deployment of key
talent
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The Chairman/CEOs annual financial and strategic goals are
agreed to with the Committee. Each of the other executive
officers establishes annual financial and strategic goals that
he or she will be held
33
accountable for during the year, in agreement with the
Chairman/CEO. At the end of the performance period, executives
are assessed against these pre-established goals and how they
accomplished them. The Committee uses this process to ensure
goals are in place for each executive officer.
Each executive officers annual financial and strategic
goals are set in consideration of:
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Current market conditions for each of the Companys diverse
business groups
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Expectations for future growth
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Opportunities to increase the breadth of the Companys
business
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Past Company performance
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Long-term strategic plans
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Comparison to competitor composites
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Opportunities to develop people and enhance the talent of the
organization
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For fiscal year 2010, the Committee considered the performance
of the executive officers against the following financial
metrics. The rationale for why each metric was chosen is
provided below.
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Metric
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Rationale
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Sales Growth (operational)
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Important
top line measure of the Companys financial wellness and
market leadership positions
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Critical
financial metric to ensure future cash growth
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Management Net Income (business group leaders only)
Includes a working capital charge and tax allocations.
Excludes certain corporate expenses and special items, and
financing activities
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Keeps
focus on capital-efficient, profitable growth
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Free Cash Flow
Operating cash flow, less capital spending
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Key
indicator of the Companys ability to meet future
obligations and allows for creation of new profitable
investments
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Allows
for the payment of dividends
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Cash Flow Metric (business group leaders only)
Change in Inventory, Accounts Receivable and Property,
Plant & Equipment
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Allows
for generation of cash and capital efficiency
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Earnings Per Share Growth
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Key
indicator of intrinsic value of shareholder investment
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Total Shareholder Return
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Key
indicator of value creation for investors
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The Committee evaluates all of the financial metrics, except
Total Shareholder Return, against business plan performance
targets. Total Shareholder Return is evaluated on a three-year
and five-year basis against: the S&P 500 Index, the
S&P Health Care Equipment Index, the S&P
Pharmaceutical Index, and the Dow Jones Industrial Average. The
performance target range is set for each financial goal based on
a roll up of business plans at each operating company, business
group, and at the overall Company level.
The Committee also compares Company performance to the
performance of competitor companies. The Company uses a
portfolio of companies for each of the three business segments.
For 2010, the
34
Companys Competitor Composite consisted of the following
companies broken down by business segment:
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Pharmaceuticals
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Medical Devices and Diagnostics
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Consumer
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Abbott Laboratories
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Abbott Laboratories
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Beiersdorf AG
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Amgen Inc.
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(Vascular & Diagnostics)
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Colgate-Palmolive Company
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AstraZeneca PLC
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Allergan, Inc.
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GlaxoSmithKline plc (OTC)
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Bristol-Myers Squibb Company
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Bayer AG (Diagnostics)
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Kimberly-Clark Corporation
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Eli Lilly and Company
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Beckman Coulter, Inc.*
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LOréal
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GlaxoSmithKline plc
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Boston Scientific Corporation
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Novartis AG (OTC)
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Merck & Co., Inc.
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C. R. Bard, Inc.
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The Procter & Gamble Company
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Novartis AG
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Covidien Ltd.
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Merck & Co., Inc. (OTC)
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Pfizer Inc.
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Edwards Lifesciences Corporation
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Pfizer Inc. (OTC)
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Roche Group
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Medtronic, Inc.
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Sanofi-Aventis
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The Cooper Companies, Inc.
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(CooperVision)
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Roche Group (Diagnostics)
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Smith & Nephew plc
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St. Jude Medical, Inc.
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Stryker Corporation
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Synthes, Inc.
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Zimmer Holdings Inc.
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OTC stands for
Over-the-Counter
* In February 2011, Beckman Coulter entered into an
agreement to be acquired by Danaher Corporation.
These companies are selected based on the following criteria and
financial metrics:
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Strength and consistency of their financial outlook
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Sales growth
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Net income growth and Net income margin
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Earnings per share growth
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Total shareholder return
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Global presence
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Product relevance ( i.e., must be a direct competitor to
one of the Companys business lines)
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The portfolio of companies is evaluated on an ongoing basis and
is updated as necessary.
As each business group is different, strategic objectives are
set based on each executive officers unique growth
strategy for his or her business unit or function and take into
consideration the challenges that may lay ahead for each
business.
The strategic objectives set by each executive officer are
aligned with meeting these long-term business imperatives. Each
executive officers strategic objectives fell into one or
several of the following categories. The rationale for why each
objective was chosen is provided below.
35
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Strategic Objective
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Rationale
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Leadership
Build the leadership pipeline by enacting effective
assessment and development measures that allow the Company to
cultivate its leadership and identify high-potential
executives
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Identifying,
developing, and retaining key talent is critical to the success
of the Companys growth strategy
Building
a diverse workforce is part of the Companys culture and
strengthens ties to its communities and its customers
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Long-Term Growth Launch innovative new products
Build a robust pipeline of future new products
Expand the Companys global presence in key markets
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Innovative
new products help maintain and grow sales
A
strong pipeline of new products is necessary for the Company to
meet its growth plans
Expanding
the Companys geographic presence is essential for short-
and long-term growth
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Reputation
Ensure that the Company fulfills its responsibilities to its
customers, employees, communities, and shareholders, as set
forth in Our Credo
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A
measure of how well the Company is meeting its social
responsibilities to its communities as outlined in the Credo
Key
to maintaining strong brands
Building
relationships with the investment community and media is
important in helping investors, customers, and other
stakeholders understand the Companys business model
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Healthcare Environment
Enhance the Companys position as an active leader in
health care and healthcare issues
|
|
|
The
Companys role in shaping the future of the healthcare
industry and the quality of care for its patients and customers
is important
The
Companys role as an educator, and its ability to improve
access to care and healthcare regulations, are critical to the
success of the Companys business and to meeting the tenets
set forth in Our Credo
|
|
|
|
|
The Committee receives an assessment from the Chairman/CEO for
the executive officers and reviews these assessments, relying on
its own judgment and knowledge of the Company to evaluate
performance for each of the executive officers. During the
performance review meetings, the Committees key
considerations include:
How the executive performed against goals
Whether decisions and actions were consistent
with Our Credo values
Whether the long-term impact of decisions to
the Company was considered
Executive
Compensation Decisions
2010
Compensation for 2009 Performance
Some of the compensation figures included in the tables in the
Executive and Director Compensation section of this
Proxy Statement were paid to executives in 2010 for performance
in 2009. The decisions regarding these awards and payments were
discussed in detail in the Companys 2010 Proxy Statement
dated March 17, 2010. For a full understanding of these
decisions, please refer to the sections of the 2010 Proxy
Statement entitled Compensation Discussion and
Analysis Executive Compensation
Decisions 2010 Compensation for 2009
Performance.
36
2011
Compensation for 2010 Performance
The following section summarizes the assessment of 2010
individual performance against the achievement of key strategic
and financial objectives. These assessments were used by the
Committee to determine compensation actions for each of the
executive officers. The Committee determined base salary
increases, annual performance bonuses and long-term incentive
awards based on total rewards, as well as on a
component-by-component
basis. Target pay position relative to the Executive Peer Group
was also taken into account. The performance of each executive
officer was evaluated, and the ultimate compensation decisions
were determined, based on the judgment and experience of the
independent members of the Board (in the case of the
Chairman/CEO) and the Committee (in the case of the other
executive officers). While performance against objectives was a
significant factor, the achievement of particular objectives did
not determine compensation award levels in a formulaic manner.
All of the executive officers were evaluated against a set of
financial and strategic objectives. Their individual performance
evaluations were based on overall business performance as well
as the performance of the business group or function that they
lead.
For 2010, the Committee evaluated the performance of the Company
and its executive officers with respect to:
|
|
|
|
|
Financial metrics, including Sales, Earnings, Cash Flow, and
Total Shareholder Return
|
|
|
|
Leadership measures, including Retention of Key Talent,
Leadership Pipeline Strength, and Employee Engagement
|
|
|
|
Long-Term Growth measures, including Innovative Products, Robust
Pipelines, and Global Presence
|
In addition to these performance indicators, the Committee also
reviewed the Companys progress with respect to Reputation
and the Healthcare Environment. The table below details the
financial objectives and results for the Company against which
all of the executive officers were evaluated.
|
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|
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|
Financial Objective
|
|
|
Goal
|
|
|
2010 Results
|
|
|
S&P 500
|
|
|
S&P HC Equip
|
|
|
S&P Pharm
|
|
|
DJIA
|
2010 Sales Growth (operational)
|
|
|
1.2% - 2.8%
|
|
|
(1.3%)
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
2010 Free Cash Flow
|
|
|
$12.7 - $13.7 billion
|
|
|
$14.0 billion
|
|
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|
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|
2010 Earnings Per Share
|
|
|
$4.71 - $4.81
|
|
|
$4.76(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Total Growth
|
|
|
1.8% - 3.9%
|
|
|
2.8%
|
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|
Total Shareholder Return
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
3 Yr Compounded Annual Growth Rate
|
|
|
Exceed index
|
|
|
0.7%
|
|
|
|
(2.9
|
%)
|
|
|
|
(3.2
|
%)
|
|
|
|
(0.7
|
%)
|
|
|
(1.6%)
|
5 Yr Compounded Annual Growth Rate
|
|
|
growth
|
|
|
3.5%
|
|
|
|
2.3
|
%
|
|
|
|
(0.2
|
%)
|
|
|
|
3.5
|
%
|
|
|
4.3%
|
|
|
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|
|
|
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|
(1) |
|
Excluding special items. A
reconciliation can be found on the Investor Relations section of
the Companys website at
www.investor.jnj.com/sales-earnings.cfm under
Reconciliation of Non-GAAP Financial Measures Q4
2010.
|
In 2010, the Companys performance was mixed. In some areas
the Company met or exceeded objectives, while in other areas it
fell short of its goals. Among the successes for the year were:
|
|
|
|
|
Earnings per share (excluding special items) met objectives
|
|
|
|
Free Cash Flow exceeded objectives
|
|
|
|
Total Shareholder Return generally met or exceeded peer indices
over the past 3 and 5 years
|
|
|
|
Senior leadership succession planning advanced significantly
|
|
|
|
The overall product pipeline strengthened, especially in the
Pharmaceuticals and Medical Devices & Diagnostics
businesses
|
|
|
|
Emerging markets growth continued to be strong
|
37
Disappointments for the year included:
|
|
|
|
|
Significant recalls during 2010, primarily at McNeil Consumer
Healthcare, negatively impacted both the Companys
reputation and revenue
|
|
|
|
Operational sales declined
year-on-year
and fell below target
|
In order to recognize the mix of short-term performance
successes and disappointments, as well as the Companys
strengthened positioning for the long-term, the Committee
lowered the annual performance bonus amounts for 2010 and
provided competitive long-term incentives tied to the future
growth of the Company. The Committee:
|
|
|
|
|
Significantly reduced the Chairman/CEOs bonus
year-on-year
by $1,624,000 (or 45%);
|
|
|
|
Lowered the planned annual performance bonuses for all executive
officers, management, and other bonus-eligible employees
worldwide by 10%; and
|
|
|
|
Provided competitive long-term incentives to motivate long-term
performance.
|
William C.
Weldon Chairman/CEO
Overview
The Board believes that Mr. Weldon generally met
expectations during 2010, a year with many successes and very
visible challenges. As referenced in the table above, in 2010
the Company delivered solid adjusted earnings per share, free
cash flow and long-term total shareholder return, while
operational sales declined and fell below the goals for the
year. Mr. Weldon guided the Company through the last year
while the Companys long-standing reputation was challenged
and revenue was impacted by a series of operational, quality and
compliance issues, most notably at McNeil Consumer Healthcare.
Mr. Weldon was instrumental in the Companys response
to these issues, including the implementation of a comprehensive
remediation plan at McNeil and a new operating model for supply
chain, quality, and compliance spanning the enterprise.
In line with the Companys long-standing approach to
succession planning, Mr. Weldon also made significant
organizational realignments at the Companys executive
leadership level to ensure the Company is well-positioned for
sustainable growth into the future and continues to develop its
leadership talent.
Under Mr. Weldon, the Company also saw a number of
successes across the businesses in 2010, including the delivery
of innovations in health care and progress in the Companys
robust pipelines. Many of the Companys businesses
performed well in light of the challenging macroeconomic
environment. The Board believes that Mr. Weldon provided
strong leadership during a very demanding year and has worked to
resolve multiple challenging issues and position the Company for
future growth. The Boards decisions on
Mr. Weldons compensation for 2010 reflect the
Companys mixed performance, with short-term successes and
disappointments, as well as continued strong positioning of the
Company for long-term growth.
Strategic
Results
|
|
|
|
|
The Companys reputation was challenged and revenue
impacted during 2010 primarily due to a series of product
recalls at McNeil Consumer Healthcare. Mr. Weldons
leadership and engagement with employees, legislators,
regulators, investors and the news media enabled the Company to
deal with the issues.
|
|
|
|
Under Mr. Weldons leadership, the Company continued
to strengthen the overall product pipeline, especially in the
Pharmaceutical and Medical Devices & Diagnostics
businesses. The Consumer pipeline results were mixed despite
some successful new product launches.
|
38
|
|
|
|
|
Manufacturing issues in 2010 triggered the need to make
additional investments in the manufacturing operations. These
additional investments began in 2010 and will continue in 2011.
|
|
|
|
The Company enhanced its global presence by continuing to
generate strong growth in emerging markets including Brazil,
Russia, India, China and Mexico.
|
|
|
|
Mr. Weldon played an effective role in shaping health care
policy around the world, especially in the U.S. and Japan.
Mr. Weldons personal involvement with key leaders and
organizations has ensured the interests of the Company are well
represented.
|
|
|
|
Under Mr. Weldons leadership, the Company continued
its long-standing commitment to philanthropic activities and was
recognized for social responsibility, inclusiveness, and
environmental sustainability.
|
|
|
|
Mr. Weldon continued to build a pipeline of future leaders.
The Company retained key leaders, took concrete steps on senior
leadership succession planning, and maintained leadership
development programs that will produce long-term results for the
Company.
|
Compensation
|
|
|
|
|
Year-over-year,
Mr. Weldons annual performance bonus was reduced by
$1,624,000 (or 45%) from 2009, demonstrating alignment with the
Companys overall performance in 2010. The bonus was equal
to 66% of his target, which also reflects the Committees
10% decrease in performance bonuses for all executive officers,
management, and other bonus-eligible employees.
|
|
|
|
Mr. Weldon was awarded an option/RSU award equal to 100% of
his target and a CLP grant equal to 100% of his target.
|
|
|
|
Mr. Weldons total direct compensation is between the
50th and the 75th percentile of the Executive Peer Group. Please
see the tables on pages 43 and 44 of this Proxy Statement
for the award values for each pay component.
|
|
|
|
In the role of Chairman/CEO, Mr. Weldons compensation
is higher than that of the Companys other executive
officers due to the level of responsibility of his position. All
other executive officers report to Mr. Weldon and are
appropriately compensated based on their roles in the
organization and against the Executive Peer Group.
|
|
|
|
For Mr. Weldon, the Board approved a 3.0% merit increase,
in line with the overall Company 2011 U.S. merit increase
budget, effective February 21, 2011.
|
Dominic J.
Caruso Vice President, Finance; Chief Financial
Officer
Mr. Caruso is the Chief Financial Officer and has
additional responsibility for the Information Technology and
Procurement functions.
Strategic
Results
|
|
|
|
|
With Mr. Carusos disciplined financial focus, the
Company continued to deliver adjusted earnings growth, despite
the unexpected impact of recalls and relatively flat sales for
the year. The Company also maintained a strong cash flow and
balance sheet to provide financial strength for investments in
growth. In 2010, the Company executed a $1.1 billion debt
offering for the lowest interest rate for long-term corporate
debt in history.
|
|
|
|
Under Mr. Carusos direction, the Procurement
function: minimized the impact from supply chain interruptions;
enabled revenue enhancing improvements through supplier
innovation; generated significant savings through
best-in-class
procurement practices; and utilized a growing network of diverse
suppliers to reach $1 billion in diverse spend.
|
39
|
|
|
|
|
Mr. Caruso continued to strengthen the Companys
critical position bench strength and exceeded targets for
incumbent retention in these areas.
|
|
|
|
Mr. Caruso also worked with the business to help establish
the proper accounting treatment for U.S. Health Care
Reform, and provide clear communication to the investment
community and legislators about the impact to the Company and
the general healthcare industry. He also advocated with key
stakeholders for an international tax system that would maintain
and enhance the competitiveness of U.S. multinationals in
the global marketplace.
|
|
|
|
Mr. Caruso continued to be recognized by the investment
community, enhancing the Companys reputation.
|
|
|
|
Under Mr. Carusos direction, the Information
Technology function continued to reduce the Companys IT
risk exposure and provided support for new enterprise business
processes, while realizing cost efficiencies.
|
Compensation
|
|
|
|
|
Mr. Caruso was awarded an annual performance bonus equal to
96% of his target (after the broad-based 10% reduction) based on
the results of his function and overall business performance. He
also received an option/RSU award equal to 100% of his target
and a CLP grant equal to 100% of his target.
|
|
|
|
Mr. Carusos total compensation is between the
50th percentile and 75th percentile of the Executive
Peer Group. Please see the tables on pages 43 and 44 of
this Proxy Statement for the award values for each pay component.
|
|
|
|
For Mr. Caruso, the Committee approved a 3.0% merit
increase, in line with the U.S. merit increase budget, effective
February 21, 2011.
|
Russell C.
Deyo Vice President, General Counsel
Mr. Deyo currently serves as Vice President, General
Counsel with additional responsibility for the offices of Health
Care Compliance & Privacy, Security and Aviation.
Mr. Deyo was also responsible for the worldwide Human
Resources function from November 2009 to September 2010 and
Government Affairs and Policy through December 2010.
Strategic
Results
|
|
|
|
|
The Law Department under Mr. Deyos leadership, won or
made substantial progress on, significant litigation matters and
government investigations, including resolving patent
litigations resulting in substantial payments to the Company and
significant net projected savings.
|
|
|
|
The Law Department provided effective legal guidance on complex
acquisitions/licensing arrangements, including the acquisition
of Crucell N.V., and on complex regulatory matters.
|
|
|
|
The Law Department effectively extended Johnson &
Johnsons intellectual property portfolio. The worldwide
patent portfolio exceeds 52,000 patents, and over 8,000
trademark applications were filed in 2010. The Department played
a leadership role, on a global basis, in shaping policies
relating to intellectual property protection, civil justice
reform and corporate governance.
|
|
|
|
Under Mr. Deyos direction, the Office of Healthcare
Compliance & Privacy developed robust global training
programs relating to Foreign Corrupt Practices Act issues. The
U.S. Department of Health & Human Services
(HHS) approved, without noting any performance gaps,
implementation of the Corporate Integrity Agreement between
Pharmaceuticals North America and HHS.
|
|
|
|
The Government Affairs and Policy Group helped shape healthcare
reform in the U.S., China, Japan and India, and improved
reimbursement for our medicines in China and Japan.
|
40
|
|
|
|
|
The Human Resources group developed a global five-year strategic
plan, completed a successful roll out of the Global Compensation
Framework, accelerated the year-end performance and compensation
review cycle, and re-staged the global HR payroll and data
management system to ensure its success.
|
|
|
|
Mr. Deyo led the integration of the global Health Care
Compliance & Privacy organizations into a single structure,
and restructured the Law Department in Latin America and Asia
Pacific to better align with business needs.
|
Compensation
|
|
|
|
|
Mr. Deyo was awarded an annual performance bonus equal to
99% of his target (after the broad-based 10% reduction). He also
received an option/RSU award equal to 100% of his target and a
CLP grant equal to 100% of target.
|
|
|
|
Mr. Deyos total compensation is above the
75th percentile of the Executive Peer Group. Please see the
tables on pages 43 and 44 of this Proxy Statement for the
award values of each pay component.
|
|
|
|
For Mr. Deyo, the Committee approved a 3.0% merit increase,
in line with the U.S. merit increase budget, effective
February 21, 2011.
|
Colleen A.
Goggins Worldwide Chairman, Consumer
Group
Financial
Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
Financial Objective Consumer
|
|
|
Goal
|
|
|
Results
|
|
|
Sales Growth (operational)
|
|
|
1.4% - 1.7%
|
|
|
(8.7%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Net Income Growth
|
|
|
9.3% - 13.8%
|
|
|
(13.5%)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Metric ($ in millions)
|
|
|
($751) - ($830)
|
|
|
($570)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excluding special items.
|
Strategic
Results
|
|
|
|
|
The Consumer Groups 2010 overall performance saw a
significant decline due to numerous product recalls at McNeil
Consumer Healthcare, the general economic slowdown, and greater
consumer sensitivity to spending. Total sales declined
approximately 9% operationally in 2010. The product recalls at
McNeil triggered the need to make additional investments in the
manufacturing operations in 2010 that will continue in 2011.
|
|
|
|
New product launch objectives were met and the value of the new
product pipeline increased by double digits, particularly on the
key growth franchises Beauty, OTC, and
Listerine as well as in the emerging markets.
|
|
|
|
In a challenging year, the Consumer Group maintained leadership
pipelines, diversity and workforce representation. A
comprehensive review was initiated to address organization
complexity and clarify decision-making in the commercial units.
|
Compensation
|
|
|
|
|
After a distinguished career with the Company, spanning almost
30 years, Ms. Goggins retired on March 1, 2011.
|
|
|
|
The 2010 compensation for Ms. Goggins reflects her
retirement. Due to her retirement, she did not receive a salary
increase or long-term incentive grants in 2011.
|
|
|
|
Ms. Goggins was awarded an annual performance bonus for
2010 equal to 48% of her target (after the broad-based 10%
reduction).
|
41
|
|
|
|
|
Ms. Gogginss total compensation is below the
50th percentile of the Executive Peer Group. Please see the
tables on pages 43 and 44 of this Proxy Statement for the
award values for each pay component.
|
Sherilyn S.
McCoy Vice Chairman, Executive
Committee
For 2010, Ms. McCoy served as Worldwide Chairman,
Pharmaceuticals Group. In December 2010, as a part of the
expansion of the Office of the Chairman, Ms. McCoy was
named as one of two Vice Chairmen of the Executive Committee,
effective January 3, 2011. Ms. McCoys expanded
responsibilities include the Pharmaceuticals Group, the Consumer
Group, the Corporate Office of Science & Technology,
and Corporate Affairs.
Financial
Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
Financial Objective Pharmaceuticals
|
|
|
Goal
|
|
|
Results
|
Sales Growth (operational)
|
|
|
(0.5%) - (0.6%)
|
|
|
(0.9%)
|
|
|
|
|
|
|
|
Management Net Income Growth
|
|
|
1.3% - 5.4%
|
|
|
3.7%(1)
|
|
|
|
|
|
|
|
Cash Flow Metric ($ in millions)
|
|
|
($884) - ($977)
|
|
|
($333)
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excluding special items.
|
Strategic
Results
|
|
|
|
|
In 2010, the Pharmaceuticals Group, under Ms. McCoys
leadership, made significant progress executing against goals,
with a focus on revitalizing the portfolio, advancing the
product pipeline, investing in key products, and developing
people and organizational capabilities.
|
|
|
|
In aggregate, the Pharmaceuticals Group met its financial
objectives, taking into consideration the advent of
U.S. healthcare reform in March and managing the impact of
austerity measures by governments in many markets around the
world. Priority products, including four launched in 2009,
generated new revenue fully sufficient to offset the significant
reduction in revenue due to loss of patent exclusivity.
|
|
|
|
The Pharmaceuticals Group advanced five compounds into
registration, including: a
first-in-class
treatment for prostate cancer patients who have failed
chemotherapy; an anticoagulant for the prevention and treatment
of thrombosis that is more predictable than the standard of
care; a one-pill,
once-a-day
therapy for HIV; and a first-in-class compound for the treatment
of Hepatitis C. The Group also advanced a diabetes treatment
compound into Phase 3 clinical testing.
|
|
|
|
Positioning the Group for expansion into new categories,
Ms. McCoy led the acquisition of Crucell (completed in
2011), which will provide entry into vaccines, a complementary
segment important in both developing and developed markets.
|
|
|
|
Ms. McCoy strengthened leadership capabilities in critical
geographies, including emerging markets, to position these
businesses for stronger, sustainable future growth.
|
|
|
|
Under Ms. McCoys leadership, the organization
enhanced the R&D and commercial business models in major
markets, resulting in strengthened therapeutic area platforms
and more customer focused, leaner commercial structures, laying
the foundation for the organizational alignment and agility
necessary to drive critical business priorities going forward.
|
Compensation
|
|
|
|
|
Ms. McCoy was awarded an annual performance bonus equal to
115% of her target (after the broad-based 10% reduction). She
also received an option/RSU award equal to 100% of her target
and a CLP grant equal to 122% of her target.
|
42
|
|
|
|
|
Ms. McCoys total compensation is between the
50th and the 75th percentile of the Executive Peer
Group. Please see the tables below for the award values of each
pay component.
|
|
|
|
For Ms. McCoy, the Committee approved a 14.5% salary
increase, effective January 3, 2011, which includes both a
3.6% merit increase, in line with the U.S. merit increase
budget, and a 10.9% promotional increase for her new role as
Vice Chairman of the Executive Committee.
|
2011 Award
Values for Individual Pay Components
The following table shows the performance bonus and long-term
incentive grants approved in January 2011 for performance in
2010 for each Named Executive Officer. This table does not
include CLC and CLP dividend equivalent payments, change in
pension value, non-qualified deferred compensation earnings or
the items categorized under All Other Compensation
in Column H of the Summary Compensation Table on page 46 of
this Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Approval/
|
|
|
|
Annual
|
|
Options
|
|
Options
|
|
RSUs
|
|
RSUs
|
|
CLPs
|
|
CLPs
|
|
Planned
|
|
|
Award
|
|
Salary
|
|
Performance
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Compensation
|
Name
|
|
Date
|
|
($)(1)
|
|
Bonus ($)
|
|
(#)
|
|
($)(2)
|
|
(#)
|
|
($)(3)
|
|
(#)
|
|
($)(4)
|
|
($)
|
|
W. C. Weldon
|
|
1/10/2011
|
|
$
|
1,851,154
|
|
|
$
|
1,976,000
|
|
|
|
560,691
|
|
|
$
|
4,189,483
|
|
|
|
46,724
|
|
|
$
|
2,608,694
|
|
|
|
1,357,855
|
|
|
$
|
6,830,011
|
|
|
$
|
17,455,342
|
|
D. J. Caruso
|
|
1/10/2011
|
|
|
749,854
|
|
|
|
900,000
|
|
|
|
145,447
|
|
|
|
1,086,780
|
|
|
|
12,121
|
|
|
|
676,740
|
|
|
|
359,840
|
|
|
|
1,809,995
|
|
|
|
5,223,369
|
|
R. C. Deyo
|
|
1/10/2011
|
|
|
867,377
|
|
|
|
1,080,000
|
|
|
|
168,444
|
|
|
|
1,258,614
|
|
|
|
14,037
|
|
|
|
783,714
|
|
|
|
359,840
|
|
|
|
1,809,995
|
|
|
|
5,799,700
|
|
C. A. Goggins
|
|
1/10/2011
|
|
|
823,031
|
|
|
|
500,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,323,031
|
|
S. S. McCoy
|
|
1/10/2011
|
|
|
780,377
|
|
|
|
1,125,000
|
|
|
|
151,621
|
|
|
|
1,132,912
|
|
|
|
12,635
|
|
|
|
705,437
|
|
|
|
437,375
|
|
|
|
2,199,996
|
|
|
|
5,943,722
|
|
|
|
|
(1)
|
|
The amounts reported represent base
salaries paid to each of the Named Executive Officers for the
2010 fiscal year.
|
|
(2)
|
|
Option exercise price was $62.20.
The grant date fair value as calculated under U.S. GAAP was
$7.472 per option share. The Black-Scholes option valuation
model was used with the following assumptions: volatility of
18.27% based on a blended rate of four-year daily historical
average volatility rate and a five-week average implied
volatility rate based on
at-the-money
traded Johnson & Johnson stock options with a life of
two years; dividend yield of 3.60%; risk-free interest rate of
2.42% based on a U.S. Treasury rate of six years; and a six-year
option life.
|
|
(3)
|
|
The price used to determine the
number of RSUs granted was $62.20, which was the average of the
high and low prices of the Companys Common Stock on the
NYSE on the grant date. The grant date fair value for the RSU
awards as calculated under U.S. GAAP was $55.832 per RSU based
on the average of the high and low prices of the Companys
Common Stock on the NYSE on the grant date and discounted by an
expected dividend yield of 3.60% due to the lack of dividends
paid on the RSUs prior to vesting.
|
|
(4)
|
|
The defined CLP present value for
purposes of determining the number of CLPs granted is the sum of
the core CLP unit value on the date of grant and the estimated
present value of the dividend equivalents to be paid over the
10-year CLP
term. For the January 10, 2011 grant, the defined present
value per CLP was $5.03. This consisted of the core CLP unit
value of $4.26 and the estimated present value of the dividend
equivalents of $0.77. The estimated present value of the
dividend equivalents was calculated assuming a dividend
equivalent amount of $0.1444 per unit per year, and a 4.27%
discount rate. The calculation took into account that dividend
equivalents are only paid on vested CLPs.
|
The following table shows the total compensation for 2009 and
2010 and the
year-on-year
change in total compensation for each Named Executive Officer.
The total compensation amounts for 2009 include the base
salaries paid to each Named Executive Officer for the 2009
fiscal year. Note, in the March 17, 2010 Proxy Statement,
the total compensation for 2009 included the new annual base
salary rate for 2010 rather than the base salaries paid for the
2009 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Planned
|
|
Change in Total
|
|
Change in Total
|
|
|
Compensation ($)
|
|
Planned
|
|
Planned
|
Name
|
|
2009
|
|
2010
|
|
Compensation ($)
|
|
Compensation (%)
|
|
W. C. Weldon
|
|
$
|
19,789,526
|
|
|
$
|
17,455,342
|
|
|
|
($2,334,184
|
)
|
|
|
(12
|
%)
|
D. J. Caruso
|
|
|
5,055,713
|
|
|
|
5,223,369
|
|
|
|
167,656
|
|
|
|
3
|
%
|
R. C. Deyo
|
|
|
5,176,608
|
|
|
|
5,799,700
|
|
|
|
623,092
|
|
|
|
12
|
%
|
C. A. Goggins
|
|
|
5,314,391
|
|
|
|
1,323,031
|
|
|
|
(3,991,360
|
)
|
|
|
(75
|
%)
|
S. S. McCoy
|
|
|
5,986,298
|
|
|
|
5,943,722
|
|
|
|
(42,576
|
)
|
|
|
(1
|
%)
|
43
The following table shows the increase in the annual base salary
rate approved on January 10, 2011 for each Named Executive
Officer. The annual base salary rates are all effective as of
February 21, 2011, except for Ms. McCoy whose increase
is effective as of January 3, 2011 (the effective date of
her promotion).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Old Annual
|
|
|
|
New Annual
|
|
|
Base Salary
|
|
Salary
|
|
Base Salary
|
Name
|
|
Rate
|
|
Increase
|
|
Rate
|
|
W. C. Weldon
|
|
$
|
1,860,000
|
|
|
|
3.0
|
%
|
|
$
|
1,915,800
|
|
D. J. Caruso
|
|
|
753,900
|
|
|
|
3.0
|
%
|
|
|
776,500
|
|
R. C. Deyo
|
|
|
873,100
|
|
|
|
3.0
|
%
|
|
|
899,300
|
|
C. A. Goggins
|
|
|
827,200
|
|
|
|
0.0
|
%
|
|
|
827,200
|
|
S. S. McCoy
|
|
|
785,900
|
|
|
|
14.5
|
%(1)
|
|
|
900,000
|
|
|
|
|
(1)
|
|
Includes a 3.6% merit increase and
a 10.9% promotional increase.
|
SECTION IV
ADDITIONAL INFORMATION CONCERNING EXECUTIVE
COMPENSATION
Use of Tally
Sheets
The Committee reviews compensation tally sheets, prepared by
management and reviewed by the Committees compensation
consultant, which present comprehensive data on the total
compensation and benefits package for each of the Companys
executive officers. These tally sheets include all obligations
for compensation, as well as analyses for hypothetical
terminations and retirements to consider the Companys
obligations under such circumstances. The Committee does not use
the tally sheets to determine the various elements of
compensation or the actual amounts of compensation to be
approved, but instead uses the tally sheets to evaluate the
Companys program design and its obligations under the
plans.
Employment
Arrangements and Agreements
None of the Named Executive Officers are covered by any special
arrangements or agreements regarding benefits or payments upon
termination. The Company offers broad-based, non-discriminatory
separation benefits to full-time U.S. employees who are
involuntarily terminated, based on level. This coverage provides
employees, including the Named Executive Officers, with two
weeks pay for each year of service, with a minimum of twelve
weeks pay.
Change-in-Control
Arrangements and Agreements
The Company does not have any
change-in-control
agreements or arrangements in place for any of its executive
officers. In addition, there are no
change-in-control
provisions in any of the Companys compensation plans or
instruments.
Stock Ownership
Guidelines for Directors and Executive Officers
The Companys stock ownership guidelines for Directors and
executive officers are intended to further align their interests
with the interests of the Companys shareholders. Under
these guidelines, the Chairman/CEO is required to directly or
indirectly own Company Common Stock equal in value to five times
his or her annual base salary, and the other executive officers
are required to own stock equal to three times his or her annual
base salary. Non-Employee Directors are required to own stock
equal to three times his or her annual cash retainer, including
all stock initially granted upon joining the Board. The Board
may designate other executive officers to be subject to specific
stock ownership thresholds. Stock ownership for the purpose of
these guidelines does not include shares underlying vested or
unvested stock options or unvested RSUs. Individuals subject to
these guidelines are required to achieve the relevant ownership
threshold within five years after first becoming subject to the
guidelines. If an individual becomes subject to a higher
ownership threshold due to promotion or increase in base salary,
that individual will be expected to meet the higher ownership
threshold within three years. In the event there is a
44
significant decline in the Companys stock price that
causes a Directors or executive officers holdings to
fall below the applicable threshold, the Director or executive
officer will not be required to purchase additional shares to
meet the threshold, but such Director or executive officer shall
not sell or transfer any shares until the threshold has again
been achieved. The Nominating & Corporate Governance
Committee of the Board reviews compliance with these guidelines
on an annual basis. Company policy prohibits Directors and
executive officers from transacting in derivative instruments
linked to the performance of the Companys securities.
Executive
Compensation Recoupment Policy
Under the Companys compensation recoupment policy, in the
event of a material restatement of the Companys financial
results, the Board will review the facts and circumstances that
led to the requirement for the restatement and will take actions
it deems necessary and appropriate. The Board will consider
whether any executive officer received compensation based on the
original financial statements because it appeared he or she
achieved financial performance targets that in fact were not
achieved based on the restatement. The Board will also consider
the accountability of any executive officer whose acts or
omissions were responsible in whole or in part for the events
that led to the restatement and whether such actions or
omissions constituted misconduct. The Board can elect to take
the following actions against a particular executive officer,
depending on all facts and circumstances as determined during
its review: the recoupment of all or part of any bonus or other
compensation paid to the executive officer that was based upon
achievement of financial results that were subsequently
restated; disciplinary actions, up to and including termination;
and/or the
pursuit of other available remedies.
Tax Impact on
Compensation
The Committee has reviewed the Companys compensation plans
with regard to the deduction limitation under the Omnibus Budget
Reconciliation Act of 1993 (the Act) and the final
regulations interpreting the Act that have been adopted by the
U.S. Internal Revenue Service (the IRS) and the
U.S. Department of the Treasury. Based on this review, the
Committee determined that the stock option grants under the
Johnson & Johnson 2005 Long-Term Incentive Plan (the
LTI Plan), as previously approved by shareholders,
meet the requirements for deductibility under the Act. RSU
grants under this same plan do not meet the requirements for
deductibility under the Act.
In order to permit the future deductibility of executive bonus
awards paid in cash and stock-based incentives for certain
executive officers of the Company, the Committee and the Board
of Directors adopted the EIP that was approved by shareholders.
As a result, all executive bonus awards qualify as
performance-based and are not subject to the tax deductibility
limitation of Section 162(m) of the IRC. In addition, the
Committee approved the Executive Income Deferral Plan (the
EIDP) that allows an individual executive officer to
elect to defer a portion of base salary, cash and stock bonus
awards on an annual basis. Participation in the EIDP is limited
to executive officers and is voluntary. Accordingly, any amounts
that would otherwise result in non-tax deductible compensation
may be deferred under the EIDP.
As a result of the implementation of the EIP, and permitting
voluntary deferrals under the EIDP, the Company strives to
maximize the tax deduction available under Section 162(m)
of the IRC. However, in some cases, the Committee may elect to
exceed the tax-deductible limits. This may be necessary for the
Company to attract and retain global business leaders who can
drive financial and strategic growth objectives that maximize
long-term shareholder value.
45
EXECUTIVE AND
DIRECTOR COMPENSATION
SUMMARY
COMPENSATION TABLE
The following table provides information concerning the
compensation of the Companys Chief Executive Officer,
Chief Financial Officer and the three other most highly
compensated executive officers for fiscal 2010 and, for those
executive officers who were named in the 2010 and 2009 Proxy
Statements, for fiscal 2009 and 2008. For a complete
understanding of the table, please read the narrative
disclosures that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F
|
|
Non-Qualified
|
|
|
|
|
A
|
|
B
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
H
|
|
|
Name and
|
|
Fiscal
|
|
C
|
|
D
|
|
E
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
I
|
Principal Position
|
|
Year
|
|
Salary ($)
|
|
Stock Awards ($)
|
|
Option Awards ($)
|
|
Compensation ($)
|
|
Earnings ($)
|
|
Compensation ($)
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. Weldon
|
|
|
2010
|
|
|
$
|
1,851,154
|
|
|
$
|
2,773,851
|
|
|
$
|
4,713,177
|
|
|
$
|
12,043,200
|
|
|
$
|
7,084,673
|
|
|
$
|
254,436
|
|
|
$
|
28,720,491
|
|
Chairman/CEO
|
|
|
2009
|
|
|
|
1,802,500
|
|
|
|
2,762,532
|
|
|
|
5,238,069
|
|
|
|
12,831,146
|
|
|
|
7,983,010
|
|
|
|
196,587
|
|
|
|
30,813,844
|
|
|
|
|
2008
|
|
|
|
1,792,019
|
|
|
|
2,452,129
|
|
|
|
3,979,360
|
|
|
|
12,598,260
|
|
|
|
8,001,976
|
|
|
|
303,688
|
|
|
|
29,127,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominic J. Caruso
|
|
|
2010
|
|
|
|
749,854
|
|
|
|
566,102
|
|
|
|
961,873
|
|
|
|
2,550,400
|
|
|
|
732,237
|
|
|
|
71,819
|
|
|
|
5,632,285
|
|
VP, Finance; CFO
|
|
|
2009
|
|
|
|
723,739
|
|
|
|
486,847
|
|
|
|
923,105
|
|
|
|
2,441,300
|
|
|
|
601,651
|
|
|
|
43,708
|
|
|
|
5,220,350
|
|
|
|
|
2008
|
|
|
|
701,442
|
|
|
|
389,612
|
|
|
|
632,234
|
|
|
|
1,999,500
|
|
|
|
452,397
|
|
|
|
43,995
|
|
|
|
4,219,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell C. Deyo
|
|
|
2010
|
|
|
|
867,377
|
|
|
|
622,707
|
|
|
|
1,058,060
|
|
|
|
3,831,820
|
|
|
|
2,359,313
|
|
|
|
112,688
|
|
|
|
8,851,965
|
|
VP, General Counsel
|
|
|
2009
|
|
|
|
831,838
|
|
|
|
611,372
|
|
|
|
1,159,245
|
|
|
|
3,608,760
|
|
|
|
2,374,644
|
|
|
|
45,535
|
|
|
|
8,631,394
|
|
|
|
|
2008
|
|
|
|
804,096
|
|
|
|
618,749
|
|
|
|
1,004,137
|
|
|
|
3,513,100
|
|
|
|
1,917,729
|
|
|
|
123,700
|
|
|
|
7,981,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colleen A. Goggins
|
|
|
2010
|
|
|
|
823,031
|
|
|
|
634,107
|
|
|
|
1,077,431
|
|
|
|
3,404,650
|
|
|
|
1,737,017
|
|
|
|
62,378
|
|
|
|
7,738,614
|
|
WW Chairman, Consumer Group
|
|
|
2009
|
|
|
|
795,854
|
|
|
|
634,037
|
|
|
|
1,202,179
|
|
|
|
3,784,070
|
|
|
|
1,840,303
|
|
|
|
60,453
|
|
|
|
8,316,896
|
|
|
|
|
2008
|
|
|
|
766,635
|
|
|
|
630,240
|
|
|
|
1,022,731
|
|
|
|
3,687,885
|
|
|
|
1,600,850
|
|
|
|
69,844
|
|
|
|
7,778,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sherilyn S. McCoy
|
|
|
2010
|
|
|
|
780,377
|
|
|
|
679,311
|
|
|
|
1,154,247
|
|
|
|
3,221,760
|
|
|
|
1,602,966
|
|
|
|
78,443
|
|
|
|
7,517,104
|
|
Vice Chairman,
|
|
|
2009
|
|
|
|
747,731
|
|
|
|
407,599
|
|
|
|
772,833
|
|
|
|
2,626,630
|
|
|
|
1,188,351
|
|
|
|
36,890
|
|
|
|
5,780,034
|
|
Executive Committee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary (Column
C)
The amounts reported in Column C represent base salaries paid to
each of the Named Executive Officers for the listed fiscal year.
Stock Awards
(Column D)
The amounts reported in Column D represent the grant date fair
value of RSU awards, in accordance with U.S. GAAP, for the
listed fiscal year. Under U.S. GAAP, the fair value of RSU
awards is estimated on the grant date and discounted for
dividends because dividends are not paid on RSUs during the
vesting period.
Restricted Share
Unit Fair Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU Grant Date
|
|
|
2/11/08
|
|
2/9/09
|
|
2/8/10
|
|
Common Stock Fair Market
Value(1)
|
|
$
|
61
|
.75
|
|
|
$
|
58
|
.33
|
|
|
$
|
62
|
.62
|
|
Dividend Yield
|
|
|
2
|
.90%
|
|
|
|
3
|
.30%
|
|
|
|
3
|
.30%
|
|
RSU Fair Value
|
|
$
|
56
|
.605
|
|
|
$
|
52
|
.832
|
|
|
$
|
56
|
.718
|
|
|
|
|
(1)
|
|
Average of the high and low prices
of the Companys Common Stock on the NYSE on the grant date.
|
Determination of RSU awards and certain terms and conditions of
the RSUs are described in the section entitled
Compensation Discussion and Analysis
Section II Compensation Framework and Pay
Components Components of Executive
Compensation on pages 29 and 31 of this Proxy
Statement.
46
Option Awards
(Column E)
The amounts reported in Column E represent the grant date fair
value of stock option awards granted in accordance with
U.S. GAAP for the listed fiscal year.
Under U.S. GAAP, the fair value of each stock option award
is estimated on the grant date using the Black-Scholes option
valuation model based on the assumptions noted in the following
table. The expected life of an option is determined using
historical data. Expected volatility represents a blended rate
of a four-year daily historical average volatility rate and a
five-week average implied volatility rate based on
at-the-money
traded Johnson & Johnson stock options with a life of
two years. The risk-free rate is based on the U.S. Treasury
yield curve in effect at the time of grant.
Black-Scholes
Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Grant Date
|
|
|
2/11/08
|
|
2/9/09
|
|
2/8/10
|
|
Common Stock Fair Market
Value(1)
|
|
|
$61
|
.75
|
|
|
|
$58
|
.33
|
|
|
|
$62
|
.62
|
|
Risk Free Rate
|
|
|
2
|
.97%
|
|
|
|
2
|
.71%
|
|
|
|
2
|
.78%
|
|
Expected Volatility
|
|
|
15
|
.00%
|
|
|
|
19
|
.48%
|
|
|
|
17
|
.43%
|
|
Expected Life
|
|
|
|
6 yrs
|
|
|
|
|
6 yrs
|
|
|
|
|
6 yrs
|
|
Dividend Yield
|
|
|
2
|
.90%
|
|
|
|
3
|
.30%
|
|
|
|
3
|
.30%
|
|
Fair Value
|
|
|
$7
|
.655
|
|
|
|
$8
|
.348
|
|
|
|
$8
|
.031
|
|
|
|
|
(1)
|
|
Average of the high and low prices
of the Companys Common Stock on the NYSE on the grant date.
|
Determination of stock option awards and certain terms and
conditions of the stock options are described in the section
entitled Compensation Discussion and Analysis
Section II Compensation Framework and Pay
Components Components of Executive
Compensation on pages 29 and 31 of this Proxy
Statement.
Non-Equity
Incentive Plan Compensation (Column F)
The amounts reported in Column F represent the aggregate dollar
value for each of the Named Executive Officers of the annual
performance bonus for the listed fiscal year, CLCs that vested
in the listed fiscal year and dividend equivalents received
during the fiscal year. The specific amounts included in Column
F are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of CLC
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
|
|
|
|
Annual
|
|
Value of CLCs
|
|
Equivalents
|
|
|
|
|
Fiscal
|
|
Performance
|
|
that Vested in
|
|
Received During the
|
|
|
Name
|
|
Year
|
|
Bonus ($)
|
|
Fiscal Year ($)
|
|
Fiscal Year ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
|
2010
|
|
|
$
|
1,976,000
|
|
|
$
|
5,541,250
|
|
|
$
|
4,525,950
|
|
|
$
|
12,043,200
|
|
|
|
|
2009
|
|
|
|
3,600,000
|
|
|
|
5,091,296
|
|
|
|
4,139,850
|
|
|
|
12,831,146
|
|
|
|
|
2008
|
|
|
|
3,700,000
|
|
|
|
5,272,360
|
|
|
|
3,625,900
|
|
|
|
12,598,260
|
|
D. J. Caruso
|
|
|
2010
|
|
|
|
900,000
|
|
|
|
1,144,000
|
|
|
|
506,400
|
|
|
|
2,550,400
|
|
|
|
|
2009
|
|
|
|
1,004,000
|
|
|
|
974,100
|
|
|
|
463,200
|
|
|
|
2,441,300
|
|
|
|
|
2008
|
|
|
|
900,000
|
|
|
|
740,500
|
|
|
|
359,000
|
|
|
|
1,999,500
|
|
R. C. Deyo
|
|
|
2010
|
|
|
|
1,080,000
|
|
|
|
1,144,000
|
|
|
|
1,607,820
|
|
|
|
3,831,820
|
|
|
|
|
2009
|
|
|
|
1,164,000
|
|
|
|
974,100
|
|
|
|
1,470,660
|
|
|
|
3,608,760
|
|
|
|
|
2008
|
|
|
|
1,000,000
|
|
|
|
1,184,800
|
|
|
|
1,328,300
|
|
|
|
3,513,100
|
|
C. A. Goggins
|
|
|
2010
|
|
|
|
500,000
|
|
|
|
1,501,500
|
|
|
|
1,403,150
|
|
|
|
3,404,650
|
|
|
|
|
2009
|
|
|
|
1,007,000
|
|
|
|
1,493,620
|
|
|
|
1,283,450
|
|
|
|
3,784,070
|
|
|
|
|
2008
|
|
|
|
1,050,000
|
|
|
|
1,569,860
|
|
|
|
1,068,025
|
|
|
|
3,687,885
|
|
S. S. McCoy
|
|
|
2010
|
|
|
|
1,125,000
|
|
|
|
1,430,000
|
|
|
|
666,760
|
|
|
|
3,221,760
|
|
|
|
|
2009
|
|
|
|
1,205,000
|
|
|
|
811,750
|
|
|
|
609,880
|
|
|
|
2,626,630
|
|
Annual performance bonuses for the listed fiscal year were
approved by the Committee and paid to the Named Executive
Officers in the first fiscal quarter of the following year in
the form of 85% cash and 15% Company Common Stock as determined
by the Committee.
CLCs are part of a deferred long-term compensation program under
which performance units are awarded to key executives.
Calculation of CLC unit value and certain terms and conditions
of CLCs are
47
described in the section entitled Compensation Discussion
and Analysis Section II
Compensation Framework and Pay Components on pages 32
and 33 of this Proxy Statement. The dollar value of the vested
CLCs reported in this column was determined using the fiscal
year-end 2009, 2008, and 2007 value of $35.75, $32.47, and
$29.62 per CLC, respectively.
CLC dividend equivalents are paid to CLC Plan participants
during the fiscal year on vested and unvested CLCs in the same
amount and at the same time as dividends on the Companys
Common Stock. The amounts of dividend equivalents on unvested
CLCs received in 2010 were for Mr. Weldon: $696,300,
Mr. Caruso: $141,370, Mr. Deyo: $59,924,
Ms. Goggins: $128,710 and Ms. McCoy: $246,870.
Commencing with the CLPs (the successor instrument to CLCs)
granted in February 2010, dividend equivalents will not be paid
on CLPs that have not yet vested. See Compensation
Discussion and Analysis Section II
Compensation Framework and Pay Components Components
of Executive Compensation Long-Term
Incentives Certificates of Long-Term
Performance Dividend Equivalents on
page 32 of this Proxy Statement. No CLPs vested during 2010
and no dividend equivalents were paid on CLPs during 2010.
Change in Pension Value and Non-Qualified Deferred Compensation Earnings (Column G)
Change in
Pension Value
The changes in pension value included in the figures reported in
Column G represent the increase in the present value of the
accrued pension benefit for each Named Executive Officer. This
increase in present value is not a current cash payment. It
represents the increase in the value of the Named Executive
Officers pensions, which are only paid after retirement.
The accrued pension benefits for each of the Named Executive
Officers were calculated based on the final average pay and the
years of service as of the listed fiscal year-end. The present
value of the accrued pension benefits for each Named Executive
Officer increased over the previous year-end because:
|
|
|
|
|
An additional year of completed service was included in the
calculation of benefits;
|
|
|
|
The average of the most recent five years of pay increased over
the five-year average pay as of the previous fiscal year-end
(for most of the Named Executive Officers); and
|
|
|
|
The normal retirement age, the assumed commencement of benefits,
is one year closer.
|
The present value can also increase or decrease in value due to
changes in actuarial assumptions. Between fiscal year-end 2007
and fiscal year-end 2008, the mortality table changed from the
1994 Group Annuity Mortality Table (the GAM 1994
Table) projected to 2004 to the 1994 Uninsured Pensioner
Mortality Table (the UP-1994 Table) projected to
2008, to reflect improvements in life expectancy. Between fiscal
year-end 2008 and fiscal year-end 2009, the mortality table was
changed to the UP-1994 Table projected to 2009. Between fiscal
year-end 2009 and fiscal year-end 2010, the mortality table was
changed to the UP-1994 Table projected to 2011 and the
discount rate decreased from 6.50% to 5.98%. No other actuarial
assumptions changed between fiscal year-end 2007 and fiscal
year-end 2010.
Change in
Non-Qualified Deferred Compensation Earnings
The CLC and CLP Plans are cash-based performance unit plans. The
value of unit awards under both of these plans is disclosed in
several tables in this Proxy Statement:
|
|
|
|
|
Grants of units are included in the Grants of Plan-Based Awards
Table.
|
|
|
|
When units vest, their value is included in the Summary
Compensation Table in the Non-Equity Incentive Plan
Compensation column.
|
|
|
|
The annual change in value of vested units between the time the
units vest and are paid out is included in the Summary
Compensation Table in the Change in Pension Value and
Non-Qualified
|
48
|
|
|
|
|
Deferred Compensation Earnings column, but
only to extent that the unit values grow at a rate that exceeds
a reference rate of return. |
|
|
|
The total value of vested units that have not been paid out as
of the fiscal year end is included in the Non-Qualified Deferred
Compensation Table. |
The change in the values of the CLCs and CLPs depend on the
long-term operational performance of the Company. The amounts
representing the above-reference-rate returns on all CLCs vested
as of the listed fiscal year-end are included in Column G. As of
the 2010 fiscal year-end, no CLPs had yet vested.
The Company uses 120% of the December applicable federal
long-term interest rate (AFR) as the reference rate
to compare potential returns of CLCs. The CLC unit value
increased 6.69% in 2010, from $35.75 as of fiscal year-end 2009
to $38.14 as of fiscal year-end 2010. 120% of the AFR for
December 2010 was 4.24%.
The calculation for CLCs in 2010 was 2.45%; the CLC unit value
increase of 6.69% minus the reference rate of return of 4.24%.
As an example, for Mr. Weldon, the actual increase in the
value of his vested CLCs in 2010 was $4,337,850, while the
above-reference-rate calculation was $1,586,673 of this amount.
This is an unrealized amount and not actual compensation
received by the executive for the year.
The table below shows the specific amounts of change in pension
value and above-reference-rate calculation for vested CLCs for
2008, 2009, and 2010 included in Column G using 120% of AFR as
the reference rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
Above-Reference-
|
|
|
|
|
Fiscal
|
|
Pension
|
|
Rate Calculation for
|
|
|
Name
|
|
Year
|
|
Value ($)
|
|
Vested CLCs ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
|
2010 |
|
|
$ |
5,498,000 |
|
|
$ |
1,586,673 |
|
|
$ |
7,084,673 |
|
|
|
|
2009
|
|
|
|
5,244,000
|
|
|
|
2,739,010
|
|
|
|
7,983,010
|
|
|
|
|
2008
|
|
|
|
6,099,932
|
|
|
|
1,902,044
|
|
|
|
8,001,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. J. Caruso
|
|
|
2010
|
|
|
|
581,000
|
|
|
|
151,237
|
|
|
|
732,237
|
|
|
|
|
2009
|
|
|
|
369,000
|
|
|
|
232,651
|
|
|
|
601,651
|
|
|
|
|
2008
|
|
|
|
311,945
|
|
|
|
140,452
|
|
|
|
452,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. C. Deyo
|
|
|
2010
|
|
|
|
1,718,000
|
|
|
|
641,313
|
|
|
|
2,359,313
|
|
|
|
|
2009
|
|
|
|
1,217,000
|
|
|
|
1,157,644
|
|
|
|
2,374,644
|
|
|
|
|
2008
|
|
|
|
1,067,933
|
|
|
|
849,796
|
|
|
|
1,917,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. A. Goggins
|
|
|
2010
|
|
|
|
1,209,000
|
|
|
|
528,017
|
|
|
|
1,737,017
|
|
|
|
|
2009
|
|
|
|
913,000
|
|
|
|
927,303
|
|
|
|
1,840,303
|
|
|
|
|
2008
|
|
|
|
947,940
|
|
|
|
652,910
|
|
|
|
1,600,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. S. McCoy
|
|
|
2010
|
|
|
|
1,429,000
|
|
|
|
173,966
|
|
|
|
1,602,966
|
|
|
|
|
2009
|
|
|
|
926,000
|
|
|
|
262,351
|
|
|
|
1,188,351
|
|
All Other
Compensation (Column H)
The amounts reported in Column H represent the aggregate dollar
amount for each Named Executive Officer for perquisites and
other personal benefits, tax reimbursements, Company
contributions to the
49
Companys 401(k) Savings Plan, and insurance premiums. The
following table shows the specific amounts included in Column H.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to
|
|
|
|
|
|
|
|
|
Perquisite and
|
|
|
|
Defined
|
|
|
|
|
|
|
Fiscal
|
|
Other Personal
|
|
Tax
|
|
Contribution
|
|
Insurance
|
|
|
Name
|
|
Year
|
|
Benefits(1)
|
|
Reimbursements(2)
|
|
Plans
|
|
Premiums(3)
|
|
Total
|
|
W. C. Weldon
|
|
|
2010
|
|
|
$
|
121,122
|
|
|
$
|
6,320
|
|
|
$
|
83,302
|
|
|
$
|
43,692
|
|
|
$
|
254,436
|
|
|
|
|
2009
|
|
|
|
114,995
|
|
|
|
480
|
|
|
|
81,112
|
|
|
|
0
|
|
|
|
196,587
|
|
|
|
|
2008
|
|
|
|
184,165
|
|
|
|
24,297
|
|
|
|
80,641
|
|
|
|
14,585
|
|
|
|
303,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. J. Caruso
|
|
|
2010
|
|
|
|
26,182
|
|
|
|
0
|
|
|
|
33,743
|
|
|
|
11,894
|
|
|
|
71,819
|
|
|
|
|
2009
|
|
|
|
11,140
|
|
|
|
0
|
|
|
|
32,568
|
|
|
|
0
|
|
|
|
43,708
|
|
|
|
|
2008
|
|
|
|
3,055
|
|
|
|
3,777
|
|
|
|
31,565
|
|
|
|
5,598
|
|
|
|
43,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. C. Deyo
|
|
|
2010
|
|
|
|
42,465
|
|
|
|
0
|
|
|
|
39,032
|
|
|
|
31,191
|
|
|
|
112,688
|
|
|
|
|
2009
|
|
|
|
8,102
|
|
|
|
0
|
|
|
|
37,433
|
|
|
|
0
|
|
|
|
45,535
|
|
|
|
|
2008
|
|
|
|
58,020
|
|
|
|
18,335
|
|
|
|
36,184
|
|
|
|
11,161
|
|
|
|
123,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. A. Goggins
|
|
|
2010
|
|
|
|
10,293
|
|
|
|
0
|
|
|
|
37,036
|
|
|
|
15,049
|
|
|
|
62,378
|
|
|
|
|
2009
|
|
|
|
24,640
|
|
|
|
0
|
|
|
|
35,813
|
|
|
|
0
|
|
|
|
60,453
|
|
|
|
|
2008
|
|
|
|
23,890
|
|
|
|
4,885
|
|
|
|
34,499
|
|
|
|
6,570
|
|
|
|
69,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. S. McCoy
|
|
|
2010
|
|
|
|
32,988
|
|
|
|
0
|
|
|
|
35,117
|
|
|
|
10,338
|
|
|
|
78,443
|
|
|
|
|
2009
|
|
|
|
3,242
|
|
|
|
0
|
|
|
|
33,648
|
|
|
|
0
|
|
|
|
36,890
|
|
|
|
|
(1) |
|
Under SEC Rules, companies are
required to identify by type all perquisites and other personal
benefits for a named executive officer if the total
value for that individual equals or exceeds $10,000, and to
report and quantify each perquisite or personal benefit that
exceeds the greater of $25,000 or 10% of the total amount of
perquisites and other personal benefits for that individual.
|
|
|
|
|
|
Mr. Weldon: The aggregate
value of perquisites and other personal benefits for
Mr. Weldon in fiscal 2010 was $121,122. This amount
comprised: personal use of Company aircraft ($89,796); car and
driver for commutation and other personal transportation
($29,635); and home security system monitoring fees.
|
|
|
|
Mr. Caruso: The aggregate
value of perquisites and other personal benefits for
Mr. Caruso in fiscal 2010 was $26,182. This amount
comprised personal use of Company aircraft.
|
|
|
|
Mr. Deyo: The aggregate value
of perquisites and other personal benefits for Mr. Deyo in
fiscal 2010 was $42,465. This amount comprised: personal use of
Company aircraft ($40,506) and home security monitoring fees.
|
|
|
|
Ms. Goggins: The aggregate
value of perquisites and other personal benefits for
Ms. Goggins in fiscal 2010 was $10,293. This amount
comprised: personal use of Company aircraft and home security
system monitoring fees.
|
|
|
|
Ms. McCoy: The aggregate value
of perquisites and other personal benefits for Ms. McCoy in
fiscal 2010 was $32,998. This amount comprised: personal use of
Company aircraft ($32,904) and car and driver for commutation
and other personal transportation.
|
|
|
|
|
|
Amounts for fiscal 2009 and 2008
for the Named Executive Officers were reported in the
Companys 2010 and 2009 Proxy Statements.
|
|
|
|
Perquisites and other personal
benefits are valued on the basis of the aggregate incremental
cost to the Company. The Company calculates the aggregate
incremental cost to the Company for personal use of Company
aircraft as the sum of the cost of trip-related crew hotels and
meals, in-flight food and beverages, landing and ground handling
fees, hangar or aircraft parking costs, fuel costs based on the
average annual cost of fuel per mile flown, and other smaller
variable costs. Fixed costs that would be incurred in any event
to operate Company aircraft (e.g., aircraft purchase
costs, maintenance not related to personal trips, and flight
crew salaries) are not included. The Company calculates the
aggregate incremental cost to the Company for Company cars and
drivers for commutation and other personal transportation as the
sum of the cost of fuel, driver overtime fees, and other smaller
variable costs. Fixed costs that would be incurred in any event
to operate Company cars (e.g., car purchase costs,
maintenance not related to personal trips, and driver salaries)
are not included. Executives are taxed on the imputed income
attributable to personal use of Company aircraft and cars and do
not receive tax assistance from the Company with respect to
these amounts, except in certain instances when such use is
required by Company policy.
|
|
(2) |
|
Use of Company aircraft for
business purposes and Company cars as required by Company policy.
|
|
(3) |
|
No insurance premiums are reported
in this table for 2009 because the executive life insurance
premiums for fiscal 2009 were actually paid at the beginning of
fiscal 2010. The insurance premiums paid in fiscal 2010 for
fiscal 2009 were as follows: Mr. Weldon: $19,068;
Mr. Caruso: $5,882; Mr. Deyo: $14,993;
Ms. Goggins: $7,842; Ms. McCoy: $4,994. These premiums
are included in the total premiums for 2010.
|
50
Total
Compensation (Column I)
The amounts reported in Column I are the sum of Columns C
through H for each of the Named Executive Officers. All
compensation amounts reported in Column I include amounts paid
and amounts deferred.
GRANTS OF
PLAN-BASED AWARDS 2010
The following table provides information concerning the annual
performance bonus and long-term incentive awards made to each of
the Named Executive Officers in fiscal 2010. For a complete
understanding of the table, please read the narrative
disclosures that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity Incentive
|
|
Estimated Future
|
|
H
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards
|
|
Payouts
|
|
All Other
|
|
Option
|
|
J
|
|
K
|
|
|
|
|
|
|
|
|
(Certificates of
|
|
Under Non-Equity
|
|
Stock
|
|
Awards:
|
|
Exercise
|
|
Closing
|
|
L
|
|
M
|
|
|
|
|
Long-term Performance)
|
|
Incentive Plan
|
|
Awards:
|
|
Number of
|
|
or Base
|
|
Market
|
|
Grant
|
|
Grant
|
|
|
|
|
|
|
D
|
|
Awards (Annual
|
|
Number of
|
|
Securities
|
|
Price of
|
|
Price on
|
|
Date Fair
|
|
Date Fair
|
|
|
B
|
|
C
|
|
Unit
|
|
Performance Bonus)
|
|
Shares of
|
|
Underlying
|
|
Option
|
|
the Grant
|
|
Value of
|
|
Value of
|
A
|
|
Grant
|
|
Units
|
|
Present
|
|
E
|
|
F
|
|
G
|
|
Stock or
|
|
Options
|
|
Awards
|
|
Date
|
|
Stock
|
|
Option
|
Name
|
|
Date
|
|
Granted (#)
|
|
Value ($)
|
|
Threshold ($)
|
|
Target ($)
|
|
Maximum ($)
|
|
Units (#)
|
|
(#)
|
|
($/sh)
|
|
($)
|
|
Awards ($)
|
|
Awards ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. C. Weldon
|
|
|
2/8/10
|
|
|
|
1,471,215
|
|
|
$
|
4.69
|
|
|
$
|
0
|
|
|
$
|
2,976,000
|
|
|
$
|
5,952,000
|
|
|
|
48,906
|
|
|
|
586,873
|
|
|
$
|
62.62
|
|
|
$
|
62.37
|
|
|
$
|
2,773,851
|
|
|
$
|
4,713,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. J. Caruso
|
|
|
2/8/10
|
|
|
|
383,795
|
|
|
|
4.69
|
|
|
|
0
|
|
|
|
942,375
|
|
|
|
1,884,750
|
|
|
|
9,981
|
|
|
|
119,770
|
|
|
|
62.62
|
|
|
|
62.37
|
|
|
|
566,102
|
|
|
|
961,873
|
|
|
|
|
2/9/10
|
|
|
|
148,400
|
|
|
|
4.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. C. Deyo
|
|
|
2/8/10
|
|
|
|
319,830
|
|
|
|
4.69
|
|
|
|
0
|
|
|
|
1,091,375
|
|
|
|
2,182,750
|
|
|
|
10,979
|
|
|
|
131,747
|
|
|
|
62.62
|
|
|
|
62.37
|
|
|
|
622,707
|
|
|
|
1,058,060
|
|
|
|
|
2/9/10
|
|
|
|
426,440
|
|
|
|
4.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. A. Goggins
|
|
|
2/8/10
|
|
|
|
383,795
|
|
|
|
4.69
|
|
|
|
0
|
|
|
|
1,034,000
|
|
|
|
2,068,000
|
|
|
|
11,180
|
|
|
|
134,159
|
|
|
|
62.62
|
|
|
|
62.37
|
|
|
|
634,107
|
|
|
|
1,077,431
|
|
|
|
|
2/9/10
|
|
|
|
211,430
|
|
|
|
4.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. S. McCoy
|
|
|
2/8/10
|
|
|
|
469,085
|
|
|
|
4.69
|
|
|
|
0
|
|
|
|
982,375
|
|
|
|
1,964,750
|
|
|
|
11,977
|
|
|
|
143,724
|
|
|
|
62.62
|
|
|
|
62.37
|
|
|
|
679,311
|
|
|
|
1,154,247
|
|
Non-Equity
Incentive Plan Awards (Columns C and D)
The amounts reported in Columns C and D relate to the CLPs
awarded to the Named Executive Officers in February 2010 for the
2009 performance year. The value of CLPs granted in 2010 was
based on the defined CLP present value as of fiscal year-end
2009. The defined CLP present value for purposes of determining
the number of CLPs granted is the sum of (i) the core CLP
unit value on the grant date and (ii) the estimated present
value of the dividend equivalents to be paid over the
10-year CLP
term.
For the February 2010 grant, the defined present value per CLP
was $4.69. This consisted of the core CLP unit value of $3.99
and the estimated present value of the dividend equivalents of
$0.70. The core CLP unit value equals the Companys
5-year
average Earnings Per Share. The estimated present value of the
dividend equivalents was calculated assuming a dividend
equivalent amount of $0.1354 per unit per year, and a 4.84%
discount rate. The calculation took into account that dividend
equivalents are only paid on vested CLPs.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Columns E through G)
The amounts reported in Columns E through G reflect threshold,
target and maximum annual performance bonus award amounts for
the 2010 performance year that were set in 2010. Actual annual
performance bonus payments, as reflected in Column F of the
Summary Compensation Table on page 46 of this Proxy
Statement, were made in recognition of 2010 performance using
the range represented in these Columns E through G as guidance.
Bonus targets as a percentage of base salary and annual
performance bonuses paid to the Named Executive Officers were
determined as described in the section entitled
Compensation Discussion and Analysis
Section II Compensation Framework and Pay
Components on pages 27 through 31 of this Proxy
Statement.
All Other Stock
and Option Awards (Columns H through M)
The amounts reported in Columns H through M relate to the RSU
and stock option grants awarded to the Named Executive Officers
in February 2010 for the 2009 performance year. Under the terms
of the LTI
51
Plan, the stock options were granted at an exercise price equal
to the fair market value (calculated as the average of the high
and low stock prices on the NYSE) of the Companys Common
Stock on the grant date. For the grants made in February 2010,
the fair market value was $0.25 higher than the closing price on
the grant date. Determination of RSU and stock option awards and
certain terms and conditions of the RSUs and stock options are
described in the section entitled Compensation Discussion
and Analysis Section II
Compensation Framework and Pay Components on pages 27
through 31 of this Proxy Statement.
Under U.S. GAAP, the grant date fair value of the RSU
awards is estimated on the grant date and discounted for
dividends because dividends are not paid on RSUs during the
vesting period. The grant date fair value was $56.718 per RSU
based on the average of the high and low prices of the
Companys Common Stock on the NYSE on the grant date and
discounted by an expected dividend yield of 3.30%.
Under U.S. GAAP, the grant date fair value of each stock
option award is calculated on the grant date using the
Black-Scholes option valuation model. The stock options expiring
on February 8, 2020 had a grant date present value of
$8.031 per option share. The Black-Scholes model was used with
the following assumptions: volatility of 17.43% based on a
blended rate of four-year daily historical average volatility
rate and a five-week average implied volatility rate based on
at-the-money
traded stock options with a life of two years; dividend yield of
3.30%; risk-free interest rate of 2.78% based on a
U.S. Treasury rate of six years; and a six-year option life.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2010
The following table provides information concerning the
unexercised stock options outstanding and unvested RSUs for each
of the Named Executive Officers as of fiscal year-end 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
Market
|
|
|
Options
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
|
|
|
|
Underlying Unexercised
|
|
F
|
|
G
|
|
Units of
|
|
Units of
|
|
|
B
|
|
C
|
|
Options (#)
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
A
|
|
Grant
|
|
Vesting
|
|
D
|
|
E
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have
|
Name
|
|
Date
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
Price ($)
|
|
Date
|
|
Vested (#)
|
|
Not Vested ($)
|
|
W. C. Weldon
|
|
|
2/11/02
|
|
|
|
2/12/05
|
|
|
|
600,000
|
|
|
|
|
|
|
$
|
57.30
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/03
|
|
|
|
2/11/06
|
|
|
|
450,000
|
|
|
|
|
|
|
|
52.20
|
|
|
|
2/8/13
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/04
|
|
|
|
2/10/07
|
|
|
|
325,000
|
|
|
|
|
|
|
|
53.93
|
|
|
|
2/7/14
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/05
|
|
|
|
2/15/08
|
|
|
|
410,000
|
|
|
|
|
|
|
|
66.18
|
|
|
|
2/13/15
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/06
|
|
|
|
2/14/09
|
|
|
|
452,520
|
|
|
|
|
|
|
|
58.34
|
|
|
|
2/12/16
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
457,178
|
|
|
|
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
519,838
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
43,320
|
|
|
$
|
2,679,342
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
627,464
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
52,289
|
|
|
|
3,234,075
|
|
|
|
|
2/8/10
|
|
|
|
2/9/13
|
|
|
|
|
|
|
|
586,873
|
|
|
|
62.62
|
|
|
|
2/8/20
|
|
|
|
48,906
|
|
|
|
3,024,836
|
|
D. J. Caruso
|
|
|
2/11/02
|
|
|
|
2/12/05
|
|
|
|
30,000
|
|
|
|
|
|
|
|
57.30
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/03
|
|
|
|
2/11/06
|
|
|
|
20,400
|
|
|
|
|
|
|
|
52.20
|
|
|
|
2/8/13
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/04
|
|
|
|
2/10/07
|
|
|
|
30,000
|
|
|
|
|
|
|
|
53.93
|
|
|
|
2/7/14
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/05
|
|
|
|
2/15/08
|
|
|
|
30,000
|
|
|
|
|
|
|
|
66.18
|
|
|
|
2/13/15
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/06
|
|
|
|
2/14/09
|
|
|
|
20,569
|
|
|
|
|
|
|
|
58.34
|
|
|
|
2/12/16
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
41,146
|
|
|
|
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
82,591
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
6,883
|
|
|
|
425,714
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
110,578
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
9,215
|
|
|
|
569,948
|
|
|
|
|
2/8/10
|
|
|
|
2/9/13
|
|
|
|
|
|
|
|
119,770
|
|
|
|
62.62
|
|
|
|
2/8/20
|
|
|
|
9,981
|
|
|
|
617,325
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
Market
|
|
|
Options
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
|
|
|
|
Underlying Unexercised
|
|
F
|
|
G
|
|
Units of
|
|
Units of
|
|
|
B
|
|
C
|
|
Options (#)
|
|
Option
|
|
Option
|
|
Stock That
|
|
Stock That
|
A
|
|
Grant
|
|
Vesting
|
|
D
|
|
E
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have
|
Name
|
|
Date
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
Price ($)
|
|
Date
|
|
Vested (#)
|
|
Not Vested ($)
|
|
R. C. Deyo
|
|
|
2/11/02
|
|
|
|
2/12/05
|
|
|
|
125,000
|
|
|
|
|
|
|
$
|
57.30
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/03
|
|
|
|
2/11/06
|
|
|
|
110,000
|
|
|
|
|
|
|
|
52.20
|
|
|
|
2/8/13
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/04
|
|
|
|
2/10/07
|
|
|
|
110,000
|
|
|
|
|
|
|
|
53.93
|
|
|
|
2/7/14
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/05
|
|
|
|
2/15/08
|
|
|
|
125,000
|
|
|
|
|
|
|
|
66.18
|
|
|
|
2/13/15
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/06
|
|
|
|
2/14/09
|
|
|
|
113,130
|
|
|
|
|
|
|
|
58.34
|
|
|
|
2/12/16
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
114,294
|
|
|
|
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
131,174
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
10,931
|
|
|
$
|
676,082
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
138,865
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
11,572
|
|
|
|
715,728
|
|
|
|
|
2/8/10
|
|
|
|
2/9/13
|
|
|
|
|
|
|
|
131,747
|
|
|
|
62.62
|
|
|
|
2/8/20
|
|
|
|
10,979
|
|
|
|
679,051
|
|
C. A. Goggins
|
|
|
2/11/02
|
|
|
|
2/12/05
|
|
|
|
123,300
|
|
|
|
|
|
|
|
57.30
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/03
|
|
|
|
2/11/06
|
|
|
|
108,085
|
|
|
|
|
|
|
|
52.20
|
|
|
|
2/8/13
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/04
|
|
|
|
2/10/07
|
|
|
|
118,150
|
|
|
|
|
|
|
|
53.93
|
|
|
|
2/7/14
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/05
|
|
|
|
2/15/08
|
|
|
|
130,000
|
|
|
|
|
|
|
|
66.18
|
|
|
|
2/13/15
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/06
|
|
|
|
2/14/09
|
|
|
|
112,359
|
|
|
|
|
|
|
|
58.34
|
|
|
|
2/12/16
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
114,294
|
|
|
|
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
133,603
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
11,134
|
|
|
|
688,638
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
144,008
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
12,001
|
|
|
|
742,262
|
|
|
|
|
2/8/10
|
|
|
|
2/9/13
|
|
|
|
|
|
|
|
134,159
|
|
|
|
62.62
|
|
|
|
2/8/20
|
|
|
|
11,180
|
|
|
|
691,483
|
|
S. S. McCoy
|
|
|
2/11/02
|
|
|
|
2/12/05
|
|
|
|
21,000
|
|
|
|
|
|
|
|
57.30
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/03
|
|
|
|
2/11/06
|
|
|
|
20,000
|
|
|
|
|
|
|
|
52.20
|
|
|
|
2/8/13
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/04
|
|
|
|
2/10/07
|
|
|
|
25,000
|
|
|
|
|
|
|
|
53.93
|
|
|
|
2/7/14
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/05
|
|
|
|
2/15/08
|
|
|
|
28,000
|
|
|
|
|
|
|
|
66.18
|
|
|
|
2/13/15
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/06
|
|
|
|
2/14/09
|
|
|
|
34,282
|
|
|
|
|
|
|
|
58.34
|
|
|
|
2/12/16
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
44,499
|
|
|
|
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
64,777
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
92,577
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
7,715
|
|
|
|
477,173
|
|
|
|
|
2/8/10
|
|
|
|
2/9/13
|
|
|
|
|
|
|
|
143,724
|
|
|
|
62.62
|
|
|
|
2/8/20
|
|
|
|
11,977
|
|
|
|
740,777
|
|
Market Value of
Shares or Units of Stock That Have Not Vested (Column
I)
The market value of unvested RSUs included in Column I was
calculated using the closing price of the Companys Common
Stock on the NYSE on December 31, 2010, which was the last
business day of fiscal 2010, of $61.85.
OPTION EXERCISES
AND STOCK VESTED 2010
The following table provides information concerning the
exercises of stock options during fiscal 2010 on an aggregated
basis and RSUs vested during 2010 for each of the Named
Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares
|
|
|
|
Shares Acquired
|
|
Value Realized
|
|
|
Acquired on
|
|
Value Realized
|
|
on Vesting
|
|
Upon on
|
Name
|
|
Exercise (#)
|
|
Upon Exercise ($)
|
|
(#)
|
|
Vesting ($)
|
|
W. C. Weldon
|
|
|
240,000
|
|
|
$
|
1,828,382
|
|
|
|
38,098
|
|
|
$
|
2,383,411
|
|
D. J. Caruso
|
|
|
19,800
|
|
|
|
159,390
|
|
|
|
3,429
|
|
|
|
214,518
|
|
R. C. Deyo
|
|
|
170,000
|
|
|
|
1,552,100
|
|
|
|
9,525
|
|
|
|
595,884
|
|
C. A. Goggins
|
|
|
55,465
|
|
|
|
451,873
|
|
|
|
9,525
|
|
|
|
595,884
|
|
S. S. McCoy
|
|
|
15,000
|
|
|
|
182,700
|
|
|
|
0
|
|
|
|
0
|
|
53
PENSION
BENEFITS 2010
The following table provides information as of fiscal year-end
2010 with respect to the Companys pension plans for each
of the Named Executive Officers. For a complete understanding of
the table, please read the narrative disclosures that follow the
table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present
|
|
|
|
|
Number of
|
|
Normal
|
|
Value of
|
|
|
|
|
Years Credited
|
|
Retirement
|
|
Accumulated
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
Age(1)
|
|
Benefit ($)
|
|
W. C. Weldon
|
|
Salaried Pension Plan
|
|
|
39.33
|
|
|
|
62
|
|
|
$
|
1,601,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
43,325,000
|
|
D. J. Caruso
|
|
Salaried Pension Plan
|
|
|
11.00
|
|
|
|
62
|
|
|
|
255,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
1,528,000
|
|
R. C. Deyo
|
|
Salaried Pension Plan
|
|
|
25.33
|
|
|
|
62
|
|
|
|
979,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
8,334,000
|
|
C. A. Goggins
|
|
Salaried Pension Plan
|
|
|
29.08
|
|
|
|
62
|
|
|
|
823,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
6,686,000
|
|
S. S. McCoy
|
|
Salaried Pension Plan
|
|
|
28.50
|
|
|
|
62
|
|
|
|
633,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
3,801,000
|
|
|
|
(1) |
Normal retirement age is calculated as the greater of 62 or the
employees age as of fiscal year-end 2010.
|
Each of the Named Executive Officers participates in the same
defined benefit pension plans offered to other
U.S. non-union employees. Annuity benefits payable under
the U.S. plans are calculated as:
(1) Final average earnings multiplied by 1.667%, multiplied
by years of service prior to 2005, plus
(2) Final average earnings multiplied by 1.55%, multiplied
by years of service after 2004, minus
(3) Age 65 Social Security benefits multiplied by
1.429%, multiplied by total years of service.
For this formula, final average earnings is defined
as the average of the highest consecutive 60 months out of
the last 120 months of pay, including base salary and
bonus, and dividend equivalents paid or deferred on nonvested
CLCs for years prior to 2009. The formula above produces the
amount payable as a monthly annuity for the life of the Named
Executive Officer beginning as early as age 62. Benefits
can begin as early as age 55, but are subject to a 4% per
year reduction for the number of years before age 62 that
benefits begin.
The Salaried Pension Plan applies this formula to pay up to the
IRSs covered compensation limit ($245,000 in 2010). The
Excess Pension Plan is a restorative supplemental retirement
plan that uses the same formula (including the definition of
final average earnings) as the Salaried Pension Plan without
applying the IRS pay limits and is offset by amounts paid from
the Salaried Pension Plan. Any U.S. non-union employee
participates in the Excess Pension Plan if his or her covered
compensation exceeds the IRS limit.
While a present value is shown in the table, benefits are not
available as a lump sum and must be taken in the form of an
annuity. Present values were calculated using the same actuarial
assumptions applied in the calculation of pension liabilities
reported in the Companys 2010 Annual Report (discount rate
of 5.98%, and mortality according to the UP-1994 table projected
to 2011).
No payments were made in 2010 under the Companys pension
plans to any of the Named Executive Officers.
54
NON-QUALIFIED
DEFERRED COMPENSATION 2010
The following table provides information with respect to the
Companys defined contribution and non-tax-qualified
compensation deferral plans for each of the Named Executive
Officers for 2010. For a complete understanding of the table,
please read the narrative disclosures that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
C
|
|
D
|
|
E
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
A
|
|
Contributions in
|
|
Contributions in
|
|
Earnings
|
|
Balance
|
Name
|
|
Last FY ($)
|
|
Last FY ($)
|
|
in Last FY ($)
|
|
at Last FYE ($)
|
|
W. C. Weldon
|
|
|
|
|
|
$
|
5,613,527
|
|
|
$
|
7,011,677
|
|
|
$
|
90,660,422
|
|
D. J. Caruso
|
|
$
|
150,538
|
|
|
|
1,166,718
|
|
|
|
430,769
|
|
|
|
7,165,848
|
|
R. C. Deyo
|
|
|
|
|
|
|
1,172,007
|
|
|
|
2,014,597
|
|
|
|
30,077,616
|
|
C. A. Goggins
|
|
|
|
|
|
|
1,527,511
|
|
|
|
1,474,628
|
|
|
|
24,536,665
|
|
S. S. McCoy
|
|
|
100,000
|
|
|
|
1,454,092
|
|
|
|
491,056
|
|
|
|
7,820,045
|
|
Executive
Contributions in Last Fiscal Year (Column B)
The amounts reported in Column B include amounts deferred in the
last fiscal year under the Executive Income Deferral Plan, which
allows eligible employees to defer up to 50% of base salary and
100% of annual performance bonus.
Registrant
Contributions in Last Fiscal Year (Column C)
The amounts reported in Column C include Company contributions
to each of the Named Executive Officers Excess Savings
Plan account. These amounts also include the value of CLCs that
vested during the fiscal year, calculated using the fiscal
year-end 2009 CLC unit value of $35.75. The value of CLCs that
vested during the fiscal year is also included in Column F of
the Summary Compensation Table on page 46 of this Proxy
Statement. The specific amounts included in Column C are shown
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
Contribution to
|
|
Value of CLCs
|
|
|
|
|
Excess Savings
|
|
Vested
|
|
|
Name
|
|
Plans ($)
|
|
in Last FY ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
$
|
72,277
|
|
|
$
|
5,541,250
|
|
|
$
|
5,613,527
|
|
D. J. Caruso
|
|
|
22,718
|
|
|
|
1,144,000
|
|
|
|
1,166,718
|
|
R. C. Deyo
|
|
|
28,007
|
|
|
|
1,144,000
|
|
|
|
1,172,007
|
|
C. A. Goggins
|
|
|
26,011
|
|
|
|
1,501,500
|
|
|
|
1,527,511
|
|
S. S. McCoy
|
|
|
24,092
|
|
|
|
1,430,000
|
|
|
|
1,454,092
|
|
Aggregate
Earnings in Last Fiscal Year (Column D)
The amounts reported in Column D include earnings on the
Executive Income Deferral Plan, Excess Savings Plan and
International Savings Plan, in addition to the change in value
on all vested CLCs as of the fiscal year-end. The CLC unit value
increased from $35.75 as of fiscal year-end 2009 to $38.14 as of
fiscal year-end 2010. The portion of the change in value on all
vested CLCs as of fiscal year-end 2010 deemed to be
above-reference-rate returns is included in Column G of the
Summary Compensation Table on page 46 of this Proxy
Statement. The specific amounts included in Column D are shown
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
on Income
|
|
|
|
|
|
|
Deferral Program
|
|
Change in
|
|
|
|
|
and Excess and
|
|
Value on All
|
|
|
|
|
Intl Savings
|
|
Vested CLCs at
|
|
|
Name
|
|
Plans ($)
|
|
Last FYE ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
$
|
2,673,827
|
|
|
$
|
4,337,850
|
|
|
$
|
7,011,677
|
|
D. J. Caruso
|
|
|
17,299
|
|
|
|
413,470
|
|
|
|
430,769
|
|
R. C. Deyo
|
|
|
261,293
|
|
|
|
1,753,304
|
|
|
|
2,014,597
|
|
C. A. Goggins
|
|
|
31,068
|
|
|
|
1,443,560
|
|
|
|
1,474,628
|
|
S. S. McCoy
|
|
|
15,446
|
|
|
|
475,610
|
|
|
|
491,056
|
|
55
Aggregate Balance
at Last Fiscal Year-End (Column E)
The amounts reported in Column E include the full balance of the
Executive Income Deferral Plan, Excess Savings Plan and
International Savings Plan for each of the Named Executive
Officers. These amounts also include the full value (at $38.14)
of all vested CLCs held by each Named Executive Officer as of
fiscal year-end 2010. The specific amounts included in Column E
are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Balance of
|
|
|
|
|
|
|
Income Deferral
|
|
Full Value of
|
|
|
|
|
Plan and Excess
|
|
All Vested
|
|
|
|
|
and Intl Savings
|
|
CLCs at Last
|
|
|
Name
|
|
Plans ($)
|
|
FYE ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
$
|
21,436,322
|
|
|
$
|
69,224,100
|
|
|
$
|
90,660,422
|
|
D. J. Caruso
|
|
|
567,628
|
|
|
|
6,598,220
|
|
|
|
7,165,848
|
|
|