Johnson & Johnson
Summary:
So as far as the rating goes, what else would we give Johnson & Johnson…
Analysis:
Did you ever meet that guy who always had Cs in his classes, always seemed to break even no matter what, and just seemed generally content? Well, if that guy were a company, his name would be Johnson & Johnson.
Everything about Johnson & Johnson is average. The Medical Supplies industry they're in is known by investors as a relatively safe bet. They aren't affected very much by a weak economy, and never seem to hit really boom years. The company itself has good returns every year, about half coming from domestically, the other half internationally. The stock price has been slightly volatile for the last 3 years, but within a reasonable range of $10. Every time the stock gets up to $70 it goes back down. Every time it gets down to $60, it goes back up… we think you get the picture.
So… What Are They Paid?
And what kind of compensation program would an average company create? An average one of course. The CEO's high option awards and non-equity incentives ($7.575 million and $9.2 million, respectively) are balanced out by the low stock awards and perquisites ($2.3 million and $150,000 for personal car and airplane usage).
The salaries are a little above average, but not too far above. The $3 million in dividends given to the CEO are high, but Johnson & Johnson is known for giving out high dividends, and this is no different for the CEO.
The termination clauses don't account for a change in control trigger, but they are mysteriously missing some of the details typically accounted for in this section. What else would you expect from a C student?
Maybe the most unique part of the executive compensation program is what the company refers to as the CEC bonus program. CECs are options given out to execs at half the current stock price, in a very discretionary manner. On the other hand, they vest at 20% per year for a 5-year period and cannot be cashed out until retirement. Enacted in the 1940s, this program was built to reward long term achievements by the executives, and eliminate their concerns about short-term volatility in stock price. It's an OK idea, but the program is outdated and should be revised.
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $1,725,000 | $764,596 |
| Bonus | $3,500,000 | $968,375 |
| Stock | $2,319,368 | $428,132 |
| Options | $7,575,164 | $1,648,327 |
| non-Equity Incentives | $9,188,120 | $2,662,850 |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report