JOHNSON & JOHNSON | Establish deferral period for senior executive bonuses at JNJ

Status
22.57% votes in favour
AGM date
Previous AGM date
Proposal number
7
Resolution details
Company ticker
JNJ
Lead filer
Sisters of St. Francis of Philadelphia
Resolution ask
Adopt or amend a policy
ESG theme
  • Governance
ESG sub-theme
  • Remuneration or pay
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 Compensation & Benefits Committee (the "Committee") of the board to take the steps necessary to provide that the Committee may decline to pay in full an award (a "Bonus") to a senior executive that is based on one or more financial measurements (a "Financial Metric") whose performance measurement period ("PMP") is one year or shorter for a period (the "Deferral Period") following the award, including developing a methodology for determining the length of the Deferral Period and adjusting the remainder of the Bonus over the Deferral Period.

The methodology referenced above should allow accurate assessment of risks taken during the PMP that could have affected performance on the Financial Metric(s) and facilitate JNJ's recoupment of Bonus compensation pursuant to its recoupment policy.

The changes should be implemented in a way that does not violate any existing contractual obligation or the terms of any compensation or benefit plan currently in effect.
Supporting statement
As long-term shareholders, we support compensation policies that align senior executives' incentives with the company's long-term success. We are concerned that short-term incentive plans can encourage senior executives to take on excessive risk.

In our view, the opioid crisis reflects overly risky behavior by companies in the supply chain, including manufacturers such as JNJ. In August 2019, an Oklahoma judge ruled that JNJ subsidiary Janssen engaged in "false, deceptive and misleading" marketing regarding opioids that led to opioid deaths in Oklahoma, which constituted a "public nuisance."[1] JNJ has offered $5 billion to settle more than 2,000 cases filed by states and cities seeking damages for JNJ's role in the opioid crisis.[2] JNJ has also been dogged by compliance failures related to off-label promotion, kickbacks and foreign bribery.[3]

To foster a longer-term orientation, this proposal asks that the Committee take the steps necessary to authorize withholding some portion of Bonuses to allow adjustment of the unpaid portion during the Deferral Period. The Committee would have discretion to set the terms and mechanics of this process.

Bonus deferral is widely used in the banking industry, where overly risky behavior was widely viewed as contributing to the financial crisis. In 2009, the Financial Stability Board ("FSB"), which coordinates national financial authorities in developing strong financial sector policies, adopted Principles for Sound Compensation Practices and implementation standards for those principles, including bonus deferral. Deferral is "particularly important" because it allows "late-arriving information about risk-taking and outcomes" to alter payouts and reduces the need to claw back compensation already paid out, which may "fac[e] legal barriers," in the event of misconduct. Banking supervisors in 16 jurisdictions, including the US, have requirements or expectations regarding bonus deferral. (https://www.fsb.org/wp-content/uploads/P170619-1.pdf)

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