Illinois, OxFam ask shareholders to reject Johnson & Johnson CEO’s $ 30 million salary

The fight for the $ 30 million salary of Johnson & Johnson CEO Alex Gorsky is escalating. The state of Illinois, the charity OxFam, and several church organizations have filed letters with the Securities and Exchange Commission opposing his compensation.

The letters urge shareholders to vote no on a “say on pay” proposal that will be considered at J&J’s annual meeting of shareholders on April 22. To pay. They said it was unfair to exclude the billions of dollars the drug company paid to settle legal claims linked to its role in opioid epidemic. Illinois asks J&J to cut Gorsky’s salary by at least $ 2 million.

“We support compensation plans that reward executives for such laudable accomplishments as developing a vaccine despite the recent recommendation from the Centers for Disease Control and Prevention and the US Food and Drug Administration to suspend use Janssen vaccine in response to rare side effects involving the blood. clots, ”says the letter, which was written by the Illinois treasurer. “Compensation plans work most effectively when they consider both successes and failures. “

Earlier this year, two influential investor advisory firms also urged shareholders of the pharmaceutical giant to force the company to recoup some of Gorsky’s compensation.

In early April, Institutional Shareholder Services joined with rival consultancy Glass Lewis in recommending that J&J investors reject Gorsky’s compensation deal at the company’s annual shareholders meeting this month. ISS said J & J’s corporate governance was poor, rating it a 7 on a scale of 1 to 10, where 1 is best. On compensation alone, ISS gave J&J a score of 9, close to its lowest.

The problem is the fact that J&J paid billions of dollars in legal settlements last year, including $ 4 billion related to his role in the country’s opioid epidemic.

Centers for Disease Control and Prevention estimates Nearly 500,000 people died from opioid-related overdoses in the United States between 1999 and 2019. J&J is one of several manufacturers of opioid-based pain medications, and other drug makers have also been involved in the opioid epidemic. Despite court settlements, J&J has denied any wrongdoing in the spike in overdose deaths.

J&J also set aside an additional $ 4 billion for litigation over allegations that its talcum powder contained carcinogenic asbestos. The company maintains that its products are safe and that any contamination was an isolated incident.

ISS said in its report that J&J refused to give shareholders enough detail on how the company’s board of directors assessed multibillion-dollar dispute settlements by deciding to pay Gorsky $ 30 million in cash and stock. Last year.

J&J, like many companies, excludes one-off legal fees from the metrics it uses to calculate executive pay, but ISS said he believes the settlements should have factored into Gorsky’s pay anyway. .

“In view of the insufficient disclosure on the subject, a vote against the proposal is warranted,” ISS said in the report.

Gorsky has been the Managing Director of Johnson & Johnson since 2012, which includes some of the years covered by legal settlements.

In a statement, J&J said executive compensation was “designed to promote long-term, sustainable value creation.” The company also noted that while losses from litigation are excluded from executive performance measures, they are a factor when the board sets compensation.

“The company’s treatment of litigation costs in compensation performance metrics is fully consistent with industry benchmarks,” said J&J.

A vaccine, but a bumpy deployment

J&J achieved a major achievement last year: It is one of only three companies to have successfully developed a vaccine to combat the spread of the COVID-19 pandemic approved for emergency use in the United States. United

Yet J & J’s vaccine deployment faced production delays and quality control issues. A subcontractor working for J&J at a factory in Baltimore had to throw away millions of doses of the company’s COVID-19 vaccine last month. Separately, several states have temporarily closed vaccination sites using the J&J vaccine after reports of adverse reactions.

Even excluding legal settlements, J&J had a lackluster fiscal year in 2020. Sales grew only 1% to nearly $ 82.6 billion, and company profits fell 8% compared to 2019, at $ 14.7 billion.

Johnson & Johnson vaccine supply down 85%


J&J’s board compensation committee granted Gorsky a 14% salary increase in 2020 to $ 30.1 million, according to ISS estimates. The investor advisory firm noted that Gorsky’s salary was 365 times the median annual salary of the company’s employees of $ 81,000.

“I think [Gorsky’s] compensation was excessive, ”said Rosanna Landis Weaver, who analyzes executive compensation at As You Sow, a nonprofit that promotes shareholder advocacy on inequality, the environment and other issues.

“One-off events, whether positive or negative, have to be treated the same,” she said. “He’s going to want credit for the extraordinarily good things that happen, like the development of a COVID-19 vaccine, but that means he should also get a penalty for the extraordinarily bad things that also happen.”