def14a
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed by the
Registrant x
Filed by a
Party other than the
Registrant o
Check the
appropriate box:
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o Preliminary
Proxy Statement
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o Confidential,
for the Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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JOHNSON
& JOHNSON
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of
Filing Fee (Check the appropriate box):
o Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title of
each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per unit
price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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Fee paid
previously with preliminary materials.
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Check box if
any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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Notice
of Annual Meeting
and Proxy
Statement
March 17, 2010
The Annual Meeting of Shareholders of Johnson & Johnson
will be held on Thursday, April 22, 2010 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
2010; and
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3.
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Transact such other business, including action on two
shareholder proposals, as may properly come before the meeting,
and any adjournment or postponement.
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Shareholders are cordially invited to attend the meeting.
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
view and listen to 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 22, 2010: 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 23, 2010, 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 2,756,260,605 shares outstanding.
Each matter to be submitted to the shareholders, including the
election of Directors, requires the affirmative vote of a
majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a
particular matter, only those cast For or
Against are included. Abstentions and broker
non-votes are counted only for purposes of determining whether a
quorum is present at the meeting.
How to
Vote. Shareholders of record (that is,
shareholders who hold their shares in their own name) can vote
any one of four ways:
(1) Via the Internet: Go to the 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.
Effect of Not Casting Your
Vote. If you hold your shares in street
name it is critical that you cast your vote if you want it to
count in the election of Directors (Item 1 of this Proxy
Statement). In the past, if you held your shares in street name
and you did not indicate how you wanted your shares voted in the
election of Directors, your bank or broker was allowed to vote
those shares on your behalf in the election of Directors as they
felt appropriate. Recent changes in regulation were made to take
away the ability of your bank or broker to vote your
uninstructed shares in the election of Directors on a
discretionary basis. Thus, if you hold your shares in street
name and you do not instruct your bank or broker how to vote in
the election of Directors, no votes will be cast on your behalf.
Your bank or broker will, however, continue to have discretion
to vote any uninstructed shares on the ratification of the
appointment of the Companys
1
independent registered public accounting firm (Item 2 of
this Proxy Statement). They will not have discretion to vote
uninstructed shares on shareholder proposals (Items 3 and 4
of this Proxy Statement). If you are a shareholder of record and
you do not cast your vote, no votes will be cast on your behalf
on any of the items of business at the Annual Meeting, except
Item 2. For more information on this topic, see the SEC
Investor Alert issued in February 2010 entitled New
Shareholder Voting Rules for the 2010 Proxy Season at
http://www.sec.gov/investor/alerts/votingrules2010.htm.
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 17, 2010 concurrently with the mailing of the
Companys 2009 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 $15,500, plus reimbursement of expenses. All costs
of the solicitation of proxies will be borne by the Company. On
the accompanying proxy, a shareholder may substitute the name of
another person in place of those persons presently named as
proxies. In order to vote, a substitute must present adequate
identification to the Secretary before the voting occurs.
Electronic Access to Proxy Materials and
Annual Report. This Proxy Statement and
the Companys 2009 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:
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gain faster access to your proxy materials;
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save the Company the cost of producing and mailing documents to
you;
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reduce the amount of mail you receive; and
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help preserve environmental resources.
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Johnson & Johnson shareholders who have enrolled in
the electronic access service previously will receive their
materials online this year.
Shareholders of record may enroll in the electronic proxy and
Annual Report access service for future Annual Meetings of
Shareholders by registering online at
www.computershare-na.com/green. If you vote via the
Internet, simply follow the prompts that will link you to that
Web site. Street name shareholders who wish to enroll for
electronic access may register for online delivery of materials
by going to
http://enroll.icsdelivery.com/jnj.
Reduce Duplicate
Mailings. The Company is required to
provide an Annual Report to all shareholders who receive this
Proxy Statement. If you are a shareholder of record and have
more than one account in your name or at the same address as
other shareholders of record, you may authorize the Company to
discontinue duplicate mailings of future Annual Reports
(commonly referred to as householding). To do so,
mark the designated box on each proxy card for which you wish to
discontinue receiving an Annual Report. If you are voting via
the Internet or by telephone, you can either follow the prompts
when you vote or give the Company instructions to discontinue
duplicate mailings of future Annual Reports. Street name
shareholders who wish to discontinue receiving duplicate
mailings of future Annual Reports should review the information
provided in the proxy materials mailed to them by their bank or
broker.
Johnson & Johnson Employee Savings
Plans. If you are an employee of a
Johnson & Johnson company and hold shares in one of the
Companys employee savings plans, you will receive one
proxy card 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 20, 2010, 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
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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 2011 Annual
Meeting of Shareholders, a shareholder proposal must be received
by the Company at its principal office on or before
November 17, 2010. In addition, under the terms of the
Companys By-Laws, a shareholder who intends to present an
item of business at the 2011 Annual Meeting of Shareholders
(other than a proposal submitted for inclusion in the
Companys proxy materials) must provide written notice of
such business to the Company, which must be received by the
Company on or before November 17, 2010. Proposals and other
items of business should be directed to the attention of the
Secretary at the principal office of the Company, One
Johnson & Johnson Plaza, New Brunswick, New
Jersey 08933.
ITEM
1: ELECTION OF DIRECTORS
Director Nomination Process. The
Nominating & Corporate Governance Committee of the Board of
Directors reviews possible candidates for the Board and
recommends the nominees for Directors to the Board for approval.
The Board has adopted General Criteria for Nomination to the
Board of Directors, which, as part of the Principles of
Corporate Governance, are posted on the Companys Web site
at www.investor.jnj.com/governance/policies.cfm. These
criteria describe specific traits, abilities and experience that
the Nominating & Corporate Governance Committee and the
Board look for in determining candidates for election to the
Board, including:
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the highest ethical character and shared values with the
Companys Credo;
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reputations consistent with the Companys image and
reputation;
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accomplishments within their respective fields, with superior
credentials and recognition;
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active and former chief executive officers of public companies
and leaders of major complex organizations, including
scientific, government, educational and other non-profit
institutions;
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widely recognized leaders in the fields of medicine or
biological sciences, including those who have received the most
prestigious awards and honors in their fields;
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relevant expertise and experience and the ability to offer
advice and guidance to the CEO based on that expertise and
experience;
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ability to exercise sound business judgment; and
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diversity reflecting gender, ethnic background and professional
experience.
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The Nominating & Corporate Governance Committee
annually considers the size, composition and needs of the Board
in light of these criteria and accordingly considers and
recommends candidates for membership on the Board.
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.
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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.
See Corporate GovernanceMajority Vote Standard in
Uncontested Director Elections on page 18 of this
Proxy Statement. If any nominee should refuse or be unable to
serve, an event which is not anticipated, the proxy will be
voted for such person as shall be designated by the Board of
Directors to replace such nominee or, in lieu thereof, the Board
of Directors may reduce the number of Directors.
Except for Anne M. Mulcahy, who was appointed to the Board in
October 2009, 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. In keeping with the
Boards policy on retirement of Directors, Mr. Arnold
G. Langbo, elected to the Board in 1991, will not stand for
re-election, after having served for one additional term on an
exception basis at the Boards request.
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, 66, was elected to the Board of Directors in 2003 and is a member of the Audit Committee and the Science & Technology Advisory Committee. She has served as President of the University of Michigan since August 2002, after having served as President of the University of Iowa from 1995 to July 2002. In addition to her current position as President, Dr. Coleman is a professor of biological chemistry in the University of Michigan Medical School and a professor of chemistry in the University of Michigan College of Literature, Science and the Arts. Prior to 1995, Dr. Coleman served as Provost and Vice President for Academic Affairs at the University of New Mexico, Vice Chancellor for Graduate Studies & Research and Associate Provost and Dean of Research at the University of North Carolina at Chapel Hill, and a member of the biochemistry faculty and an administrator at the Cancer Center of the University of Kentucky in Lexington. Elected to the National Academy of Sciences Institute of Medicine in 1997, Dr. Coleman is a Fellow of the American Academy of Arts and Sciences and the American Association for the Advancement of Science. Dr. Coleman is a Trustee of the John S. and James L. Knight Foundation and the Gerald R. Ford Foundation. Having served as President of two of the nations largest and most prestigious public universities and having a long and decorated career in the sciences, Dr. Coleman brings to the Companys Board a unique point of view regarding organizational management and academic research vital to a company competing in science-based industries.
Other Public Company Board Service: Meredith Corporation (1997 to present).
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James G. Cullen, Retired President and Chief Operating Officer, Bell Atlantic Corporation
Mr. Cullen, 67, was elected to the Board of Directors in 1995 and is the Presiding Director of the Board, Chairman of the Audit Committee and a member of the Nominating & Corporate Governance Committee. Mr. Cullen retired as President and Chief Operating Officer of Bell Atlantic Corporation (communications) in 2000. He had assumed those positions in 1998, after having been Vice Chairman since 1995 and, prior to that, President since 1993. He was President and Chief Executive Officer of Bell Atlantic-New Jersey, Inc. from 1989 to 1993. He is a Director of Eisenhower Medical Center. With years of demonstrated managerial ability as CEO and COO of a large telecommunications company, and as the current independent, non-executive Chairman of the Board of Directors of Agilent Technologies, Inc. and independent Lead Director of the Board of Directors of NeuStar, Inc., Mr. Cullen brings to the Companys Board a wealth of knowledge of organizational and operational management as well as board leadership experience essential to a large public company.
Other Public Company Board Service: Agilent Technologies, Inc. (2000 to present; Non-Executive Chairman since 2005), NeuStar, Inc. (2005 to present; Lead Independent Director since 2005), Prudential Financial, Inc. (2001 to present).
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Michael M. E. Johns, M.D., Chancellor, Emory University
Dr. Johns, 68, was elected to the Board of Directors in 2005 and is a member of the Compensation & Benefits Committee and the Science & Technology Advisory Committee. He has served since October 2007 as Chancellor of Emory University. From 1996 to 2007, Dr. Johns served as Executive Vice President for Health Affairs and Chief Executive Officer of the Robert W. Woodruff Health Sciences Center of Emory University. As the Executive Vice President for Health Affairs, he oversaw Emory Universitys widespread academic and clinical programs in health sciences and led strategic planning initiatives for both patient care and research. In addition, from 1996 to 2007, he served as the Chairman of the Board of Emory Healthcare, the largest health care system in Georgia. From 1990 to 1996, Dr. Johns served as Dean of the Johns Hopkins School of Medicine and Vice President of the Medical Faculty at Johns Hopkins University. Dr. Johns is Past Chair of the Council of Teaching Hospitals, a fellow of the American Association for the Advancement of Science and a member of the Institute of Medicine. He is a member of the editorial board of the Journal of the American Medical Association (JAMA) and chairs the Publication Committee of the journal Academic Medicine. Having served in numerous senior leadership positions at some of the nations most prestigious academic institutions, hospitals and health care systems, Dr. Johns provides a valuable combination of experience at the highest levels of both patient care and medical research, as well as organizational management skills and public health policy expertise, making him an integral board member of a company in the health care industry.
Other Public Company Board Service: AMN Healthcare Services, Inc. (2008 to present), Genuine Parts Company (2000 to present).
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Susan L. Lindquist, Ph.D., Member and Former Director, Whitehead Institute for Biomedical Research; Professor of Biology, Massachusetts Institute of Technology
Dr. Lindquist, 60, 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 Scientific Advisory Boards of the Stowers Institute for Medical Research, the Institut für Molekulare Biotechnologie GmbH, 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. From her long and decorated career in scientific research and her global reputation as a pioneer in biomedical innovation, Dr. Lindquist brings to the Companys Board an incomparable perspective on the intersection of academic and commercial medical research critical to a company in the health care industry.
Other Public Company Board Service: None.
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Anne M. Mulcahy, Chairman and Retired Chief Executive Officer, Xerox Corporation
Ms. Mulcahy, 57, was appointed to the Board of Directors in October 2009. Ms. Mulcahy was both Chairman and Chief Executive Officer of Xerox Corporation (business equipment and services) until July 2009, when she retired as CEO after eight years in the position. Prior to serving as CEO, Ms. Mulcahy was President and Chief Operating Officer of Xerox. She has also served as president of Xeroxs General Markets Operations, which created and sold products for reseller, dealer and retail channels. During a career at Xerox that began in 1976, Ms. Mulcahy has also served as Vice President for Human Resources with responsibility for compensation, benefits, human resource strategy, labor relations, management development and employee training; and Vice President and Staff Officer for Customer Operations, covering South America and Central America, Europe, Asia and Africa, and China. Having served as Chairman and CEO of a large, global manufacturing and services company with one of the worlds most recognized brands and track record for innovation, Ms. Mulcahy presents valuable insight into organizational and operational management issues crucial to a large public company, as well as a strong reputation for leadership in business innovation and talent development.
Other Public Company Board Service: Citigroup Inc. (2004 to present), The Washington Post Company (2008 to present), Xerox Corporation (2000 to present; Executive Chairman since 2002).
Recent Past Public Company Board Service: Federal National Mortgage Association (2000-2004), Target Corporation (1997 to 2009).
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Leo F. Mullin, Retired Chairman and Chief Executive Officer, Delta Air Lines, Inc.
Mr. Mullin, 67, 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 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. Mr. Mullins depth and breadth of exposure to complex issues from having served as Chairman and CEO of one of the nations largest airlines and his long and distinguished career in the banking industry, make him a skilled advisor who provides critical insight into organizational and operational management, global business and financial matters.
Other Public Company Board Service: ACE Limited (2007 to present), Education Management Corporation (2009 to present).
Recent Past Public Company Board Service: Delta Air Lines, Inc. (1997 to 2004; Executive Chairman 1999 to 2004), Bell South Corporation (1998 to 2006).
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William D. Perez, Senior Advisor, Greenhill & Co., Inc.; Retired President and Chief Executive Officer, Wm. Wrigley Jr. Company
Mr. Perez, 62, 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 is currently a Senior Advisor at Greenhill & Co., Inc., (investment banking). Mr. Perez served as President and Chief Executive Officer for the Wm. Wrigley Jr. Company (confectionary and chewing gum) from 2006 to 2008. Before joining Wrigley, Mr. Perez served as President and Chief Executive Officer of Nike, Inc. Previously, he spent 34 years with S.C. Johnson & Son, Inc., including eight years as its President and Chief Executive Officer. Mr. Perez is a Director of the Boys & Girls Club of Chicago and is a Trustee for Cornell University and Northwestern Memorial Hospital. With his experience as CEO of several large, consumer-focused companies across a wide variety of industries, Mr. Perez contributes to the Companys Board significant organizational and operational management skills, combined with a wealth of experience in global, consumer-oriented businesses vital to a large public company in the consumer products space.
Other Public Company Board Service: Campbell Soup Company (2009 to present), Whirlpool Corporation (2009 to present).
Recent Past Public Company Board Service: Kellogg Company (2000 to 2006), Nike, Inc. (2004 to 2006), Wm. Wrigley Jr. Company (2006 to 2008).
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Charles Prince, Chairman, Sconset Group, LLC; Senior Counselor, Albright Capital Management LLC; Retired Chairman and Chief Executive Officer, Citigroup Inc.
Mr. Prince, 60, 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 a Senior Counselor for Albright Capital Management LLC, a Washington, D.C. based investment firm. Mr. Prince served as Chief Executive Officer of Citigroup Inc. (financial services) from 2003 to 2007 and as Chairman from 2006 to 2007. Previously he served as Chairman and Chief Executive Officer of Citigroups Global Corporate and Investment Bank from 2002 to 2003, Chief Operating Officer from 2001 to 2002, and Chief Administrative Officer from 2000 to 2001. Mr. Prince began his career as an attorney at U.S. Steel Corporation in 1975, and in 1979 joined Commercial Credit Company (a predecessor company to Citigroup) where he held various management positions until 1995, when he was named Executive Vice President. Mr. Prince is a member of the Council on Foreign Relations and The Business Council. Having served as Chairman and CEO of the nations largest and most diversified financial institution, Mr. Prince brings to the Companys Board a strong mix of organizational and operational management skills combined with well-developed legal, global business and financial acumen critical to a large public company.
Other Public Company Board Service: Xerox Corporation (2008 to present).
Recent Past Public Company Board Service: Citigroup Inc. (2003 to 2007; Executive Chairman 2006 to 2007).
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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, 69, was elected to the Board of Directors in 2002 and is Chairman of the Science & Technology Advisory Committee and a member of the Public Policy Advisory Committee. Dr. Satcher assumed his current post at Morehouse School of Medicine in 2004 and served as the Schools Interim President from 2004 until 2006 and Director of the Schools National Center for Primary Care from 2002 through 2004. In 2002, Dr. Satcher completed his four-year term as the 16th Surgeon General of the United States. He also served as the U.S. Assistant Secretary for Health from 1998 to 2001. From 1993 to 1998, Dr. Satcher served as Director of the Centers for Disease Control and Prevention and Administrator of the Agency for Toxic Substances and Disease Registry. Dr. Satcher served as President of Meharry Medical College in Nashville, Tennessee, from 1982 to 1993. Dr. Satcher is a fellow of the American Academy of Family Physicians, the American College of Preventive Medicine and the American College of Physicians. He has received numerous honorary degrees and awards, including the Jimmy and Rosalynn Carter Award for Humanitarian Contributions to the Health of Humankind, the New York Academy of Medicine Lifetime Achievement Award and the National Association of Mental Illness Distinguished Service Award. Dr. Satcher serves on the boards of Action for Healthy Kids, Community Foundation of Greater Atlanta, Kaiser Family Foundation, Save the Children and the United Way of Atlanta. With his long and decorated career in the field of public health policy, including service as Surgeon General of the United States, as well as his valuable experience in medical academia and patient care, Dr. Satcher provides unparalleled experience and vision for a company in the health care industry.
Other Public Company Board Service: MetLife, Inc. (2007 to present).
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8
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William C. Weldon, Chairman, Board of Directors and Chief Executive Officer; Chairman, Executive Committee
Mr. Weldon, 61, 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 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. Having started his career at the Company in 1971 and been promoted to positions of increasing responsibility across business segments, culminating with his appointment as Chairman/CEO in 2002, Mr. Weldon brings vast knowledge of the Companys business, structure, history and culture to the Board and the Chairman position. Mr. Weldon continues to be one of the longest-tenured and most well-respected CEOs in the health care industry.
Other Public Company Board Service: J.P. Morgan Chase & Co. (2005 to present).
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Other Information. U.S. Securities and
Exchange Commission (SEC) regulations require the
Company to describe certain legal proceedings, including
bankruptcy and insolvency filings, involving nominees for the
Board of Directors or companies of which a nominee was an
executive officer. Mr. Mullin retired as Chief Executive
Officer of Delta Air Lines, Inc. in December 2003 and Chairman
in April 2004. In September 2005, Delta Air Lines voluntarily
filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. The Nominating & Corporate Governance
Committee of the Board of Directors does not believe that this
proceeding is material to an evaluation of
Mr. Mullins ability to serve as a Director.
The Board of Directors recommends a vote FOR the election of
each of the above-named nominees.
9
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 44 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 7,425,821 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 946,553 shares. In the aggregate,
these 8,372,374 shares represent less than 1% of the shares
outstanding. All stock ownership is as of February 23, 2010
(except shares held in the Companys Savings Plans, which
are included as of January 29, 2010).
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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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18,019
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6,708
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191,915
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Mary Sue Coleman
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11,159
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10,777
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7,600
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James G. Cullen
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76,022
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29,671
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24,050
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Russell C. Deyo
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151,544
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867,424
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Colleen A. Goggins
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106,828
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17,027
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761,653
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Michael M. E. Johns
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10,397
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8,235
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Arnold G. Langbo
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10,190
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51,492
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24,050
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Susan L. Lindquist
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10,588
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9,000
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7,600
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Sherilyn S. McCoy
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70,800
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187,781
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Anne M. Mulcahy
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2,596
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Leo F. Mullin
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17,394
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9,559
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24,050
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William D. Perez
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16,929
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4,662
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Charles Prince
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18,252
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5,006
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David Satcher
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10,337
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6,179
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13,900
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William C. Weldon
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411,819
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2,934,698
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All Directors and executive officers as a group(16)
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946,553
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(4)
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158,316
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5,044,721
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(1)
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The shares described as owned are shares of the
Companys Common Stock directly or indirectly owned by each
listed person and by members of his or her household and are
held individually, jointly or pursuant to a trust arrangement.
The Directors and executive officers disclaim beneficial
ownership of an aggregate of 95,176 of these shares,
including 30,000 shares listed as owned by Mr. Cullen,
13,602 shares listed as owned by Mr. Deyo,
900 shares listed as owned by Mr. Langbo,
17,292 shares listed as owned by Ms. McCoy, 800 shares
listed as owned by Mr. Prince, and 32,582 shares
listed as owned by Mr. Weldon.
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(2)
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Includes Common Stock equivalent units credited to Non-Employee
Directors under the Companys Deferred Fee Plan for
Non-Employee Directors and Common Stock equivalent units
credited to the executive officers under the Companys
Executive Income Deferral Plan.
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(3)
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Includes shares under options exercisable on February 23,
2010 and options that become exercisable within 60 days
thereafter.
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(4)
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Includes 44,792 shares pledged as security.
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10
As of March 10, 2010, the following are the only persons
known to the Company to be the beneficial owner of five percent
or more of any class of the Companys voting securities:
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Amount and Nature
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Name and Address of
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of Beneficial
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Title of Class
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Beneficial Owner
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Ownership
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Percent of Class
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Common Stock
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BlackRock, Inc.
40 East 52nd Street
New York, NY 10022
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147,267,993
shares(1)
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5.34
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%(1)
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State Street Bank and Trust Company
State Street Financial Center
One Lincoln Street
Boston, MA 02111
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137,505,439 shares(2)
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5.0
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%(2)
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(1)
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Based solely on a Schedule 13G filed with the SEC on
January 29, 2010, BlackRock, Inc. (BlackRock)
reported aggregate beneficial ownership of approximately 5.34%,
or 147,267,993 shares, of Johnson & Johnson
Common Stock as of December 31, 2009. BlackRock reported
that it possessed sole voting and dispositive power of
147,267,993 shares. BlackRock also reported that it did not
possess shared voting or dispositive power over any shares
beneficially owned.
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(2)
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Based solely on an Amendment to Schedule 13G filed with the
SEC on February 9, 2010, State Street Bank and
Trust Company, acting in various fiduciary capacities
(State Street), reported aggregate beneficial
ownership of approximately 5.0%, or 137,505,439 shares, of
Johnson & Johnson Common Stock as of December 31,
2009. State Street reported that it possessed sole voting power
of 104,350,943 shares, shared voting power of
32,776,467 shares, and shared dispositive power of
137,505,439 shares. State Street also reported that it did
not possess sole dispositive power over any shares beneficially
owned.
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Certain of the Companys U.S. and international
employee savings and retirement plans have retained BlackRock
and its affiliates to provide investment management services.
Certain of the Companys U.S. and international
employee savings and retirement plans have retained State Street
and its affiliates to provide certain banking services,
including trustee, custodial, investment management,
administrative, and ancillary investment services.
Section 16(a)
Beneficial Ownership Reporting Compliance
The Company believes that during 2009 all reports for the
Companys executive officers and Directors that were
required to be filed under Section 16 of the Securities
Exchange Act of 1934 were filed on a timely basis, except that
one transaction by each of Messrs. Donald M. Casey, Jr. and
Alex Gorsky and Mses. Goggins and Mulcahy was not
filed on a timely basis, and two transactions (one report) by
each of Dr. Satcher and Mr. Weldon were not filed on a timely
basis. All of those reports were subsequently filed.
11
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,
Ms. Mulcahy, Mr. Mullin, Mr. Perez,
Mr. Prince and Dr. Satcher. 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 professional associations, many of which have
business, charitable or other relationships with the Company.
The Board considered each of these relationships in light of the
Standards of Independence and determined that none of these
relationships conflict with the interests of the Company or
would impair the relevant Non-Employee Directors
independence or judgment. The following table describes the
relationships that were considered in making this determination.
The nature of the transactions, relationships and arrangements
summarized in the table below and the role of each of the
Directors at their respective institutions, were such that none
of the Non-Employee Directors had any direct business
relationships with the Company in 2009 or received any direct
personal benefit from any of these transactions, relationships
or arrangements.
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Type of
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Transaction,
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2009
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Type of
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Relationship to
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Relationship or
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Aggregate
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Director
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Organization
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Organization
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Organization
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Arrangement
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Magnitude
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M. S. Coleman
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University of Michigan
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Educational institution
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Executive officer
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Sales of health care products and services; educational and
research grants
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<1%; <$1 million
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M. M. E. Johns
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Emory University
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Educational institution
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Employee
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Sales of health care products and services; educational and
research grants and fellowships
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<1%; <$1 million
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S. L. Lindquist
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Massachusetts Institute of Technology
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Educational institution
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Employee
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Tuition; educational and research sponsorships, fellowships and
grants
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<1%
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Whitehead Institute for Biomedical Research
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Research and educational institution
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Employee
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Educational and research grants
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<1%; <$1 million
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A. M. Mulcahy
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Catalyst Inc.
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Professional association
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Director
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Membership fees; meeting facilitation and content development
fees
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<1%; <$1 million
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Save the Children
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Charity
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Director
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Charitable contributions and grants
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<1%; <$1 million
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12
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Type of
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Transaction,
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2009
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Type of
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|
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Relationship to
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Relationship or
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Aggregate
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Director
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Organization
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|
Organization
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Organization
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Arrangement
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Magnitude
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L. F. Mullin
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Juvenile Diabetes Research Foundation
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Charity
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Director
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Charitable contributions
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<1%; <$1 million
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W. D. Perez
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Cornell University
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Educational institution
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Trustee
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Contributions, grants; educational programming and conference
fees
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<1%; <$1 million
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D. Satcher
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Morehouse School of Medicine
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Educational institution
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Employee
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Educational and research fellowships and grants; conference
exhibit fees
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<1%; <$1 million
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Save the Children
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Charity
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Director
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Charitable Contributions and grants
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<1%; <$1 million
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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
2007, 2008 or 2009. 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 2007, 2008 or 2009.
In the event of Board-level discussions pertaining to a
potential transaction, relationship or arrangement involving an
organization with which a Director is affiliated, that Director
would be expected to recuse him or herself from the deliberation
and decision-making process.
Board Meetings. During 2009 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, with the
exception of Ms. Mulcahy, who was appointed to the Board in
October 2009 and attended one of the two remaining Board
meetings. 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 2009 Annual Meeting were in
attendance.
Board Leadership Structure. The current
Board Chairman is also the current Company CEO. In addition, the
independent Directors have designated an independent lead, or
Presiding Director. The independent Directors believe that the
Companys current model of the combined Chairman/CEO role
in conjunction with the Presiding Director position is the
appropriate leadership structure for Johnson & Johnson
at this time. The independent Directors believe that each of the
possible leadership structures for a board has its particular
pros and cons, which must be considered in the context of the
specific circumstances, culture and challenges facing a company,
and that such consideration falls squarely on the shoulders of a
companys board and necessitates a diversity of views and
experiences. The combined Chairman/CEO model is a leadership
model that has served our shareholders well for many
generations, through numerous economic cycles and through a
succession of effective leaders. The Nominating &
13
Corporate Governance Committee and the other independent
Directors periodically review this structure to ensure it is
still appropriate for the Company.
In 2002, the Board created the position of independent Presiding
Director and established policies to ensure that each of the
Boards standing Audit Committee, Compensation &
Benefits Committee and Nominating & Corporate
Governance Committee consists solely of independent Directors,
including the committee chairman.
The Presiding Director is designated annually by
the independent Directors. The independent Directors have
selected Mr. Cullen to serve as the designated Presiding
Director for 2010. Among the duties and responsibilities of the
Presiding Director, as described in the Companys
Principles of Corporate Governance and as embedded in the
Companys processes, are the following:
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Agenda and Schedule for Board Meetings. The
Presiding Director reviews in advance the schedule of Board and
committee meetings and participates in setting the agenda for
each Board meeting in order to ensure that the interests and
requirements of shareholders, the independent Directors and
other stake holders are appropriately addressed.
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Executive Sessions. The Presiding Director has
called and chaired and has the authority to call and
schedule Executive Sessions of the independent Directors,
which are held on a regular basis.
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Communication with Management. After each
Executive Session of the independent Directors, the Presiding
Director communicates with the Chairman/CEO to provide feedback
and also to effectuate the decisions and recommendations of the
independent Directors. In addition, the Presiding Director acts
as intermediary between the Non-Employee Directors and
management on a regular basis and when special circumstances
exist or communication out of the ordinary course is necessary.
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Chairman/CEO Performance Evaluation. The
Presiding Director is a key participant in the annual
performance evaluation of the Chairman/CEO and the other
executive officers.
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Communication with Shareholders and
Employees. Under the Boards guidelines for
handling shareholder and employee communications to the Board,
the Presiding Director is advised promptly of any communications
directed to the Board or any member of the Board that allege
misconduct on the part of Company management, or raise legal,
ethical or compliance concerns about Company policies or
practices.
|
In addition, the Presiding Director is regularly apprised of
inquires from shareholders and involved in correspondence
responding to these inquiries.
The independent Directors believe the combined Chairman/CEO
position, together with the Presiding Director, has certain
advantages over other board leadership structures that continue
to best meet the Companys current needs, including:
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Efficient communication between management and the Board;
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Clear delineation of the Presiding Directors and other
independent Directors oversight role from the
Chairman/CEOs and other managements day-to-day
operational role;
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Clarity for the Companys key stakeholders on corporate
leadership and accountability; and
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The Board Chairman possessing the best knowledge of the
Companys strategy, operations and financial condition and,
in turn, the ability to communicate that to external
stakeholders.
|
As discussed in Item 1: Election of Directors
on pages 3 to 9 of this Proxy Statement, the independent
Directors come from a variety of organizational backgrounds with
direct experience with a wide range of leadership and management
structures. The makeup of the Companys Board puts it in a
very strong position to evaluate the pros and cons of the
various types of board leadership structures and to ultimately
decide which one will work in the best interests of the
Companys stakeholders, as they are defined in Our
Credo. The independent Directors, through the
Nominating & Corporate Governance
14
Committee, will continue to periodically review the Boards
leadership structure in a serious and open-minded fashion,
especially in the context of future succession plans.
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 Public Policy
Advisory Committee, Science & Technology Advisory
Committee, and Finance Committee, each comprised of independent
Directors and members of management.
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 2009.
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Nominating &
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Science &
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Compensation &
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Corporate
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Public Policy
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Technology
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Director
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Audit
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Benefits
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Governance
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Advisory
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Advisory
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Finance
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M. S.
Coleman(1)
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Member
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Member
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J. G.
Cullen(1)(2)
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Chairman
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Member
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Member
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M. M. E.
Johns(1)
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Member
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Member
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A. G.
Langbo(1)
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Chairman
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Member
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S. L.
Lindquist(1)
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Member
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Member
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L. F.
Mullin(1)
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Member
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Chairman
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W. D.
Perez(1)
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Member
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Member
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C.
Prince(1)
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Member
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Chairman
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D.
Satcher(1)
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Member
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Chairman
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W. C. Weldon
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Chairman
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Number of meetings in 2009
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4(3)
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6
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4
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3
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4
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0
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(1) |
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Determined to be
independent under the listing standards of the NYSE.
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(2) |
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Designated as an audit
committee financial expert for purposes of
Section 407 of the Sarbanes-Oxley Act.
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(3) |
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Plus teleconferences held prior to
each release of quarterly earnings (four in total).
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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 control 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.
15
The Board has designated Mr. Cullen, the Chairman of the
Audit Committee and an independent Director, as an audit
committee financial expert under the rules and regulations
of the SEC for purposes of Section 407 of the
Sarbanes-Oxley Act of 2002 after determining that he meets the
requirements for such designation. This determination was based
on Mr. Cullens experience while President and Chief
Executive Officer of Bell Atlantic Enterprises, New Jersey Bell
and President and Chief Operating Officer of Bell Atlantic
Corporation, where he actively supervised persons performing the
functions of principal financial officer, principal accounting
officer and controller.
The primary function of the Compensation &
Benefits Committee is to discharge the Boards
duties and responsibilities relating to compensation of the
Companys Non-Employee Directors and executive officers and
oversee the management of the various pension, long-term
incentive, savings, health and welfare plans that cover the
Companys employees.
The Compensation & Benefits Committees duties
and responsibilities under its charter with respect to the
compensation of the Companys Directors and executive
officers include:
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setting the Chairman/CEOs compensation level based on the
independent Directors annual evaluation of his or her
performance;
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reviewing and providing oversight of the development of the
Companys compensation philosophy and composition of the
group of peer companies used for comparison of executive
compensation;
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approving the establishment of competitive targets versus the
group of peer companies used for comparison of executive
compensation and all equity-based plans requiring shareholder
approval;
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reviewing the eligibility criteria and award guidelines for the
compensation programs in which the executive officers
participate;
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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
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reviewing and approving compensation for the Non-Employee
Directors.
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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 Mr. Deyo (Vice
President, Human Resources and General Counsel), 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.
16
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 executive 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 Public Policy Advisory Committee is comprised
of independent Directors and the Companys Vice President,
Human Resources and 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.
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 generally does not hold
formal meetings and instead acts from time-to-time between Board
meetings by unanimous written consent in lieu of a meeting, as
needed. Any such action is taken pursuant to specific advance
delegation by the Board or is later ratified by the Board.
Executive Sessions. Each of the Audit,
Compensation & Benefits and Nominating &
Corporate Governance Committees met at least twice during 2009
in Executive Sessions without members of management present. The
independent Directors met seven times during 2009 in Executive
Sessions, without the Chairman/CEO or any other member of
management present, at which the Presiding Director acted as
Chairman.
Board Oversight of Risk Management. The
Board believes that overseeing how management manages the
various risks the Company faces is one of its most important
responsibilities to the Companys stakeholders. The Company
faces risk in many different areas, including business strategy;
government regulation; financial condition; health care
compliance; product discovery and development; competition for
talent; business vitality; operational efficiency; quality
assurance; environmental, health and safety; supply chain
management; reputation; customer spending patterns; intellectual
property; and trade secrets, among many others. The Board
believes that, in light of the interrelated nature of the
Companys risks, oversight of risk management is ultimately
the responsibility of the full Board.
In carrying out this critical responsibility, the Board meets at
least annually with key members of management with primary
responsibility for management of risk in their respective areas
of responsibility, including the Companys Chairman/CEO;
CFO; Controller; Treasurer; Vice President, Human Resources and
General Counsel; Corporate Secretary; Chief Compliance Officer;
Vice Presidents of Corporate Affairs, Government
Affairs & Policy, Worldwide Operations,
Science & Technology, and Corporate Internal Audit;
and the Worldwide Chairman and Chief Compliance Officer of each
of the Companys business segments. The Board also receives
regular reports on aspects of the Companys risk management
from senior representatives of the Companys independent
auditors. In addition, the Audit Committee (the current Chairman
of which is also the independent Presiding Director) meets in
private sessions with each of the CFO, Vice President, Human
Resources and General Counsel, Chief Compliance Officer,
Vice President of Corporate Internal Audit, and representatives
of the Companys independent auditors at the conclusion of
every regularly-scheduled meeting, where aspects of risk
management are discussed.
17
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 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 Director
Elections. The Companys
By-Laws
require that, in uncontested elections (those where the number
of nominees does not exceed the number of Directors to be
elected), Director nominees receive the affirmative vote of a
majority of the votes cast in order to be elected to the Board
of Directors of the Company. The majority standard applies only
to uncontested Director elections. Ballots for uncontested
elections, including the election of Directors at the 2010
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.
Under the Companys By-Laws and in accordance with New
Jersey law, a Directors term extends until his or her
successor is duly elected and qualified, or until he or she
resigns or is removed from office with cause by a majority vote
of shareholders entitled to vote. Thus, an incumbent Director
who fails to receive the required vote for re-election at the
Companys Annual Meeting of Shareholders would continue
serving as a Director (sometimes referred to as a
holdover director), generally until the next meeting
of shareholders. In order to address the situation where an
incumbent Director receives more votes Against his
or her re-election than votes For his or her
re-election in an uncontested election, the Boards
Director Resignation Policy for Incumbent Directors in
Uncontested Elections would require that Director to
promptly tender an offer of his or her resignation following
certification of the shareholder vote. The Committee and the
Board would then consider and take appropriate action on such
offer of resignation in accordance with the Policy.
Contested Director elections (those where the number of Director
nominees exceeds the number of Directors to be elected) would be
governed by the plurality standard under New Jersey law. Ballots
for contested elections would allow shareholders to vote
For each nominee or Withhold from voting
on any nominee, as is typically the practice under the plurality
standard. The Director Resignation Policy for Incumbent
Directors in Uncontested Elections would not apply to contested
elections.
The Companys By-Laws and Principles of Corporate
Governance, including the Director Resignation Policy for
Incumbent Directors in Uncontested Elections, can be found on
the Companys Web site at
www.investor.jnj.com/governance/materials.cfm.
18
TRANSACTIONS WITH
RELATED PERSONS
For the period beginning January 1, 2009 and ending
March 1, 2010, there were no transactions, or currently
proposed transactions, in which the Company was or is to be a
participant and the amount involved exceeds $120,000, and in
which any related person had or will have a direct or indirect
material interest.
Policies and Procedures. The Companys
written Policy on Transactions With Related Persons requires the
approval or ratification by the Nominating & Corporate
Governance Committee for any transaction or series of
transactions exceeding $120,000 in which the Company is a
participant and any related person has a material interest
(other than solely as a result of being a director or trustee or
less than 10% owner of another entity). Related persons would
include the Companys Directors and executive officers and
their immediate family members and persons sharing their
households. It would also include persons controlling more than
5% of the Companys outstanding Common Stock.
Under the Companys Principles of Corporate Governance and
Code of Business Conduct & Ethics for Members of the
Board of Directors and Executive Officers, all Directors and
executive officers of the Company have a duty to report to the
Chairman, Vice Chairman or the Presiding Director potential
conflicts of interest, including transactions with related
persons. Management 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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19
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 43, be
included in this Proxy Statement and incorporated by reference
into the Companys Annual Report on Form 10-K for the
fiscal year ended January 3, 2010.
Mr. Arnold G. Langbo, Chairman
Dr. Michael M. E. Johns
Mr. William D. Perez
Mr. Charles Prince
COMPENSATION
DISCUSSION AND ANALYSIS
EXECUTIVE
SUMMARY
In 2009, the Companys executive officers performed well
against their business objectives despite economic challenges,
an increasingly competitive business environment and significant
patent expirations. Despite a decline in sales, which the
Company had forecast, the Companys business met or
exceeded expectations for 2009 and maintained the Companys
long-term management focus; this included investing in products
and platforms that have positioned the Company well for growth
and continued leadership in global health care.
As described in Section III below, the strategic and
financial objectives of the Companys executive officers in
2009 were aligned with the following business priorities:
winning in health care; capitalizing on convergence;
accelerating growth in emerging markets; and developing
leadership and talent.
Section III describes how the Companys executive
officers were compensated for their performance in 2009. Pay for
performance is an essential element of the Companys
guiding principles. In alignment with the Companys Credo
values, it is important that the Company recognize its executive
officers for the results they achieve as well as the manner in
which they achieve them. More information on the Companys
pay for performance philosophy can be found in Sections II
and III. Additional information on the Companys business
results can be found in the Companys 2009 Annual Report
under the Managements Discussion and Analysis section.
In 2009, the Compensation & Benefits Committee (the
Committee) reviewed the executive compensation and
benefits programs and made important changes to better align
them to the Companys guiding principles. A new
Certificates of Long-Term Performance (CLP) Plan
replaced the Certificates of Long-Term Compensation
(CLC) Plan effective February 2010. The new CLP Plan
retains important elements from the CLC Plan that enable the
Company to recruit, retain and motivate its key executives. The
CLP Plan also contains several important changes that better
align the program with best practices and reinforce the guiding
principles of Competitiveness, Alignment to Shareholders
Interests, Pay for Performance and Accountability for Short- and
Long-Term Performance.
These changes are described in detail below under
Section II Long-Term
Incentives Certificates of Long-Term
Performance.
Set out below is the Compensation Discussion and Analysis
(CD&A), which is a discussion of the
Companys executive compensation programs and an analysis
of the compensation of the Named Executive Officers for 2009.
The CD&A has been organized into four sections:
Section I:
Governance
This section details the roles and responsibilities of the
parties involved in the decision-making processes related to the
development of the Companys executive compensation
programs, as well as the
20
individual performance assessments and determinations of
compensation for the Named 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 the performance assessments and
compensation awards for the Named Executive Officers.
Section III:
Performance Assessments and Compensation Decisions
This section summarizes how executive compensation decisions are
made, including the individual performance assessment process
and the importance of the Companys pay for performance
philosophy. The performance assessments of the Named Executive
Officers, along with the resulting compensation decisions for
the most recent performance year, are discussed in detail in
this section.
Section IV:
Additional Information Concerning Executive
Compensation
This section provides general information on the status of
executive employment agreements and
change-in-control
arrangements at the Company, along with a description of the
Companys Stock Ownership Guidelines and Executive
Compensation Recoupment Policy.
This CD&A demonstrates the emphasis the Company places on
its guiding principles especially accountability for
long-term performance when developing the
Companys executive compensation programs, setting
financial performance goals and strategic objectives and
ultimately in assessing 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 executive compensation program design and decision-making
process. The Committee is currently, and was for 2009, comprised
of four Directors who meet the independence requirements of the
NYSE. For 2009, the MCC was comprised of the Companys
Chairman/CEO,
Chief Financial Officer (CFO), and Vice President, Human
Resources. For 2010, the MCC is comprised of the Companys
Chairman/CEO, CFO, and Vice President, Human Resources and
General Counsel.
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 and long-term incentive awards
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Approves aggregate 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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Determines management compensation and establishes
perquisites and other compensation policies for employees
(except for executive officers), under delegation from the
Compensation & Benefits Committee.
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Independent Members of the Board of
Directors
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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 build long-term shareholder value. The primary
components of executive compensation include base salary, annual
performance bonus and long-term incentives. Compensation levels
are set to reflect competitive market practices, as well as
Company and individual performance. The Committee has
established the following guiding principles for the design of
the Companys compensation programs:
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Competitiveness All components of
compensation should be set competitively as compared against
appropriate peer companies so that the Company can continue to
attract, retain and motivate high performing executives in an
environment where companies are increasingly competing for high
caliber talent.
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Pay for Performance All components of
compensation should be tied to the performance of the individual
executive officer and his or her specific business unit or
function
and/or the
Company overall.
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Credo Values The manner in which financial
and strategic objectives are achieved is important. While not
always quantifiable, the manner in which employees achieve
results should also be a key element of the individual
performance review process. During the performance review
process, the Companys set of core values
trustworthiness, respect, responsibility, fairness, caring and
citizenship as set forth in Our Credo should be used
to assess how objectives are achieved.
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Accountability for Short- and Long-Term Performance
Annual performance bonuses and long-term
incentives should reward an appropriate balance of short-and
long-term financial and strategic business results, with an
emphasis on managing the business for the long-term.
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Alignment to Shareholders Interests
Long-term incentives should align the interests
of individual executive officers with the long-term interests of
the Companys shareholders.
|
Importance of
Credo Values
For more than 65 years, the Johnson & Johnson
Credo has guided the actions of the Company and its executive
officers in fulfilling their responsibilities to the
Companys customers, employees, 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.
Reducing the
Possibility for Excessive Risk-Taking
The Companys executive compensation program, which is
reviewed and approved by the Committee, is designed to motivate
and reward the executive officers for their performance during
the fiscal year and over the long term and for taking
appropriate risks toward achieving the long-term financial and
strategic growth objectives of the Company. The following
characteristics of the Companys executive compensation
program work to reduce the possibility of the executive
officers, either individually or as a
23
group, to make excessively-risky business decisions that could
maximize short-term results at the expense of long-term value:
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Balanced Mix of Pay Components: The target
compensation mix is not overly weighted toward annual incentive
awards and represents a balance of cash, long-term equity-based
compensation vesting over three years and long-term
performance-based units vesting over five years.
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Balanced Approach to Performance-Based Awards:
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Performance targets are tied to several financial metrics,
including operational sales growth, free cash flow, EPS growth,
and long-term shareholder return.
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Performance-based awards are based on the achievement of
strategic and leadership objectives in addition to financial
metrics.
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Performance Period and Vesting Schedules: The
performance period and vesting schedules for long-term
incentives overlap and, therefore, reduce the motivation to
maximize performance in any one period. Restricted Share Units
and Stock Options vest three years from the grant date. CLPs
vest 20% per year over 5 years.
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Capped Incentive Awards: Salary increases,
annual performance bonuses, and long-term incentive awards are
capped at 200% of target.
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Stock Ownership Guidelines: Requires the
Chairman/CEO to directly or indirectly own equity in the Company
of five times salary and other executive officers to own equity
of three times salary and to retain this equity throughout their
tenure. This policy is described below under
Section IV Additional Information
Concerning Executive Compensation.
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Executive Compensation Recoupment
Policy: Gives the Board the authority to recoup
executive officers past compensation in the event of a
material restatement of the Companys financial results.
This policy is discussed in more detail below under
Section IV Additional Information
Concerning Executive Compensation.
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No Employment or
Change-in-Control
Arrangements: None of the executive officers have
in place any employment or
change-in-control
arrangements that would result in guaranteed payouts. This is
discussed in more detail below under
Section IV Additional Information
Concerning Executive Compensation.
|
Executive Peer
Group
The Committee considers relevant market pay practices when
setting executive compensation to ensure the Companys
ability to recruit and retain high performing talent. In
assessing market competitiveness, the compensation of the
Companys executive officers is reviewed against executive
compensation at a designated set of companies (the
Executive Peer Group). The Executive Peer Group,
which is reviewed by the Committee on an annual basis, consists
of companies that:
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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.
|
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
24
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.
The following table lists the companies in the 2009 Executive
Peer Group and their business characteristics, along with
Johnson & Johnsons rankings among these
companies, based on financial data reported by each company for
the most recent four fiscal quarters. Market capitalization is
calculated as of December 31, 2009.
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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%
|
(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)
|
Abbott Laboratories (ABT)
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$30,765
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$5,746
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$83.5
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ü
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ü
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ü
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ü
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ü
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The Boeing Company (BA)
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68,281
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1,312
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39.3
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ü
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ü
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ü
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Bristol-Myers Squibb Company (BMY)
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18,808
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3,222
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43.2
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ü
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ü
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ü
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ü
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ü
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Cisco Systems, Inc. (CSCO)
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35,533
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|
6,069
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137.7
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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)
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30,990
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6,824
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|
132.1
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ü
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ü
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ü
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General Electric Company (GE)
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156,783
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11,025
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161.1
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ü
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ü
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ü
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ü
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Hewlett-Packard Company (HPQ)
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116,756
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8,093
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121.8
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ü
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ü
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ü
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Honeywell International Inc. (HON)
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30,908
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2,153
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29.9
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ü
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ü
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International Business Machines Corporation (IBM)
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95,758
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13,425
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172.0
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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)*
|
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27,428
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|
12,899
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111.6
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ü
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ü
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ü
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ü
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ü
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3M Company (MMM)
|
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|
23,123
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|
3,193
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58.5
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ü
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ü
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ü
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ü
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ü
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PepsiCo, Inc. (PEP)
|
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|
43,232
|
|
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|
5,946
|
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|
94.9
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ü
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ü
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ü
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Pfizer Inc. (PFE)*
|
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|
50,009
|
|
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|
|
8,635
|
|
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|
146.8
|
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ü
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ü
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ü
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ü
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ü
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The Procter & Gamble Company (PG)
|
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|
77,913
|
|
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|
13,050
|
|
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|
177.1
|
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ü
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ü
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ü
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ü
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United Technologies Corporation (UTX)
|
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|
52,920
|
|
|
|
|
3,829
|
|
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|
65.1
|
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ü
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ü
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Johnson & Johnson (JNJ)
|
|
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|
61,897
|
|
|
|
|
12,266
|
|
|
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|
177.7
|
|
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ü
|
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ü
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ü
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ü
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ü
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Johnson & Johnsons Ranking
|
|
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|
6th highest
|
|
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|
4th highest
|
|
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|
1st highest
|
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* |
Financial results for Merck & Co., Inc. and Pfizer
Inc. include results of Schering-Plough Corp. and Wyeth from the
dates of their respective acquisitions.
|
As a result of the Wyeth acquisition by Pfizer Inc., Wyeth is no
longer a part of the Executive Peer Group for 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 compensation 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.
|
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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.
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Component
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Purpose
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Key Characteristics
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Base Salary
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Reinforces the guiding principle of Competitiveness
Salary (merit) increases reinforce Pay for Performance guiding principle
Recognizes individual work experience and level of responsibility
Recognizes individual performance and maintains internal parity among those performing like jobs
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Fixed compensation
Increases predominantly driven by individual performance in last performance year, subject to budgetary constraints
Used to calculate other components of compensation
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Annual Performance Bonus
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Reinforces the guiding principles of Pay for Performance, Accountability for Short- and Long-Term Performance, Competitiveness, and Alignment to Shareholders Interests
Communicates the annual priorities and key objectives of the business
Motivates attainment of short-term goals for the applicable performance period
Functions as variable pay that can fluctuate based on individual performance, which includes business unit and/or function, and Company performance
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Variable compensation tied to individual performance in last performance year
Bonus targets are set as a percent of base salary
Awards paid 15% in stock and 85% in cash for executive officers
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Long-Term Incentives
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Stock Options &
Restricted Share Units
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Reinforces the guiding principles of Accountability for Long-Term Performance, Pay for Performance, Competitiveness, and Alignment to Shareholders Interests
Motivates attainment of long-term goals and support of the Companys overall business priorities
Facilitates executive equity ownership, thereby aligning executives interests with those of shareholders
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Variable compensation provided to reward performance over the long-term
Vests 100% 3 years from grant date
Stock options expire 10 years from grant date
No dividend equivalents earned
Awards granted 75% in stock options and 25% in 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
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Certificates of Long-Term
Performance
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Reinforces the guiding principles of Accountability for Long-Term Performance, Pay for Performance, Competitiveness, and Alignment to Shareholders Interests over time
Aligns employee interests with the long-term operational growth of the Company
Encourages long-term commitment to the Company
Provides a measure of overall Company performance that is not subject to short-term market volatility
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Variable, deferred compensation
Vested CLP units are payable at the earlier of: ten years after date of grant, or at termination (including retirement)
Dividend equivalents are paid on vested CLP units
Dividend equivalent yield aligned with shareholders. The same yield as the Common Stock with a one year lag.
Units vest 20% per year
Granted annually based on performance
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27
In furtherance of the Companys pay for performance guiding
principle, an individual has the opportunity to earn from 0 to 2
times the applicable target for each compensation component
based on 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 establish 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 2009 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 2010 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. To assess
individual performance, the Chairman/CEO considers 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.
28
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 2009 the bonus targets for the executive officers 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 2009 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.
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 any Vice Chairman and 0.04% of
Consolidated Net Earnings for the other executive officers.
Long-Term
Incentives
The Companys long-term incentives are variable
compensation designed to 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 and CLPs 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 2008 were granted on
February 9, 2009, and annual awards for 2009 were granted
on February 8, 2010. 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.
Certificates of
Long-Term Performance
The CLP Plan became the successor to the CLC Plan starting with
awards made under the CLP Plan in February 2010. The new CLP
Plan continues to support our pay for performance philosophy and
compensation paid under this plan is tied to the long-term
operational performance of the Company. Like all of our
long-term incentives, the CLP Plan is instrumental to retaining
key executive talent.
29
The predecessor CLC Plan was established in 1947 (originally
referred to as the Certificates of Extra Compensation Plan) to
reflect the Companys commitment to the principle of
managing the business for the long-term. The CLP Plan continues
this commitment. CLPs are performance units whose vested value
is paid out upon the earlier of: 10 years from the date of
grant, or termination for any reason, including retirement.
Dividend equivalents are paid quarterly on all vested units. One
of the hallmarks of the CLP Plan is that the unit value and
dividends are based on the Companys operating performance
and are not subject to short-term market volatility that is
associated with equity-based incentives.
Purpose: The
CLP Plan:
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Reinforces for the participants the guiding principles of
Accountability for Long-Term Performance, Pay for Performance,
Competitiveness, and Alignment to Shareholders Interests
over time
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Aligns the participants interests with the long-term
operational growth of the Company
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Provides a measure of overall Company performance that is not
subject to short-term market volatility
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Management believes that the focus on long-term operational
performance promoted by the CLP Plan and the prior CLC Plan has
benefited the Company and has enhanced total shareholder return.
This focus on long-term operational performance is especially
important during times of substantial market volatility.
Management believes that, like the CLC Plan before it, the CLP
Plan will prove to be a valuable competitive advantage in
recruiting and retention.
Unit Valuation. The CLP core unit value equals
the Companys
5-year
average Earnings Per Share (EPS). The Companys
5-year
average EPS is calculated by dividing the
5-year
average reported net income by
5-year
average basic shares outstanding. The CLP core unit value is
determined annually as of the fiscal year-end and is approved by
the Board of Directors.
Dividend Equivalents. Dividend equivalents are
paid quarterly on vested CLPs on the same date that the cash
dividend is paid on the Common Stock. No dividend equivalents
are paid on unvested CLPs. In alignment with shareholders, CLP
dividend equivalents provide the same yield as the Common Stock
with a one year lag. The dividend equivalent amounts are set at
the beginning of each year. The total dividend equivalents for a
year equals the core unit value at the beginning of the year
multiplied by the prior-years dividend yield on the Common
Stock. Dividend equivalents are an important aspect of an
executive officers compensation package and help reinforce
the importance of sustaining and increasing dividends.
Determination of Grants. The number of CLP
units that are granted to a participant as part of his or her
annual compensation review is determined by the individual
performance of that employee during the year. Employees have an
opportunity to earn a grant of 0% to 200% of their target award.
Awards are planned in U.S. dollars and award values are
divided by the defined present value per CLP on the date of
grant to determine the number of CLPs granted. The number of
CLPs is rounded to the nearest 5 CLPs (since the awards vest 20%
per year). See page 41 2010 Award Values for
Individual Pay Components for the defined CLP present
value on the February 8, 2010 grant date.
Payment of Unit Value. CLP units vest 20% per
year over 5 years. The value of a participants vested
CLPs will be paid out at the earlier of: (A) 10 years
from the date of grant; or (B) termination, for any reason,
including retirement.
Certificates of
Long-Term Compensation
CLCs, formerly known as Certificates of Extra Compensation, have
been replaced by CLPs effective with grants awarded in 2010.
CLCs were granted in 2009 and prior years and those CLCs will
continue to be held by and paid out to employees who received
them for the duration of, and in accordance with the terms of,
those CLCs. 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.
30
Unit Valuation. The CLC unit value is
determined annually as of the fiscal year-end based on a formula
applied to business performance and is approved by the Board of
Directors.
Growth in EPS is the key driver of the value of a CLC 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 not distributed to shareholders.
The CLC unit value formula is an average of two components: Net
Asset Value per Share and Earnings-Power Value per Share. Net
Asset Value per Share (also known as book value per share)
represents assets minus liabilities per share of Common Stock.
Earnings-Power Value per Share is the average five-year adjusted
net earnings per share multiplied by 12.5, a fixed price to
earnings multiple which has been consistently applied since the
inception of the program. Net Asset Value per Share and
Earnings-Power Value per Share are adjusted for in-process
research and development.
Payment of Unit Value. The value of a
participants vested 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.
The noteworthy differences between the CLC Plan and the CLP Plan
are outlined in the table below.
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2004 Certificates of
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2009 Certificates of
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Long-Term
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Long-Term
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Plan Attribute
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Compensation Plan
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Performance Plan
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Change Rationale
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Dividend Equivalents
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Paid quarterly on vested and unvested units
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Paid quarterly on vested units only
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Aligns with best practices
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Dividend Equivalent Formula
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Same dollar amount per unit as Common Stock
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Same yield as paid on the Common Stock in the prior year
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Aligns yield with shareholders each year
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Planning Basis
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Annual Vesting
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Annual Grants
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Easier to understand and aligns with other long-term incentives
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Vested Unit Value Payout
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Payout at termination
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Payout at earlier of 10 years or termination
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Provides liquidity to participants and maintains long-term focus
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Unit Value Formula
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Book value per share &
5-year
average EPS
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5-year average EPS
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Aligns the unit value formula with capital efficient profitable
growth
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Executive
Perquisites & Other Benefits
The Company-paid employee benefits for the executive officers
are the same as those provided to all other non-union
U.S. employees, with the exception of the Executive Life
Insurance Program, which is provided to employees eligible for
awards under the CLP Plan. The Executive Life Insurance premiums
paid for executive officers are disclosed in the All Other
Compensation table on pages 47 and 48 of this Proxy
Statement.
In addition to the benefits offered to all employees, certain
executives are provided additional benefits that are intended
for business purposes. In some cases, these benefits may be used
for personal consumption, which would then be considered part of
an executive officers total compensation and
31
would be treated as taxable income under the applicable tax
laws. In 2009, executive perquisites included: access to the
Company aircraft for personal travel, access to Company cars and
drivers for commutation and other personal transportation,
personal meals in the Companys executive dining room, and
reimbursement of home security system monitoring fees. The
executive dining perquisite has been discontinued as of the
beginning of 2010.
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:
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Foster a pay for performance culture
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Encourage the achievement of long-term strategic plans and
annual business plans
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Engage, encourage and motivate executives to work toward their
highest level of performance while adhering to the values
embodied in Our Credo
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Accelerate and facilitate the development and deployment of key
talent
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The Chairman/CEOs annual financial and strategic goals are
agreed to with the Committee. Each of the other executive
officers establishes annual financial and strategic goals that
he or she will be held accountable for during the year, in
agreement with the Chairman/CEO. At the end of the performance
period, executives are assessed against these pre-established
goals and how they accomplished them. The Committee uses this
process to ensure goals are in place for each executive officer.
Each executive officers annual financial and strategic
goals are set in consideration of:
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Current market conditions for each of the Companys diverse
business groups
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Expectations for future growth
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Opportunities to increase the breadth of the Companys
business
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Past Company performance
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Long-term strategic plans
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The comparison to competitor composites
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Opportunities to develop people and enhance the human talent of
the organization
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For fiscal year 2009, 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.
32
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Metric
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Rationale
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Sales Growth (operational)
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Important top line measure of the
Companys financial wellness and market leadership positions
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Critical financial metric to ensure
future cash growth
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Management Net Income (business group leaders only)
Includes a working capital charge and tax allocations.
Excludes certain corporate expenses and special items, and
financing activities
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Keeps focus on capital-efficient,
profitable growth
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Free Cash Flow
Operating cash flow less capital spending
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Key indicator of the Companys
ability to meet future obligations and allows for creation of
new profitable investments
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Allows for the payment of dividends
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Cash Flow Metric (business group leaders only)
Change in Inventory, Accounts Receivable and Property,
Plant & Equipment
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Allows for generation of cash and
capital efficiency
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Earnings Per Share Growth (EPS)
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Key indicator of intrinsic value of
shareholder investment
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Shareholder Return
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Key indicator of value creation for
investors
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The Committee evaluates Sales Growth (operational), Free Cash
Flow and Earnings Per Share against business plan performance
targets. Shareholder Return is evaluated on a three-year and
five-year basis against: the S&P 500 Index, the S&P
Health Care Equipment Index, the S&P Pharmaceutical Index,
and the Dow Jones Industrial Average. The performance target
range is set for each financial goal based on a roll up of
business plans at each operating company, business group, and at
the overall Company level.
For 2009, the Companys Competitor Composite consisted of
the following companies broken down by business segment:
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Pharmaceuticals
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Medical Devices and Diagnostics
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Consumer
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Abbott Laboratories
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Abbott Laboratories
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Beiersdorf AG
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Amgen Inc.
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(Vascular & Diagnostics)
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Colgate-Palmolive Company
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AstraZeneca PLC
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Allergan, Inc.
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GlaxoSmithKline plc (OTC)
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Bristol-Myers Squibb Company
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Bayer AG (Diagnostics)
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Kimberly-Clark Corporation
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Eli Lilly and Company
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Beckman Coulter, Inc.
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LOréal
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GlaxoSmithKline plc
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Boston Scientific Corporation
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Novartis AG (OTC)
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Merck & Co., Inc.
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C. R. Bard, Inc.
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The Procter & Gamble Company
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Novartis AG
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Covidien Ltd.
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Merck & Co., Inc. (OTC)
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Pfizer Inc.
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Edwards Lifesciences Corporation
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Pfizer Inc. (OTC)
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Roche Group
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Medtronic, Inc.
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Sanofi-Aventis
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The Cooper Companies, Inc.
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(CooperVision)
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Roche Group (Diagnostics)
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Smith & Nephew plc
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St. Jude Medical, Inc.
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Stryker Corporation
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Synthes, Inc.
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Zimmer Holdings Inc.
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OTC stands for
Over-the-Counter
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:
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Strength and consistency of their financial outlook
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Sales Growth
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Net Income growth and Net Income margin
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Earnings per share growth
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Shareholder returns
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Global presence
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Product relevance (i.e., must be a direct competitor to
one of Johnson & Johnsons business lines)
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The portfolio of companies is evaluated on an ongoing basis and
updated as necessary. In 2009, Wyeth and Schering-Plough
Corporation were removed from the Pharmaceutical composite upon
completion of the Pfizer/Wyeth and Merck/Schering-Plough
acquisitions. In addition, Chattem, Inc. was removed from the
Consumer composite because the company has a different business
model than Johnson & Johnson. Allergan, Inc. was added
to the Medical Devices and Diagnostics composite as its Breast
Aesthetics business competes directly with Johnson &
Johnsons aesthetic and reconstructive business lines.
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.
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.
34
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Strategic Objective
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Rationale
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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. Develop the product
pipeline with the long-term growth of the Company in mind
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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
A strong pipeline of new products is
necessary for the Company to meet its growth strategy plans
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External Health Care Environment
Enhance the Companys position as an active leader in
health care with an influential voice in health care issues
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The Companys role in shaping the
future of the health care industry and the quality of care for
its patients and customers is important
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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
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Reputation
Understand and proactively manage the changing dynamics on
key issues such as reputation, media/external and investment
community communications and social responsibility
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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
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Leadership
Build the leadership pipeline by enacting effective
assessment and development measures that allow the Company to
cultivate its leadership and identify high-potential
executives
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Identifying 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
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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
2009
Compensation for 2008 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 2009 for performance
in 2008. The decisions regarding these awards and payments were
discussed in detail in the Companys 2009 Proxy Statement
dated March 11, 2009. For a full understanding of these
decisions, please refer to
35
the sections of the 2009 Proxy Statement entitled
Compensation Discussion and Analysis Executive
Compensation Decisions 2009 Compensation for 2008
Performance.
2010
Compensation for 2009 Performance
The following section summarizes the assessment of 2009
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 challenging economic conditions. The
Company delivered on financial commitments and made progress to
meet or exceed its strategic objectives. In 2009, the Company
continued to advance on its winning in health care
growth strategy by strengthening its core businesses while
investing in key product launches, acquisitions and
partnerships. The Companys strong financial position
provides the ability to continue growing a global presence by
building and expanding into emerging markets. This lays 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 Company delivered solid, financial
results in a difficult year.
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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Financial Objective
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|
|
Goal
|
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|
2009 Results
|
|
|
S&P 500
|
|
|
S&P HC Equip
|
|
|
S&P Pharm
|
|
|
DJIA
|
2009 Sales Growth (operational)
|
|
|
(1.0%) - 1.0%
|
|
|
(0.3%)
|
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2009 Free Cash Flow
|
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|
$13.8 billion
|
|
|
$14.2 billion
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2009 Earnings Per Share
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$4.45 - $4.55
|
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|
$4.63(1)
|
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2009 Total Growth
|
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|
(2.2%) - 0.0%
|
|
|
1.8%
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Shareholder Return
|
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3 Yr Compounded Annual Growth Rate
|
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|
Exceed index
|
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|
2.1%
|
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|
(5.6
|
%)
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(0.7
|
%)
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0.5
|
%
|
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(3.1%)
|
5 Yr Compounded Annual Growth Rate
|
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growth
|
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2.9%
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0.4
|
%
|
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0.4
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%
|
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2.6
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%
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1.9%
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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
2009 Reconciliation of Non-GAAP Financial Measures.
|
Mr. Weldon
Chairman/CEO
Overview
The Board believes that Mr. Weldon generally exceeded
expectations despite substantial economic, political, regulatory
and competitive challenges as well as significant patent
expirations. As referenced in the table above, the Company
delivered solid financial results and positioned itself for
future growth.
Strategic
Results
|
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|
Under Mr. Weldons leadership, the Company
strengthened pipelines across the enterprise through strategic
acquisitions, investments and collaborations, including Cougar
Biotechnology, Inc., Elan Corporation, plc, Crucell NV, Mentor
Corporation and Acclarent, Inc.
|
36
|
|
|
|
|
The Company enhanced its global presence by developing
significant new sales channels, expanding its surgical training
and R&D centers and generating strong growth in emerging
markets including Brazil, China, India and Mexico.
|
|
|
|
Mr. Weldon played an effective role in helping shape health
care policy around the world and has been very involved with
efforts on U.S. Health Care Reform. Mr. Weldons
personal involvement with key leaders and organizations has
ensured the interests of the Company are well represented.
|
|
|
|
The Company continued to maintain a strong reputation through
Mr. Weldons commitment to Our Credo, focus on
sustainability, transparency in investor relations and
philanthropic activities.
|
|
|
|
In 2009, Mr. Weldon initiated a major restructuring to
streamline the global workforce and reduce costs to allow
investment in growth opportunities.
|
|
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|
Mr. Weldon continued to build a pipeline of future leaders.
He made difficult personnel decisions with the restructuring in
2009, while maintaining leadership development programs which
will produce long-term results for the Company.
|
|
|
|
Under Mr. Weldons leadership, Johnson &
Johnson supported more than 600 philanthropic programs, which
address HIV/AIDS, maternal and child health, diabetes, mental
health, management training for health care providers, and
disaster and humanitarian relief.
|
Compensation
|
|
|
|
|
For Mr. Weldon, the Board approved a 3.2% merit increase
effective February 22, 2010. His base salary is at the
75th percentile of the Executive Peer Group.
|
|
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|
Mr. Weldon was awarded an annual performance bonus equal to
125% of his target, an option/RSU award equal to 109% of his
target and a CLP grant equal to 101% of his target.
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|
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|
Mr. Weldons total direct compensation is at the
75th percentile of the Executive Peer Group. Please see the
table on page 41 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.
Strategic
Results
|
|
|
|
|
In 2009, Mr. Caruso worked with the other Company leaders
in developing their financial plans and provided ongoing
oversight and direction to support achievement of those plans.
|
|
|
|
With Mr. Carusos disciplined financial focus, the
Company continued to deliver adjusted earnings growth despite a
sales decline for the year.
|
|
|
|
The Company maintained a strong cash flow and balance sheet to
provide the financial strength for investments in growth.
|
|
|
|
In pursuit of operational excellence, Mr. Caruso initiated
standardization and restructuring efforts to facilitate
operational synergies and streamline the cost structure for the
Company.
|
|
|
|
Mr. Caruso continued to build on his strong relationship
with the financial community by proactively reaching out to the
investment community, an effort that was recognized by external
benchmarks.
|
37
|
|
|
|
|
Under Mr. Carusos direction, the Procurement function
minimized the impact from supply chain interruptions on the
business and enabled revenue enhancing improvements through
supplier innovation.
|
|
|
|
Under Mr. Carusos direction, the Information
Technology function improved I/T controls and risk management,
drove more efficiency in I/T infrastructures and reinvested
savings in the business.
|
|
|
|
Mr. Caruso provided thorough evaluation of various strategic
M&A opportunities in order to assist management in the
selection of value-creating transactions.
|
|
|
|
Mr. Caruso increased diversity at the senior leadership
level and made key appointments to continue to develop and grow
talent. His focus on retaining talent in critical positions
continued a positive trend.
|
|
|
|
Mr. Caruso is recognized for developing strong finance
talent across the Company and is sought out by other executives
in the Company for his perspective.
|
Compensation
|
|
|
|
|
For Mr. Caruso, the Committee approved a 3.6% merit
increase effective February 22, 2010. His base salary is
below the 50th percentile of the Executive Peer Group for
his position as CFO.
|
|
|
|
Mr. Caruso was also awarded an annual performance bonus
equal to 110% of his target based on the results of his function
and overall business performance. He also received an option/RSU
award equal to 101% of his target and a CLP grant equal to 102%
of his target.
|
|
|
|
Mr. Carusos total compensation is between the
50th percentile and 75th percentile of the Executive
Peer Group. Please see the table on page 41 of this Proxy
Statement for the award values for each pay component.
|
|
|
|
Due to the change in the planning basis of awards from a
vesting-based approach under the CLC Plan to a grant-based
approach under the CLP Plan, certain executives were adversely
impacted. The Committee approved one-time CLP awards to
transition these executives to the new CLP Plan. As a result,
Mr. Caruso received a CLP transition award of
148,400 CLPs.
|
Mr. Deyo
Vice President, Human Resources and General
Counsel
Mr. Deyo serves as General Counsel and has additional
responsibility for the offices of the Corporate Secretary,
Government Affairs and Policy, Health Care Compliance, Privacy,
Security and Aviation. In November 2009, he assumed
responsibility for the Human Resources function worldwide.
Strategic
Results
|
|
|
|
|
Under Mr. Deyos leadership, the Law Department
effectively managed, and provided critical advice to executives
in connection with, many significant litigation matters, some
where the Company has been the defendant and others the
plaintiff. Among the litigation successes in 2009 were several
substantial recoveries in key patent disputes.
|
|
|
|
The Law Department enhanced Johnson & Johnsons
capability to manage risk by effectively shaping the external
environment in areas such as tort reform and the protection of
intellectual property, and managing numerous governmental
investigations.
|
|
|
|
The Law Department provided effective legal guidance on
significant acquisitions and strategic collaborations, including
transactions with Cougar Biotechnology, Inc., Crucell NV and
Elan Corporation, plc.
|
|
|
|
The Government Affairs and Policy Groups provided a strong voice
in helping to shape healthcare policies around the world,
including substantial engagement with the United States
Government in its efforts at health care reform.
|
38
|
|
|
|
|
Mr. Deyo initiated a restructuring of the Compliance group
to drive more consistency across the business segments for
compliance, reporting and implementation of key compliance
programs.
|
|
|
|
The work of all departments reporting to Mr. Deyo has been
instrumental in the Companys efforts to accelerate growth
and enhance Johnson & Johnsons reputation.
|
|
|
|
Mr. Deyo continues to be active personally in efforts to
strengthen the Companys strong culture of ethical behavior
in accordance with the Credo.
|
|
|
|
Mr. Deyo was successful in retaining key talent, both in
critical senior positions, as well as in the leadership pipeline
for those positions.
|
|
|
|
Mr. Deyo performed exceptionally well in employee engagement and
provided important support for the Companys diversity and
inclusion efforts.
|
Compensation
|
|
|
|
|
For Mr. Deyo, the Committee approved a 4.5% merit increase
effective February 22, 2010. His base salary is above the
75th percentile of the Executive Peer Group for chief legal
officers.
|
|
|
|
Mr. Deyo was also awarded an annual performance bonus equal
to 139% of his target. He also received an option/RSU award
equal to 112% of his target and a CLP grant equal to 114% of
target.
|
|
|
|
Mr. Deyos total compensation is above the
75th percentile of the Executive Peer Group. Please see the
table on page 41 of this Proxy Statement for the award
values of each pay component.
|
|
|
|
Due to the change in the planning basis of awards from a
vesting-based approach under the CLC Plan to a grant-based
approach under the CLP Plan, certain executives were adversely
impacted. The Committee approved one-time CLP awards to
transition these executives to the new CLP Plan. As a result,
Mr. Deyo received a CLP transition award of 426,440 CLPs.
|
Ms. Goggins
Worldwide Chairman, Consumer Group
Financial
Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
Financial Objective Consumer
|
|
|
Goal
|
|
|
Results
|
|
|
Sales Growth (operational)
|
|
|
3.2% - 4.0%
|
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Net Income Growth
|
|
|
6.4% - 10.8%
|
|
|
|
8.7
|
%(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Metric
|
|
|
21.5% - 29.0%
|
|
|
|
99.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excluding special items.
|
Strategic
Results:
|
|
|
|
|
The Consumer Groups performance for 2009 was solid, on
both a financial and a non-financial basis, despite external
events that adversely impacted the business, including the
global economic downturn, as well as negative publicity on
certain products. Under Ms. Goggins leadership, four of
the Consumer Groups six franchises experienced
year-on-year operational growth.
|
|
|
|
Ms. Goggins continued to build on the Consumer Groups
iconic brands and introduced new products such as
AVEENO®
line extensions, the continued expansion of
LISTERINE®
TOTAL CARE and the launch of SUN
CRYSTALS®.
|
|
|
|
The Consumer Group is well positioned for future growth with an
increased product pipeline and new science-based innovations.
|
|
|
|
As part of a Company-wide focus on organizational effectiveness
and to position the Consumer Group for future sustainable
growth, Ms. Goggins significantly restructured the Consumer
business in 2009.
|
39
|
|
|
|
|
Ms. Goggins increased the effectiveness of the Consumer
Group by strengthening talent pipelines, improving recruiting
processes in key strategic markets, focusing on diversity,
driving engagement and a Credo-based culture. She performed well
in retaining and developing key talent. In addition,
Ms. Goggins restructuring efforts simplified the
business organizational structure, which facilitated
clarity in decision-making and accountability.
|
Compensation:
|
|
|
|
|
For Ms. Goggins, the Committee approved a 3.4% merit
increase effective February 22, 2010. Her base salary is
below the 50th percentile of the Executive Peer Group.
|
|
|
|
Based on the financial and strategic results of the Consumer
Group as well as overall Company results, Ms. Goggins was
awarded an annual performance bonus equal to 101% of her target.
She also received an option/RSU award equal to 103% of her
target and a CLP grant equal to 102% of her target.
|
|
|
|
Ms. Goggins total compensation is between the
50th percentile and 75th percentile of the Executive
Peer Group. Please see the table on page 41 of this Proxy
Statement for the award values for each pay component.
|
|
|
|
Due to the change in the planning basis of awards from a
vesting-based approach under the CLC Plan to a grant-based
approach under the CLP Plan, certain executives were adversely
impacted. The Committee approved one-time CLP awards to
transition these executives to the new CLP Plan. As a result,
Ms. Goggins received a CLP transition award of 211,430 CLPs.
|
Ms. McCoy
Worldwide Chairman, Pharmaceuticals Group
Financial
Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
Financial Objective Pharmaceuticals
|
|
|
Goal
|
|
|
Results
|
Sales Growth (operational)
|
|
|
(6.4%) - (5.2%)
|
|
|
(6.1%)
|
|
|
|
|
|
|
|
Management Net Income Growth
|
|
|
(13.8%) - (10.3%)
|
|
|
(10.3%)(1)
|
|
|
|
|
|
|
|
Cash Flow Metric
|
|
|
(51.9%) - (37.5%)
|
|
|
(5.0%)
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excluding special items.
|
Strategic
Results:
|
|
|
|
|
Ms. McCoy took on the position of Worldwide Chairman,
Pharmaceuticals Group in January 2009, a challenging year which
included the anticipated loss of nearly $3 billion in
revenue due to patent expirations. Under Ms. McCoys
leadership, the Pharmaceuticals Group met the financial targets
for the year.
|
|
|
|
In 2009, Ms. McCoy positioned the Pharmaceuticals Group for
future growth. The organization launched five new products and
invested in acquisitions and leading-edge collaborations that
strengthened the Company in areas such as prostate cancer
(Cougar Biotechnology, Inc.), Alzheimers disease (Elan
Corporation, plc), vaccines (Crucell NV), tuberculosis (Global
Alliance for TB Drug Development), and HIV (Gilead Sciences,
Inc.).
|
|
|
|
Under Ms. McCoys leadership, the Pharmaceuticals
Group continued to expand its core products with new indications
and the advancement of its pipeline with new filings.
|
|
|
|
The Pharmaceuticals Group has accelerated growth in key emerging
markets with robust growth in Brazil, Turkey, Mexico and China.
To position for the future, the organization has partnered with
branded generics in India, expanded its sales reach in China and
developed its R&D presence in emerging markets.
|
40
|
|
|
|
|
Ms. McCoy has also improved efficiency with the
restructuring of the Pharmaceuticals Group, integrating the
global R&D organization, geographic commercial
organizations, and the global strategy group.
|
|
|
|
Ms. McCoy made strong progress developing the
Pharmaceuticals Groups leadership pipeline and improving
overall organizational effectiveness. She made numerous
leadership appointments and organizational changes to align the
business with the Companys long-term growth strategies
while retaining critical talent.
|
Compensation
|
|
|
|
|
For Ms. McCoy, the Committee approved a 4.8% merit increase
effective February 22, 2010. Her base salary is below the
50th percentile of the Executive Peer Group.
|
|
|
|
Based on the financial and strategic results of the
Pharmaceuticals Group as well as overall Company results,
Ms. McCoy was awarded an annual performance bonus equal to
129% of her target. She also received an option/RSU award equal
to 118% of her target and a CLP grant equal to 125% of target.
|
|
|
|
Ms. McCoys total compensation is at the
75th percentile of the Executive Peer Group. Please see the
table below for the award values of each pay component.
|
2010 Award Values
for Individual Pay Components
The following table shows each component of compensation
approved in February 2010 for performance in 2009 for each Named
Executive Officer. This table does not include CLC and CLP
dividend equivalent payments, change in pension value,
non-qualified deferred compensation earnings or the items
categorized under All Other Compensation in Column H
of the Summary Compensation Table on page 44 of this Proxy
Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
Annual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approval/
|
|
Base
|
|
Performance
|
|
Options
|
|
Options
|
|
RSUs
|
|
RSUs
|
|
CLPs
|
|
CLPs
|
|
Total Planned
|
|
|
Award
|
|
Salary
|
|
Bonus
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Granted
|
|
Compensation
|
Name
|
|
Date
|
|
($)(1)
|
|
($)
|
|
(#)
|
|
($)(2)
|
|
(#)
|
|
($)(3)
|
|
(#)
|
|
($)(4)
|
|
($)(5)
|
|
W. C. Weldon
|
|
2/8/2010
|
|
$
|
1,860,000
|
|
|
$
|
3,600,000
|
|
|
|
586,873
|
|
|
$
|
4,713,177
|
|
|
|
48,906
|
|
|
$
|
2,773,851
|
|
|
|
1,471,215
|
|
|
$
|
6,899,998
|
|
|
$
|
19,847,026
|
|
D. J. Caruso
|
|
2/8/2010
|
|
|
753,900
|
|
|
|
1,004,000
|
|
|
|
119,770
|
|
|
|
961,873
|
|
|
|
9,981
|
|
|
|
566,102
|
|
|
|
383,795
|
|
|
|
1,799,999
|
|
|
|
5,085,874
|
|
|
|
2/9/2010(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148,400
|
|
|
|
695,996
|
|
|
|
|
|
R. C. Deyo
|
|
2/8/2010
|
|
|
873,100
|
|
|
|
1,164,000
|
|
|
|
131,747
|
|
|
|
1,058,060
|
|
|
|
10,979
|
|
|
|
622,707
|
|
|
|
319,830
|
|
|
|
1,500,003
|
|
|
|
5,217,870
|
|
|
|
2/9/2010(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
426,440
|
|
|
|
2,000,004
|
|
|
|
|
|
C. A. Goggins
|
|
2/8/2010
|
|
|
827,200
|
|
|
|
1,007,000
|
|
|
|
134,159
|
|
|
|
1,077,431
|
|
|
|
11,180
|
|
|
|
634,107
|
|
|
|
383,795
|
|
|
|
1,799,999
|
|
|
|
5,345,737
|
|
|
|
2/9/2010(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211,430
|
|
|
|
991,607
|
|
|
|
|
|
S. S. McCoy
|
|
2/8/2010
|
|
|
785,900
|
|
|
|
1,205,000
|
|
|
|
143,724
|
|
|
|
1,154,247
|
|
|
|
11,977
|
|
|
|
679,311
|
|
|
|
469,085
|
|
|
|
2,200,009
|
|
|
|
6,024,467
|
|
|
|
|
(1)
|
|
Annual base salary effective
February 22, 2010.
|
|
(2)
|
|
Option exercise price was $62.62.
The grant date fair value as calculated under U.S. GAAP was
$8.031 per option share. The Black-Scholes option valuation
model was used with the following assumptions: volatility of
17.43% based on a blended rate of four-year daily historical
average volatility rate, and a five-week average implied
volatility rate based on
at-the-money
traded Johnson & Johnson stock options with a life of
two years; dividend yield of 3.30%; risk-free interest rate of
2.78% based on a U.S. Treasury rate of six years; and a six-year
option life.
|
|
(3)
|
|
The price used to determine the
number of RSUs granted was $62.62, which was the average of the
high and low prices of the Companys Common Stock on the
NYSE on the grant date. The grant date fair value for the RSU
awards as calculated under U.S. GAAP was $56.718 per RSU
based on the average of the high and low prices of the
Companys Common Stock on the NYSE on the grant date and
discounted by an expected dividend yield of 3.30% due to the
lack of dividends paid on the RSUs prior to vesting.
|
|
(4)
|
|
The defined CLP present value for
purposes of determining the number of CLPs granted is the sum of
the core CLP unit value on the date of grant and the estimated
present value of the dividend equivalents to be paid over the
10-year CLP
term. For the February 8, 2010 grant, the defined present
value per CLP was $4.69. This consisted of the core CLP unit
value of $3.99 and the estimated present value of the dividend
equivalents of $0.70. The estimated present value of the
dividend equivalents was calculated assuming a dividend
equivalent amount of $0.1354 per unit per year, and a 4.84%
discount rate. The calculation took into account that dividend
equivalents are only paid on vested CLPs.
|
41
|
|
|
(5)
|
|
Total does not include the one-time
CLP transition award.
|
|
(6)
|
|
Due to the change in the planning
basis of the awards from a vesting-based approach under the CLC
Plan to a grant-based approach under the CLP Plan, certain
executives were adversely impacted. The Committee approved
selected one-time CLP awards to transition these executives to
the new CLP Plan.
|
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 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.
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
42
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. 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.
43
EXECUTIVE AND
DIRECTOR COMPENSATION
SUMMARY
COMPENSATION TABLE
The following table provides information concerning the
compensation of the Companys Chief Executive Officer,
Chief Financial Officer and the three other most highly
compensated executive officers for fiscal 2009 and, for those
executive officers who were named in the 2009 and 2008 Proxy
Statements, for fiscal 2008 and 2007. For a complete
understanding of the table, please read the narrative
disclosures that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F
|
|
Non-Qualified
|
|
|
|
|
A
|
|
B
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
H
|
|
|
Name and
|
|
Fiscal
|
|
C
|
|
D
|
|
E
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
I
|
Principal Position
|
|
Year
|
|
Salary ($)
|
|
Stock Awards ($)
|
|
Option Awards ($)
|
|
Compensation($)
|
|
Earnings ($)
|
|
Compensation ($)
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. Weldon
|
|
|
2009
|
|
|
$
|
1,802,500
|
|
|
$
|
2,762,532
|
|
|
$
|
5,238,069
|
|
|
$
|
12,831,146
|
|
|
$
|
7,983,010
|
|
|
$
|
196,587
|
|
|
$
|
30,813,844
|
|
Chairman/CEO
|
|
|
2008
|
|
|
|
1,792,019
|
|
|
|
2,452,129
|
|
|
|
3,979,360
|
|
|
|
12,598,260
|
|
|
|
8,001,976
|
|
|
|
303,688
|
|
|
|
29,127,432
|
|
|
|
|
2007
|
|
|
|
1,725,000
|
|
|
|
2,319,368
|
|
|
|
5,338,468
|
|
|
|
12,136,520
|
|
|
|
6,613,649
|
|
|
|
271,757
|
|
|
|
28,404,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominic J. Caruso
|
|
|
2009
|
|
|
|
723,739
|
|
|
|
486,847
|
|
|
|
923,105
|
|
|
|
2,441,300
|
|
|
|
601,651
|
|
|
|
43,708
|
|
|
|
5,220,350
|
|
VP, Finance, CFO
|
|
|
2008
|
|
|
|
701,442
|
|
|
|
389,612
|
|
|
|
632,234
|
|
|
|
1,999,500
|
|
|
|
452,397
|
|
|
|
43,995
|
|
|
|
4,219,180
|
|
|
|
|
2007
|
|
|
|
550,000
|
|
|
|
208,754
|
|
|
|
480,462
|
|
|
|
1,550,100
|
|
|
|
298,386
|
|
|
|
53,648
|
|
|
|
3,141,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell C. Deyo
|
|
|
2009
|
|
|
|
831,838
|
|
|
|
611,372
|
|
|
|
1,159,245
|
|
|
|
3,608,760
|
|
|
|
2,374,644
|
|
|
|
45,535
|
|
|
|
8,631,394
|
|
VP, HR & General Counsel
|
|
|
2008
|
|
|
|
804,096
|
|
|
|
618,749
|
|
|
|
1,004,137
|
|
|
|
3,513,100
|
|
|
|
1,917,729
|
|
|
|
123,700
|
|
|
|
7,981,511
|
|
|
|
|
2007
|
|
|
|
769,616
|
|
|
|
579,872
|
|
|
|
1,334,611
|
|
|
|
3,945,000
|
|
|
|
1,656,888
|
|
|
|
92,560
|
|
|
|
8,378,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colleen A. Goggins
|
|
|
2009
|
|
|
|
795,854
|
|
|
|
634,037
|
|
|
|
1,202,179
|
|
|
|
3,784,070
|
|
|
|
1,840,303
|
|
|
|
60,453
|
|
|
|
8,316,896
|
|
WW Chairman, Consumer
|
|
|
2008
|
|
|
|
766,635
|
|
|
|
630,240
|
|
|
|
1,022,731
|
|
|
|
3,687,885
|
|
|
|
1,600,850
|
|
|
|
69,844
|
|
|
|
7,778,185
|
|
Group
|
|
|
2007
|
|
|
|
729,923
|
|
|
|
579,872
|
|
|
|
1,334,611
|
|
|
|
3,884,500
|
|
|
|
1,257,220
|
|
|
|
72,269
|
|
|
|
7,858,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sherilyn S. McCoy
|
|
|
2009
|
|
|
|
747,731
|
|
|
|
407,599
|
|
|
|
772,833
|
|
|
|
2,626,630
|
|
|
|
1,188,351
|
|
|
|
36,890
|
|
|
|
5,780,034
|
|
WW Chairman, Pharmaceuticals Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary (Column
C)
The amounts reported in Column C represent base salaries paid to
each of the Named Executive Officers for the listed fiscal year.
Stock Awards
(Column D)
The amounts reported in Column D represent the grant date fair
value of RSU awards, in accordance with U.S. GAAP, for the
listed fiscal year. Under U.S. GAAP, the fair value of RSU
awards is estimated on the grant date and discounted for
dividends because dividends are not paid on RSUs during the
vesting period. In accordance with current SEC disclosure
requirements, RSU awards for fiscal 2008 and fiscal 2007,
previously reported as amounts recognized, or
expensed, for the fiscal year, are now being
reported above as grant date fair values.
Restricted Share
Unit Fair Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU Grant Date
|
|
|
2/12/07
|
|
2/11/08
|
|
2/9/09
|
|
Common Stock Fair Market
Value(1)
|
|
$
|
65.62
|
|
|
$
|
61.75
|
|
|
$
|
58.33
|
|
Dividend Yield
|
|
|
2.50
|
%
|
|
|
2.90
|
%
|
|
|
3.30
|
%
|
RSU Fair Value
|
|
$
|
60.879
|
|
|
$
|
56.605
|
|
|
$
|
52.832
|
|
|
|
|
(1)
|
|
Average of the high and low prices
of the Companys Common Stock on the NYSE on the grant date.
|
Determination of RSU awards and certain terms and conditions of
the RSUs are described in the section entitled
Compensation Discussion and Analysis
Section II Compensation Framework and Pay
Components on pages 27 and 29 of this Proxy Statement.
44
Option Awards
(Column E)
The amounts reported in Column E represent the grant date fair
value of stock option awards granted in accordance with
U.S. GAAP for the listed fiscal year. In accordance with
current SEC disclosure requirements, stock option awards for
fiscal 2008 and fiscal 2007, previously reported as amounts
recognized, or expensed, for the fiscal year, are
now being reported above as grant date fair values.
Under U.S. GAAP, the fair value of each stock option award
is estimated on the grant date using the Black-Scholes option
valuation model based on the assumptions noted in the following
table. The expected life of an option is determined using
historical data. Expected volatility represents a 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Grant Date
|
|
|
2/12/07
|
|
2/11/08
|
|
2/9/09
|
|
Common Stock Fair Market
Value(1)
|
|
$
|
65.62
|
|
|
$
|
61.75
|
|
|
$
|
58.33
|
|
Risk Free Rate
|
|
|
4.78
|
%
|
|
|
2.97
|
%
|
|
|
2.71
|
%
|
Expected Volatility
|
|
|
14.66
|
%
|
|
|
15.00
|
%
|
|
|
19.48
|
%
|
Expected Life
|
|
|
6 yrs
|
|
|
|
6 yrs
|
|
|
|
6 yrs
|
|
Dividend Yield
|
|
|
2.50
|
%
|
|
|
2.90
|
%
|
|
|
3.30
|
%
|
Fair Value
|
|
$
|
11.677
|
|
|
$
|
7.655
|
|
|
$
|
8.348
|
|
|
|
|
(1)
|
|
Average of the high and low prices
of the Companys Common Stock on the NYSE on the grant date.
|
Determination of stock option awards and certain terms and
conditions of the stock options are described in the section
entitled Compensation Discussion and Analysis
Section II Compensation Framework and Pay
Components 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, CLCs that vested
in the listed fiscal year and dividend equivalents received
during the fiscal year. The specific amounts included in Column
F are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of CLC
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
|
|
|
|
Annual
|
|
Value of CLC
|
|
Equivalents
|
|
|
|
|
Fiscal
|
|
Performance
|
|
Units that Vested in
|
|
Received During the
|
|
|
Name
|
|
Year
|
|
Bonus ($)
|
|
Fiscal Year ($)
|
|
Fiscal Year ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
|
2009
|
|
|
$
|
3,600,000
|
|
|
$
|
5,091,296
|
|
|
$
|
4,139,850
|
|
|
$
|
12,831,146
|
|
|
|
|
2008
|
|
|
|
3,700,000
|
|
|
|
5,272,360
|
|
|
|
3,625,900
|
|
|
|
12,598,260
|
|
|
|
|
2007
|
|
|
|
3,500,000
|
|
|
|
5,688,120
|
|
|
|
2,948,400
|
|
|
|
12,136,520
|
|
D. J. Caruso
|
|
|
2009
|
|
|
|
1,004,000
|
|
|
|
974,100
|
|
|
|
463,200
|
|
|
|
2,441,300
|
|
|
|
|
2008
|
|
|
|
900,000
|
|
|
|
740,500
|
|
|
|
359,000
|
|
|
|
1,999,500
|
|
|
|
|
2007
|
|
|
|
735,000
|
|
|
|
531,600
|
|
|
|
283,500
|
|
|
|
1,550,100
|
|
R. C. Deyo
|
|
|
2009
|
|
|
|
1,164,000
|
|
|
|
974,100
|
|
|
|
1,470,660
|
|
|
|
3,608,760
|
|
|
|
|
2008
|
|
|
|
1,000,000
|
|
|
|
1,184,800
|
|
|
|
1,328,300
|
|
|
|
3,513,100
|
|
|
|
|
2007
|
|
|
|
1,018,500
|
|
|
|
1,727,700
|
|
|
|
1,198,800
|
|
|
|
3,945,000
|
|
C. A. Goggins
|
|
|
2009
|
|
|
|
1,007,000
|
|
|
|
1,493,620
|
|
|
|
1,283,450
|
|
|
|
3,784,070
|
|
|
|
|
2008
|
|
|
|
1,050,000
|
|
|
|
1,569,860
|
|
|
|
1,068,025
|
|
|
|
3,687,885
|
|
|
|
|
2007
|
|
|
|
1,060,000
|
|
|
|
1,860,600
|
|
|
|
963,900
|
|
|
|
3,884,500
|
|
S. S. McCoy
|
|
|
2009
|
|
|
|
1,205,000
|
|
|
|
811,750
|
|
|
|
609,880
|
|
|
|
2,626,630
|
|
Annual performance bonuses for the listed fiscal year were
approved by the Committee and paid to the Named Executive
Officers in the first fiscal quarter of the following year in
the form of 85% cash and 15% Company Common Stock as determined
by the Committee.
45
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 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 2008, 2007 and 2006 value of $32.47, $29.62, and $26.58
per CLC unit, respectively.
CLC dividend equivalents are paid to CLC Plan participants
during the fiscal year on vested and unvested CLCs in the same
amount and at the same time as dividends on the Companys
Common Stock. The amounts of dividend equivalents on unvested
CLCs received in 2009 were for Mr. Weldon: $936,050,
Mr. Caruso: $191,070, Mr. Deyo: $116,572,
Ms. Goggins: $198,790 and Ms. McCoy: $303,010.
Commencing with the CLPs (the successor instrument to CLCs)
granted in February 2010, dividend equivalents will not be paid
on CLPs that have not yet vested. See Compensation
Discussion and Analysis Section II
Compensation Framework and Pay Components Components
of Executive Compensation Long-Term
Incentives Certificates of Long-Term
Performance Dividend Equivalents on
page 30 of this Proxy Statement.
In prior years, the Company reported dividend equivalents on
CLCs paid during the fiscal year under All Other
Compensation (Column H). The Company has determined that
dividend equivalents represent payments under the Companys
cash-based long-term incentive plan and thus are more
appropriately reported under Column F rather than Column H. The
Company has made this change in reporting for all years
presented in the Summary Compensation Table. This change in
reporting dividend equivalents from Column H to Column F has no
effect on the amounts of total compensation from what has
previously been reported by the Company in prior years
Proxy Statements.
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. Between fiscal year-end 2007
and fiscal year-end 2008 the mortality table changed from the
GAM 1994 Table projected to 2004 to the UP-1994 Table projected
to 2008 to reflect improvements in life expectancy. Between
fiscal year-end 2008 and fiscal year-end 2009 the mortality
table was changed to the UP-1994 Table projected to 2009. No
other actuarial assumptions changed between fiscal year-end 2007
and fiscal year-end 2009.
Change in
Non-Qualified Deferred Compensation Earnings
The amounts representing above-market returns on all CLCs vested
as of the listed fiscal year-end are also included in Column G.
The Company uses 120% of the December applicable federal
long-term interest rate (AFR) as the reference rate
to compare potential returns of CLCs. The CLC unit value
46
increased 10.10% in 2009, from $32.47 as of fiscal year-end 2008
to $35.75 as of fiscal year-end 2009. 120% of the AFR for
December 2009 was 5.02%.
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.
The above-market calculation for CLCs in deferred compensation
accounts in 2009 was 5.08%; the CLC unit value increase of
10.10% minus the reference rate of return of 5.02%. As an
example, for Mr. Weldon, the actual increase in the value
of his vested CLCs in 2009 was $5,444,800, while the
above-market calculation was $2,739,010 of this amount. Again,
this is an unrealized amount and not actual compensation
received by the executive for the year.
The table below shows the specific amounts of change in pension
value and above-market calculation for vested CLCs for 2007,
2008, and 2009 included in Column G using 120% of AFR as the
reference rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
Above-Market
|
|
|
|
|
Fiscal
|
|
Pension
|
|
Calculation for
|
|
|
Name
|
|
Year
|
|
Value ($)
|
|
Vested CLCs ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
|
2009
|
|
|
$
|
5,244,000
|
|
|
$
|
2,739,010
|
|
|
$
|
7,983,010
|
|
|
|
|
2008
|
|
|
|
6,099,932
|
|
|
|
1,902,044
|
|
|
|
8,001,976
|
|
|
|
|
2007
|
|
|
|
4,585,754
|
|
|
|
2,027,895
|
|
|
|
6,613,649
|
|
D. J. Caruso
|
|
|
2009
|
|
|
|
369,000
|
|
|
|
232,651
|
|
|
|
601,651
|
|
|
|
|
2008
|
|
|
|
311,945
|
|
|
|
140,452
|
|
|
|
452,397
|
|
|
|
|
2007
|
|
|
|
166,784
|
|
|
|
131,602
|
|
|
|
298,386
|
|
R. C. Deyo
|
|
|
2009
|
|
|
|
1,217,000
|
|
|
|
1,157,644
|
|
|
|
2,374,644
|
|
|
|
|
2008
|
|
|
|
1,067,933
|
|
|
|
849,796
|
|
|
|
1,917,729
|
|
|
|
|
2007
|
|
|
|
690,378
|
|
|
|
966,510
|
|
|
|
1,656,888
|
|
C. A. Goggins
|
|
|
2009
|
|
|
|
913,000
|
|
|
|
927,303
|
|
|
|
1,840,303
|
|
|
|
|
2008
|
|
|
|
947,940
|
|
|
|
652,910
|
|
|
|
1,600,850
|
|
|
|
|
2007
|
|
|
|
548,711
|
|
|
|
708,509
|
|
|
|
1,257,220
|
|
S. S. McCoy
|
|
|
2009
|
|
|
|
926,000
|
|
|
|
262,351
|
|
|
|
1,188,351
|
|
All Other
Compensation (Column H)
The amounts reported in Column H represent the aggregate dollar
amount for each Named Executive Officer for perquisites and
other personal benefits, tax reimbursements, Company
contributions to the Companys 401(k) Savings Plan, and
insurance premiums. The following table shows the specific
amounts included in Column H.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to
|
|
|
|
|
|
|
|
|
Perquisites and
|
|
|
|
Defined
|
|
|
|
|
|
|
Fiscal
|
|
Other Personal
|
|
Tax
|
|
Contribution
|
|
Insurance
|
|
|
Name
|
|
Year
|
|
Benefits(1)
|
|
Reimbursements(2)
|
|
Plans
|
|
Premiums(3)
|
|
Total
|
|
W. C. Weldon
|
|
|
2009
|
|
|
$
|
114,995
|
|
|
$
|
480
|
|
|
$
|
81,112
|
|
|
|
|
|
|
$
|
196,587
|
|
|
|
|
2008
|
|
|
|
184,165
|
|
|
|
24,297
|
|
|
|
80,641
|
|
|
$
|
14,585
|
|
|
|
303,688
|
|
|
|
|
2007
|
|
|
|
179,231
|
|
|
|
11,017
|
|
|
|
77,625
|
|
|
|
3,884
|
|
|
|
271,757
|
|
D. J. Caruso
|
|
|
2009
|
|
|
|
11,140
|
|
|
|
|
|
|
|
32,568
|
|
|
|
|
|
|
|
43,708
|
|
|
|
|
2008
|
|
|
|
3,055
|
|
|
|
3,777
|
|
|
|
31,565
|
|
|
|
5,598
|
|
|
|
43,995
|
|
|
|
|
2007
|
|
|
|
31,994
|
|
|
|
5,393
|
|
|
|
10,348
|
|
|
|
5,913
|
|
|
|
53,648
|
|
R. C. Deyo
|
|
|
2009
|
|
|
|
8,102
|
|
|
|
|
|
|
|
37,433
|
|
|
|
|
|
|
|
45,535
|
|
|
|
|
2008
|
|
|
|
58,020
|
|
|
|
18,335
|
|
|
|
36,184
|
|
|
|
11,161
|
|
|
|
123,700
|
|
|
|
|
2007
|
|
|
|
50,084
|
|
|
|
4,403
|
|
|
|
34,633
|
|
|
|
3,440
|
|
|
|
92,560
|
|
C. A. Goggins
|
|
|
2009
|
|
|
|
24,640
|
|
|
|
|
|
|
|
35,813
|
|
|
|
|
|
|
|
60,453
|
|
|
|
|
2008
|
|
|
|
23,890
|
|
|
|
4,885
|
|
|
|
34,499
|
|
|
|
6,570
|
|
|
|
69,844
|
|
|
|
|
2007
|
|
|
|
32,635
|
|
|
|
2,857
|
|
|
|
32,847
|
|
|
|
3,930
|
|
|
|
72,269
|
|
S. S. McCoy
|
|
|
2009
|
|
|
|
3,242
|
|
|
|
|
|
|
|
33,648
|
|
|
|
|
|
|
|
36,890
|
|
|
|
|
(1) |
|
Under SEC Rules, companies are
required to identify by type all perquisites and other personal
benefits for a named executive officer if the total
value for that individual equals or exceeds $10,000, and to
report and quantify each perquisite or personal benefit that
exceeds the greater of $25,000 or 10% of the total amount for
that individual.
|
47
|
|
|
|
|
The aggregate value of perquisites
and other personal benefits for Mr. Weldon in fiscal 2009
was $114,995. This amount comprised: personal use of Company
aircraft ($62,847); car and driver for commutation and other
personal transportation ($30,503); home security system
monitoring fees; and executive dining room meals.
|
|
|
|
The aggregate value of perquisites
and other personal benefits for Mr. Caruso in fiscal 2009
was $11,140. This amount comprised: personal use of Company
aircraft and executive dining room meals.
|
|
|
|
The aggregate value of perquisites
and other personal benefits for Mr. Deyo in fiscal 2009 was
$8,102.
|
|
|
|
The aggregate value of perquisites
and other personal benefits for Ms. Goggins in fiscal 2009
was $24,640. This amount comprised: personal use of Company
aircraft; executive dining room meals; home security system
monitoring fees; and car and driver for personal transportation.
|
|
|
|
The aggregate value of perquisites
and other personal benefits for Ms. McCoy in fiscal 2009
was $3,242.
|
|
|
|
|
|
Amounts for fiscal 2008 and 2007
for Messrs. Weldon, Caruso and Deyo and Ms. Goggins
were reported in the Companys 2009 and 2008 Proxy
Statements.
|
|
|
|
Perquisites and other personal
benefits are valued on the basis of the aggregate incremental
cost to the Company. The Company calculates the aggregate
incremental cost to the Company for personal use of Company
aircraft as the sum of the cost of trip-related crew hotels and
meals, in-flight food and beverages, landing and ground handling
fees, hangar or aircraft parking costs, fuel costs based on the
average annual cost of fuel per mile flown, and other smaller
variable costs. Fixed costs that would be incurred in any event
to operate Company aircraft (e.g, aircraft purchase
costs, maintenance not related to personal trips, and flight
crew salaries) are not included. The Company calculates the
aggregate incremental cost to the Company for Company cars and
drivers for commutation and other personal transportation as the
sum of the cost of fuel, driver overtime fees, and other smaller
variable costs. Fixed costs that would be incurred in any event
to operate Company cars (e.g., car purchase costs,
maintenance not related to personal trips, and driver salaries)
are not included. Executives are taxed on the imputed income
attributable to personal use of Company aircraft and cars
(excluding commuting) and do not receive tax assistance from the
Company with respect to these amounts.
|
|
(2) |
|
Use of Company aircraft for
business purposes.
|
|
(3) |
|
No insurance premiums are reported
in this table for 2009 because the executive life insurance
premiums for fiscal 2009 were actually paid at the beginning of
fiscal 2010. The insurance premiums paid in fiscal 2010 for
fiscal 2009 were as follows: Mr. Weldon: $19,068;
Mr. Caruso: $5,882; Mr. Deyo: $14,993;
Ms. Goggins: $7,842; Ms. McCoy: $4,994.
|
Total
Compensation (Column I)
The amounts reported in Column I are the sum of Columns C
through H for each of the Named Executive Officers. All
compensation amounts reported in Column I include amounts paid
and amounts deferred.
GRANTS OF
PLAN-BASED AWARDS 2009
The following table provides information concerning the annual
performance bonus and long-term incentive awards made to each of
the Named Executive Officers in fiscal 2009. For a complete
understanding of the table, please read the narrative
disclosures that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payouts
|
|
Stock
|
|
Option
|
|
J
|
|
K
|
|
L
|
|
M
|
|
|
|
|
|
|
|
|
Under Non-Equity
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Closing
|
|
Grant
|
|
Grant
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
Incentive Plan
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Market
|
|
Date Fair
|
|
Date Fair
|
|
|
|
|
(CLCs)
|
|
Awards (Annual
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
Price on
|
|
Value of
|
|
Value of
|
|
|
B
|
|
C
|
|
D
|
|
Performance Bonus)
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
the Grant
|
|
Stock
|
|
Option
|
A
|
|
Grant
|
|
Units
|
|
Unit
|
|
E
|
|
F
|
|
G
|
|
Units
|
|
Options
|
|
Awards
|
|
Date
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
Granted (#)
|
|
Price ($)
|
|
Threshold ($)
|
|
Target ($)
|
|
Maximum ($)
|
|
(#)
|
|
(#)
|
|
($/sh)
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. C. Weldon
|
|
|
2/9/09
|
|
|
|
125,000
|
|
|
$
|
32.47
|
|
|
$
|
0
|
|
|
$
|
2,884,000
|
|
|
$
|
5,768,000
|
|
|
|
52,289
|
|
|
|
627,464
|
|
|
$
|
58.33
|
|
|
$
|
58.50
|
|
|
$
|
2,762,532
|
|
|
$
|
5,238,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. J. Caruso
|
|
|
2/9/09
|
|
|
|
40,000
|
|
|
|
32.47
|
|
|
|
0
|
|
|
|
909,500
|
|
|
|
1,819,000
|
|
|
|
9,215
|
|
|
|
110,578
|
|
|
|
58.33
|
|
|
|
58.50
|
|
|
|
486,847
|
|
|
|
923,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. C. Deyo
|
|
|
2/9/09
|
|
|
|
22,000
|
|
|
|
32.47
|
|
|
|
0
|
|
|
|
835,900
|
|
|
|
1,671,800
|
|
|
|
11,572
|
|
|
|
138,865
|
|
|
|
58.33
|
|
|
|
58.50
|
|
|
|
611,372
|
|
|
|
1,159,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. A. Goggins
|
|
|
2/9/09
|
|
|
|
70,000
|
|
|
|
32.47
|
|
|
|
0
|
|
|
|
1,000,125
|
|
|
|
2,000,250
|
|
|
|
12,001
|
|
|
|
144,008
|
|
|
|
58.33
|
|
|
|
58.50
|
|
|
|
634,037
|
|
|
|
1,202,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. S. McCoy
|
|
|
2/9/09
|
|
|
|
85,000
|
|
|
|
32.47
|
|
|
|
0
|
|
|
|
937,500
|
|
|
|
1,875,000
|
|
|
|
7,715
|
|
|
|
92,577
|
|
|
|
58.33
|
|
|
|
58.50
|
|
|
|
407,599
|
|
|
|
772,833
|
|
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 2009 for the
2008 performance year. The value of CLCs granted in 2009 was
based on the CLC unit value as of fiscal year-end 2008, which
was $32.47. 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
48
Analysis Section II Compensation
Framework and Pay Components on pages 30 and 31 of
this Proxy Statement.
Estimated Future
Payouts Under Non-Equity Incentive Plan Awards (Columns E
through G)
The amounts reported in Columns E through G reflect threshold,
target and maximum annual performance bonus award amounts for
the 2009 performance year that were set in 2009. Actual annual
performance bonus payments, as reflected in Column F of the
Summary Compensation Table on page 44 of this Proxy
Statement, were made in recognition of 2009 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 25 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 2009 for the 2008 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 2009, this value was $0.17 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 U.S. GAAP, the grant date fair value of the RSU
awards is estimated on the grant date and discounted for
dividends because dividends are not paid on RSUs during the
vesting period. The grant date fair value was $52.832 per RSU
based on the average of the high and low prices of the
Companys Common Stock on the NYSE on the grant date and
discounted by an expected dividend yield of 3.30%.
Under U.S. GAAP, the grant date fair value of each stock
option award is calculated on the grant date using the
Black-Scholes option valuation model. The stock options expiring
on February 9, 2019 had a grant date present value of
$8.348 per option share. The Black-Scholes model was used with
the following assumptions: volatility of 19.48% based on a
blended rate of four-year daily historical average volatility
rate, and a five-week average implied volatility rate based on
at-the-money
traded stock options with a life of two years; dividend yield of
3.30%; risk-free interest rate of 2.71% based on a
U.S. Treasury rate of six years; and a six-year option life.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2009
The following table provides information concerning the
unexercised stock options outstanding and unvested RSUs for each
of the Named Executive Officers as of fiscal year-end 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
|
|
|
|
Underlying Unexercised
|
|
F
|
|
G
|
|
Units of
|
|
Units of
|
|
|
B
|
|
C
|
|
Options (#)
|
|
Option
|
|
Option
|
|
Stock that
|
|
Stock that
|
A
|
|
Grant
|
|
Vesting
|
|
D
|
|
E
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have
|
Name
|
|
Date
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
Price
|
|
Date
|
|
Vested (#)
|
|
Not Vested ($)
|
|
W. C. Weldon
|
|
|
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
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H
|
|
I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
|
|
|
|
Underlying Unexercised
|
|
F
|
|
G
|
|
Units of
|
|
Units of
|
|
|
B
|
|
C
|
|
Options (#)
|
|
Option
|
|
Option
|
|
Stock that
|
|
Stock that
|
A
|
|
Grant
|
|
Vesting
|
|
D
|
|
E
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have
|
Name
|
|
Date
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
Price
|
|
Date
|
|
Vested (#)
|
|
Not Vested ($)
|
|
|
|
|
2/13/06
|
|
|
|
2/14/09
|
|
|
|
452,520
|
|
|
|
|
|
|
$
|
58.34
|
|
|
|
2/12/16
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
457,178
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
38,098
|
|
|
$
|
2,453,892
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
519,838
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
43,320
|
|
|
|
2,790,241
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
627,464
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
52,289
|
|
|
|
3,367,934
|
|
D. J. Caruso
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
41,146
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
3,429
|
|
|
|
220,862
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
82,591
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
6,883
|
|
|
|
443,334
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
110,578
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
9,215
|
|
|
|
593,538
|
|
R. C. Deyo
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
114,294
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
9,525
|
|
|
|
613,505
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
131,174
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
10,931
|
|
|
|
704,066
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
138,865
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
11,572
|
|
|
|
745,353
|
|
C. A. Goggins
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
114,294
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
9,525
|
|
|
|
613,505
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
133,603
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
11,134
|
|
|
|
717,141
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
144,008
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
12,001
|
|
|
|
772,984
|
|
S. S. McCoy
|
|
|
11/30/00
|
|
|
|
12/1/03
|
|
|
|
15,000
|
|
|
|
|
|
|
|
50.69
|
|
|
|
11/29/10
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/02
|
|
|
|
2/12/05
|
|
|
|
21,000
|
|
|
|
|
|
|
|
57.30
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/03
|
|
|
|
2/11/06
|
|
|
|
20,000
|
|
|
|
|
|
|
|
52.20
|
|
|
|
2/8/13
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/04
|
|
|
|
2/10/07
|
|
|
|
25,000
|
|
|
|
|
|
|
|
53.93
|
|
|
|
2/7/14
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/05
|
|
|
|
2/15/08
|
|
|
|
28,000
|
|
|
|
|
|
|
|
66.18
|
|
|
|
2/13/15
|
|
|
|
|
|
|
|
|
|
|
|
|
2/13/06
|
|
|
|
2/14/09
|
|
|
|
34,282
|
|
|
|
|
|
|
|
58.34
|
|
|
|
2/12/16
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/07
|
|
|
|
2/13/10
|
|
|
|
|
|
|
|
44,499
|
|
|
|
65.62
|
|
|
|
2/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
2/11/08
|
|
|
|
2/12/11
|
|
|
|
|
|
|
|
64,777
|
|
|
|
61.75
|
|
|
|
2/10/18
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/09
|
|
|
|
2/10/12
|
|
|
|
|
|
|
|
92,577
|
|
|
|
58.33
|
|
|
|
2/8/19
|
|
|
|
7,715
|
|
|
|
496,923
|
|
Market Value of
Shares or Units of Stock That Have Not Vested (Column
I)
The market value of unvested RSUs included in Column I was
calculated using the closing price of the Companys Common
Stock on the NYSE on December 31, 2009, which was the last
business day of fiscal 2009, of $64.41.
50
OPTION EXERCISES
AND STOCK VESTED 2009
The following table provides information concerning the
exercises of stock options during fiscal 2009 on an aggregated
basis and RSUs vested during 2009 for each of the Named
Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Shares
|
|
|
|
Shares Acquired
|
|
Value Realized
|
|
|
Acquired on
|
|
Value Realized
|
|
on Vesting
|
|
Upon on
|
Name
|
|
Exercise (#)
|
|
Upon Exercise ($)
|
|
(#)
|
|
Vesting ($)
|
|
W. C. Weldon
|
|
|
160,000
|
|
|
$
|
1,297,556
|
|
|
|
37,710
|
|
|
$
|
2,161,160
|
|
D. J. Caruso
|
|
|
40,420
|
|
|
|
279,150
|
|
|
|
5,142
|
|
|
|
294,688
|
|
R. C. Deyo
|
|
|
100,000
|
|
|
|
1,260,316
|
|
|
|
9,427
|
|
|
|
540,261
|
|
C. A. Goggins
|
|
|
24,000
|
|
|
|
265,692
|
|
|
|
9,363
|
|
|
|
536,594
|
|
S. S. McCoy
|
|
|
9,700
|
|
|
|
118,631
|
|
|
|
|
|
|
|
|
|
PENSION
BENEFITS 2009
The following table provides information as of fiscal year-end
2009 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 (#)
|
|
Benefit ($)
|
|
W. C. Weldon
|
|
Salaried Pension Plan
|
|
|
38.33
|
|
|
|
62
|
|
|
$
|
1,357,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
38,071,000
|
|
D. J. Caruso
|
|
Salaried Pension Plan
|
|
|
10.00
|
|
|
|
62
|
|
|
|
192,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
1,010,000
|
|
R. C. Deyo
|
|
Salaried Pension Plan
|
|
|
24.33
|
|
|
|
62
|
|
|
|
809,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
6,786,000
|
|
C. A. Goggins
|
|
Salaried Pension Plan
|
|
|
28.08
|
|
|
|
62
|
|
|
|
668,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
5,632,000
|
|
S. S. McCoy
|
|
Salaried Pension Plan
|
|
|
27.50
|
|
|
|
62
|
|
|
|
503,000
|
|
|
|
Excess Pension Plan
|
|
|
|
|
|
|
|
|
|
|
2,502,000
|
|
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
and bonus, and dividend equivalents paid or deferred on
nonvested CLC units for years prior to 2009.
The formula above produces the amount payable as a monthly
annuity for the life of the Named Executive Officer beginning as
early as age 62. Benefits can begin as early as
age 55, but are subject to a 4% per year reduction for the
number of years before age 62 that benefits begin.
The Salaried Pension Plan applies this formula to pay up to the
IRS covered compensation limit ($245,000 in 2009). The
Excess Pension Plan is a restorative supplemental retirement
plan that uses the same formula (including the definition of
final average earnings) as the Salaried Pension Plan without
applying the IRS pay limits and is offset by amounts paid from
the Salaried Pension Plan. Any U.S. non-union employee may
participate in the Excess Pension Plan if his or her covered
compensation exceeds the IRS limit.
While a present value is shown in the table, benefits are not
available as a lump sum and must be taken in the form of an
annuity. Present values were calculated using the same actuarial
assumptions
51
applied in the calculation of pension liabilities reported in
the Companys 2009 Annual Report (discount rate of 6.50%,
mortality according to the UP-1994 table projected to 2009).
No payments were made in 2009 under the Companys pension
plans to any of the Named Executive Officers.
NON-QUALIFIED
DEFERRED COMPENSATION 2009
The following table provides information with respect to the
Companys defined contribution and non-tax-qualified
compensation deferral plans for each of the Named Executive
Officers for 2009. For a complete understanding of the table,
please read the narrative disclosures that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B
|
|
C
|
|
D
|
|
E
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
A
|
|
Contributions in
|
|
Contributions in
|
|
Earnings
|
|
Balance
|
Name
|
|
Last FY ($)
|
|
Last FY ($)
|
|
in Last FY ($)
|
|
at Last FYE ($)
|
|
W. C. Weldon
|
|
|
|
|
|
$
|
5,161,383
|
|
|
$
|
9,193,492
|
|
|
$
|
78,035,220
|
|
D. J. Caruso
|
|
$
|
134,962
|
|
|
|
995,643
|
|
|
|
518,523
|
|
|
|
5,417,822
|
|
R. C. Deyo
|
|
|
|
|
|
|
1,000,508
|
|
|
|
2,604,395
|
|
|
|
26,891,012
|
|
C. A. Goggins
|
|
|
157,465
|
|
|
|
1,518,408
|
|
|
|
2,040,810
|
|
|
|
21,534,526
|
|
S. S. McCoy
|
|
|
|
|
|
|
834,373
|
|
|
|
537,509
|
|
|
|
5,774,897
|
|
Executive
Contributions in Last Fiscal Year (Column B)
The amounts reported in Column B include amounts deferred in the
last fiscal year under the Executive Income Deferral Plan, which
allows eligible employees to defer up to 50% of base salary and
100% of annual performance bonus.
Registrant
Contributions in Last Fiscal Year (Column C)
The amounts reported in Column C include Company contributions
to each of the Named Executive Officers Excess Savings
Plan account. These amounts also include the value of CLCs that
vested during the fiscal year, calculated using the fiscal
year-end 2008 CLC unit value of $32.47. The value of CLCs that
vested during the fiscal year is also included in Column F of
the Summary Compensation Table on page 44 of this Proxy
Statement. The specific amounts included in Column C are shown
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
Contribution to
|
|
Value of CLC
|
|
|
|
|
Excess Savings
|
|
Units Vested
|
|
|
Name
|
|
Plans ($)
|
|
in Last FY ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
$
|
70,087
|
|
|
$
|
5,091,296
|
|
|
$
|
5,161,383
|
|
D. J. Caruso
|
|
|
21,543
|
|
|
|
974,100
|
|
|
|
995,643
|
|
R. C. Deyo
|
|
|
26,408
|
|
|
|
974,100
|
|
|
|
1,000,508
|
|
C. A. Goggins
|
|
|
24,788
|
|
|
|
1,493,620
|
|
|
|
1,518,408
|
|
S. S. McCoy
|
|
|
22,623
|
|
|
|
811,750
|
|
|
|
834,373
|
|
52
Aggregate
Earnings in Last Fiscal Year (Column D)
The amounts reported in Column D include earnings on the
Executive Income Deferral Plan, Excess Savings Plan and
International Savings Plan, in addition to the change in value
on all vested CLCs as of the fiscal year-end. The CLC unit value
increased from $32.47 as of fiscal year-end 2008 to $35.75 as of
fiscal year-end 2009. The portion of the change in value on all
vested CLCs as of fiscal year-end 2009 deemed to be above-market
returns is included in Column G of the Summary Compensation
Table on page 44 of this Proxy Statement. The specific
amounts included in Column D are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
on Income
|
|
|
|
|
|
|
Deferral Program
|
|
Change in
|
|
|
|
|
and Excess and
|
|
Value on all
|
|
|
|
|
Intl Savings
|
|
Vested CLCs at
|
|
|
Name
|
|
Plans ($)
|
|
Last FYE ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
$
|
3,748,692
|
|
|
$
|
5,444,800
|
|
|
$
|
9,193,492
|
|
D. J. Caruso
|
|
|
56,043
|
|
|
|
462,480
|
|
|
|
518,523
|
|
R. C. Deyo
|
|
|
303,147
|
|
|
|
2,301,248
|
|
|
|
2,604,395
|
|
C. A. Goggins
|
|
|
197,450
|
|
|
|
1,843,360
|
|
|
|
2,040,810
|
|
S. S. McCoy
|
|
|
15,989
|
|
|
|
521,520
|
|
|
|
537,509
|
|
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 $35.75) of all vested CLCs held by each Named
Executive Officer as of fiscal year-end 2009. The specific
amounts included in Column E are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Balance of
|
|
|
|
|
|
|
Income Deferral
|
|
Full Value of
|
|
|
|
|
Plan and Excess
|
|
all Vested
|
|
|
|
|
and Intl Savings
|
|
CLCs at Last
|
|
|
Name
|
|
Plans ($)
|
|
FYE ($)
|
|
Total ($)
|
|
W. C. Weldon
|
|
$
|
18,690,220
|
|
|
$
|
59,345,000
|
|
|
$
|
78,035,220
|
|
D. J. Caruso
|
|
|
377,072
|
|
|
|
5,040,750
|
|
|
|
5,417,822
|
|
R. C. Deyo
|
|
|
1,808,812
|
|
|
|
25,082,200
|
|
|
|
26,891,012
|
|
C. A. Goggins
|
|
|
1,443,026
|
|
|
|
20,091,500
|
|
|
|
21,534,526
|
|
S. S. McCoy
|
|
|
90,647
|
|
|
|
5,684,250
|
|
|
|
5,774,897
|
|
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. 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 $245,000 in 2009). 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 in the
Balanced Fund investment option within the Companys 401(k)
Savings Plan (26.4% in 2009). 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, 2009.
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
(4.5% in 2009). Distribution of International Savings Plan
accounts are made upon retirement or separation from the Company.
53
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.
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 the following investment options:
Johnson & Johnson Common Stock, One-Year Treasury
Bills, or the investment options within the Companys
401(k) Savings Plan. The allocation among these options is
elected by the executive officer. For 2009, the return on the
One-Year Treasury Bill option was 0.34% and the aggregate return
on Johnson & Johnson Common Stock for these
participants was 13.83%.
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
2009.
DIRECTOR
COMPENSATION 2009
The following table provides information concerning the
compensation of the Companys Non-Employee Directors for
2009. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D
|
|
|
|
|
|
|
B
|
|
C
|
|
All Other
|
|
|
|
|
A
|
|
Fees Earned or
|
|
Stock
|
|
Compensation
|
|
E
|
|
|
Name
|
|
Paid in Cash ($)
|
|
Awards ($)
|
|
($)
|
|
Total ($)
|
|
|
|
M. S. Coleman
|
|
$
|
110,000
|
|
|
$
|
99,978
|
|
|
$
|
20,000
|
|
|
$
|
229,978
|
|
|
|
|
|
J. G. Cullen
|
|
|
130,000
|
|
|
|
99,978
|
|
|
|
|
|
|
|
229,978
|
|
|
|
|
|
M. M. E. Johns
|
|
|
110,000
|
|
|
|
99,978
|
|
|
|
20,000
|
|
|
|
229,978
|
|
|
|
|
|
A. G. Langbo
|
|
|
120,000
|
|
|
|
99,978
|
|
|
|
12,500
|
|
|
|
232,478
|
|
|
|
|
|
S. L. Lindquist
|
|
|
110,000
|
|
|
|
99,978
|
|
|
|
1,700
|
|
|
|
211,678
|
|
|
|
|
|
A. M. Mulcahy
|
|
|
19,355
|
(1)
|
|
|
60,640
|
|
|
|
|
|
|
|
79,995
|
|
|
|
|
|
L. F. Mullin
|
|
|
120,000
|
|
|
|
99,978
|
|
|
|
20,000
|
|
|
|
239,978
|
|
|
|
|
|
W. D. Perez
|
|
|
110,000
|
|
|
|
99,978
|
|
|
|
20,000
|
|
|
|
229,978
|
|
|
|
|
|
C. Prince
|
|
|
120,000
|
|
|
|
99,978
|
|
|
|
|
|
|
|
219,978
|
|
|
|
|
|
D. Satcher
|
|
|
120,000
|
|
|
|
99,978
|
|
|
|
20,000
|
|
|
|
239,978
|
|
|
|
|
|
|
|
|
(1) |
|
Fees pro rated for partial service
year
|
Fees Earned or
Paid in Cash (Column B)
In 2009, 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, except Ms. Mulcahy who
received a pro rata amount for partial year service. 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 are 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 1,714 shares of
restricted Common Stock under the LTI Plan in February 2009,
except Ms. Mulcahy who joined the Board in October 2009,
and 1,596 shares of restricted Common Stock in February
2010. The restricted shares become freely transferable on the
third anniversary of the grant date. In addition, each
Non-Employee Director
54
receives a one-time grant of 1,000 shares of unrestricted
Common Stock upon first becoming a member of the Board, which
Ms. Mulcahy received in October 2009. All figures in
Column C represent the grant date fair value, computed in
accordance with U.S. GAAP.
The aggregate number of stock options outstanding for each
Non-Employee Director 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
|
|
|
24,050
|
|
M. M. E. Johns
|
|
|
|
|
A. G. Langbo
|
|
|
24,050
|
|
S. L. Lindquist
|
|
|
7,600
|
|
A. M. Mulcahy
|
|
|
|
|
L. F. Mullin
|
|
|
24,050
|
|
W. D. Perez
|
|
|
|
|
C. Prince
|
|
|
|
|
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 42 of this Proxy Statement.
All Other
Compensation (Column D)
Amounts in Column D reflect contributions made under the
Companys charitable matching gift program. 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.
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 January 3, 2010 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