JOHNSON & JOHNSON | Board Oversight - Risks Related to the Opioid Crisis at JNJ

Status
Omitted
AGM date
Previous AGM date
Resolution details
Company ticker
JNJ
Lead filer
Office of the Illinois State Treasurer
Resolution ask
Amend board structure
ESG theme
  • Social
ESG sub-theme
  • Public health
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Health Care
Company HQ country
United States
Resolved clause
RESOLVED, that shareholders of Johnson & Johnson ("JNJ") urge the Board of Directors (the "Board") to report to shareholders describing the governance measures JNJ has implemented since 2012 to more effectively monitor and manage financial and reputational risks related to the opioid crisis, given JNJ's sale of opioid medications, including whether increased centralization of JNJ's corporate functions provides stronger oversight of such risks and any changes in how the Board oversees opioid-related matters, how incentive compensation for senior executives is determined, and how the Board obtains input regarding opioids from stakeholders.

The report should be prepared at reasonable cost and should omit confidential and proprietary information.
Supporting statement
Opioid abuse is undeniably a public health crisis. The Centers for Disease Control and Prevention reported that in 2018, opioid abuse caused an average of 128 overdose deaths per day. The economic and social effects of the opioid crisis have been profound. A recent report pegged the cumulative economic toll of the opioid epidemic at over $1 trillion.1 Opioid use and dependency, according to a 2017 study, is a key factor in the decline in prime-age male labor force participation.2

Sale of opioid medications creates legal and reputational risks for JNJ. In 2019,
JNJ received a grand jury subpoena from a New York U.S. Attorney's Office related to the sale of opioids made by subsidiary Janssen.3 In August 2019, an Oklahoma judge ruled that Janssen engaged in "false, deceptive and misleading" marketing regarding opioids that contributed to the opioid crisis in Oklahoma, which constituted a "public nuisance," and awarded the State of Oklahoma $465 million.4 JNJ has offered to pay $4 billion to settle over 3,000 lawsuits by states, local governments and Native American tribes, claiming that JNJ's marketing of opioid drugs, as well as its sale of opioid active ingredients to other drug makers, contributed to the opioid crisis.5 In September 2020, the New York State Department of Financial Services filed civil charges against JNJ, accusing the company of insurance fraud and downplaying the risks of opioid products, seeking to recover $2 billion.6

In our view, Board-level oversight and governance reforms can play an important role in effectively addressing opioid-related risks and shareholders would benefit from a fuller understanding of how JNJ's governance arrangements have changed since 2012 to do so more effectively.

For example, reports indicate that JNJ has begun centralizing its famously decentralized corporate structure, including the compliance function,7 which could be expected to affect Board oversight of risks related to opioids. As well, it is not clear from JNJ's proxy statements whether senior executive compensation incentives have changed to promote compliance or ethical behavior.

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