DEF 14A
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
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Registrant x
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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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Title of
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(2)
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Aggregate
number of securities to which transaction applies:
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Per unit
price or other underlying value of transaction computed pursuant
to Exchange Act
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(set forth the amount on which the filing fee is calculated and
state how it was determined):
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any part of the fee is offset as provided by Exchange Act Rule
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Form,
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Notice
of Annual Meeting
and Proxy
Statement
March 11, 2009
The Annual Meeting of Shareholders of Johnson & Johnson
will be held on Thursday, April 23, 2009 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
2009; and
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3.
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Transact such other business, including action on a shareholder
proposal, as may properly come before the meeting, and any
adjournment or postponement.
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Shareholders are cordially invited 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 you are a shareholder whose shares are not registered in your
own name 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 your bank or broker,
must accompany your letter.
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If you are unable to attend the meeting, you will be able to
access the meeting via the Internet. The Company will broadcast
the meeting as a live Webcast through the Johnson &
Johnson Web site at www.jnj.com. The Webcast will remain
available for replay for three months following the meeting.
Visit the Johnson & Johnson Web site at
www.jnj.com and click on Webcasts &
Presentations in the Investor Relations section for
details.
By order of the Board of Directors,
Steven M. Rosenberg
Secretary
YOU CAN VOTE IN ONE OF FOUR WAYS:
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(1)
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Visit the Web site noted on your proxy card to vote via
the Internet;
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(2)
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Use 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 23, 2009: 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
February 24, 2009, 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 2,767,643,581 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 Internet: Go to the Web site listed on
your proxy card to vote via the Internet. You will need to
follow the instructions on your proxy card and the Web site. 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. 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 you give proper written
notice of revocation to the Secretary before the proxy is
exercised or you vote by ballot at the 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 11, 2009 concurrently with the mailing of the
Companys 2008 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 Shareholder
Communications, Inc. to aid in the solicitation of brokers,
banks and institutional and other shareholders for a fee of
approximately $15,000, 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
1
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 2008 Annual Report are available on the
Companys Web site 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 gain faster access to your
proxy materials, save the Company the cost of producing and
mailing documents to you, reduce the amount of mail you receive
and help preserve environmental resources. 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.com/US/ecomms, or
www.computershare.com/econsent for employees holding
shares in one of the Johnson & Johnson employee savings
plans. If you vote via the Internet, simply follow the prompts
that will link you to that Web site. Street name shareholders
who wish to enroll for electronic access should review the
information provided in the proxy materials mailed to them by
their bank or broker.
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 which covers those shares held for you in your
savings plan, as well as any other shares registered in 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 21, 2009, the Trustee of
your savings plan will vote your shares as you have directed
(your voting instructions will be kept confidential from the
Company). 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.
Advance Notice of Shareholder Proposals and
Other Items of Business. To be included
in the Proxy Statement and proxy card for the 2010 Annual
Meeting of Shareholders, a shareholder proposal must be received
by the Company at its principal office on or before
November 11, 2009. In addition, under the terms of the
Companys By-Laws, a shareholder who intends to present an
item of business at the 2010 Annual Meeting of Shareholders
(other than a proposal submitted for inclusion in the
Companys proxy materials) must provide notice of such
business to the Company on or before November 11, 2009.
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.
2
ITEM
1: ELECTION OF DIRECTORS
Nominees. There are
10 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. 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.
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. Under the Principles of Corporate Governance,
the Board has set a mandatory retirement age for Directors of
72. Arnold G. Langbo will turn 72 prior to the Annual Meeting.
The Board has asked Mr. Langbo to serve another term as
Director on an exception basis.
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, 65, 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 Director of Meredith Corporation and a Trustee of the John S. and James L. Knight Foundation and the Gerald R. Ford Foundation.
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3
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James G. Cullen, Retired President and Chief Operating Officer, Bell Atlantic Corporation
Mr. Cullen, 66, 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 Neustar, Inc., Prudential Financial, Inc. and Eisenhower Medical Center and a Director and non-executive Chairman of Agilent Technologies, Inc.
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Michael M. E. Johns, M.D., Chancellor, Emory University
Dr. Johns, 67, 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 1997, 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. Dr. Johns is a Director of Genuine Parts Company and AMN Healthcare Services, Inc.
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4
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Arnold G. Langbo, Retired Chairman and Chief Executive Officer, Kellogg Company
Mr. Langbo, 71, was elected to the Board of Directors in 1991 and is a member of the Nominating & Corporate Governance Committee and Chairman of the Compensation & Benefits Committee. Mr. Langbo retired as Chairman of Kellogg Company (cereals and convenience foods) in 2000. He had held that position since 1992 after having been President and Chief Operating Officer of Kellogg since 1990. He also served as Chief Executive Officer from 1992 until 1999. Mr. Langbo joined Kellogg Canada Inc. in 1956 and served in a number of management positions in Canada and the United States before being named President of Kellogg International in 1986. Mr. Langbo is a Director of The Hershey Company, Weyerhaeuser Company and Whirlpool Corporation.
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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, 59, 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, and both the Genetics Society of America Medal and the Centennial Medal of the Harvard University Graduate School of Arts and Sciences in 2008. She is a member of the Science Advisory Council for the MacArthur Foundation, the Scientific Advisory Board for the Stowers Institute for Medical Research and the External Advisory Board of the Chicago Biomedical Consortium. She is also a Co-Founder of FoldRx Pharmaceuticals, Inc., a private biotechnology start-up company.
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5
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Leo F. Mullin, Retired Chairman and Chief Executive Officer, Delta Air Lines, Inc.
Mr. Mullin, 66, 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 retired as Chief Executive Officer of Delta Air Lines, Inc. (air transportation) 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 currently serves as a Senior Advisor, on a part-time basis, to Goldman Sachs Capital Partners, a private equity fund group. 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. Mr. Mullin is a Director of ACE Limited and is a member of both The Business Council and the Advisory Board of the Carter Center. He is currently Chairman of the Board of the Juvenile Diabetes Research Foundation (JDRF) and served as interim Chief Executive Officer of JDRF from July through December 2008.
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William D. Perez, Retired President and Chief Executive Officer, Wm. Wrigley Jr. Company
Mr. Perez, 61, was elected to the Board of Directors in 2007 and is a member of the Compensation & Benefits Committee and the Public Policy Advisory Committee. 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 Director of the Boys & Girls Club of Chicago and a member of the Cornell University Council.
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6
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Charles Prince, Chairman, Sconset Group, LLC; Vice Chairman and Chairman of the Board of Advisors, Stonebridge International LLC; Retired Chairman and Chief Executive Officer, Citigroup Inc.
Mr. Prince, 59, was elected to the Board of Directors in 2006 and is a member of the Compensation & Benefits Committee and Chairman of the Nominating & Corporate Governance Committee. Mr. Prince is currently Chairman of Sconset Group, LLC and Vice Chairman and Chairman of the Board of Advisors of Stonebridge International LLC, a Washington, D.C. based international business strategy firm, which he joined in September 2008. 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 Director of Xerox Corporation and a member of the Council on Foreign Relations and The Business Council. He is also on the Board of Trustees of the Brookings Institution.
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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, 68, 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 is a Director of MetLife, Inc., and serves on the boards of Action for Healthy Kids, American Foundation for Suicide Prevention, Kaiser Family Foundation and Task Force for Child Survival and Development.
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7
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William C. Weldon, Chairman, Board of Directors and Chief Executive Officer; Chairman, Executive Committee
Mr. Weldon, 60, 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 Ethicon Endo-Surgery 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 also a Director of J.P. Morgan Chase & Co. Mr. Weldon is a member of The Business 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.
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Other Information. 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 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.
8
STOCK OWNERSHIP
AND SECTION 16 COMPLIANCE
The following table sets forth information regarding beneficial
ownership of the Companys Common Stock for each Director
and each executive officer named in the tables in the section
Executive and Director Compensation on pages 43 to
55 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 7,630,831 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 1,049,378 shares. In the aggregate,
these 8,680,209 shares represent less than 1% of the shares
outstanding. All stock ownership is as of February 24, 2009
(except shares held in the Companys Savings Plans, which
are included as of February 4, 2009).
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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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13,516
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4,165
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191,189
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Mary Sue Coleman
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9,563
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8,491
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7,600
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James G. Cullen
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74,131
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28,673
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26,250
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Russell C. Deyo
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141,164
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21,340
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853,130
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Colleen A. Goggins
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100,539
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16,477
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|
|
671,359
|
|
Michael M. E. Johns
|
|
|
8,527
|
|
|
|
6,035
|
|
|
|
|
|
Arnold G. Langbo
|
|
|
8,355
|
|
|
|
47,662
|
|
|
|
26,250
|
|
Susan L. Lindquist
|
|
|
8,691
|
|
|
|
6,774
|
|
|
|
7,600
|
|
Leo F. Mullin
|
|
|
14,892
|
|
|
|
9,238
|
|
|
|
26,250
|
|
William D. Perez
|
|
|
13,333
|
|
|
|
2,583
|
|
|
|
|
|
Christine A. Poon
|
|
|
55,889
|
|
|
|
16,165
|
|
|
|
1,010,691
|
|
Charles Prince
|
|
|
16,656
|
|
|
|
4,838
|
|
|
|
|
|
David Satcher
|
|
|
8,981
|
|
|
|
5,971
|
|
|
|
13,900
|
|
William C. Weldon
|
|
|
384,485
|
|
|
|
41,682
|
|
|
|
2,635,720
|
|
All Directors and executive officers as a group(19)
|
|
|
1,049,378
|
(4)
|
|
|
232,612
|
|
|
|
6,431,984
|
|
|
|
(1)
|
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 94,341 of these shares, including
30,000 shares listed as owned by Mr. Cullen,
12,327 shares listed as owned by Mr. Deyo,
900 shares listed as owned by Mr. Langbo,
800 shares listed as owned by Mr. Prince, and
28,847 shares listed as owned by Mr. Weldon.
|
|
(2)
|
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.
|
|
(3)
|
Includes shares under options exercisable on February 24,
2009 and options that become exercisable within 60 days
thereafter.
|
|
(4)
|
Includes 44,792 shares pledged as security.
|
9
As of February 17, 2009, the following is the only person
known to the Company to be the beneficial owner of more than
five percent of any class of the Companys voting
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
Name and Address of
|
|
of Beneficial
|
|
|
Title of Class
|
|
Beneficial Owner
|
|
Ownership
|
|
Percent of Class
|
|
Common Stock
|
|
State Street Bank and Trust Company
State Street Financial Center
One Lincoln Street
Boston, Massachusetts 02111
|
|
145,462,672 shares
|
|
|
5.2
|
%
|
Section 16(a)
Beneficial Ownership Reporting Compliance
The Company believes that during 2008 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.
10
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,
Dr. Johns, Mr. Langbo, Dr. Lindquist,
Mr. Mullin, Mr. Perez, Mr. Prince and
Dr. Satcher. In addition, Mr. Steven S Reinemund,
who served as a Director until April 2008, was independent
during his 2008 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
Web site 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, each of the Non-Employee
Directors is affiliated with numerous corporations, educational
institutions, hospitals, museums and charities, as well as civic
organizations and trade associations, many of which have
business, charitable or other relationships with the Company. In
addition, some of their immediate family members are executive
officers or partners of corporations that have business
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.
|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Type of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction,
|
|
|
2008
|
|
|
|
|
|
|
Type of
|
|
|
Relationship to
|
|
|
Relationship or
|
|
|
Aggregate
|
Director
|
|
|
Organization
|
|
|
Organization
|
|
|
Organization
|
|
|
Arrangement
|
|
|
Magnitude
|
M. S. Coleman
|
|
|
University of Michigan
|
|
|
Educational
institution
|
|
|
Executive officer
|
|
|
Sales of health care products and services; educational and
research grants
|
|
|
<1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. G. Cullen
|
|
|
Eisenhower Medical Center
|
|
|
Hospital
|
|
|
Director
|
|
|
Sales of health care products and services; rebates
|
|
|
<1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. M. E. Johns
|
|
|
Emory University
|
|
|
Educational
institution
|
|
|
Employee
|
|
|
Sales of health care products and services; educational and
research grants and fellowships
|
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|
<1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
S. L. Lindquist
|
|
|
Massachusetts Institute of Technology
|
|
|
Educational institution
|
|
|
Employee
|
|
|
Tuition; educational and research sponsorships, fellowships and
grants
|
|
|
<1%; <$1 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whitehead Institute for Biomedical Research
|
|
|
Research and educational institution
|
|
|
Employee
|
|
|
Educational and research grants
|
|
|
<1%; <$1 million
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
L. F. Mullin
|
|
|
Juvenile Diabetes Research Foundation
|
|
|
Charity
|
|
|
Director
|
|
|
Charitable contributions
|
|
|
<1%; <$1 million
|
|
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|
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11
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|
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|
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|
Type of
|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
Transaction,
|
|
|
2008
|
|
|
|
|
|
|
Type of
|
|
|
Relationship to
|
|
|
Relationship or
|
|
|
Aggregate
|
Director
|
|
|
Organization
|
|
|
Organization
|
|
|
Organization
|
|
|
Arrangement
|
|
|
Magnitude
|
W. D. Perez
|
|
|
Northwestern Memorial Hospital
|
|
|
Hospital
|
|
|
Director
|
|
|
Sales of health care products and services; rebates
|
|
|
<1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wm. Wrigley Jr. Company
|
|
|
Corporation
|
|
|
Director and executive officer
|
|
|
Purchases of raw materials
|
|
|
<1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Prince
|
|
|
The Brookings Institution
|
|
|
Public policy research organization
|
|
|
Trustee
|
|
|
Contributions to educational programs
|
|
|
<1%; <$1 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stonebridge International
|
|
|
Consulting firm
|
|
|
Executive officer
|
|
|
Business consulting fees (non-transactional)
|
|
|
<1%; <$1 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Satcher
|
|
|
Morehouse School of Medicine
|
|
|
Educational institution
|
|
|
Employee
|
|
|
Educational and research fellowships and grants;
conference exhibit fees
|
|
|
<1%; <$1 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
2006, 2007 or 2008. 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 2006, 2007 or 2008.
Board Meetings. During 2008 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 Web site 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 2008 Annual Meeting were in
attendance.
Board Committees. The Board of
Directors has a standing Audit Committee,
Compensation & Benefits Committee and Nominating
& Corporate Governance Committee, each comprised entirely
of Non-Employee Directors determined to be
independent under the listing standards of the NYSE.
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 Finance
Committee, Public Policy Advisory Committee and
Science & Technology Advisory Committee, each
comprised of independent directors and members of management.
12
The following table shows the Directors who are currently
members or Chairmen of each of the Board Committees and the
number of meetings each Committee held in 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating &
|
|
|
|
|
|
|
|
|
Science &
|
|
|
|
|
|
|
Compensation &
|
|
|
Corporate
|
|
|
|
|
|
Public Policy
|
|
|
Technology
|
Director
|
|
|
Audit
|
|
|
Benefits
|
|
|
Governance
|
|
|
Finance
|
|
|
Advisory
|
|
|
Advisory
|
M. S.
Coleman(1)
|
|
|
Member
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member
|
J. G.
Cullen(1)(2)
|
|
|
Chairman
|
|
|
|
|
|
Member
|
|
|
Member
|
|
|
|
|
|
|
M. M. E.
Johns(1)
|
|
|
|
|
|
Member
|
|
|
|
|
|
|
|
|
|
|
|
Member
|
A. G.
Langbo(1)
|
|
|
|
|
|
Chairman
|
|
|
Member
|
|
|
|
|
|
|
|
|
|
S. L.
Lindquist(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member
|
|
|
Member
|
L. F.
Mullin(1)
|
|
|
Member
|
|
|
|
|
|
|
|
|
|
|
|
Chairman
|
|
|
|
W. D.
Perez(1)
|
|
|
|
|
|
Member
|
|
|
|
|
|
|
|
|
Member
|
|
|
|
C.
Prince(1)
|
|
|
|
|
|
Member
|
|
|
Chairman
|
|
|
|
|
|
|
|
|
|
D.
Satcher(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member
|
|
|
Chairman
|
W. C. Weldon
|
|
|
|
|
|
|
|
|
|
|
|
Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of meetings in 2008
|
|
|
4(3)
|
|
|
6
|
|
|
4
|
|
|
0
|
|
|
4
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Determined to be
independent under the listing standards of the NYSE.
|
|
(2) |
|
Designated as an audit
committee financial expert for purposes of
Section 407 of the Sarbanes-Oxley Act.
|
|
(3) |
|
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 Web site 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 controls or other accounting or auditing
matters can do so by writing to them c/o Johnson & Johnson,
One Johnson & Johnson Plaza, Room WH 2133, 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 Directors and executive officers and oversee the
management of the various pension, long-term incentive, savings,
health and welfare plans that cover the Companys employees.
13
The Compensation & Benefits Committees duties
and responsibilities under its charter with respect to the
compensation of the Companys Directors and executive
officers include:
|
|
|
|
|
setting the Chairman/CEOs compensation level based on the
independent Directors annual evaluation of his or her
performance;
|
|
|
|
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;
|
|
|
|
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;
|
|
|
|
reviewing the eligibility criteria and award guidelines for the
compensation programs in which the executive officers
participate;
|
|
|
|
reviewing and approving management-recommended compensation
actions for the Companys executive officers, including
setting base salaries, annual incentive bonuses, long-term
incentive awards, severance benefits and perquisites; and
|
|
|
|
reviewing and approving compensation for the Non-Employee
Directors.
|
The Compensation & Benefits Committee has retained a
compensation consultant from Frederic W. Cook & Company for
matters related to executive and Director compensation. Frederic
W. Cook & Company does not provide any other services to
the Company. The compensation consultant reports directly to the
Committee. 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 21 and
22 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 comprised of Mr. Weldon (Chairman/CEO),
Mr. Caruso (Chief Financial Officer) and Ms.
Kaye Foster-Cheek (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 administration 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. For further
discussion of the roles of the Compensation & Benefits
Committee, the MCC and the Chairman/CEO in the executive
compensation decision-making process, see the section entitled
Compensation Discussion and Analysis
Section I Governance on pages 21 and
22 of this Proxy Statement. A copy of the charter of the
Compensation & Benefits Committee can be found on the
Companys Web site 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
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 management succession plans and executive
resources. In addition, the Nominating & Corporate
Governance Committee reviews possible candidates for the Board
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 Web site at
www.investor.jnj.com/governance/materials.cfm.
The Finance Committee is comprised of the Chairman
and Presiding Director of the Board. The Committee exercises the
management authority of the Board during the intervals between
Board meetings. The Finance Committee acts from time-to-time
between Board meetings by unanimous written consent in lieu of a
meeting. Any such action is taken pursuant to specific advance
delegation by the Board or is later ratified by the Board.
14
The Public Policy Advisory Committee is comprised
of independent Directors and the Companys General Counsel
and Vice Presidents for Corporate Affairs, Worldwide Operations,
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 governmental affairs
and policies 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 comprised of independent Directors and the
Companys Vice President, Science and Technology. It
advises the Board on scientific matters, including major
internal projects, interaction with academic and other outside
research organizations, and the acquisition of technologies and
products.
Executive Sessions. Each of the Audit,
Compensation & Benefits and Nominating &
Corporate Governance Committees met at least twice during 2008
in Executive Sessions without members of management present. The
independent Directors met seven times during 2008 in Executive
Sessions, without the Chairman/CEO or any other member of
management present, at which the Presiding Director acted as
Chairman.
Director Nomination Process. The
Nominating & Corporate Governance Committee reviews
possible candidates for the Board of Directors 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 Web site at
www.investor.jnj.com/governance.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:
|
|
|
|
|
the highest ethical character and shared values with the
Companys Credo;
|
|
|
|
reputations consistent with the Companys image and
reputation;
|
|
|
|
accomplishments within their respective fields, with superior
credentials and recognition;
|
|
|
|
active and former chief executive officers of public companies
and leaders of major complex organizations, including
scientific, government, educational and other non-profit
institutions;
|
|
|
|
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;
|
|
|
|
relevant expertise and experience and the ability to offer
advice and guidance to the CEO based on that expertise and
experience;
|
|
|
|
ability to exercise sound business judgment; and
|
|
|
|
diversity reflecting gender, ethnic background and professional
experience.
|
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, 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.
Presiding Director. The independent
Directors have selected Mr. Cullen to serve as the
designated Presiding Director for 2009. 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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|
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Agenda and Schedule for Board Meetings. The
Presiding Director reviews in advance the schedule of Board and
committee meetings and the agenda for each Board meeting (and
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15
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requests changes as he or she deems appropriate in order to
ensure that the interests and requirements of the independent
Directors are appropriately addressed).
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Executive Sessions. The Presiding Director
chairs and has the authority to call and schedule Executive
Sessions of the independent Directors.
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Communication with Management. After each
Executive Session of the independent Directors, the Presiding
Director communicates with the Chairman to provide feedback and
also to effectuate the decisions and recommendations of the
independent Directors. In addition, the Presiding Director is
expected to act as an intermediary between the Non-Employee
Directors and management when special circumstances exist or
communication out of the ordinary course is necessary.
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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.
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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 2133, 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 Web site 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 shareholder
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 Web site 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
Elections. In February 2009, after careful
consideration, the Board of Directors amended the Companys
By-Laws to
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. Recent changes in New Jersey law
facilitated this action. In doing so, the Board has adopted a
majority standard only for uncontested Director elections.
Ballots for uncontested elections, including the election of
Directors at the 2009 Annual Meeting, will allow shareholders to
vote For or Against each nominee and
also 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.
The Board also made conforming amendments to the policy on
Voting for Directors in Uncontested Elections, which
it had adopted in 2006 as part of the Principles of Corporate
Governance. The Board has concluded that this policy will
continue to serve an important purpose in uncontested Director
elections. 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
16
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 policy would continue to require that
Director to promptly tender an offer of his or her resignation
following certification of the shareholder vote. The Committee
and the Board would then consider and take appropriate action on
such offer of resignation in accordance with the Policy. As a
result of the Boards amendments, this policy is now known
as the Director Resignation Policy for Incumbent Directors
in Uncontested Elections.
Contested Director elections (those where the number of Director
nominees exceeds the number of Directors to be elected) will
still be governed by the plurality standard under New Jersey
law. Ballots for contested elections will 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 will 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 Web site at
www.investor.jnj.com/governance/materials.cfm.
17
TRANSACTIONS WITH
RELATED PERSONS
For the period beginning January 1, 2008 and ending
March 1, 2009, 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, except that a brother of Mr. Valeriani,
Vice President, Office of Strategy & Growth, is a
product director at Centocor, Inc., a wholly-owned subsidiary of
the Company, and earned $193,260 in base salary, annual
performance bonus and other cash awards in fiscal 2008. His
compensation was commensurate with that of his peers. This
transaction was duly ratified by the Nominating &
Corporate Governance Committee in compliance with the Policy on
Transactions With Related Persons described below.
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.
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 has established procedures for monitoring
transactions that could be subject to approval or ratification
under the Policy.
Once a related person transaction has been identified, the
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.
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18
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 20 through 42, be
included in this Proxy Statement and incorporated by reference
into the Companys Annual Report on Form 10-K for the
fiscal year ended December 28, 2008.
Mr. Arnold G. Langbo, Chairman
Dr. Michael M. E. Johns
Mr. William D. Perez
Mr. Charles Prince
19
COMPENSATION
DISCUSSION AND ANALYSIS
EXECUTIVE
SUMMARY
In 2008, our executive officers performed well against their
business objectives despite economic challenges. While we made
strides against our business plans, our organization was
affected by the challenging macroeconomic conditions, which have
prompted our leaders to consider how to better position our
Company for the future. As described in Section III below,
the strategic and financial objectives of our executive officers
are aligned with the following business priorities:
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Winning in Health Care
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Capitalizing on Convergence
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Accelerating Growth in Emerging Markets
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Developing Leadership and Talent
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In Section III, we describe how our executive officers were
compensated for their performance in 2008. Pay for performance
is an essential element of our guiding principles. In alignment
with our Credo values, it is important that we recognize our
executive officers for the results they achieve as well as the
manner in which they achieve them. More information on our 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 2008 Annual Report
under the Managements Discussion and Analysis section.
In 2008, the Compensation & Benefits Committee (the
Committee) reviewed and made important modifications
to the compensation and benefit programs to better align them to
the Companys guiding principles.
Recent Changes in
Compensation and Benefit Programs
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Executive Peer Group: In 2008, the
Committee modified the Executive Peer Group to eliminate Altria
Group, Inc., and add The Boeing Company, Cisco Systems, Inc.,
Hewlett-Packard Company, Honeywell International Inc. and United
Technologies Corporation. The new Executive Peer Group will be
used when setting compensation for the 2009 performance year.
These changes are described below under
Section II Compensation Framework and Pay
Components Executive Peer Group.
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Annual Performance Bonus: In 2008, the
Company eliminated the business bonus multiplier
from the annual performance bonus program for the executive
officers, beginning with the 2008 performance year and impacting
bonuses paid in 2009. This change is described below under
Section II Compensation Framework and Pay
Components Annual Performance Bonus.
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Performance Assessment Process: In
2008, the Company introduced a new performance assessment
process for senior leaders, including the executive officers,
which measures employees on leadership factors as well as
business results. This process is described below under
Section III Performance Assessment and
Compensation Decisions Measuring Success: Individual
Performance Assessment.
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Pensionable Earnings: In 2008, the
Company amended the definition of pensionable earnings under the
U.S. Pension Plan to exclude dividend equivalents on unvested
units granted under the Certificate of Long-term Compensation
(CLC) Plan (formerly referred to as Certificate of Extra
Compensation (CEC) Plan), effective February 1, 2009. This
change is described in the narrative discussion under the
Pension Benefits table on page 51 of this Proxy Statement.
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Dividend Equivalents: Commencing with
the CLC units to be granted in 2010, dividend equivalents will
not be paid out as current compensation on CLC units that have
not yet vested. This change is discussed below under
Section II Compensation Framework and Pay
Components
Long-Term
Incentives Certificates of
Long-term
Compensation.
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20
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Tax
Gross-up on
Executive Life Insurance: In 2009, the
Company will discontinue the practice of providing a tax
gross-up on
the Company-paid premiums under the Executive Life Insurance
Program. This change is described below under
Section II Compensation Framework and Pay
Components Executive Perquisites & Other
Benefits.
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Set out below is the Compensation Discussion and Analysis
(CD&A), which is a discussion of the
Companys executive compensation programs. 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, individual performance assessments and the
determination of compensation for the Companys executive
officers.
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
they work. It is important for anyone reading this Proxy
Statement to understand the programs along with the program
mechanics before reviewing actual performance and compensation
awards for the Named Executive Officers.
Section III:
Performance Assessment and Compensation Decisions
This section summarizes how 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.
Section IV:
Additional Information Concerning Executive
Compensation
This section provides general information on the status of
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 compensation programs, setting financial
performance goals and strategic objectives and ultimately in
assessing executive officers against these goals and objectives.
SECTION I
GOVERNANCE
The Committee, in conjunction with the Management Compensation
Committee (MCC) and the Chairman/CEO, is responsible for
the compensation program design and decision making process. The
Committee is currently, and was for 2008, comprised of four
Directors who meet the independence requirements of the NYSE.
For 2008, the MCC was comprised of the Companys
Chairman/CEO, Vice Chairman, Chief Financial Officer (CFO), and
Vice President, Human Resources.
The Committee retains the services of a compensation consultant
from Frederic W. Cook & Company to advise it on the
performance of its responsibilities. Since that consultant was
retained, and on an ongoing basis, the Compensation &
Benefits Committees independent compensation consultant
will provide services to that Committee, and has not, and will
not, perform any other service for the Company.
21
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 comparison and 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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Approves all compensation decisions for each
executive officer, including base salary levels, annual
performance bonuses, long-term incentive awards, and severance
benefits
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Approves awards to employees of long-term incentives
pursuant to the Companys long-term incentive plans
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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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Reviews the funded status and investment performance
of the benefit plan trusts in which benefit assets are invested
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Management Compensation Committee
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Designs the compensation programs and human
resources policies applicable to management level employees,
including executive officers
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Independent Members of the Board of Directors
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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
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Reviews and presents to the Committee the
performance assessment and compensation recommendations for each
of the other executive officers
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Independent Compensation Consultant
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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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Reviews the annual compensation of the
other executive officers as recommended by the Chairman/CEO
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22
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 maximize 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/or the
Company overall.
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Credo Values While the Companys pay for
performance philosophy should reward the achievement of
financial and strategic objectives, the manner in which results
are achieved is also important. Therefore, 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
Long-term incentives should align the interests of individual
executive officers with the long-term interests of the
Companys shareholders.
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Importance of
Credo Values
For more than 60 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, community 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 and,
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.
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
23
compensation at a designated set of companies (the
Executive Peer Group). The Executive Peer Group,
which is reviewed on an annual basis, consists of companies that:
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are similar to the Company in terms of their size (i.e.,
revenue, net income, market capitalization, gross margin),
industry, research and development investment,
and/or
global presence and participate in executive compensation
surveys;
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have executive officer positions that are comparable to the
Companys in terms of breadth, complexity and scope of
responsibilities; and
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compete with the Company for executive talent.
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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 than 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 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. In
addition, the Executive Peer Group does not include companies in
industries whose compensation programs are not comparable to
that of the Company, such as the financial services or oil and
gas industries. On the following page is a table displaying the
companies selected and the business characteristics reviewed by
the consultant in his evaluation of the Executive Peer Group.
As a result of the annual review of the Executive Peer Group, in
2008 the Committee removed Altria Group, Inc. because their
current business model no longer meets the appropriate business
characteristics of our Executive Peer Group. In addition, the
Committee added five new peer companies which better align with
the Companys operating model and growth strategy: The
Boeing Company, Cisco Systems, Inc., Hewlett-Packard Company,
Honeywell International Inc. and United Technologies
Corporation. The new Executive Peer Group is in effect starting
with the 2009 performance year. The 2008 compensation targets
and payments were based on the Executive Peer Group in place in
the prior year.
24
The following table lists the companies in the 2008
and/or 2009
Executive Peer Group, 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, 2008:
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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
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Company
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Revenue
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Income
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Cap
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Common
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Margin
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(International >
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Business
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(R&D
³
5%
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(Ticker Symbol)
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(Millions)
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(Millions)
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(Billions)
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Industry
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(>40%)
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33% of Sales)
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Complexity
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of Sales)
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Abbott Laboratories (ABT)
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$29,528
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$ 4,881
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$ 82.8
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ü
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ü
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ü
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ü
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Altria Group, Inc. (MO)*
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19,356
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4,930
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31.0
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ü
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ü
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ü
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The Boeing Company (BA)**
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60,925
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2,702
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31.0
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ü
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ü
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ü
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|
|
|
|
|
|
|
|
|
|
|
Bristol-Myers Squibb Company (BMY)
|
|
|
|
20,597
|
|
|
|
|
5,247
|
|
|
|
|
46.0
|
|
|
|
|
ü
|
|
|
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|
ü
|
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ü
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ü
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|
|
|
|
Cisco Systems, Inc. (CSCO)**
|
|
|
|
39,575
|
|
|
|
|
7,492
|
|
|
|
|
95.4
|
|
|
|
|
|
|
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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)
|
|
|
|
31,944
|
|
|
|
|
5,807
|
|
|
|
|
104.7
|
|
|
|
|
ü
|
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ü
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ü
|
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|
|
|
|
|
General Electric Company (GE)
|
|
|
|
182,515
|
|
|
|
|
17,410
|
|
|
|
|
170.0
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
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ü
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|
|
|
|
|
Hewlett-Packard Company (HPQ)**
|
|
|
|
118,697
|
|
|
|
|
8,050
|
|
|
|
|
87.7
|
|
|
|
|
ü
|
|
|
|
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|
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|
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|
ü
|
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ü
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|
|
Honeywell International Inc. (HON)**
|
|
|
|
36,556
|
|
|
|
|
2,792
|
|
|
|
|
23.8
|
|
|
|
|
|
|
|
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ü
|
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ü
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|
|
|
International Business Machines Corporation (IBM)
|
|
|
|
103,630
|
|
|
|
|
12,334
|
|
|
|
|
113.1
|
|
|
|
|
|
|
|
|
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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)
|
|
|
|
23,850
|
|
|
|
|
7,808
|
|
|
|
|
64.3
|
|
|
|
|
ü
|
|
|
|
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|
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ü
|
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ü
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ü
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|
|
|
|
3M Company (MMM)
|
|
|
|
25,269
|
|
|
|
|
3,460
|
|
|
|
|
39.9
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
|
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|
|
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ü
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ü
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|
|
|
|
|
PepsiCo, Inc. (PEP)
|
|
|
|
43,251
|
|
|
|
|
5,142
|
|
|
|
|
85.1
|
|
|
|
|
ü
|
|
|
|
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ü
|
|
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ü
|
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|
|
|
|
|
Pfizer Inc. (PFE)
|
|
|
|
48,296
|
|
|
|
|
8,104
|
|
|
|
|
119.4
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
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ü
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ü
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|
|
|
|
|
The Procter & Gamble Company (PG)
|
|
|
|
84,123
|
|
|
|
|
14,078
|
|
|
|
|
184.6
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
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ü
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|
|
|
|
|
|
|
|
United Technologies Corporation (UTX)**
|
|
|
|
58,681
|
|
|
|
|
4,689
|
|
|
|
|
51.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ü
|
|
|
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|
ü
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|
|
|
|
|
|
|
|
|
|
Wyeth (WYE)
|
|
|
|
22,834
|
|
|
|
|
4,418
|
|
|
|
|
49.9
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
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|
ü
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ü
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|
|
|
|
|
|
Johnson & Johnson (JNJ)
|
|
|
|
$63,747
|
|
|
|
|
12,949
|
|
|
|
|
$166.0
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
|
|
|
ü
|
|
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|
ü
|
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ü
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|
|
Johnson & Johnsons Ranking
|
|
|
|
5th highest
|
|
|
|
|
3rd highest
|
|
|
|
|
3rd highest
|
|
|
|
|
|
|
|
|
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|
|
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|
*
|
Removed from Executive Peer Group in 2009. No longer carries
Common Industry or Global Presence business characteristics in
2009.
|
|
**
|
Added to Executive Peer Group in 2009.
|
Setting
Compensation Targets
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 for each element of the Companys executive
compensation program: Base Salary, Annual Performance Bonus,
Long-Term Incentives and Total Compensation. 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 pay targets across positions to
determine whether the targets are both internally and externally
competitive.
25
The following table shows the compensation targets approved by
the Committee for executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Performance
|
|
|
Long-Term
|
|
|
Total
|
Base Salary
|
|
|
Bonus
|
|
|
Incentives
|
|
|
Compensation
|
50th Percentile
of the Executive
Peer Group
|
|
|
50th Percentile
of the Executive
Peer Group
|
|
|
75th Percentile
of the Executive
Peer Group
|
|
|
Between the
50th & 75th
Percentiles
of the Executive
Peer Group
|
|
The Company believes targeting both base salary and annual
performance bonus targets at the 50th percentile
competitively positions the pay of its executives versus the
Executive Peer Group. While the Company believes cash-based
awards are important in motivating executives for the
short-term, targeting long-term incentives at the
75th percentile focuses its executives with the greatest
ability to impact business results on managing the business for
the long-term and reinforces the link between their earnings
opportunity and the long-term growth of the Company. 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 may fall outside that range based on a
variety of factors, including individual performance, additional
responsibilities and length of tenure in a particular position.
Maintaining a long-term perspective is a core part of the
Companys business strategy, which allows management to
focus on shaping the Companys future rather than simply
reacting to change. Given the currently volatile nature of the
health care industry, the Company has found success in
establishing thoughtful processes that focus on the ongoing,
future growth of the Companys business. A long-term view
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. In summary, the long-term focus of the Companys
compensation program is key to motivating the Companys
employees to see the bigger picture and take the time to always
consider the future state of the Company when they conduct
business.
26
Components of
Executive Compensation
The following table summarizes the major components of the
Companys executive compensation programs.
|
|
|
|
|
|
|
Component
|
|
|
Purpose
|
|
|
Key Characteristics
|
Base Salary
|
|
|
Reinforces the guiding principle of Competitiveness
Salary (merit) increases reinforce Pay for Performance principle
Recognizes individual work experience and level of responsibility
Recognizes individual performance and maintains internal parity among those performing like jobs
|
|
|
Fixed compensation
Increases predominately driven by individual performance in last performance year, subject to budgetary constraints
Used to calculate other components of compensation
|
|
Annual Performance Bonus
|
|
|
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, at risk pay that can fluctuate based on individual performance, which includes business unit and/or function, and Company performance
|
|
|
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
|
|
Long-Term Incentives
|
|
|
|
|
|
|
|
Stock Options &
Restricted Share Units
|
|
|
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
|
|
|
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 Restricted Share Units (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
|
|
Certificates of Long-term
Compensation
|
|
|
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 over entire career
Provides a measure of overall Company performance and intrinsic value that is not subject to short-term market volatility
|
|
|
Variable, deferred compensation that is paid at the end of an employees career with the Company
Vested CLC units are payable only upon retirement or termination
Units earn dividend equivalents
Units vest 20% per year from grant date
Prior unvested grants are considered when making annual grants
Not granted to every executive every year
|
|
|
|
|
|
|
|
27
In furtherance of the Companys pay for performance
principle, an individual has the opportunity to earn from 0 to 2
times the applicable target for each compensation component
based on their individual performance. This broad range allows
for meaningful differentiation on a pay for performance basis.
However, the Company must also manage to a total available
budget for each component, equal to the sum of all
employees awards at target.
Pay Mix at
Target
The Committee does not define a set pay mix for the executive
officers. However, as discussed above in the Setting
Compensation Targets section, the Companys compensation
program does emphasize long-term compensation versus short-term
compensation.
The average pay mix at target for the Chairman/CEO and other
executive officers in 2008 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.
Base
Salary
Base salary is fixed compensation. 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 and an analysis of the Companys
employees salaries versus the 50th percentile of the
market. The 2009 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. Bonus
targets are set as described above under Setting
Compensation Targets, as a percent of base salary. For the
executive officers, awards are paid 15% in stock and 85% in
cash. In 2008 the bonus targets for the executive officers,
excluding the Chairman/CEO, were set based on a review of
competitive market data at the 50th percentile. Bonus
targets and maximums are disclosed in Columns F and G of the
Grants of Plan-Based Awards 2008 table on
page 48 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.
28
In past years, the annual bonus for all eligible employees other
than the Chairman/CEO was determined based on individual
performance and the application of a business bonus
multiplier. The business bonus multiplier did not apply to
the Chairman/CEOs bonus since his individual performance
goals are already reflective of overall business results. In
2008 the same practice was extended to the executive officers.
Thus, beginning with the 2008 performance year, the
Chairman/CEOs and the other executive officers
bonuses will be measured solely on individual performance. To
assess individual performance, the Chairman/CEO will consider
both overall company performance and business unit
and/or
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.
The EIP 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, which 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 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 foster our guiding principles of
Alignment to Shareholders Interests and Accountability for
Long-Term
Performance. Stock options and RSUs emphasize our commitment to
shareholder return while 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 at 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 2007 were granted on
February 11, 2008, and annual awards for 2008 were granted
on February 9, 2009. 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.
29
Certificates of
Long-term Compensation
Certificates of Long-term Compensation (CLCs),
formerly known as the Certificates of Extra Compensation, were
established in 1947 and reflect the Companys commitment to
the principle of managing the business for the long-term. CLCs
are 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 CLC units. One of the
hallmarks of the CLC program is that the unit value and
dividends are based on the Companys operating performance
and are not subject to short-term market volatility.
Purpose. The
CLC program:
|
|
|
|
|
Reinforces for the participants the guiding principles of
Accountability for Long-Term Performance, Pay for Performance,
Competitiveness, and Alignment to Shareholders Interests
over time
|
|
|
|
Aligns the participants interests with the long-term
operational growth of the Company
|
|
|
|
Encourages the participants long-term commitment to the
Company over their entire careers
|
|
|
|
Provides a measure of overall Company performance and intrinsic
value that is not subject to short-term market volatility
|
Management believes that the focus on long-term operational
performance promoted by the CLC program has benefited the
Company and has enhanced total shareholder return since the
programs inception. This focus on long-term operational
performance is especially important during times of substantial
market volatility. The CLC program has proven to be a valuable
recruiting and retention tool, which the Company believes is a
competitive advantage.
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 earnings per share (EPS) is the key driver of the
value of a CLC unit. 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 reinvested in the Company. Growth in EPS
helps to fund the growth in dividend payments to shareholders.
As those dividends to shareholders increase, so do the dividend
equivalents paid to CLC participants. Therefore, growing
earnings is central to growing CLC unit value.
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 which has been consistently
applied since the inception of the program.
|
Determination of Grants. The number of CLC
units that may be granted to a participant as part of his or her
annual compensation review is determined based on the number of
CLC units that will vest in the following year taking into
account three factors:
|
|
|
|
(1)
|
the target vesting range, determined based on the
participants position in the Company;
|
|
|
|
|
(2)
|
the actual annual vesting target, determined based on the
participants individual performance; and
|
|
|
|
|
(3)
|
the number of previously granted CLC units that will vest during
the following year.
|
* Net Asset Value per Share
and Earnings-Power Value per Share are adjusted for in-process
research and development.
30
The number of previously granted CLC units that will vest during
the following year is subtracted from the number of units
targeted to vest determined in accordance with items
(1) and (2) above. The difference between the targeted
vesting and the actual vesting is used to determine the number
of CLCs units to be granted, so the total number of CLC units
vesting during the year the grant is made is equal to the
established vesting target for the participant.
The number of units granted may vary significantly from year to
year based on the number of units vesting from prior grants. In
addition, since an executive officer may already be vesting in
units at an appropriate level, he or she may not receive a grant
every year.
Payment of Unit Value. The value of a
participants vested CLC units is paid when the participant
leaves the Company based on the CLC unit value at that time. For
units vested in 2005 or later, the vested value will be paid out
in a single lump sum shortly after termination. For units 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 unit 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. Dividend equivalents are an important aspect of an
executive officers compensation package and help support
our compensation strategy. Since dividend payments are important
to the Companys investors, the payment of dividend
equivalents on CLC units reinforces to the Companys top
managers the importance of sustaining and increasing dividends.
As part of its comprehensive review of all of the Companys
compensation programs, the Compensation & Benefits
Committee has determined that, commencing with the CLC units to
be granted in 2010, dividend equivalents will not be paid out as
current compensation on CLC units that have not yet vested. The
Committee is currently evaluating plan design alternatives that
will meet the following key objectives:
(1) Ensure that the CLC program reinforces the
companys strong pay for performance philosophy;
|
|
|
|
(2)
|
Preserve the effectiveness of the CLC program, including the
ability to recruit and retain key executive talent;
|
|
|
(3)
|
Ensure that the overall compensation packages of our senior
level executives remain competitive;
|
|
|
(4)
|
Emphasize to our senior level executives the importance to
shareholders of both current dividend income and long-term
performance of the Company.
|
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 holders of CLCs. The
Executive Life Insurance premiums paid for executive officers
are disclosed in the All Other Compensation table on
page 47 of this Proxy Statement.
In the past, the Company provided a tax
gross-up to
employees to cover the tax cost associated with the Executive
Life Insurance Program premiums paid on their behalf. After
reviewing industry practices, it was determined that current
external competitive practice no longer supports providing a tax
gross-up on
Company-paid premiums under the Executive Life Insurance
Program, so no further tax
gross-ups
will be provided.
In addition to the benefits offered to all employees, 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 2008, executive
perquisites included: access to the Company aircraft for
personal travel, access to Company cars and drivers for
commutation and other
31
personal transportation, personal meals in the Companys
executive dining room, and reimbursement of home security system
monitoring fees.
SECTION III
PERFORMANCE ASSESSMENT AND COMPENSATION DECISIONS
Measuring
Success: Individual Performance Assessment
The Company has established a formal individual performance
assessment process, which is designed to:
|
|
|
|
|
Foster a pay for performance culture
|
|
|
|
Encourage the achievement of long-term strategic plans and
annual business plans
|
|
|
|
Engage, encourage and motivate executives to work toward their
highest level of performance while adhering to the values
embodied in Our Credo
|
|
|
|
Accelerate and facilitate the development and deployment of key
talent
|
In 2008, the Company introduced a new approach to this annual
assessment. The Chairman/CEOs business and leadership
commitments are agreed to with the Committee. Each of the other
executive officers establishes annual business and leadership
commitments that he or she will be held 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. The Committee uses this process to ensure
goals are in place for each executive officer.
Annual business commitments are set in consideration of:
|
|
|
|
|
Current market conditions for each of the Companys diverse
business groups
|
|
|
|
Expectations for future growth
|
|
|
|
Opportunities to increase the breadth of the Companys
business
|
|
|
|
Past Company performance
|
|
|
|
Long-term strategic plans
|
|
|
|
The comparison to competitor composites
|
Annual leadership commitments are established to assess:
|
|
|
|
|
The executives effectiveness in developing people and
enhancing the human talent of the organization
|
|
|
|
How the individual accomplished his or her business results
|
32
For fiscal year 2008, 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.
|
|
|
|
Metric
|
|
|
Rationale
|
Sales Growth (operational)
|
|
|
Important top line measure of the Companys
financial wellness and market leadership positions
|
|
|
|
Critical financial metric to ensure future cash
growth
|
|
Net Income
|
|
|
Important measure of the Companys current
financial performance and critical component of cash flow
|
|
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
|
|
|
Keeps focus on capital-efficient, profitable growth
|
|
Free Cash Flow
Operating cash flow less capital spending
|
|
|
Key indicator of the Companys ability to meet
future obligations and allows for creation of new profitable
investments
|
|
|
|
Allows for the payment of dividends
|
|
Cash Flow Metric (business group leaders only) Change in
Inventory, Accounts Receivable and Property, Plant &
Equipment
|
|
|
Allows for generation of cash and capital efficiency
|
|
Earnings Per Share Growth (EPS)
|
|
|
Key indicator of intrinsic value of shareholder
investment
|
|
Shareholder Return
|
|
|
Key indicator of value creation for investors
|
|
The Committee evaluates Sales Growth (operational) and
Management Net Income Growth against business plan performance
targets and a Competitor Composite for each business group. Net
Income and Free Cash Flow are evaluated against business plan
only. Shareholder Return is evaluated against a Competitor
Composite on a one-year and five-year basis. EPS is evaluated
against performance targets. 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.
For 2008, the Companys Competitor Composite consisted of
the following companies broken down by business segment:
|
|
|
|
|
Pharmaceuticals
|
|
Medical Devices and Diagnostics
|
|
Consumer
|
|
Abbott Laboratories
Amgen Inc.
AstraZeneca PLC
Bristol-Myers Squibb Company
Eli Lilly and Company
GlaxoSmithKline plc
Merck & Co., Inc.
Novartis AG
Pfizer Inc.
Roche Group
Sanofi-Aventis
Schering-Plough Corporation
Wyeth
|
|
Abbott Laboratories
(Vascular & Diagnostics)
Bayer AG (Diagnostics)
Beckman Coulter, Inc.
Boston Scientific Corporation
C. R. Bard, Inc.
Covidien Ltd.
Edwards Lifesciences Corporation
Medtronic, Inc.
The Cooper Companies, Inc.
(CooperVision)
Roche Group (Diagnostics)
Smith & Nephew plc
St. Jude Medical, Inc.
Stryker Corporation
Synthes, Inc.
Zimmer Holdings Inc.
|
|
Beiersdorf AG
Chattem, Inc.
Colgate-Palmolive Company
GlaxoSmithKline plc (OTC)
Kimberly-Clark Corporation
LOréal
Novartis AG (OTC)
The Procter & Gamble Company
Schering-Plough
Corporation (OTC)
Wyeth (OTC)
|
OTC stands for Over-the-Counter
33
The Company uses a portfolio of companies for each of the three
business segments. These companies are selected based on the
following criteria and financial metrics:
|
|
|
|
|
Strength and consistency of their financial outlook
|
|
|
|
|
|
Sales Growth
|
|
|
|
Net Income growth and Net Income margin
|
|
|
|
Earnings per share growth
|
|
|
|
Shareholder returns
|
|
|
|
|
|
Global presence
|
|
|
|
Product relevance (i.e., must be a direct competitor to
one of Johnson & Johnsons business lines)
|
The portfolio of companies is evaluated on an ongoing basis and
updated as necessary. In 2008, CIBA Vision Corporation was
removed from the Medical Devices and Diagnostics composite
because Novartis no longer discloses separate financial
information for their Vision Care business line.
As each business group is different, strategic objectives are
set based on each executive officers unique growth
strategy for their business unit or function and take into
consideration the challenges that may lay ahead for each
business.
For fiscal year 2008, the Companys business priorities
remain the same:
|
|
|
|
|
Winning in Health Care
|
|
|
|
Capitalizing on Convergence
|
|
|
|
Accelerating Growth in Emerging Markets
|
|
|
|
Developing Leadership and Talent
|
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.
|
|
|
|
Strategic Objective
|
|
|
Rationale
|
|
|
|
|
Growth Strategy:
Create a strategy that articulates the growth actions for
both short-term and long-term growth with a focus on new markets
and capitalizing on convergent opportunities. Pursue
standardization/cost effectiveness initiatives, operational
excellence and evaluate and execute on key strategic
acquisitions. Explore new market areas and take steps to
capitalize on emerging opportunities.
|
|
|
Develops a strategy for both short-term and
long-term actions that the Company will need to take to ensure
that it is capitalizing on growth opportunities
organic and acquired
|
|
|
|
|
|
Research & Development Pipeline
Develop the product pipeline with the long-term growth of the
Company in mind
|
|
|
Critical to the sustenance of the Companys business
A strong pipeline of new products is necessary for the Company to meet its growth strategy plans
|
|
|
|
|
|
External Health Care Environment
Enhance the Companys position as an active leader in
health care with an influential voice in health care issues
|
|
|
The Companys role in shaping the future of the health care industry and the quality of care for its patients and customers is important
The Companys role as an educator and its ability to influence access to care and improvements in health-care regulations are critical to the success of the Companys business and to meeting the tenets set forth in Our Credo
|
|
34
|
|
|
|
Strategic Objective
|
|
|
Rationale
|
|
|
|
|
Reputation
Understand and proactively manage the changing dynamics on
key issues such as reputation, media/external and investment
community communications and social responsibility
|
|
|
Key to maintaining strong brands
A measure of how well the Company is meeting its social responsibilities to its communities as outlined in the Credo
Building relationships with the investment community and media is important in helping investors understand the Companys business model
|
|
|
|
|
|
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
|
|
|
Identifying future leaders and 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
|
|
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:
1. How the executive performed against goals
2. Whether decisions and actions were consistent with Our
Credo values
3. Whether the long-term impact of decisions to the Company
was considered
Executive
Compensation Decisions
2008
Compensation for 2007 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 2008 for performance
in 2007. The decisions regarding these awards and payments were
discussed in detail in the Companys 2008 Proxy Statement
dated March 12, 2008. For a full understanding of these
decisions, please refer to the sections of the 2008 Proxy
Statement entitled Compensation Discussion and
Analysis Executive Compensation
Decisions 2008 Compensation for 2007
Performance.
Under SEC Rules, companies are required to report in the Summary
Compensation Table the dollar amounts of the stock options and
RSUs for each named executive officer, recognized,
or expensed, as compensation costs for financial
reporting purposes (excluding forfeiture assumptions) in
accordance with Financial Standards Board Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based
Payment (FAS 123R) in the previous fiscal
year. The amounts that the Company expensed (excluding
forfeiture assumptions) for fiscal 2008 are reported in
Columns D and E of the Summary Compensation Table on
page 43 of this Proxy Statement. The reported stock option
amounts comprise options that were granted over a period of four
years. The reported RSU amounts comprise RSUs that were granted
in 2006, 2007 and 2008. The Company did not grant RSUs prior to
2006. The tables below show for each Named Executive Officer the
total dollar amounts of stock options and RSUs expensed
(excluding forfeiture assumptions) in fiscal 2008, along with a
breakdown of the grant date fair values of the annual option and
RSU grants made in February of 2005, 2006, 2007 and 2008 for
performance in the prior year and the portion of each of those
grants that was expensed (excluding forfeiture assumptions) in
fiscal 2008.
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Grants ($)
|
|
Total 2008
|
Name
|
|
2/14/2005
|
|
2/13/2006
|
|
2/12/2007
|
|
2/11/2008
|
|
Expense ($)
|
|
W. C. Weldon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
$
|
6,355,000
|
|
|
$
|
5,528,889
|
|
|
$
|
5,338,468
|
|
|
$
|
3,979,360
|
|
|
|
|
|
2008 Expense
|
|
|
264,792
|
|
|
|
|
|
|
|
|
|
|
|
3,979,360
|
|
|
$
|
4,244,152
|
|
D. J. Caruso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
|
465,000
|
|
|
|
251,312
|
|
|
|
480,462
|
|
|
|
632,234
|
|
|
|
|
|
2008 Expense
|
|
|
19,375
|
|
|
|
83,771
|
|
|
|
160,154
|
|
|
|
184,402
|
|
|
|
447,702
|
|
C. A. Poon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
|
2,867,500
|
|
|
|
2,513,133
|
|
|
|
2,402,309
|
|
|
|
1,301,656
|
|
|
|
|
|
2008 Expense
|
|
|
119,479
|
|
|
|
837,711
|
|
|
|
800,770
|
|
|
|
414,163
|
|
|
|
2,172,123
|
|
R. C. Deyo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
|
1,937,500
|
|
|
|
1,382,222
|
|
|
|
1,334,611
|
|
|
|
1,004,137
|
|
|
|
|
|
2008 Expense
|
|
|
80,729
|
|
|
|
|
|
|
|
|
|
|
|
1,004,137
|
|
|
|
1,084,866
|
|
C. A. Goggins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
|
2,015,000
|
|
|
|
1,372,802
|
|
|
|
1,334,611
|
|
|
|
1,022,731
|
|
|
|
|
|
2008 Expense
|
|
|
83,958
|
|
|
|
457,601
|
|
|
|
516,624
|
|
|
|
565,193
|
|
|
|
1,623,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU Grants ($)
|
|
|
|
|
|
|
|
|
|
|
Total 2008
|
Name
|
|
2/13/2006
|
|
2/12/2007
|
|
2/11/2008
|
|
Expense ($)
|
|
W. C. Weldon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
$
|
2,041,054
|
|
|
$
|
2,319,368
|
|
|
$
|
2,452,129
|
|
|
|
|
|
2008 Expense
|
|
|
|
|
|
|
|
|
|
|
2,452,129
|
|
|
$
|
2,452,129
|
|
D. J. Caruso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
|
278,311
|
|
|
|
208,754
|
|
|
|
389,612
|
|
|
|
|
|
2008 Expense
|
|
|
92,770
|
|
|
|
69,585
|
|
|
|
113,637
|
|
|
|
275,992
|
|
C. A. Poon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
|
927,757
|
|
|
|
1,043,710
|
|
|
|
802,093
|
|
|
|
|
|
2008 Expense
|
|
|
309,252
|
|
|
|
347,903
|
|
|
|
255,211
|
|
|
|
912,366
|
|
R. C. Deyo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
|
510,236
|
|
|
|
579,872
|
|
|
|
618,749
|
|
|
|
|
|
2008 Expense
|
|
|
|
|
|
|
|
|
|
|
618,749
|
|
|
|
618,749
|
|
C. A. Goggins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value at Grant
|
|
|
506,772
|
|
|
|
579,872
|
|
|
|
630,240
|
|
|
|
|
|
2008 Expense
|
|
|
168,924
|
|
|
|
224,467
|
|
|
|
348,291
|
|
|
|
741,682
|
|
2009
Compensation for 2008 Performance
The following section describes the assessment of 2008
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
Board, the Committee or the Chairman/CEO, as applicable. While
performance against objectives was a significant factor, the
achievement of particular objectives did not determine
compensation award levels in a formulaic manner.
All 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 their business group or function.
The Committee believes that the Named Executive Officers
performed well under difficult market conditions and made
progress in meeting their objectives. Despite the economic
challenges faced in 2008, the Company was able to leverage its
diverse business platforms and improvement to cost structure in
order to deliver against its financial objectives. In addition,
the Company was able to meet its commitment
36
on winning in health care by continuing to invest in internal
growth and new business opportunities that capitalize on our
breadth. The Companys strong financial position also
allowed it to invest in new emerging opportunities, which the
Committee felt lay the groundwork for future growth and
sustained revenue streams over the long-term. Given the
extraordinary events of the past year the Committee felt the
Companys financial performance and progress against
business priorities was strong versus the overall market.
The table below details the financial objectives for the overall
business against which all of the Companys executive
officers were evaluated.
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Results
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2008
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Competitor
|
Financial Objective
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Goal
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Actual
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Composite
|
2008 Sales Growth (operational)
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2.7%
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1.9%
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2008 Net Income
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$12.6 - $12.8 billion
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|
$12.9
billion(1)
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2008 Free Cash Flow
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$12.3 - $13.6 billion
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$11.9 billion
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2008 Earnings Per Share
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$4.45 - $4.50
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|
$4.55(1)
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2008 Total Growth
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|
7.2% - 8.4%
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9.6%
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2008 Shareholder Return
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|
|
Exceed competitor growth
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(7.8)%
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(17.2)%
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5 Yr Compounded Annual Growth Rate
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|
Exceed competitor growth
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5.4%
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1.6%
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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 Web site at
www.investor.jnj.com/sales-earnings.cfm under Q4
2008 Reconciliation of Non-GAAP Financial Measures.
|
Mr. Weldon
Chairman/CEO
The Board believes that Mr. Weldon has done an excellent
job of leading the organization through a difficult period for
both the business and overall industry. The Company delivered
continued revenue and earnings growth in a challenging global
economic environment. Mr. Weldon proactively anticipated
and addressed concerns with the Research & Development
pipeline in the Pharmaceutical Group by aggressively cutting
costs and preparing the investor community. In the Consumer
Group, the Company has seen strong growth in emerging markets
and has been successful in the integration of Pfizer Consumer
Healthcare. In the Medical Devices & Diagnostics
Group, Mr. Weldon has identified strategic opportunities to
strengthen the pipeline via several acquisitions including
Mentor Corporation, a leading supplier of medical products for
the global aesthetics market, and Omrix Biopharmaceuticals, Inc.
Mr. Weldon continues to uphold the strong reputation of the
Company. He has strengthened the Companys image by
personal involvement in health care conferences, with the media
and in investor meetings. Mr. Weldon has sustained the
ethical principles of the Credo and has personally visited
Johnson & Johnson locations around the world to
discuss the Credo.
In the area of leadership, Mr. Weldon continues to make
significant progress in developing future leaders, staying
personally involved in succession planning and leadership
engagement programs. This has been evident during the smooth
transition as part of Ms. Poons retirement.
The Company continues to have a positive impact on the external
health care environment and, under Mr. Weldons
leadership, continues to look for opportunities to increase
patients access to the medicines they require and to
participate in dialogues around the globe on health care reform.
Mr. Weldon has been instrumental in developing programs to
provide access to care for people with little or no health care
insurance. Over the past year, the Company has provided more
then 2.3 million units of medicine to more then
320,000 patients through various assistance programs.
While the Committee had recommended a merit increase in
Mr. Weldons base salary for 2009 based on his strong
performance in 2008, Mr. Weldon recommended to the
Committee that his salary for 2009 stay the same as it was for
2008, in recognition of the current global economic environment.
The
37
Committee accepted and approved Mr. Weldons
recommendation. Mr. Weldons 2009 base salary is above
the 75th percentile of the Executive Peer Group.
Mr. Weldon was awarded an annual performance bonus equal to
128% of his target, an option/RSU award equal to 108% of his
target and a CLC grant of 125,000 units bringing him to
100% of his target accrual. Mr. Weldons total direct
compensation is below the 75th percentile of the Executive
Peer Group. Please see the table on page 40 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.
Mr. Caruso
Chief Financial Officer
Mr. Caruso is the Chief Financial Officer and has additional
responsibility for the Information Technology and Procurement
functions. Mr. Caruso has been instrumental in advancing
the Companys commitment to growth in emerging markets by
developing appropriate financial measures to assess future
investment in new markets. He has made progress in establishing
and applying financial metrics to the top priorities identified
by each business segment to ensure these goals return value to
the Company. Mr. Caruso has also driven operational
excellence by putting in place the capability for enhanced
financial analysis to refine the Companys strategy for
assessing potential acquisitions, research and development
productivity, improved cash flow, organic growth and headcount
among other metrics. In the area of Investor Relations,
Mr. Caruso has successfully developed a sound strategic
plan, which has ensured that the investment community has a
clear understanding and appreciation of the Companys
growth outlook and earned a reputation for clear, open
communication with members of the financial community.
Under Mr. Carusos direction, the Company made
significant progress on its standardization initiatives. In the
area of Procurement he has delivered savings above the annual
target amount. Mr. Caruso has also made progress on the
enhancement of processes that ensure supplier product material
safety and supply continuity. In the Information Technology
area, he has advanced progress in standardizing technology
platforms and in developing key metrics that will enhance the
Companys ability to track and deliver more efficient
technology solutions across the Companys businesses. He is
also recognized for developing strong finance talent across the
Company and is sought out by other executives in the Company for
his perspective.
For Mr. Caruso, the Committee approved a 3.6% merit
increase effective February 23, 2009. This increase brings
his base salary closer to the 50th percentile of the
Executive Peer Group for his position as CFO.
Mr. Caruso was also awarded an annual performance bonus
equal to 128% of his target based on the results of his function
and overall business performance. He also received an option/RSU
award equal to 104% of his target and a CLC grant of
40,000 units bringing him to 107% of his target accrual.
Mr. Carusos total compensation is below the
50th percentile of the Executive Peer Group. Please see the
table on page 40 of this Proxy Statement for the award
values for each pay component.
38
Ms. Poon
Vice Chairman, Worldwide Chairman, Pharmaceuticals
Group
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|
Results
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2008
|
|
|
Competitor
|
Financial Objective Pharmaceuticals
|
|
|
Goal
|
|
|
Actual
|
|
|
Composite
|
Sales Growth (operational)
|
|
|
(2.5%) - (3.1%)
|
|
|
|
(3.1%)
|
|
|
|
|
Total Sales Growth
|
|
|
Exceed competitor growth
|
|
|
|
(1.2%)
|
|
|
|
5.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Net Income Growth
|
|
|
(4.5%) - (0.6%)
|
|
|
|
(0.8%)(1)
|
|
|
|
7.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Metric
|
|
|
37.6% - 52.1%
|
|
|
|
41.5%
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
(1) |
Excluding special items.
|
Ms. Poon continued to position the Pharmaceutical Group for
future growth. Both operational sales and net income results
were in line with the business plan targets for this group. She
made advancements in gaining approval for four new molecular
entities (NMEs), transitioning four NMEs to full development and
also received approval for several line extensions in the EU and
U.S. Ms. Poon also led emerging market growth, namely in
Turkey, Mexico and the BRIC markets (Brazil, Russia,
India and China) where the Pharmaceutical Group has seen
significant growth in 2008 due to increased investment. Under
her leadership, the Pharmaceutical Group continued to pursue
opportunities to improve cost structure and increase efficiency
and productivity of key functions such as Research &
Development, Commercial, Supply Chain and Support Functions. The
outcome of her efforts has been the development of a hybrid
structure that preserves the principle of decentralization but
standardizes many activities to support the operating companies.
The restructuring was accomplished with minimal business
disruption.
Ms. Poon retired from the Company in March 2009. Due to her
retirement, the Committee did not grant Ms. Poon a merit
increase, option/RSU award or a CLC grant.
Ms. Poon was awarded an annual performance bonus equal to
114% of her target based on overall Company results and the
results of the Pharmaceutical Group. Please see the table on
page 40 of this Proxy Statement for the award values for
each pay component.
Mr. Deyo
Vice President, General Counsel
Mr. Deyo serves as General Counsel with responsibility for
the legal affairs and legal compliance activities of the Company
and its operating subsidiaries, and also has responsibility for
the Office of Corporate Secretary, Government Affairs and
Policy, and the Corporate Health Care Compliance, Privacy,
Security and Aviation Departments. All of these groups had
strong years under Mr. Deyos leadership. The Law
Department managed and provided critical advice and counsel to
the executives of the Company and its subsidiaries in connection
with numerous regulatory and litigation matters, governmental
investigations, commercial transactions, the protection of
intellectual property and day-to-day business activities. The
strong performance of the Law Department is reflected by, among
other things, effective legal guidance on significant
acquisitions and divestitures, including the Omrix, Mentor and
Beijing Dabao Cosmetics Co., Ltd. acquisitions, expansion of the
Companys patent and trademark estate and successful
resolution of a number of major patent and antitrust disputes.
Compliance programs across Johnson & Johnson continued
to improve, including the development of new guidance documents,
expanded training and improved reporting and implementation
processes. Mr. Deyo worked to strengthen the Companys
strong culture of ethical behavior in accordance with the Credo,
including meeting with business leaders across the globe to
discuss complex ethical issues and provide training in ethical
decision-making.
The Law Department and Government Affairs and Policy Groups
performed well in communicating the Companys position and
shaping public policy on a global basis on issues important to
the Company, including health care matters, civil justice reform
and intellectual property rights.
For Mr. Deyo, the Committee approved a 3.3% merit increase
effective February 23, 2009. His base salary is above the
75th percentile of the Executive Peer Group.
Mr. Deyo was also awarded an annual performance bonus equal
to 124% of his target, which was based on the results of his
function and overall business performance. He also received an
option/RSU
39
award equal to 113% of his target and a CLC grant of
22,000 units bringing him to 107% of his target accrual.
Mr. Deyos total compensation is above the
75th percentile of the Executive Peer Group. Please see the
table on this page below of this Proxy Statement for the
award values for each pay component.
Ms. Goggins
Worldwide Chairman, Consumer Group
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Results
|
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|
2008
|
|
|
Competitor
|
Financial Objective Consumer
|
|
|
Goal
|
|
|
Actual
|
|
|
Composite
|
Sales Growth (operational)
|
|
|
8.1% - 9.9%
|
|
|
|
8.3%
|
|
|
|
|
|
|
Total Sales Growth
|
|
|
Exceed competitor growth
|
|
|
|
10.8%
|
|
|
|
|
8.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Net Income Growth
|
|
|
25.2% - 30.4%
|
|
|
|
25.6%(1)
|
|
|
|
|
11.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Metric
|
|
|
(74.6%) - (93.0%)
|
|
|
|
(66.4%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Excluding special items.
|
Under Ms. Goggins leadership, the Consumer Group
delivered solid financial results and outpaced the competitor
composite on Sales and Net Income. As part of the continued
effort to integrate Pfizer Consumer Healthcare, all integration
initiatives have met or exceeded their 2008 target goals
including: synergy savings, information technology
implementations and plant closures, among other projects. In
addition, Ms. Goggins focused on innovation by
strengthening the product pipeline. Emphasis was put on the Baby
Care franchise pipeline, which was improved with a focus on
several new initiatives for 2009. The Consumer Group has also
made significant progress in expanding their consumer base via
new sales channels. Ms. Goggins has continued to advance
growth in emerging markets with Russia, China and India
exceeding market growth while Brazil lagged the market. In 2008,
the Consumer Group acquired Beijing Dabao Cosmetics, which
provided greater access to mid-tier consumers in the China
market.
For Ms. Goggins, the Committee approved a 3.6% merit
increase effective February 23, 2009. Her base salary is
below the 50th percentile of the Executive Peer Group.
Ms. Goggins was also awarded an annual performance bonus
equal to 109% of her target based on overall Company results and
the results of the Consumer Group. She also received an
option/RSU award equal to 106% of her target and a CLC grant of
70,000 units bringing her to 105% of her target accrual.
Ms. Goggins total compensation is below the
50th percentile of the Executive Peer Group. Please see the
table below for the award values for each pay component.
2009 Award Values
for Individual Pay Components
The following table shows each component of compensation
approved in February 2009 or to be accrued during fiscal 2009
for performance in 2008 for each Named Executive Officer. This
table does not include 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 43 of this Proxy
Statement.
|
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|
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|
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|
|
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|
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|
|
Annual
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
Annual
|
|
|
|
|
Approval/
|
|
Base
|
|
Performance
|
|
Options
|
|
Options
|
|
RSUs
|
|
RSUs
|
|
CLC
|
|
CLC
|
|
Total Planned
|
|
|
Award
|
|
Salary
|
|
Bonus
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Accrual
|
|
Accrual
|
|
Compensation
|
Name
|
|
Date
|
|
($)(1)
|
|
($)
|
|
(#)
|
|
($)(2)
|
|
(#)
|
|
($)(3)
|
|
(#)
|
|
($)(4)
|
|
($)
|
|
W. C. Weldon
|
|
|
2/9/2009
|
|
|
$
|
1,802,500
|
|
|
$
|
3,700,000
|
|
|
|
627,464
|
|
|
$
|
5,238,069
|
|
|
|
52,289
|
|
|
$
|
2,762,532
|
|
|
|
155,000
|
|
|
$
|
5,032,850
|
|
|
$
|
18,535,951
|
|
D. J. Caruso
|
|
|
2/9/2009
|
|
|
|
727,600
|
|
|
|
900,000
|
|
|
|
110,578
|
|
|
|
923,105
|
|
|
|
9,215
|
|
|
|
486,847
|
|
|
|
32,000
|
|
|
|
1,039,040
|
|
|
|
4,076,592
|
|
C. A. Poon
|
|
|
2/9/2009
|
|
|
|
1,047,500
|
(5)
|
|
|
1,500,000
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
2,547,500
|
(5)
|
R. C. Deyo
|
|
|
2/9/2009
|
|
|
|
835,900
|
(6)
|
|
|
1,000,000
|
|
|
|
138,865
|
|
|
|
1,159,245
|
|
|
|
11,572
|
|
|
|
611,372
|
|
|
|
32,000
|
|
|
|
1,039,040
|
|
|
|
4,645,557
|
|
C. A. Goggins
|
|
|
2/9/2009
|
|
|
|
800,100
|
|
|
|
1,050,000
|
|
|
|
144,008
|
|
|
|
1,202,179
|
|
|
|
12,001
|
|
|
|
634,037
|
|
|
|
42,000
|
|
|
|
1,363,740
|
|
|
|
5,050,056
|
|
|
|
(1)
|
Annual base salary effective February 23, 2009.
|
|
(2)
|
Option exercise price was $58.33. The grant date fair value as
calculated under FAS 123R was $8.35 per option share. The
Black-Scholes option valuation model was used with the following
assumptions: volatility of 19.5% 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 &
|
40
|
|
|
Johnson stock options with a life
of two years; dividend yield of 3.3%; risk-free interest rate of
2.71% 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
$58.33, 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
FAS 123R was $52.83 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 3.3% due to the lack of dividends paid on the RSUs
prior to vesting.
|
|
(4)
|
The annual CLC accrual value is calculated based on a CLC unit
value of $32.47. The annual CLC accrual represents the number of
units granted through February 9, 2009, that are vesting in
the next fiscal year.
|
|
(5)
|
Retired in March 2009. Amount reported here reflects
Mr. Poons
12-month
salary rate at the time of her retirement.
|
|
(6)
|
Incorrectly reported as $835,600 in Exhibit 10(v) to the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 28, 2008.
|
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 present and projected future compensation, as well as
analyses for hypothetical terminations and retirements to
consider the Companys obligations under such
circumstances. The tally sheets are not used to determine the
various elements of compensation or the actual amounts of
compensation to be approved.
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
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 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, in
addition to retaining the 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 unvested stock options. 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. 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.
41
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 actions the Board could
elect to take against a particular executive officer, depending
on all facts and circumstances as determined during their
review, include: 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 has 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 have 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 has approved the Executive Income Deferral Plan (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. Prior to 2009, CLC dividend equivalents also could be
deferred under the EIDP. 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.
42
EXECUTIVE AND
DIRECTOR COMPENSATION
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 2008 and, for those
executive officers who were named in the 2008 and 2007 Proxy
Statements, for fiscal 2007 and 2006. For a complete
understanding of the table, please read the narrative
disclosures that follow the table.
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G
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Change in
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Pension Value
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and Non-
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F
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Qualified
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A
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B
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D
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E
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Non-Equity
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Deferred
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H
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Name and
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Fiscal
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C
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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I
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Principal Position
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Year
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Salary($)
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Awards($)
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Awards($)
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Compensation($)
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Earnings($)
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Compensation($)
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Total($)
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William C. Weldon
Chairman/CEO
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2008
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$
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1,792,019
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$
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2,452,129
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$
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4,244,152
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$
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8,972,360
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$
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8,001,976
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$
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3,929,588
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$
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29,392,224
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2007
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1,725,000
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2,319,368
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7,575,164
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9,188,120
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6,613,649
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3,220,157
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30,641,458
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2006
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1,659,231
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2,041,054
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9,237,481
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7,461,440
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6,512,003
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2,665,725
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29,576,934
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Dominic J. Caruso
VP, Finance, CFO
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2008
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701,442
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275,992
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447,702
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1,640,500
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452,397
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402,995
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3,921,028
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2007
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550,000
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153,657
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389,832
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1,266,600
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298,386
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337,148
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2,995,623
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Christine A. Poon*
Vice Chairman
WW Chairman, Pharmaceuticals Group
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2008
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1,042,404
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912,366
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2,172,123
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3,721,500
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1,260,949
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1,293,151
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10,402,493
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2007
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1,008,846
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613,667
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2,557,952
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3,718,000
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1,046,961
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1,198,421
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10,143,847
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2006
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967,308
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270,596
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2,504,609
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2,389,600
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1,017,184
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1,021,083
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8,170,380
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Russell C. Deyo
VP, General Counsel
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2008
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804,096
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618,749
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1,084,866
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2,184,800
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1,917,729
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1,452,000
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8,062,240
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2007
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769,616
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579,872
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2,020,505
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2,746,200
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1,656,888
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1,291,360
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9,064,441
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2006
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735,385
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510,236
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2,550,323
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2,207,176
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1,759,994
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1,144,259
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8,907,373
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Colleen A. Goggins
WW Chairman, Consumer Group
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2008
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766,635
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741,682
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1,623,376
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2,619,860
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1,600,850
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1,137,869
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8,490,272
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2007
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729,923
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365,332
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1,625,017
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2,920,600
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1,257,220
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1,036,169
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7,934,261
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|
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 dollar amount of
RSU awards recognized, or expensed, for each of the
Named Executive Officers as compensation costs for financial
reporting purposes (excluding forfeiture assumptions) in
accordance with FAS 123R, for the listed fiscal year. These
awards were originally granted for performance prior to the
listed fiscal year and are expensed and included here in
accordance with SEC reporting guidelines.
Under FAS 123R, 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. The grant date
fair value for the 2006 RSU awards was $54.13 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 2.5% due to the lack of dividends
paid on the RSUs prior to vesting. The grant date fair value for
the 2007 RSU awards was $60.88 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 2.5%. The grant date fair value for the 2008
RSU awards was $56.61 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
2.9%. The fair value of RSU awards is expensed over the
36-month
vesting period, except for employees who are retirement
eligible (i.e., age 55 and over, with ten
years of Company service), for whom it is expensed over a
6-month
period. This is the case for all of the Named Executive Officers
with the exception of Mr. Caruso, Ms. Poon and
Ms. Goggins. For Mr. Caruso, the RSU award fair value
is expensed
43
over the entire
36-month
vesting period since he is not retirement eligible. In the case
of Ms. Goggins and Ms. Poon, in 2008 the RSU award
fair value was expensed over a
19-month and
33-month
vesting period, respectively, given that both will become
retirement eligible within the
36-month
vesting period. None of the Named Executive Officers forfeited
any RSU awards in fiscal 2008. The table that appears on
page 36 of this Proxy Statement shows for each Named
Executive Officer the total dollar amount of RSUs expensed
(excluding forfeiture assumptions) in fiscal 2008, along with a
breakdown of the grant date fair value of the RSU grants made in
February 2006, 2007 and 2008 for performance in the prior year
and the portion of each of those grants that was expensed in
fiscal 2008.
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 on pages 27 and 29 of this Proxy
Statement.
Option Awards
(Column E)
The amounts reported in Column E represent the dollar amount of
stock option awards recognized for each of the Named Executive
Officers as compensation costs for financial reporting purposes
(excluding forfeiture assumptions) in accordance with
FAS 123R for the listed fiscal year. These awards were
originally granted for performance prior to the listed fiscal
year and are expensed and included here in accordance with SEC
reporting guidelines.
Under FAS 123R, 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. Prior to 2006, expected volatility was based on
a five-year weekly historical volatility rate. Starting in 2006,
expected volatility represents a four-year daily historical
average volatility rate, plus 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
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Stock Option Grant Date
|
|
|
2/10/03
|
|
2/9/04
|
|
2/14/05
|
|
2/13/06
|
|
2/12/07
|
|
2/11/08
|
|
Risk Free Rate
|
|
|
3.08%
|
|
|
|
3.15%
|
|
|
|
3.72%
|
|
|
|
4.60%
|
|
|
|
4.78%
|
|
|
|
2.97%
|
|
Expected Volatility
|
|
|
28.0%
|
|
|
|
27.1%
|
|
|
|
25.2%
|
|
|
|
19.6%
|
|
|
|
14.7%
|
|
|
|
15.00%
|
|
Expected Life
|
|
|
5 yrs
|
|
|
|
5 yrs
|
|
|
|
5 yrs
|
|
|
|
6 yrs
|
|
|
|
6 yrs
|
|
|
|
6 yrs
|
|
Dividend Yield
|
|
|
1.35%
|
|
|
|
1.76%
|
|
|
|
1.93%
|
|
|
|
2.50%
|
|
|
|
2.50%
|
|
|
|
2.90%
|
|
Fair Value
|
|
$
|
13.59
|
|
|
$
|
13.11
|
|
|
$
|
15.50
|
|
|
$
|
12.22
|
|
|
$
|
11.68
|
|
|
$
|
7.66
|
|
The fair value of stock option awards is expensed over the
36-month
vesting period, except for employees who are retirement
eligible, for whom it is expensed over a
6-month
period. This is the case for all the Named Executive Officers
with the exception of Mr. Caruso, Ms. Poon and
Ms. Goggins. For Mr. Caruso, the stock option award
fair value is expensed over the entire
36-month
vesting period since he is not retirement eligible. In the case
of Ms. Goggins and Ms. Poon, in 2008 the stock option
award fair value was expensed over a
19-month and
33-month
vesting period, respectively, given that both will become
retirement eligible within the
36-month
vesting period. Therefore, the fiscal 2008, 2007 and 2006
compensation costs recognized for all of the Named Executive
Officers includes compensation expenses related to option grants
from prior years. None of the Named Executive Officers forfeited
any stock option awards in fiscal 2008, 2007 or 2006. The table
that appears on page 36 of this Proxy Statement sets forth
for each Named Executive Officer the total dollar amount of
options expensed (excluding forfeiture assumptions) in 2008,
along with a breakdown of the grant date fair values of the
annual option grants made in February of 2005, 2006, 2007 and
2008 for performance in the prior year and the portion of each
of those grants that was expensed in fiscal 2008.
44
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 on pages 27 and 29 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 and CLCs that
vested in the listed fiscal year. The specific amounts included
in Column F are shown below.
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
Value of CLC
|
|
|
|
|
Fiscal
|
|
Performance
|
|
Units That Vested in
|
|
|
Name
|
|
Year
|
|
Bonus ($)
|
|
Fiscal Year ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
|
2008
|
|
|
$
|
3,700,000
|
|
|
$
|
5,272,360
|
|
|
$
|
8,972,360
|
|
|
|
|
2007
|
|
|
|
3,500,000
|
|
|
|
5,688,120
|
|
|
|
9,188,120
|
|
|
|
|
2006
|
|
|
|
3,200,000
|
|
|
|
4,261,440
|
|
|
|
7,461,440
|
|
D. J. Caruso
|
|
|
2008
|
|
|
|
900,000
|
|
|
|
740,500
|
|
|
|
1,640,500
|
|
|
|
|
2007
|
|
|
|
735,000
|
|
|
|
531,600
|
|
|
|
1,266,600
|
|
C. A. Poon
|
|
|
2008
|
|
|
|
1,500,000
|
|
|
|
2,221,500
|
|
|
|
3,721,500
|
|
|
|
|
2007
|
|
|
|
1,060,000
|
|
|
|
2,658,000
|
|
|
|
3,718,000
|
|
|
|
|
2006
|
|
|
|
1,000,000
|
|
|
|
1,389,600
|
|
|
|
2,389,600
|
|
R. C. Deyo
|
|
|
2008
|
|
|
|
1,000,000
|
|
|
|
1,184,800
|
|
|
|
2,184,800
|
|
|
|
|
2007
|
|
|
|
1,018,500
|
|
|
|
1,727,700
|
|
|
|
2,746,200
|
|
|
|
|
2006
|
|
|
|
850,000
|
|
|
|
1,357,176
|
|
|
|
2,207,176
|
|
C. A. Goggins
|
|
|
2008
|
|
|
|
1,050,000
|
|
|
|
1,569,860
|
|
|
|
2,619,860
|
|
|
|
|
2007
|
|
|
|
1,060,000
|
|
|
|
1,860,600
|
|
|
|
2,920,600
|
|
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 described in the section
entitled Compensation Discussion and Analysis
Section II Compensation Framework and Pay
Components on pages 27, 30 and 31 of this Proxy
Statement. The dollar value of the vested CLCs reported in this
column was determined using the fiscal year-end 2007, 2006 and
2005 value of $29.62, $26.58 and $23.16 per CLC unit,
respectively.
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 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; 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. To reflect improvements in
life expectancy, the mortality table used to calculate present
values was changed
45
from the GAM1994 Table projected to 2004, to the UP-1994 Table
projected to 2008. No other actuarial assumptions changed
between fiscal year-end 2007 and fiscal year-end 2008.
Change in
Non-Qualified Deferred Compensation Earnings
Since 2006, companies have been required by SEC Rules to report
as compensation the above-market earnings on the
investment of funds in executives deferred income accounts
over a selected reference rate. Instructions and guidance on the
SEC Rules for these types of disclosures suggest using 120% of
the applicable federal long-term interest rate (or
AFR) as the reference rate against which to compare
such returns. However, since the CLC is a unique investment
vehicle for which there is no market and no obvious investment
vehicle against which to compare returns, based on the advice
from outside advisors at that time, the Company chose to compare
the unrealized earnings of vested CLCs against the change in the
price of the Companys Common Stock during the applicable
period.
This year, outside advisors, including the Committees
independent compensation consultant, have recommended that the
Company use the same reference rate (of 120% of AFR) for this
calculation as most other Companies use in order to provide
investors with more consistent and useful compensation
information that is less subject to significant distortion based
on market volatility. This change is consistent with the
Companys goal of providing meaningful compensation
disclosure that is not subject to significant
period-to-period
variation. The Company has also restated the amounts in Columns
G and I to reflect the use of 120% of AFR instead of the change
in the price of the Common Stock as the reference rate. Thus,
the figures in Columns G and I reported in this Proxy Statement
for 2006 and 2007 are different than what was previously
reported in the Companys 2008 and 2007 Proxy Statements.
The CLC unit value increased 9.62% in 2008, from $29.62 as of
fiscal year-end 2007 to $32.47 as of fiscal year-end 2008. This
increase in vested unit value is not a current cash payment and
is not part of the executives actual realized compensation
for the year. Executives will not receive any CLC unit value
until they retire or otherwise leave the Company, and the amount
they receive will be based on the CLC unit value at that time,
which could be higher, lower or the same as the current value.
120% of the AFR for December 2008 was 5.35%.
The above-market calculation for CLC units in deferred
compensation accounts in 2008 was 4.27%; the CLC unit value
increase of 9.62% minus the reference rate of return of 5.35%.
As an example, for Mr. Weldon, the actual increase in the
value of the vested CLC units in 2008 was $4,284,120, while the
above-market calculation was $1,902,044 of this amount. Again,
this is an unrealized amount and not actual compensation
received by the executive for the year.
The rate of return for the Companys Common Stock in 2008
was negative 13.09%. If the Company used this rate of return as
the reference rate, the above-market calculation would be
22.71%; the CLC unit value increase of 9.62% minus the reference
rate of return of negative 13.09%. For Mr. Weldon, the
amount in Column G using that above-market calculation would
have been $16,212,318 and the amount in Column I would have been
$37,648,521.
46
The table below shows the specific amounts of change in pension
value and above-market calculation for vested CLC units for
2006, 2007 and 2008 included in Column G using 120% of AFR as
the reference rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Above-Market
|
|
|
|
|
Fiscal
|
|
Change in
|
|
Calculation for
|
|
|
Name
|
|
Year
|
|
Pension Value($)
|
|
Vested CLCs($)
|
|
Total($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. C. Weldon
|
|
|
2008
|
|
|
$
|
6,099,932
|
|
|
$
|
1,902,044
|
|
|
$
|
8,001,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
4,585,754
|
|
|
|
2,027,895
|
|
|
|
6,613,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
4,227,514
|
|
|
|
2,284,489
|
|
|
|
6,512,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. J. Caruso
|
|
|
2008
|
|
|
|
311,945
|
|
|
|
140,452
|
|
|
|
452,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
166,784
|
|
|
|
131,602
|
|
|
|
298,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. A. Poon
|
|
|
2008
|
|
|
|
640,937
|
|
|
|
620,012
|
|
|
|
1,260,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
411,905
|
|
|
|
635,056
|
|
|
|
1,046,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
369,583
|
|
|
|
647,601
|
|
|
|
1,017,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. C. Deyo
|
|
|
2008
|
|
|
|
1,067,933
|
|
|
|
849,796
|
|
|
|
1,917,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
690,378
|
|
|
|
966,510
|
|
|
|
1,656,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
595,134
|
|
|
|
1,164,860
|
|
|
|
1,759,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. A. Goggins
|
|
|
2008
|
|
|
|
947,940
|
|
|
|
652,910
|
|
|
|
1,600,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
548,711
|
|
|
|
708,509
|
|
|
|
1,257,220
|
|
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 Companys 401(k) Savings Plan,
insurance premiums, and the value of CLC dividend equivalents
paid or deferred during the listed fiscal year on vested and
unvested CLCs. The following table shows the specific amounts
included in Column H.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of CLC
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
Dividend
|
|
|
|
|
|
|
Perquisites
|
|
|
|
Contributions
|
|
|
|
Equivalents
|
|
|
|
|
|
|
and Other
|
|
|
|
to Defined
|
|
|
|
Received
|
|
|
|
|
|
|
Personal
|
|
Tax
|
|
Contribution
|
|
Insurance
|
|
During the
|
|
|
|
|
Fiscal
|
|
Benefits(1)
|
|
Reimbursements(2)
|
|
Plans
|
|
Premiums
|
|
Fiscal
Year(3)
|
|
Total
|
Name
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
W. C. Weldon
|
|
|
2008
|
|
|
$
|
184,165
|
|
|
$
|
24,297
|
|
|
$
|
80,641
|
|
|
$
|
14,585
|
|
|
$
|
3,625,900
|
|
|
$
|
3,929,588
|
|
|
|
|
2007
|
|
|
|
179,231
|
|
|
|
11,017
|
|
|
|
77,625
|
|
|
|
3,884
|
|
|
|
2,948,400
|
|
|
|
3,220,157
|
|
|
|
|
2006
|
|
|
|
201,191
|
|
|
|
16,122
|
|
|
|
85,777
|
|
|
|
5,535
|
|
|
|
2,357,100
|
|
|
|
2,665,725
|
|
D. J. Caruso
|
|
|
2008
|
|
|
|
3,055
|
|
|
|
3,777
|
|
|
|
31,565
|
|
|
|
5,598
|
|
|
|
359,000
|
|
|
|
402,995
|
|
|
|
|
2007
|
|
|
|
31,994
|
|
|
|
5,393
|
|
|
|
10,348
|
|
|
|
5,913
|
|
|
|
283,500
|
|
|
|
337,148
|
|
C. A. Poon
|
|
|
2008
|
|
|
|
19,713
|
|
|
|
6,387
|
|
|
|
46,908
|
|
|
|
8,518
|
|
|
|
1,211,625
|
|
|
|
1,293,151
|
|
|
|
|
2007
|
|
|
|
41,587
|
|
|
|
8,402
|
|
|
|
45,398
|
|
|
|
9,534
|
|
|
|
1,093,500
|
|
|
|
1,198,421
|
|
|
|
|
2006
|
|
|
|
14,736
|
|
|
|
7,759
|
|
|
|
43,529
|
|
|
|
9,309
|
|
|
|
945,750
|
|
|
|
1,021,083
|
|
R. C. Deyo
|
|
|
2008
|
|
|
|
58,020
|
|
|
|
18,335
|
|
|
|
36,184
|
|
|
|
11,161
|
|
|
|
1,328,300
|
|
|
|
1,452,000
|
|
|
|
|
2007
|
|
|
|
50,084
|
|
|
|
4,403
|
|
|
|
34,633
|
|
|
|
3,440
|
|
|
|
1,198,800
|
|
|
|
1,291,360
|
|
|
|
|
2006
|
|
|
|
41,512
|
|
|
|
4,306
|
|
|
|
33,092
|
|
|
|
4,654
|
|
|
|
1,060,695
|
|
|
|
1,144,259
|
|
C. A. Goggins
|
|
|
2008
|
|
|
|
23,890
|
|
|
|
4,885
|
|
|
|
34,499
|
|
|
|
6,570
|
|
|
|
1,068,025
|
|
|
|
1,137,869
|
|
|
|
|
2007
|
|
|
|
32,635
|
|
|
|
2,857
|
|
|
|
32,847
|
|
|
|
3,930
|
|
|
|
963,900
|
|
|
|
1,036,169
|
|
|
|
(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 for that individual. The
aggregate value of perquisites and other personal benefits for
Mr. Weldon in fiscal 2008 was $184,165. This amount
comprised: personal use of Company aircraft ($154,045); car and
driver for commutation and other personal transportation
($26,595); executive dining room meals; and home security system
monitoring fees. The aggregate value of perquisites and other
personal benefits for Mr. Caruso in fiscal 2008 was $3,055.
The aggregate value of perquisites and other personal benefits
for Ms. Poon in fiscal 2008 was $19,713. This amount
comprised: personal use of Company aircraft ; car and driver for
commutation and other personal transportation; executive dining
room meals; and home security monitoring fees. The aggregate
value of perquisites and other personal benefits for
Mr. Deyo in fiscal 2008 was $58,020. This amount
comprised: personal use of Company aircraft ($53,963);
executive dining room meals; and home security system monitoring
fees. The aggregate value of perquisites and other personal
benefits for Ms. Goggins in fiscal 2008 was $23,890. This amount
comprised: personal use of Company aircraft; executive dining
room meals; and home security system monitoring fees. Amounts
for fiscal 2007 for each of these Named Executive Officers were
reported in the Companys 2008 Proxy Statement. Amounts for
fiscal 2006 for Mr. Weldon, Ms. Poon and Mr. Deyo were
reported in the Companys 2007 Proxy Statement.
|
47
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 (excluding commuting)
and do not receive tax assistance from the Company with respect
to these amounts.
|
|
(2)
|
Tax reimbursements on executive life insurance premiums and use
of Company aircraft for business purposes. The practice of
providing tax reimbursements on executive life insurance
premiums was discontinued starting in 2009.
|
|
(3)
|
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. Prior to 2009, participants had the option to
defer the payment of CLC dividend equivalents. Mr. Weldon
elected to defer all dollars over $900,000 of his CLC dividend
equivalents for 2008. CLC dividend equivalents deferred in 2008
are also reported in Column B of the Non-Qualified Deferred
Compensation 2008 table on page 52 of this Proxy
Statement. The option to defer payment of CLC dividend
equivalents was discontinued in 2009. The amounts of dividend
equivalents on unvested CLC units received in 2008 were for
Mr. Weldon: $927,656, Mr. Caruso: $159,755,
Ms. Poon: $332,075, Mr. Deyo: $122,778, and
Ms. Goggins: $141,805. Commencing with the CLC units to be
granted in 2010, dividend equivalents will not be paid out as
current compensation on CLC units that have not yet vested. See
Compensation Discussion and Analysis
Section II Compensation Framework and Pay
Components Components of Executive
Compensation Long-Term Incentives
Certificates of Long-term Compensation Dividend
Equivalents on page 31 of this Proxy Statement.
|
Total
Compensation (Column I)
The amounts reported in Column I are the sum of Columns C
through H for each of the Named Executive Officers. All
compensation amounts reported in Column I include amounts
paid and amounts deferred.
GRANTS OF
PLAN-BASED AWARDS 2008
The following table provides information concerning the annual
performance bonus and long-term incentive awards made to each of
the Named Executive Officers in fiscal 2008. For a complete
understanding of the table, please read the narrative
disclosures that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payouts
|
|
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Under Non-Equity
|
|
H
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
Incentive Plan
|
|
All Other
|
|
Option
|
|
J
|
|
K
|
|
L
|
|
M
|
|
|
|
|
|
|
Awards
|
|
Awards
|
|
Stock
|
|
Awards:
|
|
Exercise
|
|
Closing
|
|
Grant
|
|
Grant
|
|
|
|
|
|
|
(CLCs)
|
|
(Annual
|
|
Awards:
|
|
Number of
|
|
or Base
|
|
Market Price
|
|
Date Fair
|
|
Date Fair
|
|
|
|
|
|
|
C
|
|
D
|
|
Performance Bonus)
|
|
Number of
|
|
Securities
|
|
Price of
|
|
on the
|
|
Value of
|
|
Value of
|
|
|
|
|
B
|
|
Units
|
|
Unit
|
|
E
|
|
F
|
|
G
|
|
Shares of
|
|
Underlying
|
|
Option
|
|
Grant
|
|
Stock
|
|
Option
|
|
|
A
|
|
Grant
|
|
Granted
|
|
Price
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Stock or
|
|
Options
|
|
Awards
|
|
Date
|
|
Awards
|
|
Awards
|
|
|
Name
|
|
Date
|
|
( # )
|
|
($/Unit)
|
|
($)
|
|
($)
|
|
($)
|
|
Units ( # )
|
|
( # )
|
|
($/Sh)
|
|
($)
|
|
($)
|
|
($)
|
|
|
W. C. Weldon
|
|
2/11/08
|
|
|
200,000
|
|
|
$
|
29.62
|
|
|
$
|
0
|
|
|
$
|
2,884,000
|
|
|
|
N/A
|
|
|
|
43,320
|
|
|
|
519,838
|
|
|
$
|
61.75
|
|
|
$
|
61.88
|
|
|
$
|
2,452,129
|
|
|
$
|
3,979,360
|
|
|
|
|
|
D. J. Caruso
|
|
2/11/08
|
|
|
25,000
|
|
|
|
29.62
|
|
|
|
0
|
|
|
|
702,500
|
|
|
$
|
1,405,000
|
|
|
|
6,883
|
|
|
|
82,591
|
|
|
|
61.75
|
|
|
|
61.88
|
|
|
|
389,612
|
|
|
|
632,234
|
|
|
|
|
|
C. A. Poon
|
|
2/11/08
|
|
|
|
|
|
|
29.62
|
|
|
|
0
|
|
|
|
1,309,375
|
|
|
|
2,618,750
|
|
|
|
14,170
|
|
|
|
170,040
|
|
|
|
61.75
|
|
|
|
61.88
|
|
|
|
802,093
|
|
|
|
1,301,656
|
|
|
|
|
|
R. C. Deyo
|
|
2/11/08
|
|
|
|
|
|
|
29.62
|
|
|
|
0
|
|
|
|
809,500
|
|
|
|
1,619,000
|
|
|
|
10,931
|
|
|
|
131,174
|
|
|
|
61.75
|
|
|
|
61.88
|
|
|
|
618,749
|
|
|
|
1,004,137
|
|
|
|
|
|
C. A. Goggins
|
|
2/11/08
|
|
|
|
|
|
|
29.62
|
|
|
|
0
|
|
|
|
965,625
|
|
|
|
1,931,250
|
|
|
|
11,134
|
|
|
|
133,603
|
|
|
|
61.75
|
|
|
|
61.88
|
|
|
|
630,240
|
|
|
|
1,022,731
|
|
|
|
|
|
Non-Equity
Incentive Plan Awards (Columns C and D)
The amounts reported in Columns C and D relate to the CLCs
awarded to the Named Executive Officers in February 2008 for the
2007 performance year. The value of CLCs granted in 2008 was
based on the CLC unit value as of fiscal year-end 2007, which
was $29.62. The CLC unit value is subject to increase or
decrease based on the performance of the Company. The
calculation of CLC unit value and certain terms and conditions
of CLCs are described in the section entitled Compensation
Discussion and Analysis Section II
Compensation Framework and Pay Components on
pages 27, 30 and 31 of this Proxy Statement.
48
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 performance bonus award amounts for the 2008
performance year that were set in 2008. No maximum performance
bonus award amount as a percentage of base salary was set for
the Chairman/CEO. Actual performance bonus payments, as
reflected in Column F of the Summary Compensation Table on
page 43 of this Proxy Statement, were made in recognition
of 2008 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 29 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 2008 for the 2007 performance year. Under the terms
of the LTI 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 2008, this value was $0.13 lower 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 and 29 of this Proxy Statement.
Under FAS 123R, 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 $56.61 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 2.9%.
Under FAS 123R, 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 10, 2018 had a grant date present value of
$7.66 per option share. The Black-Scholes model was used
with the following assumptions: volatility of 15.00% based on a
blended rate of four-year daily historical average volatility
rate, and a five-week average implied volatility rate based on
at-the-money traded stock options with a life of two years;
dividend yield of 2.9%; risk-free interest rate of 2.97% based
on a U.S. Treasury rate of six years; and a six-year option
life.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2008
The following table provides information concerning the
unexercised stock options outstanding and unvested RSUs for each
of the Named Executive Officers as of fiscal
year-end
2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
Number of Securities
|
|
F
|
|
|
|
Shares or
|
|
Shares or
|
|
|
|
|
|
|
Underlying Unexercised
|
|
Option
|
|
G
|
|
Units of
|
|
Units of
|
|
|
B
|
|
C
|
|
Options ( # )
|
|
Exercise
|
|
Option
|
|
Stock That
|
|
Stock That
|
A
|
|
Grant
|
|
Vesting
|
|
D
|
|
E
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
Name
|
|
Date
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Vested ( # )
|
|
Vested ($)
|
|
W. C. Weldon
|
|
|
12/2/99
|
|
|
|
12/3/02
|
|
|
|
160,000
|
|
|
|
|
|
|
$
|
50.08
|
|
|
|
12/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
11/30/00
|
|
|
|
12/1/03
|
|
|
|
240,000
|
|
|
|
|
|
|
|
50.69
|
|
|
|
11/29/10
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
37,710
|
|
|
$
|
2,208,298
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
457,178
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
38,098
|
|
|
|
2,231,019
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
519,838
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
43,320
|
|
|
|
2,536,819
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
Number of Securities
|
|
F
|
|
|
|
Shares or
|
|
Shares or
|
|
|
|
|
|
|
Underlying Unexercised
|
|
Option
|
|
G
|
|
Units of
|
|
Units of
|
|
|
B
|
|
C
|
|
Options ( # )
|
|
Exercise
|
|
Option
|
|
Stock That
|
|
Stock That
|
A
|
|
Grant
|
|
Vesting
|
|
D
|
|
E
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
Name
|
|
Date
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Vested ( # )
|
|
Vested ($)
|
|
D. J. Caruso
|
|
|
10/7/99
|
|
|
|
10/8/03
|
|
|
|
40,420
|
|
|
|
|
|
|
$
|
47.39
|
|
|
|
10/6/09
|
|
|
|
|
|
|
|
|
|
|
|
|
11/30/00
|
|
|
|
12/1/03
|
|
|
|
19,800
|
|
|
|
|
|
|
|
50.69
|
|
|
|
11/29/10
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
5,142
|
|
|
$
|
301,116
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
41,146
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
3,429
|
|
|
|
200,802
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
82,591
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
6,883
|
|
|
|
403,068
|
|
C. A. Poon
|
|
|
11/24/00
|
|
|
|
11/25/03
|
|
|
|
160,000
|
|
|
|
|
|
|
|
47.63
|
|
|
|
11/23/10
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/02
|
|
|
|
2/12/05
|
|
|
|
150,000
|
|
|
|
|
|
|
|
57.30
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/03
|
|
|
|
2/11/06
|
|
|
|
135,000
|
|
|
|
|
|
|
|
52.20
|
|
|
|
2/8/13
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/04
|
|
|
|
2/10/07
|
|
|
|
175,000
|
|
|
|
|
|
|
|
53.93
|
|
|
|
2/7/14
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/05
|
|
|
|
2/15/08
|
|
|
|
185,000
|
|
|
|
|
|
|
|
66.18
|
|
|
|
2/13/15
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/06
|
|
|
|
2/14/09
|
|
|
|
|
|
|
|
205,691
|
|
|
|
58.34
|
|
|
|
2/12/16
|
|
|
|
17,141
|
|
|
|
1,003,777
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
205,730
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
17,144
|
|
|
|
1,003,953
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
170,040
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
14,170
|
|
|
|
829,795
|
|
R. C. Deyo
|
|
|
12/2/99
|
|
|
|
12/3/02
|
|
|
|
100,000
|
|
|
|
|
|
|
|
50.08
|
|
|
|
12/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
11/30/00
|
|
|
|
12/1/03
|
|
|
|
170,000
|
|
|
|
|
|
|
|
50.69
|
|
|
|
11/29/10
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
9,427
|
|
|
|
552,045
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
114,294
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
9,525
|
|
|
|
557,784
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
131,174
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
10,931
|
|
|
|
640,119
|
|
C. A. Goggins
|
|
|
12/2/99
|
|
|
|
12/3/02
|
|
|
|
24,000
|
|
|
|
|
|
|
|
50.08
|
|
|
|
12/1/09
|
|
|
|
|
|
|
|
|
|
|
|
|
11/30/00
|
|
|
|
12/1/03
|
|
|
|
50,000
|
|
|
|
|
|
|
|
50.69
|
|
|
|
11/29/10
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
120,000
|
|
|
|
|
|
|
|
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
|
|
|
|
9,363
|
|
|
|
548,297
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
114,294
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
9,525
|
|
|
|
557,784
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
133,603
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
11,134
|
|
|
|
652,007
|
|
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 26, 2008, which was the last
business day of fiscal 2008, of $58.56.
OPTION EXERCISES
AND STOCK VESTED 2008
The following table provides information concerning the
exercises of stock options during fiscal 2008 on an aggregated
basis for each of the Named Executive Officers. No RSUs vested
during 2008 for any of the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of Shares
|
|
|
|
|
Acquired
|
|
Value Realized
|
Name
|
|
on Exercise ( # )
|
|
on Exercise ($)
|
|
W. C. Weldon
|
|
|
120,000
|
|
|
$
|
2,859,600
|
|
D. J. Caruso
|
|
|
|
|
|
|
|
|
C. A. Poon
|
|
|
|
|
|
|
|
|
R. C. Deyo
|
|
|
40,000
|
|
|
|
736,800
|
|
C. A. Goggins
|
|
|
28,000
|
|
|
|
872,760
|
|
50
PENSION
BENEFITS 2008
The following table provides information as of fiscal year-end
2008 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
|
|
Benefits ($)
|
|
W. C. Weldon
|
|
Salaried Pension Plan
|
|
|
37.33
|
|
|
|
62
|
|
|
$
|
1,190,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
32,994,000
|
|
D. J. Caruso
|
|
Salaried Pension Plan
|
|
|
9.00
|
|
|
|
62
|
|
|
|
157,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
676,000
|
|
C. A. Poon
|
|
Salaried Pension Plan
|
|
|
8.08
|
|
|
|
62
|
|
|
|
196,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
2,180,000
|
|
R. C. Deyo
|
|
Salaried Pension Plan
|
|
|
23.33
|
|
|
|
62
|
|
|
|
699,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
5,679,000
|
|
C. A. Goggins
|
|
Salaried Pension Plan
|
|
|
27.08
|
|
|
|
62
|
|
|
|
582,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
4,805,000
|
|
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 times 1.667% times years of service prior to 2005, plus
(2) 1.55% times years of service after 2004, minus
(3) age 65 Social Security benefits times 1.429% times
years of service. For this formula, final average earnings are
defined as the average of the highest consecutive 60 months
out of the last 120 months of pay, including base salary,
bonus and dividend equivalents paid or deferred on non-vested
CLC units.
Prior to 2009, dividend equivalents on unvested CLC units were
considered as pensionable earnings under the Companys U.S.
pension plans. Following a comparison of the executive
retirement benefits provided by the Company versus those
provided by the Competitor Composite and the Executive Peer
Group, the definition of pensionable earnings under the U.S.
pension plans was amended, effective February 1, 2009, to
eliminate the inclusion of dividend equivalents on unvested CLC
units. The change was made in recognition that our peer
companies do not include dividend equivalents, or any other form
of long-term incentives, in the definition of pensionable
earnings. Following this change, the Companys retirement
program continues to rank between the
50th and
75th
percentiles of the market. Because the change does not affect
the pension earned as of fiscal year-end 2008, the present
values in the above table are unaffected. Dividend equivalents
on vested CLC units have never been included in pensionable
earnings.
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 ($230,000 in 2008). The
Excess Pension Plan is a restorative supplemental retirement
plan that uses the same formula (including the definition of
final average earnings) as the Salaried Pension Plan without
applying the IRS pay limits and is offset by amounts paid from
the Salaried Pension Plan. Any U.S. non-union employee may
participate in the Excess Pension Plan if his or her covered
compensation exceeds the IRS limit.
While a present value is shown in the table, benefits are not
available as a lump sum and must be taken in the form of an
annuity. Present values were calculated using the same actuarial
assumptions applied in the calculation of pension liabilities
reported in the Companys 2008 Annual Report (discount rate
of 6.50%, mortality according to the
UP-1994
table projected to 2008).
No payments were made in 2008 under the Companys pension
plans to any of the Named Executive Officers.
51
NON-QUALIFIED
DEFERRED COMPENSATION 2008
The following table provides information with respect to the
Companys defined contribution and non-tax-qualified
compensation deferral plans for each of the Named Executive
Officers for 2008. For a complete understanding of the table,
please read the narrative disclosures that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
C
|
|
D
|
|
E
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
A
|
|
Contributions in
|
|
Contributions in
|
|
Earnings (Losses) in
|
|
Balance at
|
Name
|
|
Last FY($)
|
|
Last FY($)
|
|
Last FY($)
|
|
Last FYE($)
|
|
W. C. Weldon
|
|
$
|
4,042,908
|
|
|
$
|
5,342,651
|
|
|
$
|
(410,307
|
)
|
|
$
|
63,680,344
|
|
D. J. Caruso
|
|
|
110,225
|
|
|
|
761,715
|
|
|
|
291,492
|
|
|
|
3,768,693
|
|
C. A. Poon
|
|
|
158,961
|
|
|
|
2,258,058
|
|
|
|
1,098,524
|
|
|
|
17,183,810
|
|
R. C. Deyo
|
|
|
152,775
|
|
|
|
1,210,634
|
|
|
|
1,688,539
|
|
|
|
23,286,109
|
|
C. A. Goggins
|
|
|
158,961
|
|
|
|
1,594,009
|
|
|
|
1,313,359
|
|
|
|
17,817,842
|
|
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,
100% of annual performance bonus and 100% of dividend
equivalents on CLCs.
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 2007 unit value of $29.62. The value of CLCs that
vested during the fiscal year is also included in Column F of
the Summary Compensation Table on page 43 of this Proxy
Statement. The specific amounts included in Column C are shown
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
Contribution to
|
|
Value of CLC
|
|
|
|
|
Excess Savings
|
|
Units That Vested
|
|
|
Name
|
|
Plan($)
|
|
in Last FY($)
|
|
Total($)
|
|
W. C. Weldon
|
|
$
|
70,291
|
|
|
$
|
5,272,360
|
|
|
$
|
5,342,651
|
|
D. J. Caruso
|
|
|
21,215
|
|
|
|
740,500
|
|
|
|
761,715
|
|
C. A. Poon
|
|
|
36,558
|
|
|
|
2,221,500
|
|
|
|
2,258,058
|
|
R. C. Deyo
|
|
|
25,834
|
|
|
|
1,184,800
|
|
|
|
1,210,634
|
|
C. A. Goggins
|
|
|
24,149
|
|
|
|
1,569,860
|
|
|
|
1,594,009
|
|
Aggregate
Earnings (Losses) in Last Fiscal Year (Column D)
The amounts reported in Column D include earnings (losses) 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 $29.62 as of fiscal year-end 2007 to $32.47 as of
fiscal year-end 2008. The portion of the change in value on all
vested CLCs as of fiscal year-end 2008 deemed to be above-market
returns are included in Column G of the Summary Compensation
Table on page 43 of this Proxy Statement. The specific
amounts included in Column D are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Losses) on Income
|
|
|
|
|
|
|
Deferral Program and
|
|
Change in Value on All
|
|
|
|
|
Excess and Intl
|
|
Vested CLCs at Last
|
|
|
Name
|
|
Savings Plans($)
|
|
FYE($)
|
|
Total($)
|
|
W. C. Weldon
|
|
$
|
(4,694,427
|
)
|
|
$
|
4,284,120
|
|
|
$
|
(410,307
|
)
|
D. J. Caruso
|
|
|
(24,858
|
)
|
|
|
316,350
|
|
|
|
291,492
|
|
C. A. Poon
|
|
|
(297,975
|
)
|
|
|
1,396,499
|
|
|
|
1,098,524
|
|
R. C. Deyo
|
|
|
(225,522
|
)
|
|
|
1,914,061
|
|
|
|
1,688,539
|
|
C. A. Goggins
|
|
|
(157,240
|
)
|
|
|
1,470,599
|
|
|
|
1,313,359
|
|
52
Aggregate Balance
at Last Fiscal Year-End (Column E)
The amounts reported in Column E include the full balance from
the Executive Income Deferral Plan, Excess Savings Plan and
International Savings Plan. These amounts also include the full
value (at $32.47) of all vested CLCs held by each Named
Executive Officer as of fiscal year-end 2008. The specific
amounts included in Column E are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Balance of Income
|
|
Full Value of All
|
|
|
|
|
Deferral Plan and Excess
|
|
Vested CLCs
|
|
|
Name
|
|
and Intl Savings Plans ($)
|
|
at Last FYE ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
$
|
14,871,440
|
|
|
$
|
48,808,904
|
|
|
$
|
63,680,344
|
|
D. J. Caruso
|
|
|
164,523
|
|
|
|
3,604,170
|
|
|
|
3,768,693
|
|
C. A. Poon
|
|
|
1,273,510
|
|
|
|
15,910,300
|
|
|
|
17,183,810
|
|
R. C. Deyo
|
|
|
1,479,257
|
|
|
|
21,806,852
|
|
|
|
23,286,109
|
|
C. A. Goggins
|
|
|
1,063,322
|
|
|
|
16,754,520
|
|
|
|
17,817,842
|
|
Each of the Named Executive Officers participates in two or more
of the following non-tax qualified deferred compensation
programs: Excess Savings Plan (all Named Executive Officers),
International Savings Plan (Mr. Weldon and
Ms. Goggins), Executive Income Deferral Plan
(Messrs. Weldon and Deyo and Ms. Poon and
Ms. Goggins) and CLC Plan (all Named Executive Officers).
The Companys 401(k) Savings Plan provides a matching
contribution of 4.5% of base salary for employees contributing
at least 6% of base salary. Base salary covered under this plan
is limited by the IRS (to $230,000 in 2008). The Excess Savings
Plan credits an unfunded account with 4.5% of base salary in
excess of the IRS limit. The rate of earnings credited to the
Excess Savings Plan accounts is equal to actual earnings
(losses) in the Balanced Fund investment option within the
Companys 401(k) Savings Plan ((29.5)% in 2008).
Distribution of Excess Savings Plan account balances will be
made as a single lump sum shortly after retirement or
separation, unless the participant made an irrevocable deferral
or installment election before December 15, 2008.
Mr. Weldon and Ms. Goggins have each worked at
Johnson & Johnson locations outside of the United
States where no U.S. tax-qualified savings plan was
available. As a result, accounts in the International Savings
Plan were credited with 3% of base salary for those periods. The
rate of earnings credited to the International Savings Plan
accounts is equal to actual earnings in the Fixed Interest Fund
investment option within the Companys 401(k) Savings Plan
(5.1% in 2008). Distribution of International Savings Plan
accounts are made upon retirement or separation from the Company.
Under the Executive Income Deferral Program, certain executives
are eligible to defer up to 50% of base salary and 100% of
performance bonus until they retire from the Company. The option
to defer payment of CLC dividend equivalents was discontinued in
2009. Distribution of amounts deferred before 2005 can begin up
to 10 years after separation or retirement and be paid as a
lump sum or in up to 15 annual installments. Payment of amounts
deferred after 2004 begins on the later of (i) six months
after retirement; or (ii) January of the year following
retirement. Deferred amounts are credited with earnings equal to
the actual return on three investment options:
Johnson & Johnson Common Stock, One-Year Treasury
Bills, or the Balanced Fund investment option within the
Companys 401(k) Savings Plan. The allocation among these
options is elected by the executive officer. For 2008, the
return on the One-Year Treasury Bill option was 3.29% and the
aggregate return (loss) on Johnson & Johnson Common
Stock for these participants was (13.09)%.
No withdrawals or distributions were made to any of the Named
Executive Officers under any of the Companys defined
contribution or non-tax-qualified compensation deferral plans in
2008.
53
DIRECTOR
COMPENSATION 2008
The following table provides information concerning the
compensation of the Companys Non-Employee Directors for
2008. Directors who are employees of the Company receive no
additional compensation for their services as Directors or as
members of Board committees. For a complete understanding of the
table, please read the footnotes and the narrative disclosures
that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
C
|
|
D
|
|
|
A
|
|
or Paid
|
|
Stock
|
|
All Other
|
|
E
|
Name
|
|
in Cash($)
|
|
Awards($)
|
|
Compensation($)
|
|
Total($)
|
|
M. S. Coleman
|
|
$
|
110,000
|
|
|
$
|
99,973
|
|
|
$
|
29,344
|
|
|
$
|
239,317
|
|
J. G. Cullen
|
|
|
130,000
|
|
|
|
99,973
|
|
|
|
9,344
|
|
|
|
239,317
|
|
M. M. E. Johns
|
|
|
110,000
|
|
|
|
99,973
|
|
|
|
28,717
|
|
|
|
238,690
|
|
A. G. Langbo
|
|
|
120,000
|
|
|
|
99,973
|
|
|
|
29,344
|
|
|
|
249,317
|
|
S. L. Lindquist
|
|
|
110,000
|
|
|
|
99,973
|
|
|
|
9,344
|
|
|
|
219,317
|
|
L. F. Mullin
|
|
|
120,000
|
|
|
|
99,973
|
|
|
|
29,344
|
|
|
|
249,317
|
|
W. D. Perez
|
|
|
110,000
|
|
|
|
99,973
|
|
|
|
22,906
|
|
|
|
232,879
|
|
C. Prince
|
|
|
116,861
|
(1)
|
|
|
99,973
|
|
|
|
5,604
|
|
|
|
222,438
|
|
S. S
Reinemund(2)
|
|
|
38,000
|
(3)
|
|
|
99,973
|
|
|
|
121,902
|
|
|
|
259,875
|
|
D. Satcher
|
|
|
120,000
|
|
|
|
99,973
|
|
|
|
9,344
|
|
|
|
229,317
|
|
|
|
(1)
|
Pro rated for partial service year as committee Chairman.
|
|
(2)
|
Retired and did not stand for re-election in 2008.
|
|
(3)
|
Pro rated for partial service year.
|
Fees Earned or
Paid in Cash (Column B)
In 2008, each Non-Employee Director received an annual fee of
$100,000 for his or her service as a member of the
Companys Board of Directors. In addition, Non-Employee
Directors received an annual fee of $5,000 for service on a
Board committee, or $15,000 if he or she was Chairman of the
committee. The Presiding Director was paid an additional annual
fee of $10,000. Non-Employee Directors were eligible to receive
meeting fees of $1,500 per day if they attended a committee
meeting held on a day other than a Board meeting day. Meeting
fees were not paid for participation in telephonic committee
meetings.
Stock Awards
(Column C)
Each Non-Employee Director receives non-retainer equity
compensation in the first quarter of each year under the LTI
Plan in the form of shares of restricted Common Stock having a
value of $100,000 on the grant date. Accordingly, each
Non-Employee Director was granted 1,619 shares of
restricted Common Stock under the LTI Plan in February 2008 for
service on the Board in 2007 and 1,714 shares of restricted
Common Stock in February 2009 for service on the Board in 2008.
The restricted shares become freely transferable on the third
anniversary of the grant date. (In addition, each Non-Employee
Director receives a one-time grant of 1,000 shares of
unrestricted Common Stock upon first becoming a member of the
Board.) All figures in Column C represent the dollar amount
recognized for financial statement reporting purposes with
respect to fiscal year 2008, which for all grants was equal to
the grant date fair value, computed in accordance with FAS 123R.
54
The aggregate number of stock options outstanding for each
Non-Employee Director and Mr. Reinemund as of
December 28, 2008 is indicated in the table below. The
compensation costs for all of these options were recognized by
the Company for financial reporting purposes prior to fiscal
2006. The Company ceased granting stock options to Non-Employee
Directors after February 2004.
|
|
|
|
|
Name
|
|
Options ( # )
|
|
M. S. Coleman
|
|
|
7,600
|
|
J. G. Cullen
|
|
|
26,250
|
|
M. M. E. Johns
|
|
|
|
|
A. G. Langbo
|
|
|
26,250
|
|
S. L. Lindquist
|
|
|
7,600
|
|
L. F. Mullin
|
|
|
26,250
|
|
W. D. Perez
|
|
|
|
|
C. Prince
|
|
|
|
|
S. S Reinemund
|
|
|
7,600
|
|
D. Satcher
|
|
|
13,900
|
|
Non-Employee Directors are subject to the Stock Ownership
Guidelines for Directors and Executive Officers described in the
section entitled Compensation Discussion and
Analysis Section IV Additional
Information Concerning Executive Compensation Stock
Ownership Guidelines for Directors and Executive Officers
on page 41 of this Proxy Statement.
All Other
Compensation (Column D)
Amounts in Column D reflect the dollar value of dividend
payments on shares of restricted Common Stock in 2008,
contributions made under the Companys charitable matching
gift program, and, in the case of Mr. Reinemund, amounts
paid upon retirement from the Board under the Deferred Fee Plan
for Non-Employee Directors.
Non-Employee Directors are eligible to participate in the
Companys charitable matching gift program for employees,
pursuant to which the Company will contribute, on a
two-to-one
basis, up to $20,000 per year per employee or Non-Employee
Director to educational and certain other charitable
institutions. In 2008, Drs. Coleman and Johns and Messrs.
Langbo, Mullin and Perez participated in this program with the
Company contributing $20,000 on behalf of each Director
participant.
Deferred Fee Plan
for Non-Employee Directors
Under the Deferred Fee Plan for Non-Employee Directors, a
Non-Employee Director may elect to defer payment of all or a
portion of his or her fees until or beyond termination of his or
her directorship. Deferred fees earn additional amounts based on
a hypothetical investment in the Companys Common Stock.
(Non-Employee Directors who have served on the Board since prior
to January 1, 1996 instead may elect to invest
deferred fees into CLCs under the CLC Plan up to the time of
termination of his/her directorship. Currently, no Directors
have elected this option.) All Common Stock equivalent units
held in each Non-Employee Directors Deferred Fee Account
receive dividend equivalents in the same amount and at the same
time as dividends on the Companys Common Stock.
Additional
Arrangements
The Company pays for or provides (or reimburses Directors for
out-of-pocket
costs incurred for) transportation, hotel, food and other
incidental expenses related to attending Board and committee
meetings or participating in director education programs and
other director orientation or educational meetings.
55
AUDIT COMMITTEE
REPORT
The Audit Committee reports to and acts on behalf of the Board
of Directors of the Company by providing oversight of the
financial management, legal compliance programs, independent
auditors and financial reporting controls and accounting
policies and procedures of the Company. The Companys
management is responsible for preparing the Companys
financial statements and systems of internal control and the
independent auditors are responsible for auditing those
financial statements and expressing its opinion as to whether
the financial statements present fairly, in all material
respects, the financial position, results of operations and cash
flows of the Company in conformity with generally accepted
accounting principles. The Audit Committee is responsible for
overseeing the conduct of these activities by the Companys
management and the independent auditors.
In this context, the Audit Committee has met and held
discussions with management and the internal and independent
auditors (including private sessions with the internal auditors,
the independent auditors, the Chief Financial Officer and the
General Counsel at each Audit Committee meeting). Management
represented to the Audit Committee that the Companys
consolidated financial statements as of and for the fiscal year
ended December 28, 2008 were prepared in accordance with
generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial
statements with management and the independent auditors.
The Audit Committee has discussed with the independent auditors
matters required to be discussed by the applicable Auditing
Standards as periodically amended (including significant
accounting policies, alternative accounting treatments and
estimates, judgments and uncertainties). In addition, the
independent auditors provided to the Audit Committee the written
disclosures required by the applicable requirements of the
Public Company Accounting Oversight Board regarding the
independent auditors communications with the Audit
committee concerning independence, and the Audit Committee and
the independent auditors have discussed the auditors
independence from the Company and its management, including the
matters in those written disclosures. Additionally, the Audit
Committee considered the non-audit services provided by the
independent auditors and the fees and costs billed and expected
to be billed by the independent auditors for those services (as
shown on page 57 of this Proxy Statement). All of the
non-audit services provided by the independent auditors since
February 10, 2003, and the fees and costs incurred in
connection with those services, have been pre-approved by the
Audit Committee in accordance with the Audit and Non-Audit
Services Pre-Approval Policy, as adopted by the Audit Committee.
(This policy is discussed in further detail on page 58 of
this Proxy Statement.) When approving the retention of the
independent auditors for these non-audit services, the Audit
Committee has considered whether the retention of the
independent auditors to provide those services is compatible
with maintaining auditor independence.
In reliance on the reviews and discussions with management and
the independent auditors referred to above, the Audit Committee
believes that the non-audit services provided by the independent
auditors are compatible with, and did not impair, auditor
independence.
The Audit Committee also has discussed with the Companys
internal and independent auditors, with and without management
present, their evaluations of the Companys internal
accounting controls and the overall quality of the
Companys financial reporting.
In further reliance on the reviews and discussions with
management and the independent auditors referred to above, the
Audit Committee recommended to the Board of Directors on
February 9, 2009, and the Board has approved, the inclusion
of the audited financial statements in the Companys Annual
Report on
Form 10-K
for the fiscal year ended December 28, 2008, for filing
with the Securities and Exchange Commission. The Audit Committee
also recommended to the Board of Directors, and the Board has
approved, subject to shareholder ratification, the selection of
the Companys independent auditors.
Mr.
James G. Cullen, Chairman
Dr.
Mary Sue Coleman
Mr.
Leo F. Mullin
56
ITEM 2. RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Board of Directors has appointed PricewaterhouseCoopers LLP
as the independent registered public accounting firm for the
Company and its subsidiaries for the fiscal year 2009.
Shareholder ratification of the appointment is not required
under the laws of the State of New Jersey, but the Board has
decided to ascertain the position of the shareholders on the
appointment. The Board of Directors will reconsider the
appointment if it is not ratified. The affirmative vote of a
majority of the shares voted at the meeting is required for
ratification.
During fiscal years 2007 and 2008, PricewaterhouseCoopers not
only acted as the independent registered public accounting firm
for the Company and its subsidiaries (work related to the
integrated audit of the Companys consolidated financial
statements and of its internal control over financial
reporting), but also rendered on behalf of the Company and its
subsidiaries other services.
Rules enacted under the Sarbanes-Oxley Act prohibit an
independent auditor from providing certain non-audit
services for an audit client. These rules became effective on
May 6, 2003 for new engagements. All engagements with
independent auditors to perform a prohibited non-audit service
entered into prior to May 6, 2003 were required to be
completed before May 6, 2004. Since May 6, 2004,
PricewaterhouseCoopers has not provided any services that are
prohibited under applicable rules and regulations. It is
expected that PricewaterhouseCoopers will continue to provide
certain accounting, additional audit, tax and other services to
Johnson & Johnson and its affiliates, which are permitted
under applicable rules and regulations.
The following table sets forth the aggregate fees billed or
expected to be billed by PricewaterhouseCoopers for 2008 and
2007 for audit and non-audit services (as well as all
out-of-pocket costs incurred in connection with
these services) and are categorized as Audit Fees, Audit-Related
Fees, Tax Fees and Other Services. The nature of the services
provided in each such category is described following the table.
|
|
|
|
|
|
|
|
|
|
|
Actual Fees
|
|
|
2008
|
|
2007
|
|
Audit Fees
|
|
$
|
24,110,000
|
|
|
$
|
21,995,000
|
|
Audit-Related Fees
|
|
|
7,810,000
|
|
|
|
6,705,000
|
|
|
|
|
|
|
|
|
|
|
Total Audit and Audit-Related Fees
|
|
|
31,920,000
|
|
|
|
28,700,000
|
|
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
6,000,000
|
|
|
|
6,800,000
|
|
|
|
|
|
|
|
|
|
|
Other Services
|
|
|
650,000
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
38,570,000
|
|
|
$
|
36,060,000
|
|
|
|
|
|
|
|
|
|
|
Audit Fees Consists of professional services
rendered for the audit of the consolidated financial statements
of the Company, quarterly reviews, statutory audits, issuance of
comfort letters, consents, income tax provision procedures, and
assistance with and review of documents filed with the SEC.
Audit-Related Fees Consists of assurance and
related services related to employee benefit plan audits, due
diligence related to mergers and acquisitions, accounting
consultation and audits in connection with acquisitions and
dispositions, internal control reviews, attest services that are
not required by statute or regulation, advice as to the
preparation of statutory financial statements, and consultations
concerning financial accounting and reporting standards.
Tax Fees In 2008, approximately 72% of Tax
Fees were related to tax compliance (review and preparation of
corporate and expatriate tax returns, assistance with tax
audits, review of the tax treatments for certain expenses, and
transfer pricing documentation for compliance purposes relating
to acquisitions). Other tax services included state and local
tax planning and consultations with respect to various domestic
and international tax matters. In 2007, approximately 64% of Tax
Fees were related to tax compliance.
57
Other Services Consists of reviews for
compliance with various government regulations relating to the
health care industry and privacy standards, risk management
reviews and assessments, audits of various contractual
arrangements to assess compliance, validation reviews of systems
to assess compliance with Food and Drug Administration (FDA)
rules, and projects relating to reviewing systems security
controls.
Pre-Approval of
Audit and Non-Audit Services
Under the Audit and Non-Audit Services Pre-Approval Policy, as
adopted by the Audit Committee in 2003, the Audit Committee must
pre-approve all audit and non-audit services provided by the
independent auditors. The Policy, as described below, sets forth
the procedures and conditions for such pre-approval of services
to be performed by the independent auditor. The Policy utilizes
both a framework of general pre-approval for certain specified
services and specific pre-approval for all other services.
In the first quarter of each year, the Audit Committee is asked
to pre-approve the engagement of the independent auditors, and
the projected fees, for audit services, audit-related services
(assurance and related services that are reasonably related to
the performance of the auditors review of the financial
statements or that are traditionally performed by the
in