OTHER NAMED EXECUTIVE OFFICER PERFORMANCE
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|
The Compensation & Benefits Committee based its assessment of each of the other named executive officers upon its evaluation of the company’s performance and the individual performance of each named executive officer. Each of the named executive officers contributed to the company’s performance as a member of the Executive Committee and as a leader of a business or a function. See pages 44 through 46 for the Committee’s evaluation of the company’s performance for 2018.
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Joseph Wolk: Executive Vice President, Chief Financial Officer
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In addition to his contribution to our company’s overall performance, Mr. Wolk:
|
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•
|
Successfully transitioned into the CFO role, expanding the internal and external presence of the CFO office.
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•
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Led the financial analyses for all acquisition and divestiture transactions.
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•
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Executed a coordinated investor outreach covering our fundamental business conditions.
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Paulus Stoffels, M.D.: Vice Chairman of the Executive Committee, Chief Scientific Officer
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In addition to his contribution to our company’s overall performance, Dr. Stoffels:
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•
|
Delivered continued pharmaceutical pipeline growth through internal R&D, licensing and acquisitions.
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•
|
Accelerated innovative product development across J&J in Medical Device, Vision and Consumer.
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•
|
Advanced the J&J Global Public Health portfolio in Tuberculosis, HIV and Ebola.
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Joaquin Duato: Vice Chairman of the Executive Committee
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In addition to his contribution to our company’s overall performance, Mr. Duato:
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•
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Exceeded all financial goals (sales, income, and cash flow) for Pharmaceuticals, delivering above market performance and the 8th consecutive year of sales growth.
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•
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Integrated key acquisitions and increased the value of our product pipeline.
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•
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Began oversight of Consumer, Supply Chain, IT, Health & Wellness and Global Services businesses with focus on strategic priorities, capabilities and talent.
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Michael Ullmann:
Executive Vice President, General Counsel
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In addition to his contribution to our company’s overall performance, Mr. Ullmann:
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•
|
Led the Law Department in managing its extensive litigation portfolio, including reversal of significant adverse judgments, prevailing in significant litigation, and settling high profile investigations and disputes.
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•
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Oversaw legal support of all innovation, including acquisition, divestiture and licensing transactions and a record number of patent applications and issuances.
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•
|
Led the organization in meeting all key healthcare compliance obligations and commitments and enhancing compliance and privacy controls and processes.
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Former Executive Officers:
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• Dominic Caruso: Mr. Caruso, our former Chief Financial Officer, retired on August 31, 2018.
• Sandra Peterson: Ms. Peterson, our former EVP, Group Worldwide Chairman, retired on October 1, 2018.
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2019 Proxy Statement -
48
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COMPENSATION DECISIONS FOR 2018 PERFORMANCE
Our Compensation Decision Process
In January and February of each year, we assess the performance of our named executive officers and we determine the:
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•
|
Annual performance bonus
earned for the prior year’s performance,
|
|
|
•
|
Long-term incentive award
granted in the first quarter of the year based on the prior year's performance, and
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|
•
|
Salary rate
for the upcoming year.
|
The independent members of the Board approve the compensation decisions for the Chairman/CEO. The Compensation & Benefits Committee approves the compensation decisions for all other named executive officers.
In the tables on page 50 to 52, we summarize the decisions regarding the annual performance bonuses, long-term incentive awards, and salary rates. We also show the 2018 total direct compensation. We believe that these tables best summarize the actions taken on the named executive officers’ compensation for the performance year.
Reconciliation of Our CEO's 2018 Total Direct Compensation to the 2018 Summary Compensation Table
Most of the amounts required by the U.S. Securities and Exchange Commission’s (SEC) rules to be reported in the “2018 Summary Compensation Table” on page 69 are the result of compensation decisions from prior years, earnings from prior long-term incentive awards, or participation in long-standing pension programs as follows.
|
|
•
|
Stock Awards and Option Awards
are grants made in 2018 based on performance in 2017. For PSUs, grants from 2017 and 2016 are also included for the portion of the awards based on 2018 sales (since they were considered granted in 2018 according to U.S. accounting rules).
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•
|
Non-Equity Incentive Plan Compensation
includes dividend equivalent payments on our legacy cash-based long-term incentive plans. We stopped granting cash-based long-term incentives in 2012.
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•
|
Change in Pension Present Value
is not paid currently and the amount is highly sensitive to changes in mortality and interest rate assumptions.
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•
|
Non-Qualified Deferred Compensation Earnings
is the growth in value of our legacy cash-based long-term incentive plans above a reference rate. We stopped granting these long-term incentives in 2012.
|
In the table below, we show the 2018 total direct compensation for our Chairman/CEO shown on page 50, the total from the “Summary Compensation Table” on page 69, and the differences between the two amounts as described above.
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Reconciliation of Our CEO's 2018 Total Direct Compensation to Summary Compensation Table (SCT) Total
|
2018 Total Direct Compensation
|
$18,172,308
|
Long-Term Incentives granted in 2019 for 2018 Performance
|
(13,500,000)
|
Stock Awards and Option Awards granted in 2018 based on 2017 performance (included in SCT columns D and E)
|
14,625,057
|
Dividend Equivalents on legacy cash-based long-term incentives (included in SCT column F)
|
540,497
|
Change in Pension Present Value (included in SCT column G)
|
0
|
Non-Qualified Deferred Compensation Earnings (included in SCT column G)
|
0
|
All Other Compensation (included in SCT column H)
|
259,710
|
Total from Summary Compensation Table (included in SCT column I)
|
$20,097,572
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|
2019 Proxy Statement -
49
|
2018 Total Direct Compensation
In the table below, we show the salary paid during 2018 and the annual performance bonus and long-term incentive grant approved on February 11, 2019 for performance in 2018 for each named executive officer.
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A
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B
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C
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D
|
E
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|
Cash
|
Equity
|
|
Name
|
Salary Earned
($)
|
Annual Performance Bonus
($)
|
Long-Term Incentive
($)
|
Total Direct Compensation
($)
|
A. Gorsky
|
$1,642,308
|
$3,030,000
|
$13,500,000
|
$18,172,308
|
J. Wolk
|
597,542
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|
728,000
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|
3,940,000
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|
5,265,542
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P. Stoffels
|
1,178,300
|
|
1,550,000
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|
6,800,000
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|
9,528,300
|
|
J. Duato
|
934,046
|
|
1,400,000
|
|
6,580,000
|
|
8,914,046
|
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M. Ullmann
|
788,077
|
|
835,000
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|
2,920,000
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|
4,543,077
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D. Caruso
|
630,538
|
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0
|
0
|
630,538
|
|
S. Peterson
|
808,500
|
|
1,005,500
|
|
0
|
1,814,000
|
|
Salary Earned (Column B)
Column B includes the base salaries paid during 2018.
Annual Performance Bonus (Column C)
Based on 2018 company performance and individual performance as discussed on pages 44 to 48, the Board and the Committee awarded annual performance bonuses on February 11, 2019 ranging from 105% to 132% of target for the named executive officers. See the “2018 Grants of Plan-Based Awards” table on page 76 for the target bonus amounts.
Mr. Caruso retired on August 31, 2018 and was not eligible for an annual performance bonus for 2018 since he retired before October 1
st
. Ms. Peterson retired on October 1, 2018 and received a prorated annual performance bonus based on working three-quarters of the year during 2018.
Long-Term Incentive Awards (for 2018 performance) (Column D)
The Board and the Committee granted long-term incentive awards on February 11, 2019 (ranging from 105% to 140% of target) to the named executive officers based on their 2018 performance, impact on the company’s long-term results, competitive market data, and long-term potential within the organization.
In the table below, we show: the total long-term incentive awards granted; the weighting of Performance Share Units (PSUs), Options, and Restricted Share Units (RSUs); and the individual award values.
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Name
|
PSUs
($)
|
Options
($)
|
RSUs
($)
|
Total Long-Term Incentives
($)
|
Award Weight
|
60%
|
30%
|
10%
|
100%
|
A. Gorsky
|
$8,100,000
|
$4,050,000
|
$1,350,000
|
$13,500,000
|
J. Wolk
|
2,364,000
|
1,182,000
|
394,000
|
3,940,000
|
P. Stoffels
|
4,080,000
|
2,040,000
|
680,000
|
6,800,000
|
J. Duato
|
3,948,000
|
1,974,000
|
658,000
|
6,580,000
|
M. Ullmann
|
1,752,000
|
876,000
|
292,000
|
2,920,000
|
|
|
|
|
2019 Proxy Statement -
50
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|
|
In the table below, we show the number of shares of PSUs, options, and RSUs granted. We determine the number of shares for each type of long-term incentive by dividing the dollar amount by the fair value per share and rounding to the nearest whole share.
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|
|
|
|
Name
|
PSUs
(#)
|
Options
(#)
|
RSUs
(#)
|
Fair Value
|
$121.305
|
$17.805
|
$121.305
|
A. Gorsky
|
66,774
|
227,464
|
11,129
|
J. Wolk
|
19,488
|
66,386
|
3,248
|
P. Stoffels
|
33,634
|
114,575
|
5,606
|
J. Duato
|
32,546
|
110,868
|
5,424
|
M. Ullmann
|
14,443
|
49,200
|
2,407
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|
Details on Long-Term Incentive Fair Values
|
|
•
|
PSU Fair Value:
|
|
|
•
|
$121.305 was the estimated grant date fair value used to determine the number of PSUs granted.
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|
|
•
|
We assumed the estimated grant date fair value per PSU to be equal to the estimated grant date fair value per RSU to determine the number of PSUs, because:
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•
|
The RSU fair value equals the value of a PSU at 100% of target
.
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•
|
The fair values for the portions of the PSU award tied to the sales goals for the second and third years of the performance period are determined at the beginning of the second and third years when the sales goals for those years are set.
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|
•
|
Option Fair Value:
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|
|
•
|
$17.805 was the grant date fair value used to determine the number of options granted
.
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•
|
$131.94 was the option exercise price based on the average of the high and low prices of our common stock on the NYSE on the grant date.
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•
|
We used the Black-Scholes option valuation model to calculate the grant date fair value with the following assumptions:
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|
•
|
16.27% volatility based on a blended rate of historical average volatility and implied volatility based on at-the-money traded Johnson & Johnson stock options with a life of two years
.
|
|
|
|
•
|
2.80% dividend yield
.
|
|
|
|
•
|
2.56% risk-free interest rate based on a U.S. Treasury rate of seven years
.
|
|
|
|
•
|
7-year option life.
|
|
•
|
RSU Fair Value:
|
|
|
•
|
$121.305 was the grant date fair value used to determine the number of RSUs granted
.
|
|
|
•
|
We determined the grant date fair value for the RSU awards based on the average of the high and low prices of our common stock on the NYSE on the grant date ($131.94), discounted by an expected dividend yield of 2.80% since dividends are not paid on the RSUs prior to vesting.
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|
|
|
|
|
2019 Proxy Statement -
51
|
2019 Salary Rates
We do not guarantee annual salary increases and they are not automatic. The Board and the Committee reviewed performance, market data, responsibilities, and experience in determining the base salary rates for our named executive officers. Based on these factors, the Board and Committee kept Mr. Gorsky's salary rate unchanged for 2019 and adjusted the 2019 salary rates for Mssrs. Wolk, Duato and Ullmann.
Effective January 1, 2019, we discontinued the $320,000 annual stipend for Dr. Stoffels and increased his base salary rate by $44,200. See “Limited Employment Arrangement and Agreements” on page 67 for details.
The following table shows the annual base salary rate approved for each named executive officer. The annual base salary rates are all effective as of February 25, 2019 except for Dr. Stoffels’ which is effective as of January 1, 2019.
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|
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|
|
|
Name
|
2018 Base Salary Rate ($)
|
2019 Base Salary Rate ($)
|
A. Gorsky
|
$1,650,000
|
$1,650,000
|
J. Wolk
|
750,000
|
|
805,000
|
|
P. Stoffels
|
1,178,300
|
|
1,222,500
|
|
J. Duato
|
940,000
|
|
975,000
|
|
M. Ullmann
|
795,000
|
|
819,000
|
|
|
|
|
|
2019 Proxy Statement -
52
|
|
|
2018 UPDATE ON PERFORMANCE OF PERFORMANCE SHARE UNIT AWARDS VERSUS GOALS
In 2018, we completed the first year of the PSU performance period for our 2018-2020 awards, the second year of the PSU performance period for our 2017-2019 awards, and the third year of the PSU performance period for our 2016-2018 awards.
Performance Share Units Earned to Date
In the table below, we show the PSUs earned to date highlighting the contribution of the performance periods completed in 2018. We determine the number of PSUs earned based on our adjusted operational EPS and relative Total Shareholder Return (TSR) performance at the end of the 3-year performance period. We pay out earned PSUs at the end of the 3-year performance period.
|
|
|
|
|
|
|
|
|
|
|
|
PSUs Earned Based on Performance to Date
|
Performance Period and Performance Measures
|
Weight
|
2016
|
2017
|
2018
|
2019
|
2020
|
|
Total
|
2016 - 2018 Performance Share Units
|
|
|
|
|
|
|
|
|
Operational Sales
|
1/3
rd
|
118.2%
|
95.0%
|
145.3%
|
|
|
|
39.8%
|
Cumulative Adjusted Operational EPS
|
1/3
rd
|
108.6%
|
|
|
|
36.2%
|
Relative TSR
|
1/3
rd
|
121.0%
|
|
|
|
40.3%
|
Total
|
|
|
|
|
|
|
|
116.4%
|
2017 - 2019 Performance Share Units
|
|
|
|
|
|
|
|
|
Operational Sales
|
1/3
rd
|
|
95.0%
|
145.3%
|
TBD 2019
|
|
|
26.7%
|
Cumulative Adjusted Operational EPS
|
1/3
rd
|
|
TBD 2017-2019
|
|
|
0.0%
|
Relative TSR
|
1/3
rd
|
|
TBD 2017-2019
|
|
|
0.0%
|
Total
|
|
|
|
|
|
|
|
26.7%
|
2018 - 2020 Performance Share Units
|
|
|
|
|
|
|
|
|
Operational Sales
|
1/3
rd
|
|
|
145.3%
|
TBD 2019
|
TBD 2020
|
|
16.1%
|
Cumulative Adjusted Operational EPS
|
1/3
rd
|
|
|
TBD 2018-2020
|
|
0.0%
|
Relative TSR
|
1/3
rd
|
|
|
TBD 2018-2020
|
|
0.0%
|
Total
|
|
|
|
|
|
|
|
16.1%
|
Note: The percentages above are rounded to one decimal for display purposes.
|
PSU Performance versus Goals for Performance Periods Completed in 2018
|
|
|
|
|
|
|
|
|
|
|
|
2018 Operational Sales Goal
|
2016 - 2018 Cumulative Adjusted Operational EPS Goal
|
2016 - 2018 Relative TSR Goal
|
Level
|
Operational Sales
($ Millions)
|
PSUs Earned
(% of target)
|
Cum. Adj. Op. EPS
|
PSUs Earned
(% of target)
|
Relative TSR
|
PSUs Earned
(% of target)
|
Maximum
|
$83,475
|
200%
|
|
$22.94
|
200%
|
|
10.0 % points
|
200%
|
|
Target
|
79,500
|
100
|
|
20.85
|
100
|
|
0.0 % points
|
100
|
|
Threshold
|
75,525
|
50
|
|
18.77
|
50
|
|
(10.0) % points
|
50
|
|
<Threshold
|
< 75,525
|
0
|
|
< 18.77
|
0
|
|
< (10.0) % points
|
0
|
|
Result
|
$81,301
|
145.3%
|
|
$21.03
|
108.6%
|
|
2.1% points
|
121.0%
|
|
Note: Operational sales and cumulative adjusted operational EPS are non-GAAP measures. See page 55 for details.
|
If performance falls between threshold and target or between target and maximum, we determine the percentage of target earned using interpolation. If performance is below threshold for a goal, the percentage of target earned for that goal is 0%. If TSR is negative, the percentage of target earned based on TSR performance would be capped at 100%.
|
|
|
|
|
|
2019 Proxy Statement -
53
|
Our PSU Goal Setting Process
Our PSU goals support our long-term objectives to grow sales faster than our competitors and grow earnings faster than sales. Sales growth drives quality EPS growth and quality EPS growth drives shareholder value creation through increased total shareholder return.
During the first quarter of the year, the Committee establishes the goals for the next PSU award 3-year cycle. It reviews the company’s performance against the PSU goals on a quarterly basis. Following year-end, the Committee certifies the result for the year’s operational sales performance and certifies the EPS and TSR results for the completed 3-year award cycle.
Our PSU goals are based on our long-term strategic plan and take into account our product portfolio and pipeline, anticipated healthcare market growth and other external factors, including the competitive landscape. The sales goal is set to align with the annual guidance provided to the investment community. The EPS goal is set based on the operational EPS guidance for the first year that is provided to the investment community and sales and EPS targets included in our strategic plan for the second and third years of the performance period. The 3-year TSR goal is set at meeting the performance of our Competitor Composite Peer Group. See page 63 for more information on our Competitor Composite Peer Group.
Our annual operational sales goals are based on actual sales from the prior year and then aligned to the company’s annual operational sales growth guidance. Currency had a positive impact of approximately $0.3 billion on the 2017 sales base used to set the 2018 operational sales growth goal. The following table shows the 2017 operational and reported sales, the 2017 impact of currency, and the 2018 operational sales goal.
|
|
|
|
|
($ Millions)
|
Base Year Sales
|
|
2017 Operational Sales
|
$76,182
|
Currency Translation
|
268
|
2017 Reported Sales
|
$76,450
|
2018 Operational Sales Goal
|
|
2018 Operational Sales Growth Goal
|
4.0
|
%
|
2018 Operational Sales Goal
|
$79,500
|
|
|
|
|
2019 Proxy Statement -
54
|
|
|
|
|
|
|
|
|
|
|
|
|
Details on Non-GAAP PSU Performance Measures
|
|
l
|
2018 Operational Sales Performance:
Operational sales growth is the sales increase due to volume and price, excluding the effect of currency translation. The following is a reconciliation of operational sales to reported sales (the most directly comparable GAAP measure).
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
|
|
|
|
2018 Reported Sales
|
$81,581
|
|
|
|
|
|
Currency Translation
|
(280)
|
|
|
|
|
|
2018 Operational Sales
|
$81,301
|
|
|
|
|
l
|
2016-2018 Cumulative Adjusted Operational EPS Performance:
The following is a reconciliation of 2016-2018 cumulative reported EPS to cumulative adjusted operational EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
($)
|
|
|
|
|
|
Reported EPS
|
$12.01
|
|
|
|
|
|
Special Items and intangible amortization expense
|
10.20
|
|
|
|
|
|
Non-GAAP EPS
|
22.21
|
|
|
|
|
|
Currency Translation
|
(0.10)
|
|
|
|
|
|
PSU Plan Adjustments
|
(1.08)
|
|
|
|
|
|
Cumulative Adjusted Operational EPS
|
$21.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items and intangible amortization expense
|
($)
|
|
|
|
|
|
2016
|
$0.80
|
|
|
|
|
|
2017
|
6.83
|
|
|
|
|
|
2018
|
2.57
|
|
|
|
|
|
2016 - 2018 Total
|
$10.20
|
|
|
|
|
|
|
|
|
l
|
PSU plan adjustments: (1) significant acquisitions, divestitures, share repurchases, and changes in accounting rules or tax laws that impact adjusted operational EPS results by more than 1%; and (2) earnings from products that were not approved when the targets were set.
|
|
|
|
l
|
2016-2018 Relative TSR Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR from January 1, 2016 to December 31, 2018
|
(%)
|
|
|
|
|
|
Johnson & Johnson
|
12.8%
|
|
|
|
|
|
Competitor Composite Peer Group
|
10.7%
|
|
|
|
|
|
Relative TSR Performance (J&J minus Competitor Composite Peer Group)
|
2.1% points
|
|
|
|
|
|
|
|
|
|
l
|
TSR performance is calculated using trailing 20-day average closing stock prices.
|
|
|
|
|
|
|
2019 Proxy Statement -
55
|
SHAREHOLDER OUTREACH AND OUR COMPENSATION PROGRAM
|
|
|
|
|
|
In 2018, we held an annual advisory vote to approve named executive officer compensation, commonly known as “Say on Pay.” Since 2013, 92% or more of the votes cast voted in favor of our executive compensation program, as disclosed in our Proxy Statements. We believe that this continued strong support for the named executive officer compensation resulted from our direct engagement with our shareholders and the changes we made to our executive compensation program over the past several years.
We regularly consider the feedback from our shareholders and we continue to evaluate our executive compensation program. During 2018, we continued our shareholder outreach on our executive compensation program. Our Lead Director and members of senior management had discussions with a diverse mix of U.S. and international institutional shareholders on our executive compensation program. We describe our shareholder engagement, feedback, and our responses on page 26 under “Shareholder Engagement”.
|
|
|
|
Change in 2018
On October 18, 2018 the Board of Directors approved the Johnson & Johnson Policy Against Pledging Company Stock. This policy prohibits the pledging of Johnson & Johnson shares by directors and executive officers. Prior to adopting the new anti-pledging policy, Dr. Stoffels had pledged 30,000 shares as security. The Compensation & Benefits Committee grandfathered this pledge.
The policy is available at:
http://www.investor.jnj.com/gov.cfm.
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2019 Proxy Statement -
56
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Executive Compensation Philosophy
KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM
We believe that our executive compensation program includes key features that align the interests of the named executive officers with our shareholders and does not include features that could misalign their interests.
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What We Do
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What We Don't Do
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ü
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Align CEO pay with company performance
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û
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No automatic or guaranteed annual salary
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increases
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ü
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Align the majority of named executive officer pay
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with shareholders through long-term incentives
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û
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No guaranteed bonuses or long-term incentive
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awards
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ü
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Balance short-term and long-term incentives
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û
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No above-median targeting of executive
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ü
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Cap incentive awards
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compensation
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ü
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Require executives to own significant amounts of
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û
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No change-in-control benefits
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company stock
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û
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No tax gross-ups
(unless they are provided
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ü
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Employ a compensation recoupment policy
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pursuant to our standard relocation practices)
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applicable to our named executive officers
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û
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No option repricing without shareholder
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ü
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Actively engage with our shareholders
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approval
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ü
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Engage an independent compensation consultant
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û
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No hedging or pledging of company stock
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reporting directly to the Committee
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û
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No long-term incentive backdating
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û
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No dividend equivalents on unvested long-term
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incentives
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GUIDING PRINCIPLES
We design our executive compensation programs to achieve our goals of attracting, developing, and retaining global business leaders who can drive financial and strategic growth objectives and build long-term shareholder value. We use the following guiding principles to design our compensation programs:
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•
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Competitiveness:
We compare our practices against appropriate peer companies that are of similar size and complexity, so we can continue to attract, retain, and motivate high-performing executives.
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•
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Pay for Performance:
We tie annual bonuses and long-term incentive grants to the performance of: our company, the individual’s business unit or function, and the individual.
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•
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Accountability for Short-Term and Long-Term Performance:
We structure performance-based compensation to reward an appropriate balance of short-term and long-term financial and strategic business results, with an emphasis on managing the business for long-term results.
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Our Board is responsible for oversight of risk management (including product development, supply chain, and quality risks) as described under “Board Oversight of Strategy and Risk” on pages 23 through 25. Our compensation program’s emphasis on long-term value helps to reduce the possibility that our executives make excessively risky business decisions that could maximize short-term results at the expense of long-term value.
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•
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Alignment to Shareholders’ Interests:
We structure performance-based compensation to align the interests of our named executive officers with the long-term interests of our shareholders.
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2019 Proxy Statement -
57
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Components of Executive Compensation
BASE SALARY, ANNUAL PERFORMANCE BONUS, AND LONG-TERM INCENTIVES
In the table below, we describe the components of our total direct compensation, how we determine their size, and why we pay them.
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Component
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Form
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Vesting / Performance Period
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How Size is Determined
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Why We Pay Each Component
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Base Salary
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Cash
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Ongoing
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l
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We base salary rates on:
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l
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Recognize job responsibilities
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l
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Competitive data
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l
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Scope of responsibilities
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l
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Work experience
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l
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Time in position
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l
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Internal equity
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l
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Individual performance
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Annual Performance Bonus
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Cash
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1 year
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l
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We set target awards as a percent of salary based on competitive data
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l
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Motivate attainment of our near-term priorities, consistent with our long-term strategic plan
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l
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We determine award payouts based on business and individual performance
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Long-Term Incentives
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Equity
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3 years
(options: 10-year term)
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l
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We set target awards as a percent of salary based on competitive data
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l
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Motivate attainment of our long-term goals, TSR, and share price growth
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l
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We grant long-term incentives based on business and individual performance, contribution, and long-term potential
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l
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Retain executives
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l
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We determine payouts based on achievement of long-term operational goals, TSR, and share price appreciation
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2019 Proxy Statement -
58
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Long-Term Incentives
In the table below, we describe the forms of long-term incentive we use for our named executive officers, their weighting, performance periods, how the payouts are determined and why we use them.
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Long-Term Incentive Form
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2018 Mix
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Vesting / Performance Period
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How Payouts are Determined
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Why We Use Them
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Performance
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60%
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l
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0% to 200%
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l
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Measures and Weight:
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l
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Aligns with our long-term objectives
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Share Units
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vested 3 years
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l
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1/3 Sales:
1-year Operational
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of growing sales faster than our
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after grant
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Sales for each year of the 3-year
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competitors and earnings faster
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performance period
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than sales
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l
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1/3 Earnings per Share:
3-year Cumulative Adjusted Operational EPS
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l
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Ensures quality earnings growth by motivating top line and bottom line growth
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l
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1/3 Relative Total Shareholder
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l
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Reflects overall TSR outcomes
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Return:
3-year Compound Annual
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relative to our competitors
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Growth Rate versus the
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l
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Ties PSU value directly to the
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Competitor Composite Peer Group
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share price
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l
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Share Price
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Options
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30%
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l
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100% vested
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l
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Share price appreciation
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l
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Motivates share price appreciation
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3 years after
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over the long-term
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grant
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l
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Reinforces emphasis on long-term growth aligned with our objectives
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l
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10-year term
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Restricted Share Units
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10%
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l
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100% vested
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l
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Share price
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l
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Ties RSU value directly to the share price
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3 years after
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grant
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Notes:
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•
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Operational sales and cumulative adjusted operational EPS are non-GAAP measures. See page 55 for details.
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•
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No dividend equivalents are paid on our PSUs, stock options, or RSUs.
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2019 Proxy Statement -
59
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Long-Term Incentive Vesting and Treatment upon Termination
Our long-term incentives vest 100% on the third anniversary of the grant date. In addition, we do not pay out our PSUs until we determine the percent of target PSUs that have been earned based on performance.
The treatment of our long-term incentives upon termination varies depending on the termination circumstances, as follows:
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Termination
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Eligibility
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Eligible Named Executive Officers
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Voluntary
Termination
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Involuntary
Termination
Without
Cause
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Involuntary
Termination
with
Cause
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Death
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Disability
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Qualifying Separation
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l
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Termination of employment at age 62 or later, or
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Gorsky
Stoffels
Duato
Ullmann
Caruso
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l
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Grants within 6 months prior to termination would be forfeited.
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l
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All vested and unvested equity awards would be forfeited.
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l
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All equity awards would become vested on the termination date.
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l
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Termination of employment after attainment of age 55 and at least 10 years of service with at least 5 years of consecutive service immediately before termination of employment.
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l
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Other equity awards would become vested on their normal vesting dates.
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l
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Options would remain exercisable for their remaining terms.
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l
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Options would remain exercisable for their remaining terms.
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l
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Accelerated PSUs would be paid out at 100% of target with a “top up” at the end of the performance period if the payout exceeds target.
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Non-Qualifying Separation (age 55-61)
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l
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Termination of employment after attainment of age 55, but before age 62 and without meeting the service requirements for Qualifying Separation.
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Peterson
(1)
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l
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All unvested equity incentives would be forfeited.
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l
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Vested options would remain exercisable for up to three years.
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Non-Qualifying Separation (Under age 55)
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l
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Termination of employment before attainment of age 55.
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Wolk
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l
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All unvested equity incentives would be forfeited.
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l
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Vested options would remain exercisable for up to three months.
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(1)
Ms. Peterson retired on October 1, 2018. She forfeited all of her unvested equity awards except for a prorated portion of her 2018 equity
award as described below.
Non-Competition and Non-Solicitation
Long-term incentive awards granted in 2018 and later are subject to enhanced forfeiture and repayment provisions if an employee violates non-competition or non-solicitation agreements, as follows:
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Competition with the Company
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Impact on Long-Term Incentive Awards
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l
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Violating the non-competition provisions of the award agreement during employment or within 18 months of termination.
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l
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Forfeit vested and unvested PSUs, options, and RSUs.
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l
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Violating any other non-competition or non-solicitation agreement an employee has with the company.
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l
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Repay any PSUs or RSUs vested or options exercised within the 12 months prior to the violation.
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Involuntary Termination due to Specified Divestiture or Reduction in Force
• Specified Divestiture:
A Specified Divestiture is a divestiture where the acquirer does not replace the awards that would be forfeited.
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•
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Reduction in Force:
A Reduction in Force is a termination of employment due to position elimination or plant closing.
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Long-term incentive awards granted in 2018 and later are pro-rated and vested in the event of a Specified Divestiture or Reduction in Force, as follows:
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•
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Pro-ration:
Awards would be prorated in proportion to the time worked during the vesting period.
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•
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Vesting:
PSU and RSU awards would become available on their normal vesting dates. Option vesting would be accelerated as of the date of termination and the options would remain exercisable for up to three months.
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•
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Coordination with Qualifying Separations:
If an employee’s termination is also a Qualifying Separation, any of the employee’s awards that would have been forfeited because they were granted within 6 months prior to termination would receive the pro-ration and vesting treatment described above
.
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2019 Proxy Statement -
60
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EXECUTIVE PERQUISITES & OTHER BENEFITS
Our named executive officers participate in the same employee benefits provided to all other non-union U.S. employees. In addition, they participate in the following benefits and perquisites:
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•
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Executive Life Insurance:
Effective January 2015, we closed this program to new participants. We grandfathered prior participants. Messrs. Gorsky, Ullmann, Caruso, and Dr. Stoffels participated in the program in 2018.
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•
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Personal Use of Company Aircraft and Cars:
Our named executive officers may use company aircraft for limited personal travel and company cars and drivers for commuting and other personal transportation. These perquisites are intended to enhance productivity, minimize distractions, and ensure the safety of our executives.
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The incremental cost to the company to provide these perquisites is included in the perquisites and other personal benefits table on page 75. These values are not paid to our named executive officers. For example, approximately 63% of our CEO’s 2018 personal use of corporate aircraft value was fuel costs and approximately 37% was landing fees, handling charges, crew expenses, and other incidentals. Approximately 76% of his 2018 personal use of the company car was overtime paid to the driver and approximately 24% was fuel costs and tolls.
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•
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Home Security:
We reimburse limited home security system related fees.
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We detail the executive life insurance premiums paid, values of personal use of company aircraft and cars, and home security related costs in the perquisites and other personal benefits table on page 74. Our named executive officers pay the income taxes due on the value of these benefits and perquisites.
COMPENSATION TARGET SETTING PROCESS AND PAY POSITION
Before each year begins, we set compensation targets to ensure that we can compete for talent and to maintain internal equity among positions with similar responsibilities. We conduct an annual review of publicly available information and executive compensation surveys to determine current pay levels among the Executive Peer Group. The Committee reviews market data to understand how our target pay levels compare to benchmark positions, but does not target total compensation to a specific percentile of the Executive Peer Group.
2018 PAY MIX AT TARGET
Our pay mix at target for our named executive officers is a result of our compensation targets that emphasize long-term versus short-term compensation.
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2019 Proxy Statement -
61
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Peer Groups for Pay and Performance
We use two peer groups for executive compensation:
|
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•
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Executive Peer Group:
We use the Executive Peer Group to assess the competitiveness of the compensation of our named executive officers.
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|
•
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Competitor Composite Peer Group:
We use the Competitor Composite Peer Group to evaluate the relative performance of our company.
|
As described below, the two peer groups vary because executive compensation levels and practices are influenced by business complexity and company size. Most of our business competitors are smaller than Johnson & Johnson or even each of our individual businesses.
EXECUTIVE PEER GROUP
The Committee compares our executive compensation levels and practices to those of the Executive Peer Group companies. It consists of companies that generally: are similar to Johnson & Johnson's size and scope; have executive positions similar to ours; and compete with us for executive talent. The Committee reviews the composition of the Executive Peer Group annually.
We compare our salaries, annual performance bonuses, long-term incentives, total direct compensation, benefits, perquisites and other compensation to the Executive Peer Group companies.
We do not include non-U.S. companies because comparable compensation data for the named executive officers is not available. We also do not include companies in industries whose compensation programs are not comparable to our programs, such as the financial services or oil and gas industries.
The following table lists the 2018 Executive Peer Group companies, their business characteristics, and Johnson & Johnson’s rankings among these companies. Each company’s figures are for the most recent four fiscal quarters. Market capitalization is as of December 31, 2018. Johnson & Johnson ranks in the top quartile of the peers for revenue and market capitalization.
Effective 2019, Eli Lilly and Company and Bristol-Myers Squibb Company will be removed and replaced with AT&T Inc. and AbbVie Inc.
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Company (Ticker Symbol)
|
Revenue
($ Millions)
|
Net Income
($ Millions)
|
Market Cap
($ Billions)
|
Common
Industry
(Y/N)
(1)
|
Gross
Margin
(>40%)
|
Inter-national Sales
(> 33%)
|
Business
Complexity
(2)
|
R&D % of Sales
(>or = 5%)
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3M Company (MMM)
|
$32,765
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$5,349
|
$111
|
ü
|
ü
|
ü
|
ü
|
ü
|
Abbott Laboratories (ABT)
|
30,578
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2,368
|
127
|
ü
|
ü
|
ü
|
ü
|
ü
|
The Boeing Company (BA)
|
101,127
|
10,460
|
183
|
|
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ü
|
ü
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|
Bristol-Myers Squibb Company (BMY)
|
22,561
|
4,952
|
85
|
ü
|
ü
|
ü
|
ü
|
ü
|
Cisco Systems, Inc. (CSCO)
(3)
|
50,825
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12,865
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195
|
|
ü
|
ü
|
ü
|
ü
|
The Coca-Cola Company (KO)
|
31,856
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6,434
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202
|
ü
|
ü
|
ü
|
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|
Eli Lilly and Company (LLY)
|
32,753
|
5,687
|
123
|
ü
|
ü
|
ü
|
ü
|
ü
|
General Electric Company (GE)
|
121,615
|
(22,443)
|
66
|
ü
|
|
ü
|
ü
|
|
Intel Corporation (INTC)
|
70,848
|
21,053
|
214
|
|
ü
|
ü
|
ü
|
ü
|
International Business Machines Corporation (IBM)
|
79,591
|
8,728
|
103
|
|
ü
|
ü
|
ü
|
ü
|
Medtronic PLC (MDT)
(3)
|
30,555
|
4,919
|
122
|
ü
|
ü
|
ü
|
ü
|
ü
|
Merck & Co., Inc. (MRK)
|
42,294
|
6,220
|
199
|
ü
|
ü
|
ü
|
ü
|
ü
|
Microsoft Corporation (MSFT)
(4)
|
118,459
|
33,541
|
785
|
ü
|
ü
|
ü
|
ü
|
ü
|
PepsiCo, Inc. (PEP)
|
64,661
|
12,515
|
156
|
ü
|
ü
|
ü
|
|
|
Pfizer Inc. (PFE)
|
53,647
|
11,153
|
252
|
ü
|
ü
|
ü
|
ü
|
ü
|
The Procter & Gamble Company (PG)
(4)
|
66,912
|
10,795
|
229
|
ü
|
ü
|
ü
|
ü
|
|
United Technologies Corporation (UTX)
|
66,501
|
5,269
|
92
|
|
|
ü
|
ü
|
|
Johnson & Johnson (JNJ)
|
81,581
|
15,297
|
346
|
ü
|
ü
|
ü
|
ü
|
ü
|
Johnson & Johnson's Ranking
|
4th
|
|
3rd
|
|
2nd
|
|
|
|
|
|
|
Johnson & Johnson's Percentile Rank
|
82
|
%
|
88
|
%
|
94
|
%
|
|
|
|
|
|
|
|
(1)
|
Common Industry means that the company is in an industry similar to one of Johnson & Johnson’s business segments: pharmaceutical, medical devices or consumer packaged goods.
|
|
|
(2)
|
Business Complexity means the company is a complex organization with multiple product lines.
|
|
|
(3)
|
Used last four calendar quarters ending January 25, 2019 for Medtronic, plc. and January 26, 2019 for Cisco Systems, Inc.
|
|
|
(4)
|
Used last four calendar quarters ending December 31, 2018 for The Procter & Gamble Company and Microsoft Corporation.
|
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|
2019 Proxy Statement -
62
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|
|
COMPETITOR COMPOSITE PEER GROUP
The Committee compares overall company performance to the weighted performance of the Competitor Composite Peer Group companies. For example, when we set the sales goals for our businesses, we compare the sales of our individual businesses to the total sales of their industry competitors. For the TSR component of our PSUs, we weight the TSR within the three business groups by market capitalization and weight the three business groups using our sales mix each year. We include each of the peer companies in only one of the business groups for the TSR comparison.
These companies compete with one, or more, of our three businesses. We evaluate the peer group on an ongoing basis and update it as necessary. We select the companies based on the following criteria and financial metrics:
|
|
•
|
Financial Comparison: Sales growth, net income growth and margin, EPS growth, and TSR
|
The following table lists the 2018 Competitor Composite Peer Group companies by business.
|
|
|
|
|
|
|
|
Pharmaceuticals
|
|
Medical Devices
|
|
Consumer
|
|
|
|
|
|
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|
•
Bristol-Myers Squibb Company
•
Roche Holding AG (Pharm Rx only)
|
|
•
Becton, Dickinson and Company
•
Boston Scientific Corporation
•
Edwards Lifesciences Corporation
•
The Cooper Companies, Inc.
•
Roche Holding AG (Diabetes)
•
Zimmer Biomet Holdings, Inc.
|
|
•
Bayer AG (Consumer Healthcare)
•
Colgate-Palmolive Company
•
GlaxoSmithKline plc (Consumer Healthcare)
•
Pfizer Inc. (Consumer Healthcare)
•
The Procter & Gamble Company
•
Reckitt Benckiser Group plc
•
Sanofi (Consumer Healthcare)
|
|
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|
2019 Proxy Statement -
63
|
Compensation Decision Process
IMPORTANCE OF CREDO VALUES IN ASSESSING PERFORMANCE
Since 1943, the Johnson & Johnson Credo has guided us in fulfilling our responsibilities to our customers, employees, communities, and shareholders. In assessing our named executive officers’ contributions to Johnson & Johnson’s performance, the Committee not only looks to results-oriented measures of performance, but also considers how those results were achieved. It considers whether the decisions and actions leading to the results were consistent with the values embodied in Our Credo and the long-term impact of their decisions.
Credo-based behavior is not something that can be precisely measured. Thus, there is no formula for how Credo-based behavior can, or will, impact an executive’s compensation. The Committee and the Chairman/CEO use their judgment and experience to evaluate whether an executive’s actions were aligned with our Credo values.
ASSESSING "THE WHAT" AND "THE HOW"
We evaluate the performance of our named executive officers based on what objectives they have accomplished and how they have accomplished them.
|
|
•
|
The “What”:
We evaluate each of them against financial and strategic goals for the company and for the business or function that they lead
.
|
|
|
•
|
The “How”:
We also consider how they accomplished their goals. This includes whether the executive achieves business results in a manner that is consistent with the values embodied in Our Credo
.
|
During the first quarter:
|
|
•
|
The Committee reviews the financial and strategic goals for the company and each of the businesses for the current year.
|
|
|
•
|
The Chairman/CEO provides his assessment to the Committee of “the what” and “the how” for each of the other named executive officers for the prior year
.
|
|
|
•
|
The independent members of the Board of Directors evaluate “the what” and “the how” for the Chairman/CEO for the prior year.
|
ALIGNING COMPENSATION TO "THE WHAT" AND "THE HOW"
An individual employee can earn from 0% to 200% of the applicable target for annual performance bonuses and long-term incentives based on his or her individual performance on both “the what” and “the how”. This broad range allows for meaningful differentiation based on performance.
The Committee determines annual performance bonuses, long-term incentive awards and salary rates on a component-by-component and total direct compensation basis. The Committee also compares the position of actual compensation for the prior year and target compensation for the current year to Executive Peer Group data.
The independent directors (in the case of the Chairman/CEO) and the Committee (in the case of the other named executive officers) use their judgment and experience to determine annual performance bonuses, long-term incentives, and salary rates. Performance against goals is the most significant input in determining compensation levels. However, it does not determine them in a formulaic manner. In addition, we do not consider an employee’s previous long-term incentive awards and total equity ownership when making annual long-term incentive awards.
|
|
|
|
2019 Proxy Statement -
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|
|
|
Governance of Executive Compensation
The Committee is responsible for the executive compensation program design and decision-making process. It solicits input from the independent members of the Board of Directors, the Chairman/CEO, other members of management, and its independent compensation consultant, to assist it with its responsibilities.
The Committee has retained Frederic W. Cook & Co., Inc. (FWC) as its independent compensation consultant to advise it on executive compensation matters. The Committee has sole authority to negotiate the terms of service, including all fees paid to FWC.
We summarize the roles of each of the key participants in the executive compensation decision-making process in the table below.
|
|
|
|
Participant
|
Role
|
Compensation & Benefits Committee
|
l
|
Acts on behalf of the Board by setting the principles that guide the design of our compensation and benefits programs
|
l
|
Sets the executive compensation philosophy and composition of the Executive Peer Group
|
l
|
Approves the compensation target levels
|
l
|
Sets compensation programs and principles that are designed to link executive pay with company and individual performance
|
l
|
Recommends to the Board the Chairman/CEO’s compensation
|
l
|
Reviews and approves compensation decisions recommended by the Chairman/CEO for each of the other named executive officers
|
l
|
Reviews the eligibility criteria and award guidelines for the corporate-wide compensation and benefits programs in which the named executive officers participate
|
Independent Members of the Board of Directors
|
l
|
Participate in the performance assessment process for the Chairman/CEO
|
l
|
Approve the Chairman/CEO’s compensation
|
Chairman/CEO
|
l
|
Reviews and presents to the Committee the performance assessments and compensation recommendations for each of the other named executive officers
|
Independent Compensation Consultant
|
l
|
Attends all Committee meetings at the request of the Committee
|
l
|
Advises the Committee on market trends, regulatory issues and developments and how they may impact our executive compensation programs
|
l
|
Reviews the compensation strategy and executive compensation programs for alignment with our strategic business objectives
|
l
|
Advises on the design of executive compensation programs to ensure the linkage between pay and performance
|
l
|
Provides market data analyses to the Committee
|
l
|
Advises the Committee on setting the Chairman/CEO’s pay
|
l
|
Reviews the annual compensation of the other named executive officers as recommended by the Chairman/CEO
|
|
|
|
|
|
|
2019 Proxy Statement -
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|
INDEPENDENCE OF COMPENSATION CONSULTANT
The Committee determined that FWC’s service as its independent compensation consultant did not raise any conflict of interest concerns. The Committee considered the following factors, among others, when assessing the independence of its compensation consultant:
|
|
•
|
FWC does not provide any other services to the company and reports directly to the Committee.
|
|
|
•
|
FWC has policies and procedures in place to prevent conflicts of interest.
|
|
|
•
|
No member of the FWC consulting team serving the Committee has a business or personal relationship with any member of the Committee or any executive officer of the company.
|
|
|
•
|
Neither FWC nor any principal of FWC owns any shares of our common stock.
|
|
|
•
|
The amount of fees paid to FWC is less than 1% of FWC's total consulting income.
|
To assure continuing independence, the Committee periodically considers whether there should be rotation of its independent compensation consulting firm or the lead consultant.
|
|
|
|
2019 Proxy Statement -
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|
|
|
Additional Information Concerning Executive Compensation
USE OF TALLY SHEETS
The Committee reviews tally sheets, prepared by management and reviewed by the Committee’s independent compensation consultant, for each of our named executive officers. These tally sheets include all the company’s obligations for compensation and benefits under hypothetical termination scenarios. The Committee does not use the tally sheets to determine the various elements of compensation or the actual amounts of compensation to be approved, but instead uses the tally sheets to evaluate the company’s obligations under the plans.
LIMITED EMPLOYMENT ARRANGEMENTS AND AGREEMENTS
Our Severance Pay Plan provides benefits to certain full-time U.S. employees who are involuntarily terminated. We provide two weeks base salary for each year of service, with guaranteed minimums based on an employee’s level. The minimum for our named executive officers is 52 weeks of base salary. We pay severance according to our normal payroll cycle. We do not pay severance as a lump-sum payment.
In 2018, we provided Dr. Stoffels an annual stipend of $320,000 to assist him in the payment of foreign taxes. While serving as a member of the Executive Committee, he is considered a U.S. employee even though he is a non-resident of the United States. As a result, he is subject to both U.S. taxation and foreign taxation. He did not receive any other tax equalization assistance.
The Committee reviewed the stipend annually and decided to terminate it beginning in 2019. In its place, we increased his target total direct compensation (salary, bonus, and long-term incentives) by approximately $320,000 by increasing his base salary rate by $44,200 effective January 1, 2019. Approximately 86% of the replacement is performance-based compensation: bonus and long-term incentives. We believe that this change fairly removes a fixed element of compensation and replaces it with compensation that is mostly performance-based.
We do not have employment arrangements or agreements with any of our other named executive officers.
STOCK OWNERSHIP GUIDELINES FOR NAMED EXECUTIVE OFFICERS
We require our named executive officers to own our company’s stock to further align their interests with our shareholders’ interests. They must meet the following requirements:
|
|
|
|
|
Name
|
Stock Ownership Guideline
as a Multiple of Base Salary
|
2018 Compliance with Stock
Ownership Guidelines?
|
Ownership Threshold Met?
(1)
|
A. Gorsky
|
6x
|
Yes
|
Yes
|
J. Wolk
|
3x
|
Yes
|
Yes
|
P. Stoffels
|
3x
|
Yes
|
Yes
|
J. Duato
|
3x
|
Yes
|
Yes
|
M. Ullmann
|
3x
|
Yes
|
Yes
|
D. Caruso
|
3x
|
Yes
|
Yes
|
S. Peterson
|
3x
|
Yes
|
Yes
|
(1)
Executive Officers have five years after first becoming subject to the guidelines to achieve the required ownership thresholds.
|
We do not count shares underlying stock options or unearned PSUs as owned shares for these guidelines. A named executive officer cannot sell the after-tax shares received from long-term incentives until his or her ownership threshold is met. The Nominating & Corporate Governance Committee of the Board monitors compliance with these guidelines on an annual basis.
Our hedging policy prohibits named executive officers from transacting in derivative instruments linked to the performance of the company’s securities. Our anti-pledging policy prohibits the pledging of Johnson & Johnson shares by directors and executive officers. Prior to adopting the new anti-pledging policy, Dr. Stoffels had pledged 30,000 shares as security. The Compensation & Benefits Committee grandfathered this pledge.
|
|
|
|
|
|
2019 Proxy Statement -
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|
EXECUTIVE COMPENSATION RECOUPMENT POLICY
The Board can recoup all or part of any compensation paid to an executive officer in the event of a material restatement of the company’s financial results. The Board will consider:
|
|
•
|
whether any executive officer received compensation based on the original financial statements because it appeared he or she achieved financial performance targets that in fact were not achieved based on the restatement; and
|
|
|
•
|
the accountability of any executive officer whose acts or omissions were responsible
,
in whole or in part
,
for the events that led to the restatement and whether such actions or omissions constituted misconduct.
|
The Board can also recoup compensation from senior executives in the event of significant misconduct resulting in a violation of a significant company policy, law, or regulation relating to manufacturing, sales or marketing of products that causes material harm to Johnson & Johnson.
The compensation recoupment policies are available at:
http://www.investor.jnj.com/gov/compensation-recoupment-policy.cfm.
TAX IMPACT ON COMPENSATION
We consider objectives such as attracting, retaining and motivating leaders when we design our executive compensation programs. We also consider the tax-deductibility of compensation, but it is not our sole consideration. Given the limitations on deductibility of compensation for our named executive officers imposed as a result of U.S. tax reform, we expect that tax deductibility will have less of an impact on our program design for our named executive officers in the future.
For federal income taxes, compensation is an expense that is fully tax-deductible for almost all our U.S. employees. Following tax reform, annual compensation in excess of $1 million paid to our named executive officers who are covered employees under Section 162(m) of the Internal Revenue Code will generally not be tax deductible, even if such compensation is performance-based or paid following termination of employment.
The tax reform legislation includes a “grandfather rule” under which compensation payable pursuant to a written binding contract that was in effect on November 2, 2017 will remain tax deductible for U.S. federal income tax purposes. We generally expect to preserve the “grandfathered” status of any of our plans or awards (or portions thereof) that qualify for such status.
COMPENSATION DECISIONS FOR 2017 PERFORMANCE
The following compensation figures included in this year’s Summary Compensation Table were granted to the named executive officers in February 2018 for performance in 2017:
|
|
•
|
2018 PSU and RSU awards included in the “Stock Awards” column
|
|
|
•
|
The 2018 option award included in the “Option Awards” column
|
The decisions regarding these awards were discussed in detail in our 2018 Proxy Statement dated March 14, 2018. For a full understanding of these decisions, please refer to the section of our 2018 Proxy Statement entitled “Compensation Discussion and Analysis — 2017 Performance and Compensation."
|
|
|
|
2019 Proxy Statement -
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|
|
|
Executive Compensation Tables
2018 Summary Compensation Table
In the table below, we show the compensation of our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers for 2018. We also show the compensation of two of our former executive officers who served for part of 2018. We show the compensation of the current and former executive officers listed in the table below for 2017 and 2016 if they were also named in the 2018 and 2017 Proxy Statements. For a complete understanding of the table, please read the descriptions of each column that follow the table.
Note on Compensation Decisions for 2018 Performance
In January and February of each year, we assess the performance of our named executive officers and we determine the annual performance bonus earned for the prior year's performance, long-term incentive award granted in the first quarter of the year based on the prior year's performance, and salary rate for the upcoming year.
Most of the amounts required by the SEC's rules to be reported in the Summary Compensation Table are the result of compensation decisions from prior years, earnings from prior long-term incentive awards, or participation in long-standing pension programs. Our compensation decision process and a reconciliation of our CEO's 2018 total direct compensation to the Summary Compensation Table is included on page 49.
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
Name and Principal Position
|
Year
|
Salary
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity Incentive Plan Compensation
($)
|
Change in Pension Value and Non-Qualified Deferred Compensation Earnings
($)
|
All Other Compensation
($)
|
Total
($)
|
Alex Gorsky
|
2018
|
$1,642,308
|
$10,319,463
|
$4,305,594
|
$3,570,497
|
$0
|
$259,710
|
$20,097,572
|
Chairman/CEO
|
2017
|
1,600,000
|
12,354,361
|
5,054,398
|
3,598,382
|
6,959,144
|
236,279
|
29,802,564
|
|
2016
|
1,600,000
|
10,608,901
|
4,118,398
|
4,652,556
|
5,663,771
|
228,094
|
26,871,720
|
Joseph Wolk
|
2018
|
597,542
|
670,085
|
216,898
|
749,729
|
441,000
|
32,935
|
2,708,189
|
EVP, CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paulus Stoffels
|
2018
|
1,178,300
|
4,666,961
|
2,010,004
|
2,191,603
|
154,000
|
390,897
|
10,591,765
|
VC of the Executive
|
2017
|
1,173,023
|
4,630,306
|
1,859,996
|
2,139,188
|
3,335,134
|
443,139
|
13,580,786
|
Committee, CSO
|
2016
|
1,144,000
|
4,383,454
|
1,750,317
|
2,425,461
|
2,642,012
|
380,232
|
12,725,476
|
Joaquin Duato
|
2018
|
934,046
|
4,275,951
|
1,892,999
|
2,010,088
|
79,000
|
91,876
|
9,283,960
|
Vice Chairman of the
|
2017
|
897,254
|
11,483,016
|
1,650,003
|
1,928,262
|
3,329,047
|
71,726
|
19,359,308
|
Executive Committee
|
2016
|
875,000
|
3,198,483
|
1,260,002
|
2,158,006
|
2,535,760
|
77,278
|
10,104,529
|
Michael Ullmann
|
2018
|
788,077
|
1,968,687
|
827,993
|
1,276,665
|
430,000
|
44,730
|
5,336,152
|
EVP, General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominic Caruso
|
2018
|
630,538
|
3,677,454
|
1,545,001
|
727,531
|
0
|
131,322
|
6,711,846
|
Former EVP, CFO
|
2017
|
932,600
|
4,263,779
|
1,756,706
|
2,156,680
|
2,467,265
|
159,172
|
11,736,202
|
|
2016
|
909,500
|
3,624,523
|
1,425,643
|
2,758,967
|
2,475,956
|
110,240
|
11,304,829
|
Sandra Peterson
|
2018
|
808,500
|
4,002,361
|
1,689,007
|
1,005,500
|
273,000
|
2,901,505
|
10,679,873
|
Former EVP, Group
|
2017
|
1,057,500
|
12,027,780
|
1,859,996
|
1,270,000
|
832,000
|
128,780
|
17,176,056
|
Worldwide Chairman
|
2016
|
963,462
|
3,897,074
|
1,539,002
|
1,600,000
|
592,000
|
141,246
|
8,732,784
|
Note: VC means Vice Chairman
Salary (Column C)
Column C includes the base salaries paid for the year.
|
|
|
|
|
|
2019 Proxy Statement -
69
|
Stock Awards (Column D)
Column D includes the grant date fair value of Performance Share Unit (PSU) and Restricted Share Unit (RSU) awards. See “2018 Grants of Plan-Based Awards” on page 76 for details on 2018 awards.
Ms. Peterson retired on October 1, 2018 and forfeited all unvested stock awards except for the awards granted in 2018 which were prorated. If the forfeited stock awards were excluded, the 2018 stock awards amount would be $680,991. See "Detail on Sandra Peterson's Long-Term Incentives" on page 78.
PSUs are considered granted when the performance goals are approved (according to US accounting rules). Since we use three, 1-year sales goals, 7/9
ths
of the 2018 award and 1/9
th
of the prior two years' awards are considered granted in 2018 as shown in the following table.
|
|
|
|
|
|
PSU Award
|
Fraction of Award Considered Granted in 2018
|
2018 Operational Sales
|
2018-2020 Cumulative Adjusted Operational EPS
|
2018-2020 Relative TSR
|
Total
|
2018-2020
|
1/9
th
|
3/9
th
|
3/9
th
|
7/9
th
|
2017-2019
|
1/9
th
|
N.A.
|
N.A.
|
1/9
th
|
2016-2018
|
1/9
th
|
N.A.
|
N.A.
|
1/9
th
|
The following table details the number and value of the PSUs assuming achievement at (i) threshold, (ii) target and (iii) maximum performance (at 200%).
|
|
|
|
|
|
|
|
|
|
|
Performance Share Units
|
|
|
Units
|
Grant Date Fair Value
|
Name
|
Award
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
A. Gorsky
|
2018-2020 PSU
|
0
|
56,079
|
112,158
|
$0
|
$6,765,090
|
$13,530,180
|
|
2017-2019 PSU
|
0
|
8,828
|
17,656
|
0
|
1,083,134
|
2,166,268
|
|
2016-2018 PSU
|
0
|
8,216
|
16,432
|
0
|
1,036,013
|
2,072,026
|
J. Wolk
|
2018-2020 PSU
|
0
|
2,260
|
4,520
|
0
|
272,635
|
545,270
|
|
2017-2019 PSU
|
0
|
432
|
864
|
0
|
53,003
|
106,007
|
|
2016-2018 PSU
|
0
|
323
|
646
|
0
|
40,729
|
81,459
|
P. Stoffels
|
2018-2020 PSU
|
0
|
26,179
|
52,358
|
0
|
3,158,104
|
6,316,207
|
|
2017-2019 PSU
|
0
|
3,248
|
6,496
|
0
|
398,507
|
797,014
|
|
2016-2018 PSU
|
0
|
3,492
|
6,984
|
0
|
440,331
|
880,661
|
J. Duato
|
2018-2020 PSU
|
0
|
24,656
|
49,312
|
0
|
2,974,377
|
5,948,753
|
|
2017-2019 PSU
|
0
|
2,882
|
5,764
|
0
|
353,601
|
707,202
|
|
2016-2018 PSU
|
0
|
2,514
|
5,028
|
0
|
317,008
|
634,016
|
M. Ullmann
|
2018-2020 PSU
|
0
|
10,784
|
21,568
|
0
|
1,300,928
|
2,601,856
|
|
2017-2019 PSU
|
0
|
1,677
|
3,354
|
0
|
205,756
|
411,512
|
|
2016-2018 PSU
|
0
|
1,475
|
2,950
|
0
|
185,993
|
371,986
|
D. Caruso
|
2018-2020 PSU
|
0
|
20,122
|
40,244
|
0
|
2,427,417
|
4,854,835
|
|
2017-2019 PSU
|
0
|
3,068
|
6,136
|
0
|
376,422
|
752,844
|
|
2016-2018 PSU
|
0
|
2,844
|
5,688
|
0
|
358,620
|
717,240
|
S. Peterson
|
2018-2020 PSU
|
0
|
21,998
|
43,996
|
0
|
2,653,729
|
5,307,457
|
|
2017-2019 PSU
|
0
|
3,248
|
6,496
|
0
|
398,507
|
797,014
|
|
2016-2018 PSU
|
0
|
3,070
|
6,140
|
0
|
387,118
|
774,236
|
Option Awards (Column E)
Column E includes the grant date fair value of stock option awards. See “2018 Grants of Plan-Based Awards” on page 76 for details on 2018.
|
|
|
|
2019 Proxy Statement -
70
|
|
|
Ms. Peterson retired on October 1, 2018 and forfeited all unvested option awards except for the awards granted in 2018 which were prorated. If the forfeited option awards were excluded, the 2018 option awards amount would be $357,866. See "Detail on Sandra Peterson's Long-Term Incentives" on page 78.
Non-Equity Incentive Plan Compensation (Column F)
Column F includes the annual performance bonus, Certificates of Long-Term Performance (CLPs) that vested, and dividend equivalents received on vested Certificates of Long-Term Compensation (CLCs) and CLPs.
|
|
•
|
Annual Performance Bonuses:
The Board and Committee approved the annual performance bonuses after reviewing performance for the year. We determine the size of the bonuses and pay them out in the first quarter of the year after the performance year
.
|
|
|
•
|
CLCs and CLPs:
We stopped granting CLCs and CLPs in 2012. These cash-based long-term incentives have all vested and will be paid out in accordance with their original terms. The values of CLCs and CLPs are included in several tables in this Proxy Statement. The:
|
|
|
◦
|
Non-Equity Incentive Plan Compensation
column of the Summary Compensation Table includes the value when they vested and the dividend equivalents paid on vested CLCs and CLPs.
|
|
|
◦
|
Change in Pension Value and Non-Qualified Deferred Compensation Earnings
column of the Summary Compensation Table includes the annual change in value of vested CLCs and CLPs, but only to extent that the unit values grow at a rate that exceeds a reference rate of return.
|
|
|
◦
|
Non-Qualified Deferred Compensation table
on page 87 includes the value of vested CLCs and CLPs that have not been paid out.
|
The following table details the amounts included in column F.
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan Compensation
|
Name
|
Year
|
Annual Performance Bonus
($)
|
Value of CLP Units that Vested in Fiscal Year
($)
|
Value of CLC Dividend Equivalents Earned During the Fiscal Year
($)
|
Value of CLP Dividend Equivalents Earned During the Fiscal Year
($)
|
Total
($)
|
A. Gorsky
|
2018
|
$3,030,000
|
$0
|
$424,800
|
$115,697
|
$3,570,497
|
|
2017
|
3,080,000
|
0
|
398,400
|
119,982
|
3,598,382
|
|
2016
|
3,780,000
|
378,529
|
378,000
|
116,027
|
4,652,556
|
J. Wolk
|
2018
|
728,000
|
0
|
14,160
|
7,569
|
749,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P. Stoffels
|
2018
|
1,550,000
|
0
|
566,400
|
75,203
|
2,191,603
|
|
2017
|
1,530,000
|
0
|
531,200
|
77,988
|
2,139,188
|
|
2016
|
1,600,000
|
246,044
|
504,000
|
75,417
|
2,425,461
|
J. Duato
|
2018
|
1,400,000
|
0
|
548,700
|
61,388
|
2,010,088
|
|
2017
|
1,350,000
|
0
|
514,600
|
63,662
|
1,928,262
|
|
2016
|
1,400,000
|
208,193
|
488,250
|
61,563
|
2,158,006
|
M. Ullmann
|
2018
|
835,000
|
0
|
417,720
|
23,945
|
1,276,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Caruso
|
2018
|
0
|
0
|
633,600
|
93,931
|
727,531
|
|
2017
|
1,230,000
|
0
|
796,800
|
129,880
|
2,156,680
|
|
2016
|
1,534,800
|
342,568
|
756,000
|
125,599
|
2,758,967
|
S. Peterson
|
2018
|
1,005,500
|
0
|
0
|
0
|
1,005,500
|
|
2017
|
1,270,000
|
0
|
0
|
0
|
1,270,000
|
|
2016
|
1,600,000
|
0
|
0
|
0
|
1,600,000
|
|
|
|
|
|
|
2019 Proxy Statement -
71
|
Change in Pension Value and Non-Qualified Deferred Compensation Earnings (Column G)
Column G includes the increase in the present value of the accrued pension benefit and the above-reference-rate non-qualified deferred compensation earnings.
The table below shows the change in pension values and above-reference-rate amounts for vested CLCs and CLPs.
|
|
|
|
|
|
|
Change in Pension Value and Non-Qualified Deferred Compensation Earnings
|
Name
|
Fiscal Year
|
Change in Pension Value
($)
|
Above Reference-Rate Calculation for Vested CLCs
($)
|
Above Reference-Rate Calculation for Vested CLPs
($)
|
Total
($)
|
A. Gorsky
|
2018
|
$0
|
$0
|
$0
|
$0
|
|
2017
|
6,807,000
|
91,082
|
61,062
|
6,959,144
|
|
2016
|
5,012,000
|
354,676
|
297,095
|
5,663,771
|
J. Wolk
|
2018
|
441,000
|
0
|
0
|
441,000
|
|
|
|
|
|
|
|
|
|
|
|
|
P. Stoffels
|
2018
|
154,000
|
0
|
0
|
154,000
|
|
2017
|
3,174,000
|
121,443
|
39,691
|
3,335,134
|
|
2016
|
1,976,000
|
472,901
|
193,111
|
2,642,012
|
J. Duato
|
2018
|
79,000
|
0
|
0
|
79,000
|
|
2017
|
3,179,000
|
117,648
|
32,399
|
3,329,047
|
|
2016
|
1,920,000
|
458,123
|
157,637
|
2,535,760
|
M. Ullmann
|
2018
|
430,000
|
0
|
0
|
430,000
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Caruso
|
2018
|
0
|
0
|
0
|
0
|
|
2017
|
2,219,000
|
182,165
|
66,100
|
2,467,265
|
|
2016
|
1,445,000
|
709,352
|
321,604
|
2,475,956
|
S. Peterson
|
2018
|
273,000
|
0
|
0
|
273,000
|
|
2017
|
832,000
|
0
|
0
|
832,000
|
|
2016
|
592,000
|
0
|
0
|
592,000
|
Change in Pension Value
The change in pension present value is not a current cash payment. The pensions are only paid after retirement. See “2018 Pension Benefits” on page 85 for details on the pension. See Note 10 to the Consolidated Financial Statements of the 2018 Form 10-K for details on the discount rate.
|
|
•
|
Impact of Service, Pay, and Age:
The following factors increased the present values:
|
|
|
◦
|
Service:
An additional year of completed service was included in the calculation of benefits.
|
|
|
◦
|
Five-Year Average Pay:
The five-year average pay increased since the previous fiscal year-end.
|
|
|
◦
|
Age:
Each executive is one year closer to the age when we the assume the pension payments will begin.
|
|
|
•
|
Impact of Changes in Assumptions:
The change in present value is highly sensitive to changes in mortality and interest rate assumptions which can increase or decrease the values. The following table details the changes in actuarial assumptions and their net effect on the change in pension value.
|
|
|
|
|
2019 Proxy Statement -
72
|
|
|
|
|
|
|
|
Effect of Change in Actuarial Assumptions on Pension Present Value
|
Year
|
Mortality Table
|
Discount Rate
|
Net Effect of
Changes on Pension
Present Value
|
2018
|
RP-2014 Table, Generational Mortality Projection with Scale MMP-2018
|
4.47%
|
Decrease
|
2017
|
RP-2014 White Collar Table, Generational Mortality Projection with Scale MMP-2016
|
3.74%
|
Increase
|
2016
|
RP-2014 Table, Generational Mortality Projection
|
4.41%
|
Increase
|
2015
|
RP-2014 Table, Generational Mortality Projection
|
4.73%
|
N.A.
|
In the table below, we show the 2016 - 2018 changes in pension value and the impacts of: (i) service, pay and age; and (ii) changes in assumptions. Negative figures are not included in the Summary Compensation Table (according to the SEC's rules).
|
|
|
|
|
|
|
Change in Pension Value
|
Name
|
Year
|
Impact of Service, Pay, and Age
($)
|
Impact of Changes in Assumptions
($)
|
Total Change in Pension Value
($)
|
Amount Reported in Summary Compensation Table
($)
|
A. Gorsky
|
2018
|
$2,619,000
|
$(2,812,000)
|
$(193,000)
|
$0
|
|
2017
|
3,936,000
|
2,871,000
|
6,807,000
|
6,807,000
|
|
2016
|
4,216,000
|
796,000
|
5,012,000
|
5,012,000
|
J. Wolk
|
2018
|
796,000
|
(355,000)
|
441,000
|
441,000
|
|
|
|
|
|
|
|
|
|
|
|
|
P. Stoffels
|
2018
|
1,662,000
|
(1,508,000)
|
154,000
|
154,000
|
|
2017
|
1,648,000
|
1,526,000
|
3,174,000
|
3,174,000
|
|
2016
|
1,576,000
|
400,000
|
1,976,000
|
1,976,000
|
J. Duato
|
2018
|
1,552,000
|
(1,473,000)
|
79,000
|
79,000
|
|
2017
|
1,660,000
|
1,519,000
|
3,179,000
|
3,179,000
|
|
2016
|
1,521,000
|
399,000
|
1,920,000
|
1,920,000
|
M. Ullmann
|
2018
|
1,341,000
|
(911,000)
|
430,000
|
430,000
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Caruso
|
2018
|
2,777,000
|
(2,935,000)
|
(158,000)
|
0
|
|
2017
|
1,390,000
|
829,000
|
2,219,000
|
2,219,000
|
|
2016
|
1,190,000
|
255,000
|
1,445,000
|
1,445,000
|
S. Peterson
|
2018
|
707,000
|
(434,000)
|
273,000
|
273,000
|
|
2017
|
577,000
|
255,000
|
832,000
|
832,000
|
|
2016
|
530,000
|
62,000
|
592,000
|
592,000
|
Above-Reference-Rate Non-Qualified Deferred Compensation Earnings
The above-reference-rate returns on vested CLCs and CLPs are not paid in the current year. They are deferred.
|
|
•
|
The change in the values of the CLCs and CLPs depend on our long-term operational performance.
|
|
|
•
|
We use 120% of the December applicable federal long-term interest rate (AFR) as the reference rate.
|
|
|
•
|
Negative figures are not included in the Summary Compensation Table (according to the SEC’s rules).
|
The following table details the calculation of the above-reference-rate returns on CLCs and CLPs. See page 87 for "Details on CLC and CLP Unit Values".
|
|
|
|
|
|
2019 Proxy Statement -
73
|
|
|
|
|
|
|
Above-Reference-Rate Return
|
CLC
|
CLP
|
Beginning of Year Unit Value
|
$48.78
|
$5.49
|
End of Year Unit Value
|
$49.09
|
$5.57
|
Change in Unit Value ($)
|
$0.31
|
$0.08
|
Change in Unit Value (%)
|
0.64
|
%
|
1.46
|
%
|
Reference-Rate
|
3.98
|
%
|
3.98
|
%
|
Above-Reference-Rate Return
|
(3.34
|
)%
|
(2.52
|
)%
|
Above reference-rate return included in the Summary Compensation Table
|
0.00
|
%
|
0.00
|
%
|
All Other Compensation (Column H)
Column H includes the value of perquisites and other personal benefits, tax reimbursements, company contributions to our 401(k) and Excess Savings Plans, insurance premiums, stipends, and severance:
|
|
|
|
|
|
|
|
|
|
Name
|
Fiscal Year
|
Perquisite and Other Personal Benefits
($)
|
Tax Reimbursements
($)
|
Registrant Contributions to Defined Contribution Plans
($)
|
Insurance Premiums
($)
|
Other
(Stipend & Severance)
($)
|
Total
($)
|
A. Gorsky
|
2018
|
|
$177,353
|
$0
|
$73,904
|
$8,453
|
$0
|
$259,710
|
|
2017
|
|
156,187
|
0
|
72,000
|
8,092
|
0
|
236,279
|
|
2016
|
|
147,865
|
0
|
72,000
|
8,229
|
0
|
228,094
|
J. Wolk
|
2018
|
|
297
|
0
|
26,889
|
5,749
|
0
|
32,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P. Stoffels
|
2018
|
|
8,767
|
0
|
53,024
|
9,106
|
320,000
|
390,897
|
|
2017
|
|
61,542
|
0
|
52,786
|
8,811
|
320,000
|
443,139
|
|
2016
|
|
0
|
0
|
51,480
|
8,752
|
320,000
|
380,232
|
J. Duato
|
2018
|
|
49,844
|
0
|
42,032
|
0
|
0
|
91,876
|
|
2017
|
|
31,350
|
0
|
40,376
|
0
|
0
|
71,726
|
|
2016
|
|
37,903
|
0
|
39,375
|
0
|
0
|
77,278
|
M. Ullmann
|
2018
|
|
1,832
|
0
|
35,463
|
7,435
|
0
|
44,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Caruso
|
2018
|
|
95,001
|
0
|
28,374
|
7,947
|
0
|
131,322
|
|
2017
|
|
108,753
|
0
|
41,967
|
8,452
|
0
|
159,172
|
|
2016
|
|
60,824
|
0
|
40,927
|
8,489
|
0
|
110,240
|
S. Peterson
|
2018
|
|
85,906
|
0
|
36,383
|
0
|
2,779,216
|
2,901,505
|
|
2017
|
|
81,193
|
0
|
47,587
|
0
|
0
|
128,780
|
|
2016
|
|
97,890
|
0
|
43,356
|
0
|
0
|
141,246
|
|
|
|
|
2019 Proxy Statement -
74
|
|
|
|
|
|
|
|
|
|
|
|
Details on All Other Compensation
•
2018 Perquisites and Other Personal Benefits Detail
|
|
Name
|
Personal Use of Corporate Aircraft
($)
|
Value of Car and Driver for Personal Transportation
($)
|
Home Security Related Fees
($)
|
Total
($)
|
|
|
A. Gorsky
|
$118,440
|
$56,613
|
$2,300
|
$177,353
|
|
|
J. Wolk
|
0
|
297
|
0
|
297
|
|
|
P. Stoffels
|
0
|
8,767
|
0
|
8,767
|
|
|
J. Duato
|
48,717
|
1,127
|
0
|
49,844
|
|
|
M. Ullmann
|
0
|
416
|
1,416
|
1,832
|
|
|
D. Caruso
|
63,702
|
31,299
|
0
|
95,001
|
|
|
S. Peterson
|
73,003
|
12,903
|
0
|
85,906
|
|
|
◦
We value perquisites and other personal benefits based on the incremental cost to the company.
◦
We calculate the incremental cost for personal use of company aircraft as the sum of the cost of trip-related crew hotels and meals, in-flight food and beverages, landing and ground handling fees, hangar or aircraft parking costs, fuel costs based on the average annual cost of fuel per mile flown, and other smaller variable costs. Fixed costs such as aircraft purchase costs, maintenance not related to personal trips, and flight crew salaries are not included.
◦
We calculate the incremental cost for company cars and drivers for commutation and other personal transportation as the sum of the cost of fuel, driver overtime fees, and other smaller variable costs. Fixed costs such as car purchase costs, maintenance not related to personal trips, and driver salaries are not included.
◦
Named executive officers are taxed on the imputed income attributable to their personal use of company aircraft and cars and do not receive tax assistance from us with respect to these amounts. As described on page 61, these values are not paid to our named executive officers and consist primarily of driver overtime, fuel costs, landing fees, handling charges, crew expenses, and other incidentals.
•
Tax Reimbursements:
In 2013, the Committee discontinued all non-relocation related tax reimbursement for executive officers.
•
Stipend:
In 2018, we provided Dr. Stoffels an annual stipend of $320,000 to assist him in the payment of foreign taxes. While serving as a member of the Executive Committee, he is considered a U.S. employee even though he is a non-resident of the United States. As a result, he is subject to both U.S. taxation and foreign taxation. He did not receive any other tax equalization assistance.
The Committee reviewed the stipend annually and decided to terminate it beginning in 2019. See "Limited Employment Arrangements and Agreements" on page 67 for more detail.
•
Severance:
In 2018, we paid Ms. Peterson $2,779,216 in severance. This included severance payments of $2,725,539 and a payment for unused vacation of $53,677. See "2018 Potential Payments Upon Termination" on page 89 for detail on Ms. Peterson's severance.
|
|
|
|
|
|
|
2019 Proxy Statement -
75
|
2018 Grants of Plan-Based Awards
In the table below, we show the potential ranges of the 2018 annual performance bonus and the PSUs considered granted in 2018. We also show the RSUs and options granted in 2018. We include the grant date fair values of the stock awards and option awards in columns D and E of the Summary Compensation Table on page 69
.
For a complete understanding of the table, please read the descriptions of each column that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
J
|
K
|
L
|
M
|
N
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
(Annual Performance Bonus)
|
Estimated Future Payouts Under Equity Incentive Plan Awards
(Performance Share Units)
|
All other Stock Awards: Number of Shares of Stock or Units
(#)
|
All Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise or Base Price of Option Awards
($/sh)
|
Closing Market Price on the Grant Date
($)
|
Grant Date Fair Value of Stock and Option Awards
($)
|
Name
|
Award
|
Grant Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
A. Gorsky
|
Bonus
|
|
$0
|
$2,887,500
|
$5,775,000
|
|
|
|
|
|
|
|
|
|
2018-2020 PSU
|
2/12/2018
|
|
|
|
0
|
|
56,079
|
|
112,158
|
|
|
|
|
|
$6,765,090
|
|
2017-2019 PSU
|
2/12/2018
|
|
|
|
0
|
|
8,828
|
|
17,656
|
|
|
|
|
|
1,083,134
|
|
2016-2018 PSU
|
2/12/2018
|
|
|
|
0
|
|
8,216
|
|
16,432
|
|
|
|
|
|
1,036,013
|
|
RSU
|
2/12/2018
|
|
|
|
|
|
|
12,017
|
|
|
|
|
1,435,226
|
|
Stock Awards Total
|
|
|
|
|
|
|
|
|
|
|
|
10,319,463
|
|
Option
|
2/12/2018
|
|
|
|
|
|
|
|
239,519
|
|
$129.51
|
$130.27
|
4,305,594
|
J. Wolk
|
Bonus
|
|
0
|
|
693,800
|
|
1,387,600
|
|
|
|
|
|
|
|
|
|
|
2018-2020 PSU
|
2/12/2018
|
|
|
|
0
|
|
2,260
|
|
4,520
|
|
|
|
|
|
272,635
|
|
2017-2019 PSU
|
2/12/2018
|
|
|
|
0
|
|
432
|
|
864
|
|
|
|
|
|
53,003
|
|
2016-2018 PSU
|
2/12/2018
|
|
|
|
0
|
|
323
|
|
646
|
|
|
|
|
|
40,729
|
|
RSU
|
2/12/2018
|
|
|
|
|
|
|
2,543
|
|
|
|
|
303,718
|
|
Stock Awards Total
|
|
|
|
|
|
|
|
|
|
|
|
670,085
|
|
Option
|
2/12/2018
|
|
|
|
|
|
|
|
12,066
|
|
129.51
|
|
130.27
|
|
216,898
|
P. Stoffels
|
Bonus
|
|
0
|
|
1,325,600
|
|
2,651,200
|
|
|
|
|
|
|
|
|
|
|
2018-2020 PSU
|
2/12/2018
|
|
|
|
0
|
|
26,179
|
|
52,358
|
|
|
|
|
|
3,158,104
|
|
2017-2019 PSU
|
2/12/2018
|
|
|
|
0
|
|
3,248
|
|
6,496
|
|
|
|
|
|
398,507
|
|
2016-2018 PSU
|
2/12/2018
|
|
|
|
0
|
|
3,492
|
|
6,984
|
|
|
|
|
|
440,331
|
|
RSU
|
2/12/2018
|
|
|
|
|
|
|
5,610
|
|
|
|
|
670,019
|
|
Stock Awards Total
|
|
|
|
|
|
|
|
|
|
|
|
4,666,961
|
|
Option
|
2/12/2018
|
|
|
|
|
|
|
|
111,816
|
|
129.51
|
|
130.27
|
|
2,010,004
|
J. Duato
|
Bonus
|
|
0
|
|
1,057,500
|
|
2,115,000
|
|
|
|
|
|
|
|
|
|
|
2018-2020 PSU
|
2/12/2018
|
|
|
|
0
|
|
24,656
|
|
49,312
|
|
|
|
|
|
2,974,377
|
|
2017-2019 PSU
|
2/12/2018
|
|
|
|
0
|
|
2,882
|
|
5,764
|
|
|
|
|
|
353,601
|
|
2016-2018 PSU
|
2/12/2018
|
|
|
|
0
|
|
2,514
|
|
5,028
|
|
|
|
|
|
317,008
|
|
RSU
|
2/12/2018
|
|
|
|
|
|
|
5,283
|
|
|
|
|
630,965
|
|
Stock Awards Total
|
|
|
|
|
|
|
|
|
|
|
|
4,275,951
|
|
Option
|
2/12/2018
|
|
|
|
|
|
|
|
105,307
|
|
129.51
|
|
130.27
|
|
1,892,999
|
M. Ullmann
|
Bonus
|
|
0
|
|
795,000
|
|
1,590,000
|
|
|
|
|
|
|
|
|
|
|
2018-2020 PSU
|
2/12/2018
|
|
|
|
0
|
|
10,784
|
|
21,568
|
|
|
|
|
|
1,300,928
|
|
2017-2019 PSU
|
2/12/2018
|
|
|
|
0
|
|
1,677
|
|
3,354
|
|
|
|
|
|
205,756
|
|
2016-2018 PSU
|
2/12/2018
|
|
|
|
0
|
|
1,475
|
|
2,950
|
|
|
|
|
|
185,993
|
|
RSU
|
2/12/2018
|
|
|
|
|
|
|
2,311
|
|
|
|
|
276,010
|
|
Stock Awards Total
|
|
|
|
|
|
|
|
|
|
|
|
1,968,687
|
|
Option
|
2/12/2018
|
|
|
|
|
|
|
|
46,061
|
|
129.51
|
|
130.27
|
|
827,993
|
|
|
|
|
2019 Proxy Statement -
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
J
|
K
|
L
|
M
|
N
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
(Annual Performance Bonus)
|
Estimated Future Payouts Under Equity Incentive Plan Awards
(Performance Share Units)
|
All other Stock Awards: Number of Shares of Stock or Units
(#)
|
All Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise or Base Price of Option Awards
($/sh)
|
Closing Market Price on the Grant Date
($)
|
Grant Date Fair Value of Stock and Option Awards
($)
|
Name
|
Award
|
Grant Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
D. Caruso
|
Bonus
|
|
$0
|
$1,171,000
|
$2,342,000
|
|
|
|
|
|
|
|
|
|
2018-2020 PSU
|
2/12/2018
|
|
|
|
0
|
20,122
|
|
40,244
|
|
|
|
|
|
$2,427,417
|
|
2017-2019 PSU
|
2/12/2018
|
|
|
|
0
|
3,068
|
|
6,136
|
|
|
|
|
|
376,422
|
|
2016-2018 PSU
|
2/12/2018
|
|
|
|
0
|
2,844
|
|
5,688
|
|
|
|
|
|
358,620
|
|
RSU
|
2/12/2018
|
|
|
|
|
|
|
4,312
|
|
|
|
|
514,995
|
|
Stock Awards Total
|
|
|
|
|
|
|
|
|
|
|
|
3,677,454
|
|
Option
|
2/12/2018
|
|
|
|
|
|
|
|
85,948
|
|
129.51
|
|
130.27
|
|
1,545,001
|
S. Peterson
|
Bonus
|
|
$0
|
$1,340,625
|
$2,681,250
|
|
|
|
|
|
|
|
|
|
2018-2020 PSU
|
2/12/2018
|
|
|
|
0
|
|
21,998
|
|
43,996
|
|
|
|
|
|
2,653,729
|
|
2017-2019 PSU
|
2/12/2018
|
|
|
|
0
|
|
3,248
|
|
6,496
|
|
|
|
|
|
398,507
|
|
2016-2018 PSU
|
2/12/2018
|
|
|
|
0
|
|
3,070
|
|
6,140
|
|
|
|
|
|
387,118
|
|
RSU
|
2/12/2018
|
|
|
|
|
|
|
4,714
|
|
|
|
|
563,007
|
|
Stock Awards Total
|
|
|
|
|
|
|
|
|
|
|
|
4,002,361
|
|
Option
|
2/12/2018
|
|
|
|
|
|
|
|
93,959
|
|
$129.51
|
$130.27
|
1,689,007
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Columns D through F)
Columns D through F include the threshold, target, and maximum annual performance bonus amounts for 2018 performance. The Board and the Committee considered this potential range when they determined the actual annual performance bonuses (included in column F of the Summary Compensation Table on page 69).
Mr. Wolk became our Chief Financial Officer and Dr. Stoffels and Mr. Duato became Vice Chairmen of the Executive Committee on July 1, 2018. Their target annual performance bonuses as a percentage of salary for 2018 was the average of their targets for their current and former positions.
Estimated Future Payouts Under Equity Incentive Plan Awards (Columns G through I)
Columns G through I include the threshold, target, and maximum number of PSUs that were considered granted in 2018. See page 70 for detail on the awards that were considered granted in 2018 according to U.S. accounting rules.
For actual performance results to date, please see “2018 Update on Performance of Performance Share Unit Awards versus Goals” on pages 53 to 55.
Please see "Detail on Sandra Peterson's Long-Term Incentives" on page 78 to see the long-term incentive awards Ms. Peterson received net of forfeitures.
All Other Stock Awards (Column J)
Column J includes the number of RSUs awarded in February 2018 based on 2017 performance.
Please see "Detail on Sandra Peterson's Long-Term Incentives" on page 78 to see the long-term incentive awards Ms. Peterson received net of forfeitures.
All Other Option Awards (Columns K through M)
Columns K through M include: the number of options awarded in February 2018 based on 2017 performance, their exercise price, and the closing stock price on the date of grant.
Please see "Detail on Sandra Peterson's Long-Term Incentives" on page 78 to see the long-term incentive awards Ms. Peterson received net of forfeitures.
The exercise price equals the average of the high and low stock prices on the NYSE on the grant date. The closing price on the grant date was $0.76 higher than the exercise price.
|
|
|
|
|
|
2019 Proxy Statement -
77
|
Grant Date Fair Value of Stock and Option Awards (Column N)
Column N includes the grant date fair values of PSUs, RSUs, and stock option awards granted in 2018. We include the grant date fair values of the stock awards and option awards in columns D and E of the Summary Compensation Table on page 69
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Detail on Sandra Peterson's Long-Term Incentives
|
|
The SEC's rules require that the full amount of the grants to Ms. Peterson be included in the Grants of Plan Based Awards table even though most of them were forfeited.
Ms. Peterson retired on October 1, 2018. According to the award agreements:
|
|
|
l
|
Her 2018 PSUs, RSUs and options were prorated based on the number of days she worked during the vesting period.
|
|
|
|
l
|
Her prorated 2018 PSUs and RSUs will become vested on their normal vesting dates.
|
|
|
|
l
|
Her prorated 2018 options vested upon her retirement and she had three months to exercise them post-retirement.
|
|
|
l
|
Her 2017 and 2016 PSUs, RSUs, and options were forfeited.
|
|
|
l
|
She has 3 years post-retirement to exercise her outstanding vested options.
|
|
|
The table below shows the stock awards and options considered granted in 2018 adjusted to exclude the forfeited awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
(Annual Performance Bonus)
|
Estimated Future Payouts Under Equity Incentive Plan Awards
(Performance Share Units)
|
All other Stock Awards: Number of Shares of Stock or Units
(#)
|
All Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise or Base Price of Option Awards
($/sh)
|
Closing Market Price on the Grant Date
($)
|
Grant Date Fair Value of Stock and Option Awards
($)
|
|
|
Award
|
Grant Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
|
|
Bonus
|
|
$0
|
$1,340,625
|
$2,681,250
|
|
|
|
|
|
|
|
|
|
|
2018-2020 PSU
|
2/12/2018
|
|
|
|
0
|
4,657
|
9,314
|
|
|
|
|
$561,797
|
|
|
2017-2019 PSU
|
2/12/2018
|
|
|
|
0
|
0
|
0
|
|
|
|
|
0
|
|
|
2016-2018 PSU
|
2/12/2018
|
|
|
|
0
|
0
|
0
|
|
|
|
|
0
|
|
|
RSU
|
2/12/2018
|
|
|
|
|
|
|
998
|
|
|
|
119,194
|
|
|
Stock Awards Total
|
|
|
|
|
|
|
|
|
|
|
|
680,991
|
|
|
Option
|
2/12/2018
|
|
|
|
|
|
|
|
19,908
|
$129.51
|
$130.27
|
357,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Proxy Statement -
78
|
|
|
|
|
|
|
|
|
|
|
|
|
Details on 2018 Long-Term Incentive Grant Date Fair Values
|
|
|
|
|
|
l
|
Assumptions used for PSUs, RSUs, and options:
We used the same grant date, common stock fair market value and dividend yield assumptions in calculating the fair values of the PSUs, RSUs, and options as shown in the table below
.
|
|
|
|
|
Assumptions used in PSUs, RSUs, and Option Fair Value Calculations
|
|
|
|
|
|
Grant Date
|
2/12/2018
|
|
|
|
|
|
Common Stock Fair Market Value (average of the high and low prices on the NYSE)
|
$129.51
|
|
|
|
|
|
Dividend yield
|
2.70%
|
|
|
|
|
|
|
|
|
|
|
l
|
Fair values of RSUs and PSUs tied to 2018 operational sales and 2018-2020 EPS:
We calculated the fair value of RSUs and PSUs tied to 2018 operational sales and 2018-2020 EPS based on the common stock fair market value discounted by the expected dividend yield since dividends are not paid prior to vesting. The discount is greater on the awards with more time until vesting since those awards do not receive dividends for a longer period than the awards with less time remaining in the vesting period.
|
|
|
|
|
l
|
PSUs:
|
|
|
l
|
2018-2020 PSUs:
We calculated the fair value of the 2018-2020 PSUs using the weighted average of the fair values of each component of the award that was considered granted in 2018 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 – 2020 PSU Fair Value
|
|
|
|
|
|
Performance Measures
|
Weight
|
Fair Value
|
|
|
|
|
|
2018 Operational Sales
|
1/9
th
|
$119.433
|
|
|
|
|
|
2018-2020 EPS
|
3/9
ths
|
$119.433
|
|
|
|
|
|
2018-2020 Relative TSR
|
3/9
ths
|
$122.237
|
|
|
|
|
|
Weighted Average
|
$120.635
|
|
|
|
|
|
|
|
|
|
|
|
|
l
|
2018 Operational Sales & 2018-2020 EPS:
$119.433 was the fair value of the PSUs tied to 2018 operational sales and 2018-2020 EPS.
|
|
|
|
l
|
2018-2020 Relative TSR:
$122.237 was the fair value of the PSUs tied to relative TSR
.
An independent third party calculated it using a Monte Carlo valuation.
|
|
|
l
|
2017-2019 PSUs:
$122.693 was the fair value of the PSUs tied to 2018 operational sales.
|
|
|
l
|
2016-2018 PSUs:
$126.097 was the fair value of the PSUs tied to 2018 operational sales.
|
|
l
|
RSUs:
$119.433 was the fair value of the RSUs.
|
|
l
|
Options:
$17.976 was the fair value of the options. We calculated the option fair value using the Black-Scholes option valuation model using the additional assumptions in the table below.
|
|
|
|
|
2018 Stock Option Fair Value Assumptions
|
|
|
|
|
|
Exercise Price
|
$129.51
|
|
|
|
|
|
Risk Free Rate (Determined based on U.S. Treasury rate of seven years)
|
2.77%
|
|
|
|
|
|
Expected Volatility (Calculated using blended historical average volatility and implied volatility on at-the-money, 2-year, traded stock options)
|
15.77%
|
|
|
|
|
|
Expected Life (Calculated based on historical data)
|
7 yrs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Proxy Statement -
79
|
2018 Outstanding Equity Awards at Fiscal Year-End
In the table below, we show the outstanding stock options, RSUs, and PSUs as of fiscal year-end 2018. We also show the values of the RSUs and PSUs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
J
|
K
|
|
|
|
Options
|
Stock Awards
|
Number of Securities Underlying Unexercised Options
(#)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
Name
|
Grant Date
|
Vesting Date
|
Exercisable
|
Unexercisable
|
A. Gorsky
|
Stock Options
|
1/17/2012
|
1/17/2015
|
231,951
|
|
|
$65.37
|
1/17/2022
|
|
|
|
|
1/16/2013
|
1/17/2016
|
547,692
|
|
72.54
|
|
1/13/2023
|
2/10/2014
|
2/11/2017
|
495,146
|
|
90.44
|
|
2/9/2024
|
2/9/2015
|
2/10/2018
|
427,127
|
|
100.06
|
|
2/9/2025
|
2/8/2016
|
2/9/2019
|
|
411,264
|
|
101.87
|
|
2/8/2026
|
2/13/2017
|
2/13/2020
|
377,673
|
|
115.67
|
|
2/13/2027
|
2/12/2018
|
2/12/2021
|
239,519
|
|
129.51
|
|
2/11/2028
|
RSUs
|
2/8/2016
|
2/8/2019
|
|
|
|
|
29,579
|
|
$3,764,519
|
|
|
2/13/2017
|
2/13/2020
|
31,779
|
|
4,044,513
|
|
2/12/2018
|
2/12/2021
|
12,017
|
|
1,529,404
|
|
2016 - 2018 PSU Award
|
2/8/2016
|
2/8/2019
|
|
|
|
|
66,306
|
|
8,438,765
|
|
|
|
2/13/2017
|
2/8/2019
|
7,805
|
|
993,342
|
|
2/12/2018
|
2/8/2019
|
11,938
|
|
1,519,349
|
|
2017 - 2019 PSU Award
|
2/13/2017
|
2/13/2020
|
|
|
|
|
8,385
|
|
1,067,159
|
|
47,086
|
$5,992,635
|
2/12/2018
|
2/13/2020
|
12,827
|
|
1,632,492
|
|
|
|
2018 - 2020 PSU Award
|
2/12/2018
|
2/12/2021
|
|
|
|
|
11,640
|
|
1,481,423
|
|
25,596
|
3,257,603
|
J. Wolk
|
Stock Options
|
1/16/2013
|
1/17/2016
|
1,855
|
|
|
72.54
|
|
1/13/2023
|
|
|
|
|
2/10/2014
|
2/11/2017
|
12,926
|
|
90.44
|
|
2/9/2024
|
2/9/2015
|
2/10/2018
|
13,015
|
|
100.06
|
|
2/9/2025
|
2/8/2016
|
2/9/2019
|
|
16,820
|
|
101.87
|
|
2/8/2026
|
2/13/2017
|
2/13/2020
|
19,241
|
|
115.67
|
|
2/13/2027
|
2/12/2018
|
2/12/2021
|
12,066
|
|
129.51
|
|
2/11/2028
|
RSUs
|
2/8/2016
|
2/8/2019
|
|
|
|
|
2,540
|
|
323,266
|
|
|
|
2/13/2017
|
2/13/2020
|
3,400
|
|
432,718
|
|
2/12/2018
|
2/12/2021
|
2,543
|
|
323,648
|
|
2016 - 2018 PSU Award
|
2/8/2016
|
2/8/2019
|
|
|
|
|
2,601
|
|
331,029
|
|
|
|
2/13/2017
|
2/8/2019
|
307
|
|
39,072
|
|
2/12/2018
|
2/8/2019
|
469
|
|
59,690
|
|
2017 - 2019 PSU Award
|
2/13/2017
|
2/13/2020
|
|
|
|
|
410
|
|
52,181
|
|
2,303
|
293,103
|
2/12/2018
|
2/13/2020
|
628
|
|
79,926
|
|
|
|
2018 - 2020 PSU Award
|
2/12/2018
|
2/12/2021
|
|
|
|
|
468
|
|
59,562
|
|
1,032
|
131,343
|
|
|
|
|
2019 Proxy Statement -
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
J
|
K
|
|
|
|
Options
|
Stock Awards
|
Number of Securities Underlying Unexercised Options
(#)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
Name
|
Grant Date
|
Vesting Date
|
Exercisable
|
Unexercisable
|
P. Stoffels
|
Stock Options
|
2/9/2015
|
2/10/2018
|
170,668
|
|
|
$100.06
|
2/9/2025
|
|
|
|
|
2/8/2016
|
2/9/2019
|
|
174,787
|
|
101.87
|
2/8/2026
|
2/13/2017
|
2/13/2020
|
138,982
|
|
115.67
|
2/13/2027
|
2/12/2018
|
2/12/2021
|
111,816
|
|
129.51
|
2/11/2028
|
RSUs
|
2/8/2016
|
2/8/2019
|
|
|
|
|
12,571
|
|
$1,599,911
|
|
|
2/13/2017
|
2/13/2020
|
11,695
|
|
1,488,423
|
|
2/12/2018
|
2/12/2021
|
5,610
|
|
713,985
|
|
2016 - 2018 PSU Award
|
2/8/2016
|
2/8/2019
|
|
|
|
|
28,181
|
|
3,586,596
|
|
|
|
2/13/2017
|
2/8/2019
|
3,317
|
|
422,155
|
|
2/12/2018
|
2/8/2019
|
5,074
|
|
645,768
|
|
2017 - 2019 PSU Award
|
2/13/2017
|
2/13/2020
|
|
|
|
|
3,088
|
|
393,010
|
|
17,327
|
|
$2,205,207
|
2/12/2018
|
2/13/2020
|
4,719
|
|
600,587
|
|
|
|
2018 - 2020 PSU Award
|
2/12/2018
|
2/12/2021
|
|
|
|
|
5,433
|
|
691,458
|
|
11,949
|
|
1,520,749
|
|
J. Duato
|
Stock Options
|
1/17/2012
|
1/17/2015
|
84,423
|
|
|
65.37
|
1/17/2022
|
|
|
|
|
1/16/2013
|
1/17/2016
|
148,538
|
|
72.54
|
1/13/2023
|
2/10/2014
|
2/11/2017
|
130,969
|
|
90.44
|
2/9/2024
|
2/9/2015
|
2/10/2018
|
126,369
|
|
100.06
|
2/9/2025
|
2/8/2016
|
2/9/2019
|
|
125,824
|
|
101.87
|
2/8/2026
|
2/13/2017
|
2/13/2020
|
123,291
|
|
115.67
|
2/13/2027
|
2/12/2018
|
2/12/2021
|
105,307
|
|
129.51
|
2/11/2028
|
RSUs
|
2/8/2016
|
2/8/2019
|
|
|
|
|
9,049
|
|
1,151,666
|
|
|
|
2/13/2017
|
2/13/2020
|
10,374
|
|
1,320,299
|
|
2/13/2017
|
2/13/2020
|
70,733
|
|
9,002,189
|
|
2/12/2018
|
2/12/2021
|
5,283
|
|
672,367
|
|
2016 - 2018 PSU Award
|
2/8/2016
|
2/8/2019
|
|
|
|
|
20,287
|
|
2,581,926
|
|
|
|
2/13/2017
|
2/8/2019
|
2,388
|
|
303,921
|
|
2/12/2018
|
2/8/2019
|
3,653
|
|
464,917
|
|
2017 - 2019 PSU Award
|
2/13/2017
|
2/13/2020
|
|
|
|
|
2,738
|
|
348,465
|
|
15,370
|
|
1,956,140
|
2/12/2018
|
2/13/2020
|
4,188
|
|
533,007
|
|
|
|
2018 - 2020 PSU Award
|
2/12/2018
|
2/12/2021
|
|
|
|
|
5,117
|
|
651,241
|
|
11,254
|
|
1,432,297
|
|
|
|
|
|
|
|
2019 Proxy Statement -
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
J
|
K
|
|
|
|
Options
|
Stock Awards
|
Number of Securities Underlying Unexercised Options
(#)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
Name
|
Grant Date
|
Vesting Date
|
Exercisable
|
Unexercisable
|
M. Ullmann
|
Stock Options
|
1/16/2013
|
1/17/2016
|
134,615
|
|
|
$72.54
|
1/13/2023
|
|
|
|
|
2/10/2014
|
2/11/2017
|
85,754
|
|
90.44
|
2/9/2024
|
2/9/2015
|
2/10/2018
|
76,664
|
|
100.06
|
2/9/2025
|
2/8/2016
|
2/9/2019
|
|
73,817
|
|
101.87
|
2/8/2026
|
2/13/2017
|
2/13/2020
|
71,733
|
|
115.67
|
2/13/2027
|
2/12/2018
|
2/12/2021
|
46,061
|
|
129.51
|
2/11/2028
|
RSUs
|
2/8/2016
|
2/8/2019
|
|
|
|
|
5,309
|
|
$675,676
|
|
|
2/13/2017
|
2/13/2020
|
6,036
|
|
768,202
|
|
2/12/2018
|
2/12/2021
|
2,311
|
|
294,121
|
|
2016 - 2018 PSU Award
|
2/8/2016
|
2/8/2019
|
|
|
|
|
11,900
|
|
1,514,513
|
|
|
|
2/13/2017
|
2/8/2019
|
1,401
|
|
178,305
|
|
2/12/2018
|
2/8/2019
|
2,143
|
|
272,740
|
|
2017 - 2019 PSU Award
|
2/13/2017
|
2/13/2020
|
|
|
|
|
1,592
|
|
202,614
|
|
8,943
|
|
$1,138,176
|
2/12/2018
|
2/13/2020
|
2,437
|
|
310,157
|
|
|
|
2018 - 2020 PSU Award
|
2/12/2018
|
2/12/2021
|
|
|
|
|
2,238
|
|
284,830
|
|
4,922
|
|
626,423
|
|
D. Caruso
|
Stock Options
|
1/10/2011
|
1/11/2014
|
145,447
|
|
|
62.20
|
1/8/2021
|
|
|
|
|
1/17/2012
|
1/17/2015
|
173,702
|
|
|
65.37
|
1/17/2022
|
1/16/2013
|
1/17/2016
|
233,846
|
|
|
72.54
|
1/13/2023
|
2/10/2014
|
2/11/2017
|
158,277
|
|
|
90.44
|
2/9/2024
|
2/9/2015
|
2/10/2018
|
136,535
|
|
|
100.06
|
2/9/2025
|
2/8/2016
|
2/9/2019
|
|
142,365
|
|
101.87
|
2/8/2026
|
2/13/2017
|
2/13/2020
|
|
131,264
|
|
115.67
|
2/13/2027
|
2/12/2018
|
2/12/2021
|
|
85,948
|
|
129.51
|
2/11/2028
|
RSUs
|
2/8/2016
|
2/8/2019
|
|
|
|
|
10,239
|
|
1,303,118
|
|
|
|
2/13/2017
|
2/13/2020
|
11,045
|
|
1,405,697
|
|
2/12/2018
|
2/12/2021
|
4,312
|
|
548,788
|
|
2016 - 2018 PSU Award
|
2/8/2016
|
2/8/2019
|
|
|
|
|
22,954
|
|
2,921,356
|
|
|
|
2/13/2017
|
2/8/2019
|
2,702
|
|
343,884
|
|
2/12/2018
|
2/8/2019
|
4,132
|
|
525,880
|
|
2017 - 2019 PSU Award
|
2/13/2017
|
2/13/2020
|
|
|
|
|
2,916
|
|
371,119
|
|
16,365
|
|
2,082,774
|
2/12/2018
|
2/13/2020
|
4,459
|
|
567,497
|
|
|
|
2018 - 2020 PSU Award
|
2/12/2018
|
2/12/2021
|
|
|
|
|
4,176
|
|
531,480
|
|
9,185
|
|
1,168,975
|
|
|
|
|
|
2019 Proxy Statement -
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
I
|
J
|
K
|
|
|
|
Options
|
Stock Awards
|
Number of Securities Underlying Unexercised Options
(#)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
Name
|
Grant Date
|
Vesting Date
|
Exercisable
|
Unexercisable
|
S. Peterson
|
Stock Options
|
1/16/2013
|
1/17/2016
|
61,538
|
|
|
$72.54
|
10/1/2021
|
|
|
|
|
2/10/2014
|
2/11/2017
|
162,509
|
|
90.44
|
10/1/2021
|
2/9/2015
|
2/10/2018
|
147,395
|
|
100.06
|
10/1/2021
|
2/12/2018
|
10/1/2018
|
19,908
|
|
129.51
|
1/1/2019
|
RSUs
|
2/12/2018
|
2/12/2021
|
|
|
|
|
998
|
|
$127,015
|
|
|
2016 - 2018 PSU Award
|
2/8/2016
|
2/8/2019
|
|
|
|
|
0
|
|
0
|
|
|
|
2/13/2017
|
2/8/2019
|
0
|
|
0
|
|
2/12/2018
|
2/8/2019
|
0
|
|
0
|
|
2017 - 2019 PSU Award
|
2/13/2017
|
2/13/2020
|
|
|
|
|
0
|
|
0
|
|
|
|
2/12/2018
|
2/13/2020
|
0
|
|
0
|
|
|
|
2018 - 2020 PSU Award
|
2/12/2018
|
2/12/2021
|
|
|
|
|
966
|
|
122,943
|
|
2,126
|
$270,576
|
Grant Date (Column B)
PSUs are considered granted when the performance goals are approved (according to U.S. accounting rules). Since we use three 1-year sales goals, we grouped the PSU awards based on their vesting date.
Vesting Date (Column C)
Our Stock Options, RSUs and PSUs vest 100% 3-years from the date of grant. PSUs are not distributed until the percent of target vested based on performance is certified at the end of the 3-year performance period. Please see "Grant Date (Column B)" for when the PSUs tied to operational sales in the second and third years of the 3-year performance period are considered granted for accounting purposes.
Number of Shares or Units of Stock that Have Not Vested (Column H)
The PSUs that have been earned based on performance to date are included in column H. See "2018 Update on Performance of Performance Share Unit Awards Versus Goals" on page 53 for details.
Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested
(Column J)
We calculated the estimated number of PSUs to vest in the future assuming:
|
|
•
|
2017 - 2019 PSUs tied to (i) Relative TSR performance vest at 76.5% of target and (ii) cumulative adjusted EPS performance vest at 101.3% of target.
|
|
|
•
|
2018 - 2020 PSUs tied to (i) Relative TSR performance vest at 0.0% of target and (ii) cumulative adjusted EPS performance vest at 106.5% of target.
|
Market Value of Shares or Units of Stock That Have Not Vested (Columns I and K)
We calculated the market values of unvested PSUs and RSUs included in columns I and K using the closing price of our common stock on the NYSE on December 28, 2018, which was the last business day of fiscal 2018, of $127.27.
|
|
|
|
|
|
2019 Proxy Statement -
83
|
2018 Option Exercises and Stock Vested
In the table below, we show how many options each executive exercised in 2018 and the value received from exercising them. We also show how many PSUs and RSUs vested in 2018 and their value when they vested.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
|
Number of Shares Acquired on Exercise
(#)
|
Value Realized Upon Exercise
($)
|
Number of Shares Acquired on Vesting
(#)
|
Value Realized Upon on Vesting
($)
|
A. Gorsky
|
264,465
|
|
$22,100,929
|
145,927
|
|
$18,854,896
|
J. Wolk
|
0
|
|
0
|
|
5,202
|
|
670,083
|
|
P. Stoffels
|
155,342
|
|
6,123,286
|
|
58,309
|
|
7,533,973
|
|
J. Duato
|
40,000
|
|
3,256,950
|
|
43,173
|
|
5,578,285
|
|
M. Ullmann
|
0
|
|
0
|
|
26,193
|
|
3,384,338
|
|
D. Caruso
|
230,348
|
|
17,792,175
|
|
46,647
|
|
6,027,154
|
|
S. Peterson
|
0
|
|
0
|
|
50,358
|
|
6,506,643
|
|
|
|
|
|
2019 Proxy Statement -
84
|
|
|
2018 Pension Benefits
In the table below, we show the present value of pension benefits as of year-end 2018 and payments during 2018. For a complete understanding of the table, please read the description of the pension benefits that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Number of Years Credited Service
(#)
|
Normal Retirement Age
|
Present Value of Accumulated Benefit
|
Payments During Last Fiscal Year
($)
|
Salaried Pension Plan
($)
|
Excess Pension Plan
($)
|
Total
($)
|
A. Gorsky
|
26.41
|
|
62
|
|
$1,286,000
|
$24,631,000
|
$25,917,000
|
$0
|
J. Wolk
|
20.58
|
|
62
|
|
750,000
|
|
1,734,000
|
|
2,484,000
|
|
0
|
P. Stoffels
|
25.33
|
|
62
|
|
1,117,000
|
|
11,169,000
|
|
12,286,000
|
|
0
|
J. Duato
|
29.25
|
|
62
|
|
1,293,000
|
|
10,730,000
|
|
12,023,000
|
|
0
|
M. Ullmann
|
29.42
|
|
62
|
|
1,567,000
|
|
8,127,000
|
|
9,694,000
|
|
0
|
D. Caruso
|
18.67
|
|
62
|
|
997,000
|
|
8,521,000
|
|
9,518,000
|
|
234,634
|
S. Peterson
|
5.83
|
|
62
|
|
292,000
|
|
2,497,000
|
|
2,789,000
|
|
0
|
We calculated the present values included in the table using the same assumptions we used for the pension liabilities included in our 2018 Annual Report. We used a discount rate of 4.47% and mortality assumptions according to the RP-2014 Table, Generational Mortality Projection with Scale MMP-2018
.
The named executive officers participate in the same defined benefit pension plans provided to other U.S. non-union employees hired before January 1, 2015.
We provide pension benefits to our employees to provide retirement income, facilitate succession, and motivate long-service. Our pension benefits are paid through our Salaried Pension Plan and Excess Pension Plan as described below. We offset the benefits from these plans for amounts earned from our non-U.S. pension plans.
|
|
•
|
U.S. Pension Formula:
Our U.S. pension formula determines a monthly annuity amount payable for life.
|
|
|
•
|
Retirement Age:
At age 62 employees can begin receiving unreduced pension payments. At age 55 they can begin receiving reduced pension benefits. If an employee begins receiving his or her pension before age 62, the pension is reduced by 4% per year for each year before age 62.
|
|
|
•
|
Monthly Annuity Amount:
We calculate the monthly annuity amount as:
|
|
|
(1)
|
Final average earnings multiplied by 1.667%, multiplied by years of service prior to 2005, plus
|
|
|
(2)
|
Final average earnings multiplied by 1.55%, multiplied by years of service after 2004, minus
|
|
|
(3)
|
Age 65 Social Security benefits multiplied by 1.429%, multiplied by total years of service.
|
|
|
•
|
Final Average Earnings:
Final average earnings is the average of the highest consecutive 60 months out of the last 120 months of pay. Pay includes: base salary, bonus, and dividend equivalents paid or deferred on unvested CLCs for years prior to 2009.
|
|
|
•
|
Benefits Paid as an Annuity:
Pension benefits must be taken in the form of an annuity, except the Belgian portion of Dr. Stoffels’ benefit which is payable as a lump sum at retirement.
|
|
|
•
|
Pension Plans:
We pay our U.S. pensions from the Salaried and Excess Pension Plans as follows:
|
|
|
•
|
Salaried Pension Plan:
The Salaried Pension Plan applies the U.S. pension formula to pay up to the IRS’s covered compensation limit. The limit was $275,000 in 2018.
|
|
|
•
|
Excess Pension Plan
: The Excess Pension Plan uses the U.S. pension formula without applying the IRS pay limits. Its payments are reduced by amounts paid from the Salaried Pension Plan. U.S. non-union employees participate in the Excess Pension Plan if their covered compensation exceeds the IRS limit.
|
|
|
•
|
Offset for non-U.S. Pensions:
Because Dr. Stoffels has worked in both Belgium and the U.S., his pension includes benefits from both the U.S. and Belgian Plans. The U.S. portion is calculated using the U.S. formula above for all service and subtracting the amount earned in the Belgian Plan. This treatment of service rendered outside the U.S. applies to all participants in the Salaried Pension Plan who were hired before January 1, 2015 and who earned company service outside the U.S. before joining the U.S. pension plan on, or before, July 1, 2015.
|
|
|
|
|
|
|
2019 Proxy Statement -
85
|
2018 Non-Qualified Deferred Compensation
In the table below, we show our named executive officers’ year-end non-tax-qualified compensation deferral plan balances. We also show how much they and the company contributed to the plans, the earnings on the deferred compensation, and withdrawals and distributions during the year. For a complete understanding of the table, please read the descriptions of the columns that follow the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
B
|
C
|
D
|
E
|
F
|
Name
|
Executive Contributions in Last FY
($)
|
Registrant Contributions in Last FY
($)
|
Aggregate Earnings in Last FY
($)
|
Aggregate Withdrawals / Distributions
($)
|
Aggregate Balance at Last FYE
($)
|
A. Gorsky
|
$0
|
$61,529
|
$58,168
|
|
$0
|
$11,126,588
|
J. Wolk
|
0
|
|
14,514
|
|
2,227
|
|
|
0
|
|
543,978
|
|
P. Stoffels
|
0
|
|
40,649
|
|
64,785
|
|
|
0
|
|
11,234,538
|
|
J. Duato
|
0
|
|
29,657
|
|
59,282
|
|
|
0
|
|
10,384,911
|
|
M. Ullmann
|
0
|
|
23,088
|
|
32,899
|
|
|
0
|
|
6,990,576
|
|
D. Caruso
|
0
|
|
15,999
|
|
55,089
|
|
|
2,048,760
|
|
17,133,031
|
|
S. Peterson
|
0
|
|
24,008
|
|
(14,219)
|
|
0
|
|
197,912
|
|
Executive Contributions in Last Fiscal Year (Column B)
Column B includes the amount the named executive officers deferred under the Executive Income Deferral Plan. This plan allows eligible employees to defer up to 50% of their base salary and 100% of their annual performance bonus.
Registrant Contributions in Last Fiscal Year (Column C)
Column C includes company contributions to the named executive officer’s Excess Savings Plan accounts. These amounts are included in Column H of the Summary Compensation Table.
Aggregate Earnings in Last Fiscal Year (Column D)
Column D includes earnings on the Executive Income Deferral Plan and Excess Savings Plan. It also includes the change in value on vested CLCs and CLPs. We show each of these amounts and the total earnings in the table below. See details on CLC and CLP unit values on page 87
.
The earnings or losses on the Executive Income Deferral Plan and Executive Savings Plan balances are based on market rates of return as described on page 87. Therefore, there are no above market earnings from these plans and the amounts are not included in column G of the Summary Compensation Table.
The changes in value of the CLCs and CLPs are included in Column G of the Summary Compensation Table but only to the extent that the unit value grows at a rate that exceeds a reference rate of return. See page 73 for details.
|
|
|
|
|
|
|
|
|
|
|
Name
|
Earnings / (Losses) on Executive Income Deferral Plan
($)
|
Earnings / (Losses) on Excess Savings Plan
($)
|
Change in Value of Vested CLCs
($)
|
Change in
Value of
Vested CLPs
($)
|
Total
($)
|
A. Gorsky
|
$0
|
$(44,956)
|
$37,200
|
$65,924
|
$58,168
|
|
J. Wolk
|
0
|
(3,326)
|
1,240
|
|
4,313
|
|
2,227
|
|
P. Stoffels
|
0
|
(27,666)
|
49,600
|
|
42,851
|
|
64,785
|
|
J. Duato
|
0
|
(23,747)
|
48,050
|
|
34,979
|
|
59,282
|
|
M. Ullmann
|
0
|
(17,325)
|
36,580
|
13,644
|
32,899
|
|
D. Caruso
|
(40,562)
|
|
(37,092)
|
61,380
|
|
71,363
|
|
55,089
|
|
S. Peterson
|
0
|
(14,219)
|
0
|
|
0
|
|
(14,219)
|
|
Aggregate Withdrawals/Distributions (Column E)
Column E includes the payout of 42,000 CLC units to Mr. Caruso (at the beginning of year unit value of $48.78). These units vested prior to 2004. His CLC units that vested after 2004 will be paid in 2019 (six months following his retirement).
|
|
|
|
2019 Proxy Statement -
86
|
|
|
Aggregate Balance at Last Fiscal Year-End (Column F)
Column F includes the Executive Income Deferral Plan and Excess Savings Plan balances. It also includes the value of all vested CLCs and CLPs (calculated using the end of year unit values). See details on CLC and CLP unit values below.
|
|
|
|
|
|
|
Name
|
Executive Income Deferral Plan Balance
($)
|
Excess Savings Plan Balance
($)
|
Value of Vested CLCs
($)
|
Value of Vested CLPs
($)
|
Total
($)
|
A. Gorsky
|
$0
|
$645,802
|
$5,890,800
|
$4,589,986
|
$11,126,588
|
J. Wolk
|
0
|
47,339
|
196,360
|
300,279
|
543,978
|
P. Stoffels
|
0
|
396,651
|
7,854,400
|
2,983,487
|
11,234,538
|
J. Duato
|
0
|
340,534
|
7,608,950
|
2,435,427
|
10,384,911
|
M. Ullmann
|
0
|
248,020
|
5,792,620
|
949,936
|
6,990,576
|
D. Caruso
|
1,911,434
|
533,142
|
9,719,820
|
4,968,635
|
17,133,031
|
S. Peterson
|
0
|
197,912
|
0
|
0
|
197,912
|
|
|
•
|
Executive Income Deferral Plan:
Our executive officers can defer up to 50% of their base salary and 100% of their performance bonuses under the Executive Income Deferral Plan.
|
|
|
◦
|
Earnings:
The deferred amounts are credited with earnings equal to the return on: Johnson & Johnson common stock, one-year Treasury Bills, or the investment options within our 401(k) Savings Plan. The participant elects the allocation among these alternatives.
|
For 2018, the return on our common stock for these participants was -2.08%. None of the named executive officers had amounts allocated to the one-year Treasury Bill alternative in 2018.
|
|
◦
|
Distribution:
Amounts deferred after 2004 are paid on the later of six months after termination or January of the year following termination. Amounts deferred before 2005 can be paid up to 10 years after termination and be paid as a lump sum or in up to 15 annual installments.
|
|
|
•
|
Excess Savings Plan:
Our 401(k) Savings Plan provides a matching contribution of 4.5% of base salary to employees who contribute at least 6% of base salary. The base salary covered under this plan is limited by the IRS’s covered compensation limit. The limit was $275,000 in 2018. The Excess Savings Plan credits an unfunded account with 4.5% of the amount of the base salary over the IRS limit.
|
|
|
◦
|
Earnings:
The accounts are credited with earnings equal to the return on the Balanced Fund investment option within our 401(k) Savings Plan. In 2018, the rate of return was -6.44%.
|
|
|
◦
|
Distribution:
Account balances will be paid out in a lump sum
,
six months after termination, unless the participant made an irrevocable deferral or installment election before December 15, 2008.
|
|
|
|
|
|
|
|
|
Details on CLC and CLP Unit Values
The following table includes the beginning and end of year CLC and CLP unit values. It also includes the change in unit values during the year.
|
|
Unit Values and Change in Values
|
CLC
($)
|
CLP
($)
|
|
|
Beginning of Year Unit Value
|
$48.78
|
$5.49
|
|
|
End of Year Unit Value
|
49.09
|
5.57
|
|
|
Change in Unit Value
|
0.31
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Proxy Statement -
87
|
2018 Potential Payments Upon Termination
We pay earned and unpaid compensation to our employees upon termination as described below. In addition, depending upon the circumstances of the termination and the employee’s age and years of service, we pay severance, provide continued health benefit coverage, and provide continued vesting in equity incentives as described below. We have no change-in-control benefits.
|
|
•
|
Earned but Unpaid Compensation:
Upon any termination of employment as of year-end 2018, employees would receive their annual performance bonus and vested non-qualified deferred compensation. They would also be entitled to their pension benefits upon retirement. If a named executive officer had terminated as of year-end 2018, he or she would have received his or her:
|
|
|
◦
|
Earned but unpaid annual performance bonuses for 2018.
An employee must be employed through the end of the year to be eligible for a non-pro-rated bonus. However, in case of involuntary termination for cause, these amounts would be forfeited. See the “Non-Equity Incentive Plan Compensation” table on page 71 for the bonus amounts.
|
|
|
◦
|
Vested non-qualified deferred compensation balances.
See the “Non-Qualified Deferred Compensation — Aggregate Balance at Last Fiscal Year-End (Column F)” table on page 87 for the year-end balances.
|
|
|
◦
|
Pension benefits upon retirement.
See “2018 Pension Benefits” on page 85 for details.
|
|
|
•
|
Severance, Healthcare Coverage, and Equity Incentives:
In the table below, we show the value of cash severance, continued healthcare coverage, and continued vesting in equity incentives as if the named executive officers had terminated as of year-end 2018 under the circumstances shown below. For a complete understanding of the table please read the descriptions of the types of payments that follow the table.
|
|
|
•
|
No Change-in-Control Benefits:
We do not have any change-in-control agreements or arrangements in place for any of our named executive officers. In addition, there are no change-in-control provisions in any of our compensation plans or instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Type of Payment
|
Voluntary Termination
($)
|
Involuntary Termination Without
Cause
($)
|
Involuntary Termination with
Cause
($)
|
Death
($)
|
Disability
($)
|
A. Gorsky
|
Cash Severance
|
$0
|
$1,650,000
|
$0
|
$0
|
$0
|
|
Healthcare Coverage
|
228,000
|
|
231,000
|
|
228,000
|
|
115,000
|
|
244,000
|
|
|
Equity Incentives
|
51,710,977
|
|
51,710,977
|
|
0
|
|
51,710,977
|
|
51,710,977
|
|
|
Total
|
51,938,977
|
|
53,591,977
|
|
228,000
|
|
51,825,977
|
|
51,954,977
|
|
J. Wolk
|
Cash Severance
|
0
|
|
750,000
|
|
0
|
|
0
|
|
0
|
|
|
Healthcare Coverage
|
0
|
|
121,000
|
|
0
|
|
4,000
|
|
286,000
|
|
|
Equity Incentives
|
0
|
|
0
|
|
0
|
|
2,913,158
|
|
2,913,158
|
|
|
Total
|
0
|
|
871,000
|
|
0
|
|
2,917,158
|
|
3,199,158
|
|
P. Stoffels
|
Cash Severance
|
0
|
|
1,178,300
|
|
0
|
|
0
|
|
0
|
|
|
Healthcare Coverage
|
181,000
|
|
186,000
|
|
181,000
|
|
91,000
|
|
248,000
|
|
|
Equity Incentives
|
21,284,982
|
|
21,284,982
|
|
0
|
|
21,284,982
|
|
21,284,982
|
|
|
Total
|
21,465,982
|
|
22,649,282
|
|
181,000
|
|
21,375,982
|
|
21,532,982
|
|
J. Duato
|
Cash Severance
|
0
|
|
1,048,462
|
|
0
|
|
0
|
|
0
|
|
|
Healthcare Coverage
|
198,000
|
|
203,000
|
|
198,000
|
|
101,000
|
|
249,000
|
|
|
Equity Incentives
|
17,305,634
|
|
17,305,634
|
|
0
|
|
26,307,823
|
|
26,307,823
|
|
|
Total
|
17,503,634
|
|
18,557,096
|
|
198,000
|
|
26,408,823
|
|
26,556,823
|
|
M. Ullmann
|
Cash Severance
|
0
|
|
886,731
|
|
0
|
|
0
|
|
0
|
|
|
Healthcare Coverage
|
200,000
|
|
201,000
|
|
200,000
|
|
102,000
|
|
215,000
|
|
|
Equity Incentives
|
9,578,489
|
|
9,578,489
|
|
0
|
|
9,578,489
|
|
9,578,489
|
|
|
Total
|
9,778,489
|
|
10,666,220
|
|
200,000
|
|
9,680,489
|
|
9,793,489
|
|
|
|
|
|
2019 Proxy Statement -
88
|
|
|
Former Executives
Mr. Caruso and Ms. Peterson, upon their retirements, were eligible for their earned but unpaid compensation as described on page 88.
In the table below, we show the value of cash severance, continued healthcare coverage, and continued vesting in equity incentives for Mr. Caruso and Ms. Peterson. A description of each type of payment is below.
|
|
|
|
|
|
Type of Payment
|
D. Caruso
|
S. Peterson
|
Termination Reason
|
Retirement
|
Retirement
|
Cash Severance
|
$0
|
$11,072,500
|
Healthcare Coverage
|
159,000
|
|
8,000
|
|
Equity Incentives
|
18,031,566
|
|
689,803
|
|
Total
|
18,190,566
|
|
11,770,303
|
|
Dominic Caruso
Mr. Caruso retired on August 31, 2018. He did not receive cash severance. He is receiving continued retiree healthcare coverage as described on page 90.
His equity incentives were eligible for Qualifying Separation treatment as described on page 60. The value of the unvested equity incentives as of year-end 2018 is included in the table.
Sandra Peterson
Ms. Peterson retired on October 1, 2018. As described in our June 22, 2018 Form 8-K, she entered into a transition and separation agreement with the company and is receiving $11,072,500 in severance over 52 weeks comprised of 52 weeks of base salary ($1,072,500) and $10 million supplemental severance. She forfeited approximately $34.5 million in unvested equity awards (valued as of October 1, 2018). Ms. Peterson is receiving continued healthcare coverage during her 52 week severance period as described on page 90. Ms. Peterson received a payment for unused vacation of $53,677.
Ms. Peterson forfeited all of her unvested equity awards except for a prorated portion of her 2018 equity award as described in "Detail on Sandra Peterson's Long-Term Incentives" on page 78. The value of the prorated equity incentives as of year-end 2018 is included in the table.
Cash Severance
Our Severance Pay Plan provides benefits to certain full-time U.S. employees who are involuntarily terminated. We provide two weeks base salary for each year of service, with guaranteed minimums based on an employee’s level. The minimum for our named executive officers is 52 weeks of base salary. We pay severance according to our normal payroll cycle. We do not pay severance as a lump-sum payment.
In order to receive the full number of weeks of base salary under our Severance Pay Plan, U.S. employees must sign a release agreement and comply with the conditions set forth in the agreement which may include: compliance with non-competition provisions, release of all claims and rights, and any other terms set forth in the agreement. If U.S. employees do not sign the release agreement, the severance amount is 4 weeks of base salary.
In the table below, we show how the “Cash Severance” amounts in the table on page 88 were calculated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Salary Rate
as of
Year-End
($)
|
Years of Eligible Service
(#)
|
Weeks of Base Salary Continuation
|
Total Amount of Cash Severance
($)
|
Accrued
(#)
|
Minimum
(#)
|
Final
(#)
|
A. Gorsky
|
$1,650,000
|
10
|
|
20
|
|
52
|
|
52
|
|
$1,650,000
|
J. Wolk
|
750,000
|
|
20
|
|
40
|
|
52
|
|
52
|
|
750,000
|
|
P. Stoffels
|
1,178,300
|
|
21
|
|
42
|
|
52
|
|
52
|
|
1,178,300
|
|
J. Duato
|
940,000
|
|
29
|
|
58
|
|
52
|
|
58
|
|
1,048,462
|
|
M. Ullmann
|
795,000
|
|
29
|
|
58
|
|
52
|
|
58
|
|
886,731
|
|
|
|
|
|
|
|
2019 Proxy Statement -
89
|
Healthcare Coverage
Upon termination of employment, all non-union U.S. employees receive continued healthcare coverage that varies based upon the termination circumstances. The “Healthcare Coverage” amounts in the table on page 88 are the present values of continued healthcare coverage. The values vary based upon the termination circumstances as follows:
|
|
|
|
|
|
|
|
|
Healthcare Coverage
|
Eligibility
|
Eligible Named Executive Officers
|
Voluntary
Termination
|
Involuntary
Termination
Without Cause
|
Involuntary Termination
with Cause
|
Death
|
Disability
|
Retiree
|
Employees age 55 with ten years of service
|
Gorsky
Duato
Stoffels
Ullmann
Caruso
|
ü
|
ü
Begins at the end of the cash severance period
|
ü
|
ü
Coverage for Dependents
|
ü
|
Separation
|
Employees between ages 50 and 54 with ten years of service who are involuntarily terminated without cause
|
Wolk
|
Not Applicable
|
ü
Begins at the earlier of the end of the cash severance period or 52 weeks and ends at age 65
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Active-employee
|
All Employees
|
Peterson
|
No continued coverage
|
ü
While on severance - up to 52 weeks
|
No continued coverage
|
ü
Coverage for Dependents for 6 months
|
ü
While on Long-term disability
|
Note: "
ü
" means eligible for coverage
Equity Incentives
The “Equity Incentives” amounts in the table on page 88 are the value of unvested equity incentives as of year-end 2018. The values vary based upon the termination circumstances as described under “Long-Term Incentive Vesting and Treatment upon Termination” on page 60.
The special retention award of 70,733 RSUs granted to Mr. Duato on February 13, 2017 is not eligible for qualifying separation treatment. Therefore, its value is not included in the "voluntary termination" and "involuntary termination without cause" scenarios.
|
|
|
|
2019 Proxy Statement -
90
|
|
|
Ratio of the Annual Total Compensation of the Median-Paid Employee to the CEO
The annual total compensation of our median-paid employee on a worldwide basis for 2018 was $75,000. The annual total compensation of our Chief Executive Officer for 2018 was $20,111,045. The ratio of the two amounts for 2018 is 268 to 1. For a complete understanding of these amounts, please read the descriptions below.
We used the following methodology and assumptions to calculate the annual total compensation of the median-paid employee:
|
|
•
|
We gathered payroll data from 22 countries around the world, which account for 88% of our employees.
|
|
|
•
|
We assumed that employees not included in this database are paid less than the median. This is a conservative assumption. If any of the employees assumed to be below the median were paid higher than the calculated median, the actual median would be higher.
|
|
|
•
|
We calculated the annual total compensation and ranked our employees using their taxable cash earnings, which includes: (i) salary, wages (regular, hourly, overtime, shift differentials), commissions, bonuses, other miscellaneous cash earnings; (ii) the estimated value of the company-provided pension earned during 2018 and company contributions to defined contribution retirement plans during 2018 (using an estimated percentage of salary for each country where we have a company-provided retirement plan); and (iii) the estimated value of company provided medical and dental insurance coverage (using an estimated per-employee amount for each country where we have company-provided medical and dental plans).
|
|
|
•
|
We counted down from the top to identify the median-paid employee. At least 50% of our employees have annual total compensation amounts higher than $75,000.
|
|
|
•
|
We rounded the annual total compensation of the median-paid employee to the nearest thousand dollars.
|
The annual total compensation of our Chief Executive Officer for 2018 is the $20,097,572 total as reported in the Summary Compensation Table on page 69 plus healthcare benefits of $13,473.
The ratio of the Annual Total Compensation of the Median-Paid Employee to the CEO is calculated by dividing the annual total compensation of our Chief Executive Officer by that of our median-paid employee. Because the annual total compensation of the median-paid employee is a conservative estimate (as described above), the pay ratio is also a conservative estimate - the actual ratio could be lower, but not higher.
Comparison to 2017 Median-Paid Annual Total Compensation
The annual total compensation of our median-paid employee for 2017 was $66,000. The median for 2018 is $75,000. In addition to salary increases and other increases in compensation, the following factors contributed to the increase in the median:
|
|
•
|
The percentage of employees included in the calculation described above increased from 80% to 88%.
|
|
|
•
|
We included estimates of company contributions to defined contribution retirement plans and the value of company-provided medical and dental insurance coverage to the 2018 analysis. These were not included in the 2017 analysis.
|
|
|
•
|
Currency exchange rates changed during 2018. If the exchange rates had not changed, the $75,000 median for 2018 amount shown above would have been $74,000.
|
|
|
|
|
|
|
2019 Proxy Statement -
91
|