J&J CEO Under Fire for Big Bonuses Amid Scandals

J&J CEO Under Fire for Big Bonuses Amid Scandals

April 25th, 2012 // 12:23 pm @ jmpickett

Source

Etched in stone on the side of the Johnson & Johnson headquarters building in New Brunswick, New Jersey, the famed credo been seen as an oath of responsibility and the corporate equivalent of the Ten Commandments for countless generations of employees. “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services,” the opening line intones.

Lately, though, the commitment to the guiding principles (you can read the entire credo here) has been called into question. Quality control lapses led to the recall of millions of over-the-counter products; congressional hearings; government investigations; hundreds of job losses; the retooling of a key plant; a reorganization of its consumer health unit, and hundreds of millions of dollars in lost sales.

There was also a foreign bribery scandal, costly legal setbacks over the marketing of the Risperdal antipsychotic (see this) and embarrassing disclosures about safety data for hip replacements. Although investors have been heartened by a rising share price – based on the theory that the whole is greater than the sum of its parts – consumer confidence has eroded. J&J dropped to 7th place on the annual Corporate Reputation poll from Harris Interactive, its lowest-ever ranking (read here).

Nonetheless, embattled ceo Bill Weldon – who retires but will become chairman – maintains the credo is alive and well. In fact, the corporate mantra is a source of comfort for J&J execs as they grapple with challenging situations. “What the credo does,’’ Weldon said, “is create an opportunity for debate.’’ J&J execs look to the credo to guide decision-making, he explained, whether they are deciding things about a product or philanthropy spending.

“We challenge it all the time,’’ the 63-year-old Weldon said yesterday as part of a day-long symposium on the state of workforce diversity at Rutgers University. “It’s the heart and soul of the company.” But when The Star-Ledger of New Jersey asked why the credo wasn’t more of a factor in avoiding the problems that led to the massive recalls, Weldon was suddenly demure. J&J, he insisted, was trying “to make sure we are getting things right.’’

Weldon got at least one thing right, at least far as he is concerned. He received an annual bonus of $3.1 million for 2011 – which amounts to a 55 percent increase from the year before. As noted previously, the board offered opaque reasoning for awarding him a hefty reward (read here).

Where was the credo in this picture? The J&J board can best answer this question: “Credo-based behavior is not something that can be precisely measured,” the J&J proxy states on page 33. “Thus, there is no formula for how credo-based behavior can, or will, impact an executive’s compensation. The (compensation) committee and the chairman/ceo use their judgment and experience to evaluate whether an executive’s actions were aligned with ‘Our Credo’ values.”