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 / /
Check the appropriate box:
/ / Preliminary proxy statement
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
JOHNSON & JOHNSON
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
JOHNSON & JOHNSON
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or Rule
14a-6(i)(2).
/ / $500 per each party per Exchange Act Rule 14a-6(i)(3), or Rule
14a-6(i)(2).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
logo
Notice of Annual Meeting
and Proxy Statement
March 10, 1994
The Annual Meeting of the Stockholders of Johnson & Johnson will be held
on April 28, 1994 at 10:00 A.M. at the Hyatt Regency Hotel, Two Albany Street,
New Brunswick, New Jersey, to:
1. Elect directors;
2. Consider and act upon a proposal to ratify the appointment of Coopers
& Lybrand as the Company's independent auditors; and
3. Transact such other business, including action on stockholder
proposals, as may properly come before the meeting.
Stockholders are cordially invited to attend the meeting. If you are a
stockholder of record and plan to attend, please complete and return the
enclosed Request for Admission Card. If you are a stockholder whose shares are
not registered in your own name and you plan to attend, please request an
Admission Card by writing to the Office of the Secretary, WH 2132, Johnson &
Johnson, One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933.
Evidence of your stock ownership, which you can obtain from your bank,
stockbroker, etc., must accompany your letter.
J. TAYLOR WOODWARD III
Secretary
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* PLEASE SIGN, DATE AND RETURN YOUR PROXY *
* CARD PROMPTLY IN THE ENCLOSED ENVELOPE *
********************************************
GENERAL INFORMATION
Stockholders Entitled to Vote. Holders of shares of the Common Stock of
the Company of record at the close of business on March 1, 1994 are entitled
to notice of and to vote at the Annual Meeting of Stockholders and at any and
all adjournments 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
643,161,600 shares outstanding.
Other than the election of directors, which requires a plurality of the
votes cast, each matter to be submitted to the stockholders 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.
Proxy Solicitation. The accompanying proxy is solicited by the Board of
Directors of the Company. In that connection, this Proxy Statement is being
mailed to the stockholders on or about March 10, 1994 concurrently with the
mailing of the Company's 1993 Annual Report. 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 &
Company, Inc. to aid in the solicitation of brokers, banks, institutional and
other stockholders for a fee of approximately $10,000. All costs of the
solicitation of proxies will be borne by the Company. Stockholders who execute
proxies may revoke them at any time before they are voted by executing a later
dated proxy, by voting by ballot at the meeting or by giving written notice to
the Secretary of the Company. On the accompanying proxy a stockholder 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.
Principal Stockholder. As of January 31, 1994, The Robert Wood Johnson
Foundation, located at Princeton Forrestal Center, Plainsboro Township, New
Jersey, was the only stockholder known to the Company to have the power to
vote or to direct the voting and/or the power to dispose or to direct the
disposition of more than 5% of the Company's outstanding Common Stock. On that
date the Foundation was the holder of 45,491,400 shares (7.1%) of the
Company's outstanding Common Stock. Mr. R.E. Campbell, Vice Chairman of the
Board of Directors of the Company, is one of 18 Trustees of the Foundation.
Stockholder Proposals. To be included in the Board of Directors' proxy
statement for the 1995 Annual Meeting of Stockholders, a stockholder proposal
must be received by the Company on or before November 10, 1994. Proposals
should be directed to the attention of the Secretary at the principal
executive offices of the Company, One Johnson & Johnson Plaza, New Brunswick,
New Jersey 08933.
ELECTION OF DIRECTORS
Nominees. There are 15 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 the persons nominated for election as directors
unless authority to vote shall have been withheld. If any nominee should
refuse or be unable to serve, an event not anticipated, the proxy will be
voted for such person as shall be designated by the Board of Directors to
replace such nominee.
All of the nominees were elected to the Board at the last Annual Meeting
and all are currently serving as directors of the Company.
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Following are summaries of the background and business experience and
descriptions of the principal occupations of the nominees.
JAMES W. BLACK, M.D., FRS, FRCP, Professor of Analytical
Pharmacology, Rayne Institute, King's College School of
Medicine, London, England.
Dr. Black, 69, was elected to the Board of Directors in
1989. He is Chairman of the Company's Science and
Technology Advisory Committee and is employed by the
Company as a consultant. Dr. Black is Professor and Head
of the Department of Analytical Pharmacology at the Rayne
{Photo} Institute, King's College School of Medicine where he has
been since 1984. He is also Chairman of the James Black
Foundation, a non-profit research foundation, which is
associated with the King's College School of Medicine and
is funded by the Company. Dr. Black has previously held
University teaching positions and research positions with
Imperial Chemical Industries Ltd., Smith Kline and French
Laboratories Limited and The Wellcome Foundation, Ltd. Dr.
Black was awarded the Nobel Prize for Medicine in 1988.
Shares owned: 1,952.
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GERARD N. BURROW, M.D., Dean of the Yale University School
of Medicine.
Dr. Burrow, 61, was elected to the Board of Directors in
1993. He was named to his present position at the Yale
Medical School in 1992 following service since 1988 as
Vice Chancellor for health sciences and Dean of the
University of California, San Diego School of Medicine. He
previously served as a Professor and Chairman of the
{Photo} Department of Medicine at the University of Toronto and as
Physician-in-Chief at Toronto General Hospital following
earlier work in medical education, research and clinical
practice. Dr. Burrow is a member of the Institute of
Medicine of the National Academy of Sciences, the Society
for Clinical Investigation and a Fellow of the American
Association for the Advancement of Science. Shares owned:
1,000.
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ROBERT E. CAMPBELL, Vice Chairman, Board of Directors and
Member, Executive Committee.
Mr. Campbell, 60, was elected to the Board of Directors in
1976, appointed to the Executive Committee in 1980,
appointed a Vice Chairman of the Executive Committee and
Chairman of a Sector Operating Committee in 1985 and was
appointed to his present position in 1989. Mr. Campbell
joined Johnson & Johnson in 1955 and later served as an
{Photo} Air Force officer, rejoining the company in 1959. He held
a number of positions in financial management, including
Vice President, Finance, of Johnson & Johnson
International during 1975 and 1976. Mr. Campbell served as
Vice President, Finance of Johnson & Johnson from 1980 to
1983 after having served as Treasurer since 1976. He is a
Trustee of The Robert Wood Johnson Foundation and a member
of the Board of Directors of New Jersey Bell Telephone Co.
Shares owned: 123,191.
3
JOAN GANZ COONEY, Chairman, Executive Committee,
Children's Television Workshop.
Mrs. Cooney, 64, was elected to the Board of Directors in
1978 and is a member of the Compensation Committee and the
Benefits Committee. She co-founded the Children's
Television Workshop as its Executive Director in 1968 and
was named its President-CEO in 1970 and Chairman-CEO in
1988. She assumed her present responsibilities in
{Photo} 1990. The Workshop's activities include production of the
well-known children's educational television programs
Sesame Street, 3-2-1 Contact and Square One T.V. Mrs.
Cooney is a Director of The Chase Manhattan Corporation
and The Chase Manhattan Bank, N.A., Metropolitan Life
Insurance Company and Xerox Corporation, as well as a
trustee of the Educational Broadcasting Corporation
(Channel 13/WNET, New York City) and the National Child
Labor Committee. Shares owned: 4,534.
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PHILIP M. HAWLEY, Retired Chairman of the Board and Chief
Executive Officer, Carter Hawley Hale Stores, Inc.
Mr. Hawley, 68, was elected to the Board of Directors in
1988 and is a member of the Compensation Committee and the
Benefits Committee. He served as Chairman and Chief
Executive Officer of Carter Hawley Hale Stores, Inc. from
1983 to December 31, 1992. He served as Chairman until
March, 1993. On February 11, 1991, Carter Hawley Hale
{Photo} Stores, Inc. filed for bankruptcy court protection under
Chapter 11 of the federal bankruptcy laws. Carter Hawley
Hale's Plan of Reorganization was confirmed on September
14, 1992, and became effective October 8, 1992. Mr. Hawley
is also a Director of American Telephone and Telegraph
Company, Atlantic Richfield Company, BankAmerica
Corporation and Weyerhaeuser Company. He is a senior
member of the Conference Board, a member of The Business
Council and serves as a Trustee of The California
Institute of Technology. Shares owned: 3,506.
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CLARK H. JOHNSON, CMA, Member, Executive Committee; Vice
President, Finance.
Mr. Johnson, 58, was elected to the Board of Directors in
1988. He was named Chief Financial Officer in 1988 after
having been General Controller since 1977. Mr. Johnson
joined Johnson & Johnson in 1953 and held a variety of
financial positions with several affiliated companies
{Photo} before being named Assistant Corporate Controller of
Johnson & Johnson in 1975 and General Controller in 1977.
Mr. Johnson serves as a Trustee of Fairleigh Dickinson
University and on the Executive Committee of the Institute
of Management Accountants. He served as Chairman of the
Institute of Certified Management Accountants and as a
Trustee of the Financial Accounting Foundation. Shares
owned: 36,527.
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ANN DIBBLE JORDAN, Former Director, Social Services
Department, Chicago Lying-In Hospital, University of
Chicago Medical Center.
Mrs. Jordan, 59, was elected to the Board of Directors in
1981 and is a member of the Audit Committee and the Public
Policy Advisory Committee. She assumed her previous
responsibilities at Chicago Lying-In Hospital in 1970
after having served as a Caseworker and then a Senior
{Photo} Caseworker at the University of Chicago Hospital. She is
also a former Assistant Professor at the University of
Chicago School of Social Service Administration. She is a
Director of Automatic Data Processing, Capital Cities/ABC,
Inc., The Hechinger Company, National Health Laboratories
Inc., Salant Corporation and Travelers Inc. Mrs. Jordan is
a Director of The Phillips Collection, The Child Welfare
League and of the National Symphony Orchestra. Shares
owned: 3,418.
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ARNOLD G. LANGBO, Chairman of the Board and Chief
Executive Officer, Kellogg Company.
Mr. Langbo, 56, was elected to the Board of Directors in
1991. He is a member of the Company's Audit Committee and
the Compensation Committee. Mr. Langbo assumed his present
position with Kellogg Company in January of 1992 after
having been President and Chief Operating Officer since
{Photo} December of 1990. Mr. Langbo joined Kellogg Canada Inc. in
1956 and served in a number of management positions in
Canada and the United States before being named President
of Kellogg International in 1986. Mr. Langbo is a Director
of Kellogg Company and a member of the Advisory Board of
the J. L. Kellogg Graduate School of Management at
Northwestern University. He is also a member of the Board
of Trustees of Albion College. Shares owned: 2,442.
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RALPH S. LARSEN, Chairman, Board of Directors and Chief
Executive Officer; Chairman, Executive Committee.
Mr. Larsen, 55, was elected to the Board of Directors in
1987 and appointed to the Executive Committee in 1986. He
assumed his present responsibilities in 1989. He joined
the Company in 1962 as a manufacturing trainee with
Johnson & Johnson Products, Inc. and was named Vice
President of Marketing for the McNeil Consumer Products
Company in 1980. He left Johnson & Johnson for two years
as President of Becton Dickinson's Consumer Products
{Photo} Division and returned to Johnson & Johnson as President of
its Chicopee subsidiary in 1983. Mr. Larsen was appointed
Company Group Chairman in 1986 before being appointed Vice
Chairman of the Executive Committee and Chairman of a
Sector Operating Committee later in 1986. Mr. Larsen is a
Director of Xerox Corporation and The New York Stock
Exchange. He is also a member of the Executive Committee
of The Business Council and of the Policy Committee of The
Business Roundtable. He serves on the Board of the United
Negro College Fund and as a member of the Board of
Governors of the United Way of America. Shares owned:
117,132.
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JOHN S. MAYO, Ph.D., President, AT&T Bell Laboratories.
Dr. Mayo, 64, was elected to the Board of Directors in
1986 and is a member of the Science and Technology
Advisory Committee and Chairman of the Public Policy
Advisory Committee. He assumed his present
responsibilities with AT&T Bell Laboratories in 1991 after
having served as Director of the Ocean Systems Laboratory,
Executive Director of the Ocean Systems Division,
Executive Director of the Toll Electronic Switching
Division, Vice President of Electronics Technology,
Executive Vice President of Network Systems and Senior
{Photo} Vice President, Network Systems and Network Services. Dr.
Mayo is a member of the National Academy of Engineering
and a fellow of the Institute of Electrical and Electronic
Engineers. He is a member of the Boards of Trustees of
Polytechnic University, the Liberty Science Center, the
Kenan Institute for Engineering, Technology and Science;
the Board of Overseers for the New Jersey Institute of
Technology; and served on the Board of Directors of the
National Engineering Consortium, Inc. Dr. Mayo was awarded
the National Medal of Technology in 1990, the Industrial
Research Institute Medal in 1992, and the Navy League New
York Council Roosevelts Gold Medal for Science in 1993.
Shares owned: 15,931.
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THOMAS S. MURPHY, Chairman of the Board and Chief
Executive Officer, Capital Cities/ABC, Inc.
Mr. Murphy, 68, was elected to the Board of Directors in
1980, and is Chairman of the Compensation Committee. He
joined Capital Cities when it was founded in 1954 and was
elected Chairman and Chief Executive Officer in 1966. From
June 1990 to February 1994 he served as Chairman of the
Board only. Capital Cities/ABC operates the ABC Television
{Photo} Network and eight affiliated television stations, radio
networks and radio stations; provides programming for
cable television; is partnered with international
broadcasters in program production and distribution
ventures as well as broadcast and cable television
services overseas; and publishes daily and weekly
newspapers and trade publications. Mr. Murphy is a
Director of International Business Machines Corporation
and Texaco Inc. He is Chairman of the New York University
Medical Center Board and a member of the Board of
Overseers of Harvard University. Shares owned: 58,312.
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PAUL J. RIZZO, Vice-Chairman, International Business
Machines Corporation.
Mr. Rizzo, 66, was elected to the Board of Directors in
1982, and is Chairman of the Benefits Committee and a
member of the Audit Committee. Upon his retirement from
International Business Machines Corporation as
{Photo} Vice-Chairman in 1987, Mr. Rizzo became Dean of the
Kenan-Flagler Business School at the University of North
Carolina-Chapel Hill. He retired from that position in
1992, and became a partner in Franklin Street Partners, a
Chapel Hill, North Carolina investment firm. He assumed
his present responsibilities with International Business
Machines Corporation in 1993. Mr. Rizzo is a director of
International Business Machines Corporation and
McGraw-Hill, Inc. Shares owned: 30,049.
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MAXINE F. SINGER, Ph.D., President of the Carnegie
Institution of Washington.
Dr. Singer, 63, was elected to the Board of Directors in
1991. She is a member of the Company's Science and
Technology Advisory Committee and the Public Policy
Advisory Committee. Dr. Singer became President of the
{Photo} Carnegie Institution of Washington in 1988 after serving
for over thirty years at the National Institutes of Health
where she advanced to be Chief of the Laboratory of
Biochemistry at NIH's National Cancer Institute. Dr.
Singer is a member of the National Academy of Sciences,
the American Philosophical Society, the Pontifical Academy
of Sciences, the Governing Board of the Weizmann Institute
of Science and the Whitehead Institute. Shares owned:
4,044.
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ROGER B. SMITH, Former Chairman of the Board and Chief
Executive Officer, General Motors Corporation.
Mr. Smith, 68, was elected to the Board of Directors in
1985 and is Chairman of the Audit Committee and a member
{Photo} of the Benefits Committee. He retired as Chairman of
General Motors Corporation in 1990. He is a member of the
Business Council and serves as a Trustee of the Alfred P.
Sloan Foundation. Mr. Smith also serves on the Board of
Directors of Citicorp/Citibank, N.A., International Paper
Company and PepsiCo, Inc. Shares owned: 17,193.
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ROBERT N. WILSON, Vice Chairman, Board of Directors and
Member, Executive Committee.
Mr. Wilson, 53, was elected to the Board of Directors in
1986. He joined the Company in 1964, served in several
sales and marketing management positions and was named
President of Johnson & Johnson Dental Products Company in
{Photo} 1977 and President of Ortho Pharmaceutical Corporation in
1979. Mr. Wilson was appointed Company Group Chairman in
1981 and appointed to the Executive Committee in 1983. He
was appointed Vice Chairman of the Executive Committee and
Chairman of a Sector Operating Committee in 1985 and
assumed his present responsibilities in 1989. Mr. Wilson
is also a Director of U.S. Trust Corporation. Shares
owned: 164,322.
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Stock Ownership/Control. The shares described as "owned" in the biography
of each nominee are shares of the Company's Common Stock owned by the nominee
and by members of his or her household. For the nonemployee nominees, such
shares include an aggregate of 22,878 Common Stock equivalent units credited
to them under the Retirement Plan for Nonemployee Directors and an aggregate
of 77,631 Common Stock equivalent units credited to them under the Deferred
Fee Plan for Nonemployee Directors. Because they serve as trustees of
institutions or trusts which hold stock for the benefit of others, certain of
the nominees "control" additional shares of the Company's stock in which they
have no economic interest. See also "General Information--Principal
Stockholder". Messrs. Campbell, Larsen and Wilson are co-trustees of two
trusts holding a total of 5,562,196 shares; Mr. Campbell is a trustee of an
institution holding 3,190,792 shares and an institution holding 14,100 shares.
In addition to the 8,767,088 shares so controlled, the directors and executive
officers as a group own/control a total of 780,017 shares, the aggregate of
9,547,105 shares representing approximately 1.5% of the shares outstanding.
Except as set forth under the caption "General Information--Principal
Stockholder", no director, officer or nominee owns/controls one percent or
more of the shares outstanding. All stock ownership/control information is as
of February 15, 1994, and the amounts exclude an aggregate of 940,610 shares
which are subject to employee stock options exercisable by directors and
executive officers within 60 days after that date at prices ranging from $8.85
to $50.28.
Directors' Fees, Committees and Meetings. Directors who are employees of
the Company receive no compensation for their services as directors or as
members of committees. Each director who is not an employee of the Company
receives an award valued at approximately $10,000 in the form of Company
Common Stock upon first becoming a member of the Board of Directors and
receives an annual fee of $45,000 for his or her services as director, plus an
additional $5,000 for service on a committee of the Board of Directors, $8,000
if chairperson of the committee. Nonemployee directors receive a meeting fee
of $1,500 per day for committee meetings held on days other than Board of
Directors meeting days. A director may elect to defer payment of all or a part
of the fee until termination of his or her directorship. Deferred fees may
earn additional amounts based either on the increase in value of units under
the Certificate of Extra Compensation program or on a hypothetical investment
in the Company's Common Stock. Under the Retirement Plan for Nonemployee
Directors, each nonemployee director is credited with Common Stock equivalent
units in the actuarially determined amount required to provide at retirement
an annual benefit of $25,000 payable for a period equal to the number of years
the director has served on the Board of Directors. The Common Stock units held
in each nonemployee director's account receive dividend equivalents. Upon
retirement, the amounts held in a nonemployee director's account will be paid
in cash in a lump sum to the director or, in the event of the director's death
prior to retirement, to the director's beneficiary.
Sir James Black serves as a scientific consultant to the Company at an
annual fee of $10,000. Dr. Black is also a member of the Company's Bio-Science
Advisory Committee and receives a fee of $3,000 for attendance at each meeting
of the Committee.
During the last fiscal year the Board of Directors met seven times. All
directors attended at least 75% of the Board of Directors meetings and
meetings of the committees on which the directors served.
The Board of Directors has a standing Audit Committee and Compensation
Committee. The Board of Directors has no standing Nominating Committee;
however, the Board of Directors serves as a Nominating Committee of the whole.
The Board considers suggestions from many sources, including stockholders,
regarding possible candidates for director. Such suggestions, together with
appropriate biographical information, should be submitted to the Secretary of
the Company.
The members of the Audit Committee are Mrs. Jordan, Mr. Langbo, Mr. Rizzo
and Mr. Smith (Chairman). The Audit Committee assists the Board of Directors
in fulfilling its responsibilities of ensuring that management is maintaining
an adequate system of internal controls 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 management's policies
and procedures. In performing these functions, the Audit Committee meets
periodically with the independent auditors, management, and internal auditors
to review their work and confirm that they are properly discharging their
responsibilities. In addition, the Audit Committee
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recommends the independent auditors for appointment by the Board of Directors.
The Audit Committee met three times during the last fiscal year.
The members of the Compensation Committee are Mrs. Cooney, Mr. Hawley,
Mr. Langbo and Mr. Murphy (Chairman). The primary function of the Compensation
Committee is to review the compensation philosophy and policy of the Manage-
ment Compensation Committee, a non-Board committee composed of Messrs. Larsen
(Chairman), Fine (Vice President, Administration) and Johnson which determines
management and executive compensation and establishes fringe benefit and other
compensation policies. The compensation of the members of the Executive
Committee (which includes the members of the Management Compensation Commit-
tee) is determined by the Compensation Committee. The Compensation Committee
is also responsible for the administration of the Company's stock option plans
and is the approving authority for management recommendations with respect to
option grants. The members of the Compensation Committee are not eligible to
become optionees under the plans. During the last fiscal year there were three
meetings of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE OF THE BOARD
The Compensation Committee is comprised entirely of nonemployee,
independent Members of the Board of Directors. It is the Compensation
Committee's responsibility to review, recommend and approve changes to the
Company's compensation policies and programs. It is also the Committee's
responsibility to review and approve all compensation actions for the Chief
Executive Officer and members of the Executive Committee.
JOHNSON & JOHNSON COMPENSATION POLICY AND OBJECTIVES
Johnson & Johnson's executive compensation programs are designed to
enable the Company to attract, retain and motivate the high caliber of
executives required for the success of the business. Overall, the intent of
Johnson & Johnson's Executive Compensation Program is to provide compensation
opportunities which are comparable to the opportunities provided by a select
group of high performing, growth companies similar to Johnson & Johnson. This
objective is achieved through a variety of compensation programs, summarized
below, which support both the current and long term performance of the
business.
The primary responsibility of the Company's Chief Executive Officer and
executive officers is to ensure the long-term health and growth of the
Company. This responsibility is summarized in the Johnson & Johnson Credo,
which defines the obligations of Johnson & Johnson employees to strengthen the
ethical, human and business foundations of the Company. The Credo describes
the responsibilities of the Company to its customers and others with whom it
does business, to its employees, to the communities in which the Company has a
presence as well as to the world community, and to its stockholders. The Credo
merges these business and ethical responsibilities by stating: "When we
operate according to these principles, the stockholders should realize a fair
return."
The compensation of Johnson & Johnson's Chief Executive Officer is
determined by the Compensation Committee of the Board of Directors based on
its assessment of the Company's financial and non-financial performance
against the background of the factors and principles outlined in the Credo.
With respect to financial performance, the Committee has identified several
factors which are critical to the success of the business, including Sales
Growth, Earnings Per Share (EPS) Growth, increase in Cash Flow, New Product
Flow and growth in Stockholder Value. In evaluating performance against these
factors, Johnson & Johnson's results are compared to results of a premium
group of high performing companies in the consumer, pharmaceutical and
professional health care fields with comparable sales volumes and above
average EPS growth rates and financial strength. These companies include those
in the S&P Diversified Health Care Index referred to in the Stockholder Return
Performance Graph which meet these criteria.
Sales Growth is measured as the percentage increase in sales volume from
one year to the next. EPS Growth is assessed in the same manner. Cash Flow is
measured as the Net Cash Flows from Operating
9
Activities as reported in the Consolidated Statement of Cash Flows.
Stockholder Value is measured as the increase in stock price plus dividend
return over a five year period. New Product Flow is assessed by reviewing the
percentage of sales growth resulting from the sale of new products introduced
in the past five years.
The Committee believes it is crucial that these financial and
non-financial factors are managed well, in order to ensure superior return to
Johnson & Johnson's stockholders over the long term. Therefore, while
performance in these areas is reviewed on an annual basis, the primary
consideration in assessing performance is Corporate results over a longer
period, usually five years. No specific fixed weighting or formula is applied
to these factors in determining performance. Rather, the Compensation
Committee exercises its judgment in evaluating these factors and in
determining appropriate compensation.
A discussion of 1993 performance reviewed by the Compensation Committee
can be found under "1993 Compensation Decisions".
JOHNSON & JOHNSON'S COMPENSATION PROGRAMS
Base Salary
The Base Salary for all employees exempt from the Fair Labor Standards
Act (FLSA), which includes executives, is managed through the Johnson &
Johnson Salary Administration Program. Under this Program, increases in Base
Salary are governed by guidelines covering three factors: Merit (an
individual's performance); Market Parity (to adjust salaries of high
performing individuals who are earning less than the competitive market); and
Promotions (to reflect increases in responsibility).
These guidelines are set each year and vary from year-to-year to reflect
the competitive environment and to control the overall cost of salary growth.
Individual merit increases are based on performance and can range from 0% to
200% of the merit guideline.
The domestic salary guideline for all exempt employees for 1993 was 3.9%
for merit increases plus 1% for market parity and 1% for promotion
adjustments. The domestic salary guideline for 1994 has been set at 3.5% for
merit increases plus 1% for market parity and 1% for promotion adjustments.
The 1994 guideline reflects both the lower rate of inflation and competitive
market data, compared to prior years.
Cash and Stock Incentive Compensation Programs
To reward performance, Johnson & Johnson provides eligible executives
with additional current compensation in the form of executive bonus and stock
awards. The total target value of the Cash Bonus plus the Stock Compensation
Award is set at a level that is competitive with annual incentives provided by
other companies in the premium community. Actual awards against target vary
based on the performance factors discussed above and individual contribution.
No fixed weighting or formula is applied by the Committee to corporate
performance versus individual performance in determining incentive cash bonus
and stock awards for the Chief Executive Officer and executive officers. Such
incentive bonus and stock awards can range from zero, in the case of poor
performance, up to 200% of the target amount if the performance is judged to
be exceptional. For the Chief Executive and executive officers the amount of
the total target incentive is split evenly between cash and stock (i.e., 50%
paid in cash, 50% paid in stock).
Stock Options
The Stock Option Plan is a long-term plan designed to link executive
rewards with stockholder value over time. Johnson & Johnson's award practice
is unique in comparison to other companies. Stock Option awards are not based
on an annual value. They are designed around the concept of a "career
multiple" of salary.
Under a career multiple, awards are granted to maintain an executive's
total option holdings at a specified multiple of salary. Option holdings are
the sum of all unexpired option grants (i.e., less than 10 years old), valued
at the market price on the original date of grant.
When an executive becomes eligible, the appropriate option holdings
multiple is determined based on the range available and performance. Once the
performance based option multiple is determined, the
10
value of that multiple is awarded in the first year of eligibility. In
subsequent years, the executive's option value multiple is reassessed based
upon the applicable range that year and performance. Additional grants are
made, if necessary, to bring the executive's option holdings to the multiple
of pay determined for that year. As a result, awards can, and typically do,
vary significantly from year to year.
No stock option awards are made in the absence of satisfactory
performance. Performance is evaluated by the Committee based on the
executive's individual contribution to the long term health and growth of the
Company and the Company's performance based on the factors discussed above. No
fixed weighting or formula is applied to corporate performance versus
individual performance in determining stock option awards.
In the event that the stock price declines to a level below the option
grant price, options are not revalued or reissued. Vesting in awards generally
occurs over a period of six years.
Certificates of Extra Compensation
Certificates of Extra Compensation (CECs) provide deferred compensation
which is paid at the end of an executive's career. CECs are performance units
which measure the Company's value based on a formula composed of one half of
the Company's net asset value and one half of its earning power value,
relative to the number of shares of Johnson & Johnson common stock
outstanding. Earning power value is calculated by taking the capitalized value
of earnings averaged over the previous five years.
The CEC program uniquely reflects Johnson & Johnson's commitment to the
long term. No awards are paid out to executives during employment. Although
the units vest over a five year period from grant, the value of those units is
not vested until retirement or termination of employment. The value of the
program is purely performance driven and fully at risk until paid. The Company
pays dividend equivalents on units awarded. Dividend equivalents are paid at
the same rate provided to stockholders on a share of Johnson & Johnson common
stock, and are paid quarterly.
Awards of CECs to the Chief Executive and executive officers are targeted
to provide an above average long-term compensation opportunity as compared to
the premium community. Award amounts are based on the Compensation Committee's
evaluation of individual performance, based on the executive's individual
contribution to the long term health and growth of the Company and the
Company's performance based on the factors discussed above. No fixed weighting
or formula is applied to corporate performance versus individual performance
in determining CEC awards.
1993 Compensation Decisions
Johnson & Johnson's performance for the most recent five year period
exceeded that of the premium community companies in the areas of Sales Growth,
Stockholder Value, and increase in Cash Flow. Performance was approximately
equal to the premium companies in the area of EPS Growth. The Company met its
goal for New Product flow.
With respect to non-financial performance, management continued to excel
in the area of managing Credo responsibility. Various initiatives undertaken
by Johnson & Johnson embody the principles of the Credo by addressing its
responsibilities to its customers, employees and the community.
Mr. Larsen's compensation awards were made based upon the Committee's
assessment of the Company's financial performance in the five areas outlined
above and its non-financial performance against the background of the Credo as
outlined above.
The above performance results were evaluated based on the overall
judgement of the Compensation Committee with no fixed or specific mathematical
weighting applied to each element of performance. Based on the Committees'
judgement, compensation awards for 1993 were made at target.
Mr. Larsen was awarded a salary increase in 1993 of 4.7% versus a 4.9%
guideline for merit increase and market parity. The 1993 annual incentive was
approximately 100% of the target percentage for the Chief Executive Officer,
with one half provided in cash and one half provided in Johnson & Johnson
common stock. Stock Option grants were awarded during 1993 to the Chief
Executive Officer which maintain his holdings value at the target multiple of
pay. A grant of Certificate of Extra Compensation was made to Mr. Larsen to
maintain his 1994 accrual at the competitive target.
11
Tax Deductibility Considerations
The Compensation Committee has reviewed the Company's compensation plans
with regard to the deduction limitation under the Omnibus Budget
Reconciliation Act of 1993. The Committee has determined that the Johnson &
Johnson Stock Option Plan, as currently approved by stockholders, meets the
requirements for deductibility under the Act. Since the particular
requirements of the Act applicable to other elements of compensation have not
yet been definitively established and since the Committee is concerned that
the requirements of the Act could effectively divest the Committee of the
ability to exercise its discretion to act in the best interests of the
stockholders in establishing compensation, the Committee has decided for the
present not to alter the other compensation plans to attempt to meet the
deductibility requirements. The Committee will continue to review the issue
and evaluate whether the compensation plans should be altered in the future to
meet the deductibility requirements.
Thomas S. Murphy, Chair
Joan G. Cooney
Philip M. Hawley
Arnold G. Langbo
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Standard & Poor's 500 Stock Index and the Standard & Poor's
Diversified Health Care Index for the period of five years commencing December
31, 1988 and ending December 31, 1993. The graph and table assume that $100
was invested on December 31, 1988 in each of the Company's Common Stock, the
Standard & Poor's 500 Stock Index and the Standard & Poor's Diversified Health
Care Index and that all dividends were reinvested. This data was furnished by
Standard & Poor's Compustat Services, Inc.
{Graphical representation of Data Table Below}
- - - ------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993
- - - ------------------------------------------------------------------------------
Johnson & Johnson $100.00 $142.64 $175.99 $285.65 $256.52 $233.37
- - - ------------------------------------------------------------------------------
S&P Diversified
Health Care $100.00 $139.16 $169.02 $250.35 $213.76 $203.71
- - - ------------------------------------------------------------------------------
S&P 500 Index $100.00 $131.69 $127.60 $166.47 $179.15 $197.21
- - - ------------------------------------------------------------------------------
12
EXECUTIVE COMPENSATION
The following Table shows, for each of the last three fiscal years, the
annual compensation paid by the Company, together with long term and other
compensation for the Chief Executive Officer and the other four most highly
compensated executive officers (the "Named Officers"), of the Company in all
capacities in which they served:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- AWARDS
NAME OTHER -------------------------
AND ANNUAL RESTRICTED ALL OTHER
PRINCIPAL COMPEN- STOCK OPTIONS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) SATION ($) AWARDS ($) (#) ($)
--------- ---- --------- -------- --------- ---------- ------- ------------
(1) (2) (3) (5)
R. S. Larsen 1993 $890,000 $448,125 $331,740 $0 142,500 $10,613
Chairman/CEO 1992 850,000 290,000 290,200 287,138 6,000 10,299
1991 765,000 275,000 192,500 296,250 22,000 10,000
R. N. Wilson 1993 $665,000 $388,750 $341,693 $0 109,100 $10,613
Vice Chairman 1992 630,000 275,000 299,380 211,575 6,000 10,299
1991 575,000 260,000 255,486 222,188 16,000 10,000
R. E. Campbell 1993 $645,000 $324,375 $457,415 $0 96,500 $10,613
Vice Chairman 1992 615,000 200,000 383,928 211,575 8,000 10,299
1991 575,000 190,000 321,860 222,188 12,000 10,000
P. N. Larson 1993 $435,000 $280,625 $109,060 $0 64,000 $10,613
Chairman, 1992 415,000 140,000 49,582 136,013 26,400 10,299
ConsumerSector(4)
C. H. Johnson 1993 $380,000 $200,000 $218,687 $0 47,700 $10,613
Vice President 1992 360,000 120,000 152,285 120,900 0 10,299
Finance 1991 330,000 170,000 119,812 118,500 20,000 10,000
- - - ------------
(1) Bonus amounts for 1992 and 1991 have been restated to include only cash
payments for those years. 1993 bonus amounts include stock compensation
since the plan has been changed to a one year award from the previous
long term (3 year) stock award.
(2) Amounts include dividend equivalents paid under the Certificate of Extra
Compensation (CEC) Program (Long term incentive plan).
(3) The total number of shares of Restricted Stock valued at the year-end
value of $44.88 per share held under the Stock Compensation Program and
the vesting schedule is as follows:
Total Restricted
Shares Stock Awards
Vesting ------------------
Name in 1994 Shares Value
- - - ---- ------- ------ -------
R. S. Larsen. . . . . . . . . . . . . 1,900 1,900 $85,272
R. N. Wilson. . . . . . . . . . . . . 1,400 1,400 62,832
R. E. Campbell. . . . . . . . . . . . 1,400 1,400 62,832
P. N. Larson. . . . . . . . . . . . . 900 900 40,392
C. H. Johnson . . . . . . . . . . . . 800 800 35,904
Dividend equivalents are payable on the Restricted Stock awards when paid
on the Company's Common Stock.
(4) Mr. P. N. Larson became an executive officer of the Company during 1992.
(5) Amount shown is the Company's matching contribution to the 401(k) Savings
Plan.
13
Stock Options
The following table contains information concerning the grant of stock
options under the Company's 1991 Stock Option Plan to the Named Officers
during the Company's last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL
-------------------------------------------------- REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTIONTERM (2)
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------------------
NAME GRANTED(#)(1) IN 1993 ($/SH) DATE 0%($) 5%($) 10%($)
---- ------------- --------- -------- ---------- ----- ----- ------
Ralph S. Larsen . . . . . . . . . . 133,500 1.2% $44.63 06/14/03 $0 $3,747,345 $9,495,855
9,000 0.1% $44.25 12/02/03 $ 250,470 $ 634,680
Robert N. Wilson. . . . . . . . . . 100,100 0.9% $44.63 06/14/03 $0 $2,809,807 $7,120,113
9,000 0.1% $44.25 12/02/03 $ 250,470 $ 634,680
Robert E. Campbell. . . . . . . . . 96,500 0.9% $44.63 06/14/03 $0 $2,708,755 $6,864,045
Peter N. Larson . . . . . . . . . . 55,000 0.5% $44.63 06/14/03 $0 $1,543,850 $3,912,150
9,000 0.1% $44.25 12/02/03 $0 $ 250,470 $ 634,680
Clark H. Johnson. . . . . . . . . . 47,700 0.4% $44.63 06/14/03 $0 $1,338,939 $3,392,901
All Stockholders. . . . . . . . . . -- -- -- -- $0 $17.9 billion $45.3 billion
- - - ------------
(1) The options were granted at an exercise price equal to the fair market
value of the Company's common stock on the date of grant. The options
become exercisable over a six year period in increments of 20% per year
beginning with the second anniversary of the date of grant except for
the options granted to Mr. R. S. Larsen, Mr. R. E. Campbell and Mr. C.
H. Johnson which, like the vesting schedule for all executives in the
Stock Option Plan over age 55, become exercisable over a four year
period in increments of 40% beginning with the second anniversary of the
date of grant and an additional 30% per year for each of the next two
years. The grant dates of the options are June 14, 1993 and December 2,
1993.
(2) The amounts shown under these columns are the result of calculations at
0% and at the 5% and 10% rates required by the Securities and Exchange
Commission and are not intended to forecast future appreciation of the
Company's stock price.
14
Option Exercises and Fiscal Year-End Values
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT YEAR END 1993 (#) YEAR END 1993 ($) (1)
ACQUIRED ON VALUE ---------------------------- -----------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
Ralph S. Larsen . . . . . . . . . . . . 16,400 $419,716 242,000 273,300 $5,288,632 $2,132,821
Robert N. Wilson. . . . . . . . . . . . 13,600 $418,732 203,400 201,900 $4,718,730 $1,403,071
Robert E. Campbell. . . . . . . . . . . -- -- 278,800 120,100 $6,121,264 $ 101,573
Peter N. Larson . . . . . . . . . . . . -- -- 30,440 142,160 $ 262,640 $ 413,380
Clark H. Johnson. . . . . . . . . . . . 5,300 $183,645 84,540 83,300 $1,784,200 $ 480,917
- - - ------------
(1) Based on the New York Stock Exchange Composite closing price as published
in the Wall Street Journal for the last business day of the fiscal year
-------------------
($44.88).
Certificate of Extra Compensation Program
The following Table provides information concerning awards made during
the last fiscal year under the Company's Certificate of Extra Compensation
(CEC) Program.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
Estimated
Number of Period Until Future
Name Units (#) Payout Payout ($)
- - - ---- -------- ------------ ----------
(1) (2)
Ralph S. Larsen . . . . . . 13,000 $239,850
Robert N. Wilson. . . . . . -- --
Robert E. Campbell. . . . . 20,000 369,000
Peter N. Larson . . . . . . -- --
Clark H. Johnson. . . . . . 35,000 645,750
- - - ------------
(1) Awards are paid out upon retirement or other termination of employment.
(2) The value used is the value as of the end of the last fiscal year and was
$18.45 per CEC unit. The value of the CEC units is not fixed and the
value is fully at risk and subject to increase or decrease based on the
performance of the Company.
Since 1947, the Company has maintained a deferred compensation program
under which awards of CEC units may be made to senior management and other key
personnel of the Company and its subsidiaries worldwide. Typically, an award
of CEC units provides for a specified number of units which vest over a five
year period, though no awards are paid out to a participant until retirement
or other termination of employment. During employment, dividend equivalents
are paid to participants on CEC units in the same amount and at the same time
as dividends on the Company's Common Stock. The CEC units are valued in
accordance with a formula based on the Company's net assets and earning power
over the five preceding fiscal years. Until paid at retirement or termination
of employment, the value of the CEC units is not fixed and the value is fully
at risk and subject to increase or decrease based on the performance of the
Company. The value as of the end of the last fiscal year was $18.45 per CEC
unit. The numbers of CEC units earned as of the end of the last fiscal year by
each of the Named Officers during their careers with the Company, valued for
illustrative purposes at the $18.45 per unit value as of the end of the last
fiscal year are: Mr. R. S. Larsen 261,200 CEC units ($4,819,140); Mr. R. N.
Wilson 298,200 CEC units ($5,501,790); Mr. R. E. Campbell 403,600 CEC units
($7,446,420); Mr. P. N. Larson 40,000 CEC units ($738,000) and Mr. C. H.
Johnson 163,600 CEC units ($3,018,420).
15
Retirement Plan
The following table shows the estimated annual retirement benefit payable
on a straight life annuity basis to participating employees in the
compensation and years of service classifications indicated, under the
Company's Retirement Plan. The Retirement Plan generally covers salaried
employees of the Com-pany and designated subsidiaries on a non-contributory
basis.
PENSION PLAN TABLE
FIVE YEAR
AVERAGE ANNUAL BENEFITS FOR YEARS OF SERVICE
COVERED ----------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- - - ------------ -------- -------- -------- -------- -------- --------
$ 500,000 $122,100 $162,800 $203,500 $244,100 $284,800 $ 325,500
600,000 147,100 196,100 245,100 294,200 343,200 392,200
700,000 172,100 229,400 286,800 344,200 401,500 458,900
800,000 197,100 262,800 328,500 394,200 459,900 525,600
900,000 222,100 296,100 370,200 444,200 518,200 592,300
1,000,000 247,100 329,500 411,800 494,200 576,600 658,900
1,100,000 272,100 362,800 453,500 544,200 634,900 725,600
1,200,000 297,100 396,100 495,200 594,200 693,300 792,300
1,300,000 322,100 429,500 536,900 644,200 751,600 859,000
1,400,000 347,100 462,800 578,500 694,200 809,900 925,700
1,500,000 372,100 496,200 620,200 744,200 868,300 992,300
1,600,000 397,100 529,500 661,900 794,300 926,600 1,059,000
1,700,000 422,100 562,800 703,600 844,300 985,000 1,125,700
Covered compensation includes regular annual earnings, cash bonus, the
value of awards of Restricted Stock under the Stock Compensation Program, and
dividend equivalents paid on both undelivered Restricted Stock awards and
non-vested CEC units. The calculation of retirement benefits is based upon
final average earnings (the average of the highest covered compensation during
the five consecutive years out of the last ten years of employment with the
Company). The benefits are subject to an offset based on the Age 65 Primary
Social Security Benefit. Five-Year Average Covered Compensation for the Named
Officers as of the end of the last fiscal year is: Mr. R. S. Larsen
$1,384,500; Mr. R. N. Wilson $1,060,800; Mr. R. E. Campbell $1,023,300; Mr. P.
N. Larson $709,300 (Mr. Larson's Average Covered Compensation reflects Covered
Compensation from December, 1990 when he rejoined the Company); and Mr. C. H.
Johnson $599,900. The estimated years of service for each Named Officer as of
the end of the last fiscal year is: Mr. R. S. Larsen 30 years; Mr. R. N.
Wilson 29 years; Mr. R. E. Campbell 39 years; Mr. P. N. Larson 13 years; and
Mr. C. H. Johnson 37 years.
As permitted by the Employee Retirement Income Security Act of 1974, the
Company has adopted a supplemental plan which is designed to provide the
amount of retirement benefit which cannot be paid from the Retirement Plan by
reason of certain Internal Revenue Code limitations on qualified plan
benefits. The amounts shown in the Pension Plan Table include the amounts
payable under the supplemental plan.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand as the independent
auditors for the Company and its subsidiaries for the fiscal year 1994.
Stockholder ratification of the appointment is not required under the laws of
the State of New Jersey, but the Board has decided to ascertain the position
of the stockholders on the appointment. The Board of Directors will reconsider
the appointment if it is not ratified. The affirmative vote of a majority of
the shares voted at the meeting is required for ratification.
Representatives of Coopers & Lybrand are expected to be present at the
meeting and will be allowed to make a statement if they wish. Additionally,
they will be available to respond to appropriate questions from stockholders
during the meeting.
16
STOCKHOLDER PROPOSAL ON EXECUTIVE COMPENSATION
The following stockholder proposal has been submitted to the Company for
action at the meeting by Beatrice M. Katz, 11435 Monterrey Drive, Silver
Spring, MD 20902, owner of 800 shares of the Company's common stock. The
affirmative vote of a majority of the votes cast at the meeting by or on
behalf of the stockholders is required for approval of a stockholder proposal.
The text of the proposal follows:
Stockholder Proposal Regarding Executive Compensation
RESOLVED: That the shareholders of Johnson & Johnson recommend that the
Board of Directors take the necessary steps to institute a salary and
compensation ceiling such that as to future employment contracts, no senior
executive officer or director of the Company receive combined salary and other
compensation which is more than two times the salary provided to the President
of the United States, that is, no more than $400,000.
REASONS: There is no corporation which exceeds the size and complexity of
operation of the government of the United States of which the President is the
chief executive officer. Even most government agencies far exceed the size, as
measured by personnel and budget, of most private corporations. The President
of the United States now receives a salary of $200,000; even heads of agencies
and members of Congress are paid only somewhat in excess of $100,000. The
recommended ceiling is sufficient to motivate any person to do his best.
While the duties of the President of the United States are not comparable
to those of senior executive officers or directors (the President has a much
more demanding job), and while the President has many valuable compensations,
we use the salary of the President only as a reference point for the
shareholders to consider as they evaluate this resolution.
Officers of Public corporations are the employees and not the owners,
except as they may be shareholders in common with other stockholders. Yet,
officers give the appearance that they run the corporations primarily for
their benefit rather than for the benefit of the shareholders. Thus, they may
drain away millions of dollars in salary, stock options and other
compensation. When more than the recommended ceiling on salary and
compensation is taken, this is an expression of greed and abuses of power.
Usually, there is no direct correlation between the profitability of a
corporation and the compensation to officers. In fact, in many corporations,
compensation increases even as profits fall. It is apparent that high
compensation does not usually serve as an incentive for a better run or more
profitable corporation. Obscene compensation packages illustrate the power of
the Board of Directors, a closed group which perpetuates itself, by
determining who is to be selected to the Board and who is to be an officer of
the company, as well as the compensation to be received. The Board of
Directors does not own the corporation, but it can run the corporation as if
it were their property. There is no shortage of qualified people who would
gladly step in and do as good a job as the incumbent officers of the
Corporation and who would have no hesitation serving within the aforementioned
pay ceiling.
Any officer who believes he can better the corporation should be
sufficiently motivated to purchase stock on the open market or to receive
stock options as part of his salary and compensation package. To remain
competitive in world markets we must cut our costs and not overcompensate
directors and officers.
If you AGREE, please mark your proxy FOR this resolution.
MANAGEMENT'S STATEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
Johnson & Johnson's executive compensation programs are intended to
attract, retain and motivate the high caliber of executives required for the
continued success of our business.
The proposal would impose an arbitrary limitation on executive
compensation that would cripple the Company's ability to successfully compete
by reducing executive compensation to a level well below that
17
of executives in comparable positions at peer companies. We believe that
competitive rates are the proper basis for comparison for executive
compensation and not an inappropriate analogy with the President of the United
States.
Johnson & Johnson must retain the flexibility to make compensation
decisions that will help achieve the corporate goals of continued growth and
profitability, which are the same as those of the stockholders.
The Compensation Committee of the Board, composed entirely of nonemployee
independent members of the Board, reviews and approves all compensation for
the Chief Executive Officer and members of the Executive Committee. This is
the best guarantee of the Company continuing to have a management that
achieves stockholder objectives, so we oppose the foregoing stockholder
proposal.
IT IS, THEREFORE, RECOMMENDED THAT THE STOCKHOLDERS VOTE AGAINST THIS
PROPOSAL.
STOCKHOLDER PROPOSAL ON PHARMACEUTICAL PRICING
The following stockholder proposal has been submitted to the Company for
action at the meeting by the Mercy Consolidated Assets Management Program, 20
Washington Square North, New York, NY 10011, owner of 4,000 shares of the
Company's common stock. Five other groups whose names, addresses and
shareholdings will be supplied upon oral or written request to the Secretary
of the Company have co-sponsored the proposal. The affirmative vote of a
majority of the votes cast at the meeting by or on behalf of the stockholders
is required for approval of a stockholder proposal. The text of the proposal
follows:
Stockholder Proposal Regarding Pharmaceutical Pricing
WHEREAS: We believe all U.S. citizens and corporate entities are being
called to sacrifice and to do their part in bringing about a more just and
equitable health care system.
During the 1980's, prescription drug prices increased at almost three
times the rate of general inflation in the United States.
The burden of these cost increases has been borne by individual consumers
such as the elderly and the underinsured in the retail market as well as
increased costs for the institutional health care facilities.
The drug companies have been criticized by citizens, organizations, and
U.S. government agencies as being unjust in the reaping of "excessive profits
at the expense of millions of U.S. Citizens".
The price of drugs is consistently higher in the U.S. retail market than
in other industrialized countries.
The drug companies have argued that the higher prices in the U.S. are
necessary to recoup research and development costs. While all persons who
receive these drugs benefit from the research and development, U.S. consumers
bear the burden of these costs.
Pharmaceutical companies' recent efforts to limit overall price increases
to inflation have failed to significantly benefit retail consumers due to
discounted prices offered to volume purchasers such as HMO's and large
purchasing groups.
We believe U.S. citizens want reasonable limits on pharmaceutical prices.
RESOLVED: The shareholders request the Board to create and implement a
policy of price restraint of pharmaceutical products for both the average
individual consumer and the institutional purchasers utilizing a combination
of approaches to keep drug prices to a reasonable level.
The Board will report to shareholders on positive changes in policies and
pricing procedures for our pharmaceutical products by September, 1994.
SUPPORTING STATEMENT: In creating this policy the Board should consider a
formula whereby the individual price on each of the top five prescription
drugs for the retail market based on dollar volume in the U.S. for our company
be no higher than 10% of the average price for each of the five drugs in the
top five markets of these same drugs in the industrialized world. If the price
differential is more than 10% for any one of the drugs, that a voluntary cap
be immediately placed on the price of said drug in the U.S. until the
differential is within the 10%.
18
Drug pricing has been a controversial topic for the last few years. Now
that we are facing major reforms in our health care system in the U.S. it
seems most appropriate that all pharmaceutical companies take their share of
the responsibility in this reform effort.
If you AGREE, please mark your proxy FOR this resolution.
MANAGEMENT'S STATEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board of Johnson & Johnson recommends voting against the proposal on
pharmaceutical pricing.
The Board does so in the context of Johnson & Johnson's unique position
as a comprehensive health care products company. As has been noted to
stockholders before, we are keenly aware of the concern about the rising costs
of health care and will continue our practice of pricing our products
responsibly. For the last 13 years, the weighted average compound growth rate
of price increases in the United States for our health care products
(prescription and over-the-counter drugs, hospital and professional products)
has been slightly below the U.S. Consumer Price Index. That will be true once
again this year.
We believe it is inappropriate to impose on the Company a formula for
pharmaceutical pricing, including one based on comparisons with markets
outside the U.S. Prices vary around the world for many reasons, including
local marketplace and competitive situations as well as the cost of gaining
regulatory approval and running our business in a particular region. Over
time, currency fluctuations can also produce substantial differences in prices
between countries.
The future of our pharmaceutical business depends on continued intensive
investment in research and development that will yield new and innovative
medicines for the treatment of disease and will bring down the cost of health
care over the long term. In order to continue this research and assure the
future of its business, the Company must have the latitude to price its
products based on marketplace forces and in a way that yields the required
revenue. The steadily increasing cost of research and development makes this
particularly important.
The pharmaceutical marketplace in the U.S. is already undergoing profound
change. The rapid growth of managed care organizations has created large,
sophisticated purchasers and intense competition that has significantly
reduced the rate of price increases on prescription medicines.
Capping individual prices on prescription drugs in the U.S. based on a
formula or on arbitrary comparisons with selected world markets would inhibit
our ability to compete in the marketplace and is contrary to the best
interests of the patients we serve, as well as the Company and its
shareholders.
IT IS, THEREFORE, RECOMMENDED THAT THE STOCKHOLDERS VOTE AGAINST THIS
PROPOSAL.
OTHER MATTERS
The Board of Directors does not intend to bring other matters before the
meeting except items incident to the conduct of the meeting. However, on all
matters properly brought before the meeting by the Board or by others, the
persons named as proxies in the accompanying proxy, or their substitutes, will
vote in accordance with their best judgment.
19
Notice of
1994 Annual
Meeting and
Proxy
Statement
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 12 contains a description in tabular form of a graph
entitled "Stockholder Return Performance Graph" which represents the
comparison of the cumulative total stockholder return on the
Company's Common Stock against the cumulative total return of the
Standard & Poor's 500 Stock Index and the Standard & Poor's
Diversified Health Care Index for the period of five years
commencing December 31, 1988 and ending December 31, 1993, which
graph is contained in the paper format of this Proxy Statement being
sent to Stockholders.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON APRIL 28, 1994
The undersigned hereby appoints R.E. Campbell, C.H. Johnson and R.N.
Wilson and each or any of them as proxies, with full power of
substitution and revocation, to represent the undersigned and to
P vote all shares of the Common Stock of Johnson & Johnson which the
R undersigned is entitled to vote at the Annual Meeting of
O Stockholders of the Company to be held on April 28, 1994 at 10:00
X A.M. at the Hyatt Regency Hotel, Two Albany Street, New Brunswick,
Y New Jersey, and any adjournment thereof, upon the matters listed on
the reverse side hereof and, in their discretion, upon such other
matters as may properly come before the meeting. The proxies
appointed hereby may act by a majority of said proxies present at
the meeting (or if only one is present, by that one).
(change of address/comments)
Election of Directors, Nominees:
---------------------------------
James W. Black, Gerard N.
Burrow, Robert E. Campbell, Joan ---------------------------------
G. Cooney, Philip M. Hawley, Clark
H. Johnson, Ann D. Jordan, Arnold ---------------------------------
G. Langbo, Ralph S. Larsen, John
S. Mayo, Thomas S. Murphy, Paul J. ---------------------------------
Rizzo, Maxine F. Singer, Roger B. (If you have written in the above
Smith, Robert N. Wilson. space, please mark the
corresponding box on the reverse
side of this card)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE *****************
APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK * SEE REVERSE *
ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD * SIDE *
OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE *****************
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
- - - ------------------------------------------------------------------------------
DETACH PROXY CARD HERE
PLEASE MARK YOUR 0409
VOTES AS IN THIS
/X/ EXAMPLE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS, FOR
PROPOSAL 2 AND AGAINST PROPOSALS 3 AND 4.
********************************************************************************************************************************
* THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2. * THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST *
* * PROPOSALS 3 AND 4. *
********************************************************************************************************************************
WITH-
FOR HELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of / / / / 2. Ratification of / / / / / / 3. Proposal on executive / / / / / /
Directors appointment of compensation.
(see reverse) Coopers & Lybrand
as the independent 4. Proposal on
accountants. pharmaceutical pricing. / / / / / /
For, except vote withheld from the following nominee(s):
-------------------------------------------------------------
Change of
Address/Comments
on Reverse Side. / /
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any
adjournments thereof.
Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, give
please full title as such.
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SIGNATURE(S) DATE
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PLEASE CAREFULLY DETACH HERE AND RETURN THIS PROXY IN THE ENCLOSED REPLY ENVELOPE.
