SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
JOHNSON & JOHNSON
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
[Johnson & Johnson Logo]
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
March 13, 2002
The Annual Meeting of the Shareowners of Johnson & Johnson will be held on
Thursday April 25, 2002 at 10:00 a.m. at the Hyatt Regency Hotel, Two Albany
Street, New Brunswick, New Jersey, to:
1. Elect directors;
2. Ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for 2002; and
3. Transact such other business, including action on a shareowner proposal,
as may properly come before the meeting.
Shareowners are cordially invited to attend the meeting. If you are a
shareowner of record and plan to attend, please complete and return the enclosed
Request for Admission Card. If you are a shareowner whose shares are not
registered in your own name and you plan to attend, please request an Admission
Card by writing to the Office of the Secretary, WH 2132, Johnson & Johnson, One
Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. Evidence of your stock
ownership, which you can obtain from your bank, stockbroker, etc., must
accompany your letter.
If you are unable to attend the meeting, you will be able to access the
meeting on the Internet. The Company will rebroadcast the meeting as a webcast
through the Johnson & Johnson website at www.jnj.com. The webcast will remain
available for replay for one week following the meeting. Visit the Johnson &
Johnson website at www.jnj.com and click on the Calendar of Events in the
Investor Relations section for details.
By order of the Board of Directors,
MICHAEL H. ULLMANN
Secretary
YOU CAN VOTE IN ONE OF THREE WAYS:
(1) Use the toll-free telephone number on your proxy card to vote by phone;
(2) Visit the web site noted on your proxy card to vote via the Internet;
or
(3) Sign, date and return your proxy card in the enclosed envelope to vote
by mail.
GENERAL INFORMATION
SHAREOWNERS ENTITLED TO VOTE. Holders of shares of the Common Stock of the
Company of record at the close of business on February 26, 2002 are entitled to
notice of and to vote at the Annual Meeting of Shareowners and at any and all
adjournments or postponements of the meeting. Each share entitles its owner to
one vote. The holders of a majority of the shares entitled to vote at the
meeting must be present in person or represented by proxy in order to constitute
a quorum for all matters to come before the meeting. On the record date there
were 3,047,147,480 shares outstanding.
Other than the election of directors, which requires a plurality of the
votes cast, each matter to be submitted to the shareowners requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Abstentions and broker non-votes are
counted only for purposes of determining whether a quorum is present at the
meeting.
HOW TO VOTE. Shareowners of record (that is, shareowners who hold their
shares in their own name) can vote any one of three ways:
(1) By Mail: Sign, date and return your proxy card in the enclosed
postage-paid envelope. If you sign and return your proxy card but do not
give voting instructions, the shares represented by that proxy will be
voted as recommended by the Board of Directors.
(2) By Telephone: Call the toll-free number on your proxy card to vote
by phone. You will need to follow the instructions on your proxy card and
the voice prompts.
(3) By Internet: Go to the web site listed on your proxy card to vote
through the Internet. You will need to follow the instructions on your
proxy card and the web site. If you vote through the Internet, you may
incur telephone and Internet access charges.
If you vote by telephone or the Internet, your electronic vote authorizes
the named proxies in the same manner as if you signed, dated and returned your
proxy card. IF YOU VOTE BY TELEPHONE OR THE INTERNET, YOU SHOULD NOT RETURN YOUR
PROXY CARD.
If your shares are held in the name of a bank, broker or other holder of
record (that is, "street name"), you will receive instructions from the holder
of record that you must follow in order for your shares to be voted. Telephone
and Internet voting also will be offered to shareowners owning shares through
most banks and brokers.
PROXY SOLICITATION. The accompanying proxy is solicited by the Board of
Directors of the Company. In that connection, this Proxy Statement is being
mailed to the shareowners on or about March 13, 2002 concurrently with the
mailing of the Company's 2001 Annual Report. In addition to this solicitation by
mail, several regular employees of the Company may solicit proxies in person or
by telephone. The Company has also retained the firm of Georgeson Shareholder
Communications, Inc. to aid in the solicitation of brokers, banks and
institutional and other shareowners for a fee of approximately $11,500, plus
reimbursement of expenses. All costs of the solicitation of proxies will be
borne by the Company. On the accompanying proxy a shareowner may substitute the
name of another person in place of those persons presently named as proxies. In
order to vote, a substitute must present adequate identification to the
Secretary before the voting occurs.
CHANGING YOUR VOTE. You may change your vote at any time before the proxy
is exercised. If you voted by mail, you may revoke your proxy at any time before
it is voted by executing and delivering a timely and valid later-dated proxy, by
voting by ballot at the meeting or by giving written notice to the Secretary of
the Company. If you voted by telephone or the Internet you may also change your
vote with a timely and valid later telephone or Internet vote, as the case may
be. Attendance at the meeting will not have the effect of revoking a proxy
unless you give proper written notice of revocation to the Secretary before the
proxy is exercised or you vote by written ballot at the meeting.
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ELECTRONIC DELIVERY OF PROXY MATERIALS AND ANNUAL REPORT. This Proxy
Statement and the Company's 2001 Annual Report are available on the Company's
Internet site at www.jnj.com. Instead of receiving paper copies of next year's
Proxy Statement and Annual Report in the mail, shareowners can elect to receive
an e-mail message which will provide a link to these documents on the Internet.
By opting to receive your proxy materials online, you will save the Company the
cost of producing and mailing documents to you, reduce the amount of mail you
receive and help preserve environmental resources. Johnson & Johnson shareowners
who enrolled in the electronic proxy delivery service last year will receive
their materials online this year.
Shareowners of record may enroll in the electronic proxy delivery service
for the 2003 Annual Meeting of Shareowners by registering online at
www.econsent.com/jnj. If you vote by Internet, simply follow the prompts that
will link you to www.econsent.com/jnj. Beneficial or "street name" shareowners
should see the information provided in the proxy materials mailed to them by
their bank or broker.
JOHNSON & JOHNSON EMPLOYEE SAVINGS PLANS. If you are an employee and hold
stock in one of the Johnson & Johnson employee savings plans, you will receive
one proxy card which covers those shares held for you in your savings plan, as
well as any other shares registered in your own name. If you vote in any of the
three ways described above, the Trustee of your savings plan will vote your
shares as you have directed. In accordance with the terms of the Johnson &
Johnson Savings Plan, if you hold shares in that Plan and do not vote, the Plan
Trustee will vote those shares in direct proportion to the shares held in that
Plan for which votes have been cast. If you hold shares in any other Johnson &
Johnson employee savings plan, including the Savings Plan for Union Represented
Employees, and do not vote, the Plan Trustee will not vote those shares.
REDUCE DUPLICATE MAILINGS. The Company is required to provide an Annual
Report to all shareowners who receive this Proxy Statement. If you are a
shareowner of record and have more than one account in your name or at the same
address as other shareowners of record, you may authorize the Company to
discontinue mailings of multiple Annual Reports. To do so, mark the designated
box on each proxy card for which you wish to discontinue to receive a duplicate
Annual Report. If you are voting by telephone or the Internet you can either
follow the prompts when you vote or give us instructions to discontinue mailings
of future duplicate Annual Reports.
SHAREOWNER PROPOSALS. To be included in the Board of Directors' proxy
statement and proxy card for the 2003 Annual Meeting of Shareowners, a
shareowner proposal must be received by the Company on or before November 13,
2002. In addition, under the terms of the Company's By-Laws, a shareowner who
intends to present an item of business at the 2003 Annual Meeting of Shareowners
(other than a proposal submitted for inclusion in the Company's proxy materials)
must provide notice of such business to the Company on or before November 13,
2002. Proposals and other items of business should be directed to the attention
of the Secretary at the principal office of the Company, One Johnson & Johnson
Plaza, New Brunswick, New Jersey 08933.
ELECTION OF DIRECTORS
NOMINEES. There are 13 nominees for election as directors of the Company
to hold office until the next Annual Meeting and until their successors have
been duly elected and qualified.
If the enclosed proxy is properly executed and received in time for the
meeting, it is the intention of the persons named in the proxy to vote the
shares represented thereby for the persons nominated for election as directors
unless authority to vote shall have been withheld. If any nominee should refuse
or be unable to serve, an event not anticipated, the proxy will be voted for
such person as shall be designated by the Board of Directors to replace such
nominee or, in lieu thereof, the Board of Directors may reduce the number of
directors.
Except for Mr. Robert J. Darretta, who was elected to the Board of
Directors in January 2002, all of the nominees were elected to the Board at the
last Annual Meeting and all are currently serving as directors of the Company.
In accordance with the Board's policy on retirement of directors,
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Mrs. Joan G. Cooney and Dr. John S. Mayo are not standing for re-election. In
addition, Mr. Ralph S. Larsen, Chairman of the Board and Chief Executive
Officer, has announced his intention to retire from the Company and will not
stand for re-election to the Board.
Following are summaries of the background and business experience and
descriptions of the principal occupations of the nominees.
[Gerard N. Burrow, GERARD N. BURROW, M.D., President and Chief Executive
M.D. Photo] Officer, Sea Research Foundation.
Dr. Burrow, 69, was elected to the Board of Directors in
1993 and is a member of the Nominating & Corporate
Governance Committee and Chairman of the Science and
Technology Advisory Committee. He has been serving in his
current position since January 1, 2002, following 10 years
at Yale University. Dr. Burrow had served as Special Advisor
to the President of Yale University for Health Affairs since
1997, following service since 1992 as Dean of the Yale
University School of Medicine. He previously served as Vice
Chancellor for health sciences and Dean of the University of
California, San Diego School of Medicine. Dr. Burrow is a
member of the Institute of Medicine of the National Academy
of Sciences and a Fellow of the American Association for the
Advancement of Science. He is also a Director of SURx, Inc.
and Sea Research Foundation and on the Corporation
Sub-Committee for Brown University School of Medicine.
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[James G. Cullen JAMES G. CULLEN, Retired President and Chief Operating
Photo] Officer, Bell Atlantic Corporation.
Mr. Cullen, 59, was elected to the Board of Directors in
1995 and is Chairman of the Audit Committee and a member of
the Compensation Committee. Mr. Cullen retired as President
and Chief Operating Officer of Bell Atlantic Corporation in
2000. He had assumed those positions in 1998, after having
been Vice Chairman since 1995 and, prior to that, President
since 1993. He was President and Chief Executive Officer of
Bell Atlantic-New Jersey, Inc. from 1989 to 1993. He is a
Director of Prudential Life Insurance Company, Agilent
Technologies, Inc. and Quantum Bridge Communications Inc.
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[Robert J. Darretta, ROBERT J. DARRETTA, JR., Vice President, Finance; Chief
Jr. Photo] Financial Officer and Member, Executive Committee.
Mr. Darretta, 55, was elected to the Board of Directors in
January 2002. The Board of Directors has named Mr. Darretta
as Executive Vice President, effective following the Annual
Meeting. Mr. Darretta joined the Company in 1968 and held
several accounting and finance positions before becoming
Managing Director of Ethicon Italy in 1985. He was named
President of IOLAB Corporation in 1988 and in 1995 became
Treasurer of the Company. Mr. Darretta was named Vice
President, Finance and Chief Financial Officer and appointed
to the Executive Committee in 1997.
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[M. Judah Folkman, M. JUDAH FOLKMAN, M.D., Senior Associate in Surgery and
M.D. Photo] Director, Surgical Research Laboratory, Children's Hospital
and Andrus Professor of Pediatric Surgery and Professor of
Cell Biology, Harvard Medical School, Department of Surgery.
Dr. Folkman, 69, was elected to the Board of Directors in
1998 and is a member of the Science and Technology Advisory
Committee and the Public Policy Advisory Committee. Dr.
Folkman has been with Children's Hospital since 1967, having
served as Surgeon-in-Chief of Children's Hospital from 1967
to 1981, and with Harvard Medical School since 1967. He is a
member of the National Academy of Sciences and the American
Academy of Arts and Sciences. In recognition of his founding
the field of angiogenesis research he has received numerous
honorary degrees and awards, among the most recent of which
are The Franklin Institute's 2001 Benjamin Franklin Award in
Life Science, the 1998 Keio University (Tokyo) Medical
Science Prize and the 1997 Charles S. Mott Prize of the
General Motors Cancer Research Foundation.
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[Ann Dibble Jordan ANN DIBBLE JORDAN, Former Director, Social Services
Photo] Department, Chicago Lying-In Hospital, University of Chicago
Medical Center.
Mrs. Jordan, 67, was elected to the Board of Directors in
1981 and is a member of the Nominating & Corporate
Governance Committee and the Public Policy Advisory
Committee. She assumed her previous responsibilities at
Chicago Lying-In Hospital in 1970 after having served as a
Caseworker and then a Senior Caseworker at the University of
Chicago Hospital. She is also a former Assistant Professor
at the University of Chicago School of Social Service
Administration. She is a Director of Automatic Data
Processing, Catalyst and Citigroup Inc. Mrs. Jordan is also
a Director of The Phillips Collection, The National Symphony
Orchestra, the Kennedy Center for the Performing Arts, Sloan
Kettering Medical Center and The University of Chicago.
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[Arnold G. Langbo ARNOLD G. LANGBO, Retired Chairman of the Board and Chief
Photo] Executive Officer, Kellogg Company.
Mr. Langbo, 64, was elected to the Board of Directors in
1991 and is a member of the Audit Committee and Chairman of
the Compensation Committee. Mr. Langbo retired as Chairman
of the Board of Kellogg Company in 2000. He had held that
position since 1992 after having been President and Chief
Operating Officer of Kellogg since 1990. He also served as
Chief Executive Officer from 1992 until 1999. Mr. Langbo
joined Kellogg Canada Inc. in 1956 and served in a number of
management positions in Canada and the United States before
being named President of Kellogg International in 1986. Mr.
Langbo is a Director of Weyerhaeuser Company, Whirlpool
Corporation and The International Youth Foundation.
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[JAMES T. LENEHAN JAMES T. LENEHAN, Vice Chairman, Board of Directors; Member,
PHOTO] Executive Committee and Worldwide Chairman, Medical Devices
& Diagnostics Group.
Mr. Lenehan, 53, was elected to the Board of Directors and
named Vice Chairman of the Board in 2001. The Board of
Directors has named Mr. Lenehan as President of the Company
also, effective following the Annual Meeting. Mr. Lenehan
joined the Company in 1976 and held several marketing
management positions before becoming President of McNeil
Consumer Products Company in 1990. He became a Company Group
Chairman in 1993 and was appointed to the Executive
Committee in 1994. Mr. Lenehan was named Worldwide Chairman,
Consumer Pharmaceuticals & Professional Group in 1994 and
Worldwide Chairman, Medical Devices & Diagnostics Group in
1999. He is a member of the Board of Trustees of the
Healthcare Leadership Council.
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[Leo F. Mullin Photo] LEO F. MULLIN, Chairman and Chief Executive Officer, Delta
Air Lines, Inc.
Mr. Mullin, 59, was elected to the Board of Directors in
1999 and is a member of the Audit Committee and the
Nominating & Corporate Governance Committee. Mr. Mullin has
been President and Chief Executive Officer of Delta since
1997 and was named Chairman in 1999. Mr. Mullin was Vice
Chairman of Unicom Corporation and its principal subsidiary,
Commonwealth Edison Company, from 1995 to 1997. He was an
executive of First Chicago Corporation from 1981 to 1995,
serving as that company's President and Chief Operating
Officer from 1993 to 1995, and as Chairman and Chief
Executive Officer of American National Bank, a subsidiary of
First Chicago Corporation, from 1991 to 1993. Mr. Mullin is
also a Director of BellSouth Corporation. He is a member of
the board of the Air Transport Association of America and a
former Chairman of the International Air Transport
Association. He is also a member of The Business Council and
The Business Roundtable.
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[Henry B. Schacht HENRY B. SCHACHT, Chairman of the Board, Lucent Technologies
Photo] Inc.; Managing Director and Senior Advisor, E.M. Warburg,
Pincus & Co. (currently on non-paid leave of absence).
Mr. Schacht, 67, was elected to the Board of Directors in
1997 and is a member of the Audit Committee and the Chairman
of the Nominating & Corporate Governance Committee. Mr.
Schacht returned to Lucent Technologies in October 2000 as
Chairman of the Board and, until January 2002, Chief
Executive Officer. Previously, he had been Lucent's Chairman
of the Board from April 1996 until February 1998 and Chief
Executive Officer from February 1996 to October 1997.
Earlier in 2000, Mr. Schacht had served as Chairman of the
Lucent spin-off, Avaya Inc., until his return to Lucent. Mr.
Schacht was Chairman (1977-1995) and Chief Executive Officer
(1973-1994) of Cummins Engine Company, Inc. He is also a
Director of Aluminum Company of America, The New York Times
Company, Avaya Inc., Agere Systems, Inc. and Knoll, Inc., as
well as a member of The Business Council. Mr. Schacht is a
former Chairman of the Board of Trustees of The Ford
Foundation and a Trustee of the Metropolitan Museum of Art.
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[Maxine F. Singer, MAXINE F. SINGER, PH.D., President of the Carnegie
Ph.D. Photo] Institution of Washington.
Dr. Singer, 71, was elected to the Board of Directors in
1991 and is a member of the Science and Technology Advisory
Committee and the Benefits Committee. Dr. Singer became
President of the Carnegie Institution of Washington in 1988
after serving for over thirty years at the National
Institutes of Health where she advanced to be Chief of the
Laboratory of Biochemistry at NIH's National Cancer
Institute. Dr. Singer is a member of the National Academy of
Sciences, the American Philosophical Society, the Pontifical
Academy of Sciences and the Governing Board of the Weizmann
Institute of Science. She is also a Director of Perlegen
Sciences Inc.
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[JOHN W. SNOW PHOTO] JOHN W. SNOW, Chairman, President and Chief Executive
Officer, CSX Corporation.
Mr. Snow, 62, was elected to the Board of Directors in 1998
and is a member of the Compensation Committee and the
Benefits Committee. Mr. Snow was named President and Chief
Executive Officer of CSX Corporation in 1989 and added the
title of Chairman in 1991. Mr. Snow is also a Director of
Circuit City Stores, Inc., Verizon Communications Inc. and
U.S. Steel Corporation. He is a member of The Business
Council and The Business Roundtable and is serving a
three-year term as Chairman of the Air Traffic Services
Subcommittee of the FAA Management Advisory Council. Mr.
Snow is also a member of the Board of Trustees of Johns
Hopkins University.
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[WILLIAM C. WELDON WILLIAM C. WELDON, Vice Chairman, Board of Directors and
PHOTO] Member, Executive Committee.
Mr. Weldon, 53, was elected to the Board of Directors and
named Vice Chairman of the Board in 2001. The Board of
Directors has named Mr. Weldon as Chairman, Board of
Directors and Chief Executive Officer, effective following
the Annual Meeting. Mr. Weldon joined the Company in 1971,
and served in several sales, marketing and international
management positions before becoming President of Ethicon
Endo-Surgery in 1992 and Company Group Chairman of Ethicon
Endo-Surgery in 1995. He was appointed to the Executive
Committee and named Worldwide Chairman, Pharmaceuticals
Group in 1998. As Vice Chairman, Mr. Weldon is responsible
for the Pharmaceuticals Group and the Consumer
Pharmaceuticals & Nutritional Products Group.
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[ROBERT N. WILSON ROBERT N. WILSON, Senior Vice Chairman, Board of Directors
PHOTO] and Vice Chairman, Executive Committee.
Mr. Wilson, 61, was elected to the Board of Directors in
1986. He joined the Company in 1964, served in several sales
and marketing management positions and was appointed Company
Group Chairman in 1981 and appointed to the Executive
Committee in 1983. He was appointed Chairman of a Sector
Operating Committee in 1985 and was appointed Vice Chairman
of the Board of Directors in 1989. He assumed expanded
responsibilities as Vice Chairman of the Executive Committee
in 1994 and was named Senior Vice Chairman of the Board of
Directors in 2001. Mr. Wilson is also a Director of U.S.
Trust Corporation (a wholly-owned subsidiary of The Charles
Schwab Corporation) and Amerada Hess Corporation.
STOCK OWNERSHIP/CONTROL
The following table sets forth information regarding beneficial ownership
of the Company's Common Stock owned by each director and each executive officer
named in the Summary Compensation Table and by all directors and executive
officers as a group. Each of the individuals/groups listed below is the owner of
less than one percent of the Company's outstanding shares. Because they serve as
co-trustees of two trusts which hold stock for the benefit of others, Messrs.
Larsen and Wilson "control" an additional 13,798,233 shares of the Company's
stock in which they have no economic interest. In addition to such shares, the
directors and executive officers as a group own/control a total of 3,718,679
shares, the aggregate of 17,516,912 shares representing less than 1% of the
shares outstanding. All stock ownership is as of January 31, 2002 (except for
shares held in the Company's Dividend Reinvestment Plan or Savings Plan, and
Common Stock equivalent units credited under the Deferred Fee Plan for
Nonemployee Directors or the Executive Income Deferral Plan, which are listed as
of December 31, 2001) and also reflects the two-for-one stock split of the
Company effective May 22, 2001.
SHARES UNDER
NUMBER OF COMMON EXERCISABLE
NAME SHARES(1)(2) OPTIONS(3)
---- ---------------- ------------
Gerard N. Burrow.................................... 14,605 14,600
Joan Ganz Cooney.................................... 24,549 14,600
James G. Cullen..................................... 54,499 14,600
Robert J. Darretta.................................. 189,393 253,000
M. Judah Folkman.................................... 8,174 9,600
Ann Dibble Jordan................................... 19,616 14,600
Arnold G. Langbo.................................... 32,961 14,600
Ralph S. Larsen..................................... 1,365,104 2,086,800
James T. Lenehan.................................... 135,005 689,200
John S. Mayo........................................ 97,364 14,600
Leo F. Mullin....................................... 10,401 7,600
Henry B. Schacht.................................... 10,441 12,400
Maxine F. Singer.................................... 37,062 12,400
John W. Snow........................................ 7,931 10,600
William C. Weldon................................... 98,054 335,040
Robert N. Wilson.................................... 1,156,365 1,280,000
All directors and executive officers as a
group(24)........................................... 3,718,679 6,478,240
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(1) Includes an aggregate of 235,293 Common Stock equivalent units credited to
nonemployee directors under the Deferred Fee Plan for Nonemployee Directors
and an aggregate of 59,103
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Common Stock equivalent units credited to the named executive officers
(73,202 units to all executive officers as a group) under the Executive
Income Deferral Plan for an aggregate of 308,495 units to all directors and
executive officers as a group. In addition, 532,246 of the shares listed as
owned by Mr. Larsen and 101,030 of the shares listed as owned by Mr. Wilson,
represent the net gain of shares of Common Stock resulting from the exercise
of stock options, of which the actual distribution of these shares to these
executive officers has been deferred under the terms of the Company's Stock
Option Gain Deferral Plan.
(2) The shares described as "owned" are shares of the Company's Common Stock
owned by each listed person and by members of his or her household and are
held either individually, jointly or pursuant to a trust arrangement. The
directors and executive officers disclaim beneficial ownership of an
aggregate of 389,169 of these shares, including, 228,576 shares listed as
owned by Mr. Larsen, 20,000 shares listed as owned by Mr. Cullen, 775 shares
listed as owned by Mr. Lenehan, 72 shares listed as owned by Dr. Singer, 200
shares listed as owned by Mr. Snow and 100,800 shares listed as owned by Mr.
Wilson.
(3) Includes shares under options exercisable on January 31, 2002 and options
which become exercisable within 60 days thereafter.
DIRECTORS' FEES, COMMITTEES AND MEETINGS. Directors who are employees of
the Company receive no compensation for their services as directors or as
members of committees. Each director who is not an employee of the Company
receives an award valued at approximately $10,000 in the form of the Company's
Common Stock upon first becoming a member of the Board of Directors and receives
an annual fee of $65,000 for his or her services as director. Of such annual
fee, $20,000 is required to be deferred in Common Stock equivalent units under
the Deferred Fee Plan for Nonemployee Directors until termination of his or her
directorship. Directors also receive non-retainer equity compensation each year
in the form of a stock option grant. The number of options granted is determined
annually and is currently 4,750 shares per person. In addition, directors
receive $5,000 for service on a committee of the Board of Directors, or $8,000
if chairperson of the committee. Nonemployee directors receive a meeting fee of
$1,500 per day for committee meetings held on days other than Board of Directors
meeting days. In fiscal year 2001, a total of $16,500 was paid to four directors
for attending additional committee meetings. A director may elect to defer
payment of all or a part of the fees until, or beyond, termination of his or her
directorship. Deferred fees (other than the required deferral referred to above)
may earn additional amounts based on a hypothetical investment in the Company's
Common Stock or, in the case of directors who have served on the Board since
prior to January 1, 1996, on the increase in value of units under the
Certificate of Extra Compensation Program, up to the time of termination of
his/her directorship. Deferred fees beyond termination of directorship can only
earn additional amounts based on a hypothetical investment in the Company's
Common Stock. All Common Stock equivalent units held in each nonemployee
director's Deferred Fee Account receive dividend equivalents.
During the last fiscal year the Board of Directors met eight times. Each
director attended at least 75% of the total regularly scheduled meetings of the
Board of Directors and the committees on which they served.
The Board of Directors has a standing Audit Committee, Compensation
Committee and Nominating & Corporate Governance Committee.
The members of the Audit Committee are Mr. Langbo, Mr. Mullin, Mr. Schacht
and Mr. Cullen (Chairman). The Audit Committee is comprised entirely of
nonemployee, independent members of the Board of Directors and operates under a
written charter adopted by the Board of Directors, which is required to be
provided to shareowners every three years, unless amended earlier. The Audit
Committee assists the Board of Directors in fulfilling its responsibilities of
ensuring that management is maintaining an adequate system of internal controls
such that there is reasonable assurance that assets are safeguarded and that
financial reports are properly prepared; that there is consistent application of
generally accepted accounting principles; and that there is compliance with
management's policies and procedures. In performing these functions, the Audit
Committee meets
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periodically with the independent auditors, management, and internal auditors to
review their work and confirm that they are properly discharging their
respective responsibilities. In addition, the Audit Committee recommends the
independent auditors for appointment by the Board of Directors. The Audit
Committee met four times during the last fiscal year.
The members of the Compensation Committee are Mrs. Cooney, Mr. Cullen, Mr.
Snow and Mr. Langbo (Chairman). The primary function of the Compensation
Committee is to review the compensation philosophy and policy of the Management
Compensation Committee, a non-Board committee composed of Messrs. Larsen
(Chairman), Wilson (Senior Vice Chairman), Darretta (Vice President, Finance)
and Deyo (Vice President, Administration) which determines management and
executive compensation (except for executive officers of the Company) and
establishes fringe benefit and other compensation policies. The compensation and
benefits of the executive officers of the Company (which includes the members of
the Management Compensation Committee) is determined by the Compensation
Committee. The Compensation Committee is also responsible for the administration
of the Company's stock option plans and is the approving authority for
management recommendations with respect to option grants. During the last fiscal
year there were four meetings of the Compensation Committee.
The members of the Nominating & Corporate Governance Committee are Dr.
Burrow, Mrs. Jordan, Mr. Mullin and Mr. Schacht (Chairman). The Nominating &
Corporate Governance Committee is responsible for overseeing matters of
corporate governance, including the evaluation of the performance and practices
of the Board of Directors and the Chief Executive Officer of the Company. It is
also within the charter of the Nominating & Corporate Governance Committee to
review the Company's management succession plans and executive resources. In
addition, the Nominating & Corporate Governance Committee reviews possible
candidates for the Board of Directors and recommends the nominees for directors
to the Board of Directors for approval. The Nominating & Corporate Governance
Committee considers suggestions from many sources, including shareowners,
regarding possible candidates for director. Such suggestions, together with
appropriate biographical information, should be submitted to the Secretary of
the Company. The Nominating & Corporate Governance Committee met four times
during the last fiscal year.
A discussion of the role of the Board of Directors in the Company's
strategic planning process can be found on the Company's website at www.jnj.com
under "Company Information -- Corporate Governance" in the Investor Relations
section.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 2001 all reports for the Company's
executive officers and directors that were required to be filed under Section 16
of the Securities Exchange Act of 1934 were timely filed, except that: one
report was filed late by Mr. Russell C. Deyo, Member of the Executive Committee,
to reflect a stock-for-stock exercise and hold of an employee stock option; one
report was filed late by Mr. Leo F. Mullin, a member of the Board, to reflect
two purchases of common stock in March 2001 by a broker for a family limited
partnership in which Mr. Mullin is a partner; one report was filed late by Ms.
Christine A. Poon, Member of the Executive Committee, to reflect her pro-rata
share of a sale of common stock held by a family limited partnership; the
original Form 3 filed by Ms. Colleen A. Goggins, Member of the Executive
Committee, did not include 192 shares of common stock held in a broker's
account, which have subsequently been reported; and the original Form 3 filed by
Mr. Brian D. Perkins, Member of the Executive Committee, did not include 480
shares of common stock, which have subsequently been reported.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reports to and acts on behalf of the Board of Directors
by providing oversight of the financial management, independent auditors and
financial reporting procedures of the Company. The Company's management is
responsible for preparing the Company's financial
10
statements and the independent auditors are responsible for auditing those
financial statements. The Audit Committee is responsible for overseeing the
conduct of these activities by the Company's management and the independent
auditors.
In this context, the Committee has met and held discussions with management
and the independent auditors. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent auditors.
The Committee has discussed with the independent auditors matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication With
Audit Committees), as amended. In addition, the independent auditors provided to
the Audit Committee the written disclosures required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee and the independent auditors have discussed the auditors' independence
from the Company and its management, including the matters in those written
disclosures. Additionally, the Committee considered the management consulting
services, the financial and other information systems design and implementation
services and other non-audit services provided by the independent auditors and
the fees and costs billed and expected to be billed by the independent auditors
for those services (as shown on page 21 of this Proxy Statement). The Committee
has discussed with management the procedures for selection of consultants and
the related competitive bidding practices and fully considered whether those
services provided by the independent auditors are compatible with maintaining
auditor independence.
In addition, the Committee discussed with management, and took into
consideration when issuing this Report, the policy adopted by the Company in
January 2002, which prohibits the Company or any of its affiliates from entering
into most non-audit related consulting arrangements with its independent
auditors on a going-forward basis. (This policy is discussed in further detail
on page 21 of this Proxy Statement.)
The Committee has discussed with the Company's internal and independent
auditors, with and without management present, their evaluations of the
Company's internal accounting controls and the overall quality of the Company's
financial reporting.
In reliance on the reviews and discussions with management and the
independent auditors referred to above, the Committee believes that the
non-audit services provided by the independent auditors are compatible with, and
did not impair, auditor independence.
In further reliance on the reviews and discussions with management and the
independent auditors referred to above, the Audit Committee recommended to the
Board of Directors on February 11, 2002, and the Board has approved, the
inclusion of the audited financial statements in the Company's Annual Report on
Form 10-K for the fiscal year ended December 30, 2001, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended to the
Board of Directors, and the Board has approved, subject to shareowner
ratification, the selection of the Company's independent auditors.
Mr. James G. Cullen, Chairman
Mr. Arnold G. Langbo
Mr. Leo F. Mullin
Mr. Henry B. Schacht
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE OF THE BOARD
The Compensation Committee is composed entirely of non-employee,
independent members of the Board of Directors. It is the Compensation
Committee's responsibility to review and approve all compensation actions for
the Chief Executive Officer and other executive officers of the Company.
JOHNSON & JOHNSON COMPENSATION POLICY AND OBJECTIVES
Johnson & Johnson's executive compensation programs are designed to enable
the Company to attract, retain and motivate the high caliber of executives
required for the success of the business. Overall, the intent of Johnson &
Johnson's Executive Compensation Program is to provide compensation
opportunities which are comparable to the opportunities provided by a select
group of high performing companies similar to Johnson & Johnson, as described
below. This objective is achieved through a variety of compensation programs,
summarized below, which support both the current and long-term performance of
the business.
The primary responsibility of the Company's Chief Executive Officer and
executive officers is to ensure the long-term health and growth of the Company.
This responsibility is summarized in the Johnson & Johnson Credo, which defines
the obligations of Johnson & Johnson employees to strengthen the ethical, human
and business foundations of the Company. The Credo describes the
responsibilities of the Company to its customers and others with whom it does
business, to its employees, to the communities in which the Company has a
presence as well as to the world community, and to its shareowners. The Credo
merges these business and ethical responsibilities by stating: "When we operate
according to these principles, the stockholders should realize a fair return."
The compensation of Johnson & Johnson's Chief Executive Officer is
determined by the Compensation Committee of the Board of Directors based on its
assessment of the Company's financial and non-financial performance against the
background of the factors and principles outlined in the Credo. With respect to
financial performance, the Committee has identified several factors which are
critical to the success of the business, including Sales Growth, Earnings Per
Share (EPS) Growth, increase in Cash Flow, New Product Flow and growth in
Shareowner Value. In evaluating performance against these factors, Johnson &
Johnson's results are compared to results of a premium group of high performing
companies in the consumer, pharmaceutical, medical device and diagnostics health
care fields with comparable sales volumes and above average EPS growth rates and
financial strength. There are currently fifty-three companies in this comparison
group, which is subject to occasional change as the Company or its competitors
change their focus, merge or are acquired, or as new competitors emerge.
Sales Growth is measured as the percentage increase in sales volume from
one year to the next. EPS Growth is assessed in the same manner. Cash Flow is
measured as the Net Cash Flows from Operating Activities as reported in the
Consolidated Statement of Cash Flows. New Product Flow is assessed by reviewing
the percentage of sales resulting from the sale of new products introduced in
the past five years. Shareowner Value is measured as the increase in stock price
plus dividend return over a five year period.
The Compensation Committee believes it is crucial that these financial and
non-financial factors are managed well, in order to ensure superior return to
Johnson & Johnson's shareowners over the long-term. Therefore, while performance
in these areas is reviewed on an annual basis, the primary consideration in
assessing performance is corporate results over a longer period, usually five
years. No specific fixed weighting or formula is applied to these factors in
determining performance. Rather, the Compensation Committee exercises its
judgment in evaluating these factors and in determining appropriate
compensation.
12
A discussion of 2001 performance reviewed by the Compensation Committee can
be found under "Decisions on 2001 Compensation".
JOHNSON & JOHNSON'S COMPENSATION PROGRAMS
BASE SALARY
The Base Salary for all employees exempt from the Fair Labor Standards Act,
which includes executives, is managed through the Johnson & Johnson Salary
Administration Program. Under this Program, increases in Base Salary are
governed by guidelines covering three factors: Merit (an individual's
performance); Market Parity (to adjust salaries of high performing individuals
based on the competitive market); and Promotions (to reflect increases in
responsibility). In assessing Market Parity, the Company targets to pay base
salaries that are, overall, equal on average to the select group of premium
companies referred to above.
These guidelines are set each year and vary from year to year to reflect
the competitive environment and to control the overall cost of salary growth.
Merit increases are based on individual performance and can range from 0% to
over 200% of the merit guideline.
The domestic salary guideline for all exempt employees for 2001 and 2002
was 4.5% for merit increases. Guidelines for market parity and promotion
adjustments are as approved in each operating company's budget. Those guidelines
are determined based on each unit's overall competitive position with respect to
salaries paid versus the marketplace.
CASH AND STOCK INCENTIVE COMPENSATION PROGRAMS
To reward performance, Johnson & Johnson provides its executive officers
with additional current compensation in the form of executive cash bonus and
stock awards which is competitive with annual incentives provided by other
companies in the premium community. No fixed weighting or formula is applied by
the Compensation Committee to corporate performance versus individual
performance in determining incentive cash bonus and stock awards for the Chief
Executive Officer and executive officers. The amounts of Awards to executive
officers are determined by the Committee acting in its discretion subject to the
maximum amounts specified in the Company's Executive Incentive Plan. Such
determination, except in the case of the Award for the Chairman, is made after
considering the recommendations of the Chairman and such other matters as the
Committee deems relevant. The Committee, acting in its discretion, may determine
to pay a lesser Award than the maximum specified. For the Chief Executive
Officer and other executive officers the amount of the total incentive is
divided between cash and stock at the discretion of the Committee.
STOCK OPTIONS
The Stock Option Plan is a long-term plan designed to link executive
rewards with shareowner value over time. Johnson & Johnson's award practice uses
a percentage of each year's base salary, expressed as a range of opportunity, to
arrive at the range of option shares available to be granted. Individual grants
are made annually and vary within that range based on performance. This "annual
multiple" approach results in grants which vary from year to year based on
assessed performance, stock price and base salary.
No stock option awards are made in the absence of satisfactory performance.
Performance is evaluated by the Compensation Committee based on the executive's
individual contribution to the long-term health and growth of the Company and
the Company's performance based on the factors discussed above. No fixed
weighting or formula is applied to corporate performance versus individual
performance in determining stock option awards. Specifically, for the Chief
Executive Officer and other named executive officers, the Committee does not
apply a mathematical formula that relates financial and/or non-financial
performance to the number of options awarded.
13
In the event that the stock price declines to a level below the option
grant price, options are not revalued or reissued. Vesting in awards made prior
to December 1997 generally occurred over a period from two to six years. Vesting
in awards granted in or after December 1997 generally occurs three years from
grant.
CERTIFICATES OF EXTRA COMPENSATION
Certificates of Extra Compensation (CECs) provide deferred compensation
that is paid at the end of an executive's career. CECs are performance units
which measure the Company's value based on a formula composed of one-half of the
Company's net asset value and one-half of its earning power value, relative to
the number of shares of Johnson & Johnson Common Stock outstanding. Earning
power value is calculated by taking the capitalized value of earnings averaged
over the previous five years.
The CEC program uniquely reflects Johnson & Johnson's commitment to the
long-term. No awards are paid out to executives during employment. Although the
units vest over a five year period from grant, the final value of those units is
not determined until retirement or termination of employment. The value of the
program is purely performance driven. The Company pays dividend equivalents on
units awarded. Dividend equivalents are paid at the same rate provided to
shareowners on a share of Johnson & Johnson Common Stock, and are paid
quarterly.
Awards of CECs to the Chief Executive Officer and executive officers are
targeted to provide an above average long-term compensation opportunity as
compared to the premium community. Award amounts are based on the Compensation
Committee's evaluation of individual performance, based on the executive's
individual contribution to the long-term health and growth of the Company and
the Company's performance based on the factors discussed above. No fixed
weighting or formula is applied to corporate performance versus individual
performance in determining CEC awards.
DECISIONS ON 2001 COMPENSATION
Johnson & Johnson's performance for the most recent five year period ranked
in the upper half of the premium community companies in all financial factors
considered: Sales Growth, Shareowner Value, EPS Growth Rate and increase in Cash
Flow. The Company met its goal for New Product Flow.
With respect to non-financial performance, management continued to excel in
the area of managing Credo responsibility. Various initiatives undertaken by
Johnson & Johnson embody the principles of the Credo by addressing its
responsibilities to its customers, employees and the community.
None of the Named Officers were granted stock options or CECs in fiscal
year 2001. During 2001, the Compensation Committee changed the timing of
granting annual stock option awards and CECs to all executives, including the
Named Officers. For fiscal year 2000, and prior years, annual stock option
awards and CECs were granted to executive officers in December of each year.
Starting with fiscal year 2001, stock option awards and CECs are granted in
February of the following year. The stock option awards and CECs shown in the
Summary Compensation Table reflect awards made in February 2002 for 2001
performance.
Mr. Larsen's compensation awards were made based upon the Compensation
Committee's assessment of the Company's financial performance in the five areas
outlined above and its non-financial performance against the background of the
Credo as outlined above.
The above performance results were evaluated based on the overall judgment
of the Compensation Committee with no fixed or specific mathematical weighting
applied to each element of performance. Based on the Compensation Committee's
judgment, compensation awards for 2001, in total, were consistent with
established targets.
14
Mr. Larsen was awarded an annual salary increase in January 2001 of 6%. The
2001 annual incentive (comprised of cash bonus and stock award) paid to Mr.
Larsen was slightly above the target amount. No stock options or CECs were
granted to Mr. Larsen for 2001 performance due to his projected July 2002
retirement.
TAX DEDUCTIBILITY CONSIDERATIONS
The Compensation Committee has reviewed the Company's compensation plans
with regard to the deduction limitation under the Omnibus Budget Reconciliation
Act of 1993 (the "Act") and the final regulations interpreting the Act which
have been adopted by the Internal Revenue Service and the Department of the
Treasury. Based on this review, the Committee has determined that the Johnson &
Johnson Stock Option Plans, as previously approved by shareowners, meet the
requirements for deductibility under the Act. In order to permit the future
deductibility of cash bonus and stock incentive awards for certain executive
officers of the Company, the Committee and the Board of Directors have adopted
an Executive Incentive Plan that was approved by shareowners. As a result, all
bonus and stock awards qualify as performance based and are not subject to the
tax deductibility limitation of Section 162(m). In addition, the Committee has
approved the Executive Income Deferral Plan that allows an individual to elect
to defer a portion of Base Salary, CEC Dividend Equivalents and Cash and Stock
Bonus Awards. Participation in the Plan is limited to Executive Committee
members and is voluntary. Accordingly, any amounts that would otherwise result
in non-tax deductible compensation may be deferred under the Plan. As a result
of the implementation of the Johnson & Johnson Executive Incentive Plan and
elections made under the Executive Income Deferral Plan, the Company maximizes
the tax deduction available under Section 162(m). However, in some cases, the
Compensation Committee may elect to exceed the tax-deductible limits. This may
be necessary for the Company to meet competitive market pressures and to ensure
that it is able to attract and retain top talent to successfully lead the
organization.
Arnold G. Langbo, Chairman
Joan G. Cooney
James G. Cullen
John W. Snow
15
SHAREOWNER RETURN PERFORMANCE GRAPH
Following is a line graph comparing the cumulative total shareowner return
on the Company's Common Stock for a period of five years ending December 31,
2001 against the cumulative total return of the Standard & Poor's 500 Stock
Index, the Standard & Poor's Diversified Health Care Index, the Standard &
Poor's Pharmaceutical Index and the Standard & Poor's Health Care Equipment
Index. The graph and table assume that $100 was invested on December 31, 1996 in
the Company's Common Stock, the Standard & Poor's 500 Stock Index, the Standard
& Poor's Diversified Health Care Index, the Standard & Poor's Pharmaceutical
Index and the Standard & Poor's Health Care Equipment Index and that all
dividends were reinvested.
In prior years, Johnson & Johnson was included in the Standard & Poor's
Diversified Health Care Index, and the Company's 2001 proxy statement included a
comparison of the cumulative total shareowner return on the Company's Common
Stock against the return of the Standard & Poor's Diversified Health Care Index.
Standard & Poor's discontinued its Diversified Health Care Index as of December
31, 2001, and has placed the Company in the Standard & Poor's Pharmaceutical
Index. In addition to the Standard & Poor's Pharmaceutical Index, the Company
has included the Standard & Poor's Health Care Equipment Index in this
performance graph due to the significance of the Company's Medical Devices and
Diagnostics business. In future proxy statements the Company intends to include
the Standard & Poor's Pharmaceutical Index and Health Care Equipment Index in
this performance graph, and will no longer include the discontinued Diversified
Health Care Index.
FIVE-YEAR CUMULATIVE TOTAL SHAREOWNER RETURN (1996-2001)
[LINE GRAPH]
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------
Johnson & Johnson $100.00 $134.32 $173.30 $194.87 $222.68 $253.93
S&P 500 Index $100.00 $133.35 $171.46 $207.54 $188.65 $166.24
S&P Pharmaceutical $100.00 $151.02 $222.25 $193.18 $259.80 $218.89
S&P Health Care
Equipment $100.00 $121.90 $171.37 $156.98 $229.24 $216.45
S&P Diversified
Health Care $100.00 $146.08 $212.81 $203.35 $278.99 $274.57
16
EXECUTIVE COMPENSATION
The following table shows, for each of the last three fiscal years, the
annual compensation paid to or earned by the Company's Chief Executive Officer
and the other four most highly compensated executive officers (the "Named
Officers") in all capacities in which they served:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1) LONG TERM
------------------------------------ COMPENSATION
NAME OTHER AWARDS
AND ANNUAL ------------ ALL OTHER
PRINCIPAL COMPEN- OPTIONS COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION($) (#) SATION($)
--------- ---- ---------- ---------- ---------- ------------ ---------
(2) (3) (4)(5) (6)
R. S. Larsen 2001 $1,525,000 $1,610,868 $2,143,569 -- $68,625
Chairman/CEO 2000 1,435,000 1,550,287 1,653,620 1,500,000 64,575
1999 1,365,000 1,409,629 1,437,529 500,000 61,425
R. N. Wilson 2001 $1,050,000 $1,113,508 $1,952,601 100,000 $47,250
Senior Vice Chairman 2000 980,000 1,049,689 1,420,374 500,000 44,100
1999 930,000 923,077 1,168,656 230,000 41,850
W. C. Weldon 2001 $ 863,462 $ 871,761 $ 415,144 600,000 $38,856
Vice Chairman 2000 712,500 675,385 298,171 240,000 32,063
1999 575,000 476,806 206,169 160,000 25,875
J. T. Lenehan 2001 $ 842,308 $ 864,965 $ 644,161 400,000 $37,904
Vice Chairman 2000 730,000 625,385 440,471 240,000 32,850
1999 660,000 505,641 299,930 160,000 29,700
R. J. Darretta 2001 $ 750,000 $ 604,679 $ 452,689 150,000 $33,750
Vice President, 2000 650,000 575,479 343,227 200,000 29,250
Finance 1999 512,500 407,414 277,512 150,000 23,063
------------------
(1) Includes amounts paid and deferred.
(2) Bonus amounts are comprised of cash and the fair market value of stock
awards on the date award is issued.
(3) Amounts include dividend equivalents paid under the Certificate of Extra
Compensation (CEC) Program (long-term incentive plan).
(4) Adjusted to reflect Company's two-for-one stock split in May 2001.
(5) Stock option awards listed for 2001 were granted on February 11, 2002 as
compensation for fiscal year 2001. The options were granted at an exercise
price equal to the fair market value of the Company's Common Stock on the
date of grant. All of the options become exercisable on the third
anniversary of date of grant, which is the same vesting schedule for all
executives granted options on such date.
(6) Amount shown is the Company's matching contribution to the 401(k) Savings
Plan and related supplemental plan.
17
STOCK OPTIONS
None of the Named Officers were granted stock options during the Company's
last fiscal year. In 2001, the Compensation Committee changed the timing of
granting annual stock option grants to all eligible employees, including
executive officers of the Company. For fiscal year 2000, and prior years, annual
stock option awards were granted to executive officers in December of each such
year. Starting with fiscal year 2001, stock option awards are granted in
February of the following year. As a result, no stock options were granted to
the Named Officers in fiscal year 2001. The following table contains information
with respect to the grant of stock options under the Company's 2000 Stock Option
Plan to the Named Officers in February 2002, as compensation for performance in
2001.
OPTION GRANTS WITH RESPECT TO LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) IN 2001 ($/SH) DATE VALUE($)(2)
---- ------------- ---------- -------- ---------- -----------
Ralph S. Larsen.................. -- -- -- -- --
Robert N. Wilson................. 100,000 0.2% $57.30 2/10/12 $1,549,800
William C. Weldon................ 600,000 1.2% $57.30 2/10/12 $9,298,800
James T. Lenehan................. 400,000 0.8% $57.30 2/10/12 $6,199,200
Robert J. Darretta............... 150,000 0.3% $57.30 2/10/12 $2,324,700
------------------
(1) The options were granted at an exercise price equal to the fair market value
of the Company's Common Stock on February 11, 2002, the date of grant. All
of the options become exercisable on the third anniversary of the date of
grant, which is the same vesting schedule for all executives granted options
on such date.
(2) The grant date present values per option share were derived using the
Black-Scholes option pricing model in accordance with the rules and
regulations of the Securities and Exchange Commission and are not intended
to forecast future appreciation of the Company's stock price. The options
expiring on February 10, 2012 had a grant date present value of $15.498 per
option share. The Black-Scholes model was used with the following
assumptions: volatility of 26% based on a historical weekly average over
five years; dividend yield of 1.33%; risk free interest of 4.4% based on a
U.S. Treasury rate of five years; and a five year option life.
18
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT YEAR END IN-THE-MONEY OPTIONS AT
SHARES 2001(#)(1) YEAR END 2001($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ------------ ----------- ------------- ----------- -------------
Ralph S. Larsen............ 112,000 $4,223,280 2,086,800 2,000,000 $71,507,600 $18,645,000
Robert N. Wilson........... 88,000 $3,765,452 1,305,200 730,000 $47,307,796 $ 6,834,400
William C. Weldon.......... 8,000 $ 288,928 335,040 404,760 $10,995,990 $ 3,926,774
James T. Lenehan........... 60,000 $2,652,000 689,200 484,400 $25,120,456 $ 6,092,984
Robert J. Darretta......... 13,600 $ 629,680 253,000 380,000 $ 8,630,960 $ 4,223,200
------------------
(1) Adjusted to reflect Company's two-for-one stock split in May 2001.
(2) Based on the New York Stock Exchange Composite closing price as published in
the Wall Street Journal for the last business day of the fiscal year
($59.86).
CERTIFICATE OF EXTRA COMPENSATION PROGRAM
The following table provides information concerning awards made in February
2002 as compensation for performance during the last fiscal year to the Named
Officers under the Company's Certificate of Extra Compensation (CEC) Program.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
ESTIMATED
NUMBER PERIOD UNTIL FUTURE
NAME OF UNITS(#) PAYOUT(2) PAYOUT($)(3)
---- ----------- ------------ ------------
Ralph S. Larsen............................... -- $ --
Robert N. Wilson.............................. -- --
William C. Weldon............................. 380,000 4,818,400
James T. Lenehan.............................. 124,000 1,572,320
Robert J. Darretta............................ 20,000 253,600
---------------
(1) In 2001, the Company changed the timing of granting annual long-term
incentive compensation to all eligible employees, including executive
officers of the Company. For fiscal year 2000, and prior years, CEC units
were awarded in December of each such year. Starting with fiscal year 2001,
CEC units were awarded in February of the following year. As a result, no
CEC units were awarded to the Named Officers in fiscal year 2001. However,
this table shows the CEC units awarded to the Named Officers in February
2002, as compensation for performance in 2001.
(2) Awards are paid out upon retirement or other termination of employment.
(3) The value used is the value as of the end of the last fiscal year and was
$12.68 per CEC unit. The value of the CEC units is subject to increase or
decrease based on the performance of the Company.
Since 1947, the Company has maintained a deferred compensation program
under which awards of CEC units may be made to senior management and other key
personnel of the Company and its subsidiaries worldwide. Typically, an award of
CEC units provides for a specified number of units which vest over a five year
period, though no awards are paid out to a participant until retirement or other
termination of employment. During employment, dividend equivalents are paid to
19
participants on CEC units in the same amount and at the same time as dividends
on the Company's Common Stock. The CEC units are valued in accordance with a
formula based on the Company's net assets and earning power over the five
preceding fiscal years. Until paid at retirement or termination of employment,
the final value of the CEC units is subject to increase or decrease based on the
performance of the Company. The value as of the end of the last fiscal year was
$12.68 per CEC unit. The cumulative number of CEC units earned as of the end of
the last fiscal year by each of the Named Officers during their careers with the
Company, valued for illustrative purposes at the $12.68 per unit value, are: Mr.
R. S. Larsen 2,626,400 CEC units ($33,302,752); Mr. R. N. Wilson 2,276,000 CEC
units ($28,859,680); Mr. W. C. Weldon 361,200 CEC units ($4,580,016); Mr. J. T.
Lenehan 643,200 CEC units ($8,155,776) and Mr. R. J. Darretta 450,000 CEC units
($5,706,000).
RETIREMENT PLAN
The following table shows the estimated annual retirement benefit payable
on a straight life annuity basis to participating employees in the compensation
and years of service classifications indicated, under the Company's Retirement
Plan. The Retirement Plan generally covers salaried U.S. employees of the
Company and designated subsidiaries on a non-contributory basis.
PENSION PLAN TABLE
FIVE YEAR
AVERAGE ANNUAL BENEFITS FOR YEARS OF SERVICE
COVERED -------------------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
------------ -------- -------- -------- -------- -------- --------
$ 900,000 $221,100 $ 294,800 $ 368,500 $ 442,200 $ 515,900 $ 589,600
1,150,000 283,600 378,100 472,700 567,200 661,700 756,300
1,400,000 346,100 461,500 576,900 692,200 807,600 923,000
1,650,000 408,600 544,800 681,100 817,300 953,500 1,089,700
1,900,000 471,100 628,200 785,200 942,300 1,099,300 1,256,400
2,150,000 533,700 711,500 889,400 1,067,300 1,245,200 1,423,100
2,400,000 596,200 794,900 993,600 1,192,300 1,391,100 1,589,800
2,650,000 658,700 878,200 1,097,800 1,317,400 1,536,900 1,756,500
2,900,000 721,200 961,600 1,202,000 1,442,400 1,682,800 1,923,200
3,150,000 783,700 1,044,900 1,306,200 1,567,400 1,828,600 2,089,900
3,400,000 846,200 1,128,300 1,410,400 1,692,400 1,974,500 2,256,600
3,650,000 908,700 1,211,600 1,514,600 1,817,500 2,120,400 2,423,300
Covered compensation includes regular annual earnings, dividend equivalents
paid on non-vested CEC units, amounts paid under the Company's Standards of
Leadership Award Program, amounts paid under the Company's Executive Incentive
Plan and amounts deferred under the Company's Executive Income Deferral Plan.
The calculation of retirement benefits is based upon final average earnings (the
average of the highest covered compensation during the five consecutive years
out of the last ten years of employment with the Company). The benefits are
subject to an offset based on the Age 65 Primary Social Security Benefit.
Five-Year Average Covered Compensation for the Named Officers as of the end of
the last fiscal year is: Mr. R. S. Larsen $3,177,140; Mr. R. N. Wilson
$2,141,303; Mr. W. C. Weldon $1,207,604; Mr. J. T. Lenehan $1,380,972 and Mr. R.
J. Darretta $1,054,305. The approximate years of service for each Named Officer
as of the end of the last fiscal year is: Mr. R. S. Larsen 38 years; Mr. R. N.
Wilson 37 years; Mr. W. C. Weldon 30 years; Mr. J. T. Lenehan 25 years and Mr.
R. J. Darretta 34 years.
As permitted by the Employee Retirement Income Security Act of 1974, the
Company has adopted a supplemental plan which is designed to provide the amount
of retirement benefits which cannot be paid from the Retirement Plan by reason
of certain Internal Revenue Code limitations on
20
qualified plan benefits. The amounts shown in the Pension Plan Table include the
amounts payable under the supplemental plan.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as the
independent auditors for the Company and its subsidiaries for the fiscal year
2002. Shareowner ratification of the appointment is not required under the laws
of the State of New Jersey, but the Board has decided to ascertain the position
of the shareowners on the appointment. The Board of Directors will reconsider
the appointment if it is not ratified. The affirmative vote of a majority of the
shares voted at the meeting is required for ratification.
During fiscal year 2001, PricewaterhouseCoopers not only acted as the
independent auditors for the Company and its subsidiaries (work related to
auditing the annual financial statements for fiscal year 2001 and reviewing the
financial statements included in the Company's Forms 10-Q), but also rendered on
behalf of the Company and its subsidiaries other services, including management
consulting services, litigation support services, tax-related services, employee
benefit services and other accounting and auditing services. The following table
sets forth the aggregate fees billed or expected to be billed by
PricewaterhouseCoopers for audit services rendered in connection with the
financial statements and reports for fiscal year 2001 and for other services
rendered during fiscal year 2001 on behalf of the Company and its subsidiaries,
as well as all "out-of-pocket" costs incurred in connection with these services,
which have been or will be billed to the Company:
Audit Fees.................................................. $ 9,000,000
Financial Information Systems Design and Implementation..... $ 6,700,000
All Other Fees:
Management Consulting Services............................ $14,300,000
Other Information Systems Design and Implementation....... 12,300,000
Tax Services.............................................. 9,500,000
Litigation Support Services............................... 8,400,000
Employee Benefit Services................................. 2,400,000
Other Accounting and Auditing Services.................... 4,200,000
-----------
Total All Other Fees...................................... $51,100,000
In January 2002, in response to public concerns about the integrity of
independent audits, Johnson & Johnson adopted a policy which prohibits the
Company or any of its affiliates from entering into most non-audit related
consulting arrangements with its independent auditors. The policy applies to all
"Management Consulting Services," "Financial Information Systems Design and
Implementation" services and "Other Information Systems Design and
Implementation" services, as shown in the table above. The policy does not
affect pre-existing arrangements, which can continue, but cannot be expanded in
scope or renewed. It is expected that the independent auditors will continue to
provide certain accounting, additional auditing and tax-related services to
Johnson & Johnson and its affiliates; however the Company will continue its
practice of not using its independent auditors for internal auditing services,
except at a minimal level.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting of Shareowners and will be allowed to make a statement if
they wish. Additionally, they will be available to respond to appropriate
questions from shareowners during the meeting.
SHAREOWNER PROPOSAL ON PHARMACEUTICAL PRICING
The following shareowner proposal has been submitted to the Company for
action at the meeting by 18 shareowners whose names, addresses and respective
shareholdings will be supplied
21
upon oral or written request to the Secretary of the Company. The affirmative
vote of a majority of the shares voted at the meeting is required for approval
of the shareowner proposal. The text of the proposal is as follows:
"Lower Pharmaceutical Prices"
"WHEREAS:
Tens of millions of Americans have severely limited or no practical
access to needed prescription drugs because they are uninsured or
underinsured;
Johnson & Johnson has stated that it "is keenly aware of the need to
broaden access to life-saving and life-enhancing pharmaceuticals;" (2001
Proxy Statement)
Our company further states that it "will continue our practice of
pricing our products responsibly... Over the past ten years... price
increases for health care products... including prescription and over-the
counter drugs and hospital and professional medical products, has been well
below the rate of inflation;" (2001 Proxy Statement)
Holding down the average price increases for pharmaceuticals to below
the inflation rate does not, in itself, provide any relief for those for
whom prescription drugs are already unaffordable;
Johnson & Johnson is one of the world's largest pharmaceutical
companies, marketing more than 100 prescription drugs; it is the sixth
largest seller of prescription drugs in the US;
Our company's pharmaceutical segment is the most profitable of its
three business segments, having almost $12 billion in sales in 2000, an
increase from $10.7 billion in 1999 and $8.9 billion in 1998. This segment
accounted for 41% of total revenue, and had operating profit of 34.9%
(accounting for 62% of total operating profit);
In 2000, Johnson & Johnson reported selling, marketing and
administration expenses as 37.2% of total sales, and research and
development expenses as 10.04% of total sales; (2000 Annual Report, p. 50)
THEREFORE BE IT RESOLVED: Shareholders request the Board of Directors to:
1. Create and implement a policy of price reduction on the pharmaceuticals
needed for Americans' most frequent illnesses. 2. Report to shareholders by
September 2002 on such a policy and its implementation (withholding any
competitive information, and at reasonable cost).
SUPPORTING STATEMENT: Lower prices for some drugs could mean that more
consumers could afford them. Supporters of such a strategy argue that it often
leads to an increased volume in sales, which makes up for any decrease in
profits resulting from the lower prices. Lowering prices is an ancient and
fundamental method of creating price competition, and is used by companies to
this day.
Such efforts on the part of pharmaceutical companies could forestall
federal or state regulations that might be more severe than companies or
shareholders would countenance.
We urge you to vote FOR this resolution."
MANAGEMENT'S STATEMENT IN OPPOSITION TO SHAREOWNER PROPOSAL
THE BOARD OF DIRECTORS FAVORS A VOTE AGAINST THE ADOPTION OF THIS PROPOSAL
FOR THE FOLLOWING REASONS:
The most effective way to ensure access to life-saving and life-enhancing
pharmaceuticals is to extend insurance for prescription medicines to those who
now lack adequate drug coverage. Such
22
coverage should be market-based, provide participants with access to all
FDA-approved medicines, and offer a variety of prescription drug plans.
Johnson & Johnson strongly supports adding a prescription drug benefit to a
modernized and strengthened Medicare program. Until such broad change occurs, we
support a private-sector medicine-only benefit for seniors who lack an adequate
drug benefit. Seniors will be best served if such coverage features subsidies
for lower-income seniors, provisions that limit out-of-pocket expenses, access
to all FDA-approved medicines and a choice of plans.
Even as we work toward better prescription drug coverage, we have
priced -- and will continue to price -- our products responsibly. The weighted
average compound growth rate of price increases for our health care products in
the U.S. has been well below the rate of inflation. These include prescription
and over-the-counter medicines as well as hospital and professional medical
products.
We have also continued to help the neediest patients through our patient
assistance programs, which provide free medications, and through our
participation in a wide range of State programs offering prescription medicines
at reduced cost to low income elderly and the disabled who do not qualify for
Medicaid.
Medicines today have become the best and most cost effective way to relieve
human suffering and prevent, manage and even cure a wide range of
diseases -- progress that is due largely to the very significant investments in
research and development made by pharmaceutical companies. Numerous studies also
underscore the value of pharmaceutical innovation for the health of people
everywhere and the important promise the industry's research holds to find
additional cures and treatments for the future.
Such research is costly and, as technology advances, it is becoming even
more expensive. Today it takes an average of $800 million to bring a drug to
market. The Company must have the latitude to price its products based on
marketplace forces in order to be able to continue to invest aggressively in
research and development. A formal policy of U.S. price reductions on
prescription drugs would impede research and development, inhibit the Company's
ability to compete in the marketplace, and is contrary to the interests of
patients, the Company and its shareowners.
IT IS, THEREFORE, RECOMMENDED THAT THE SHAREOWNERS VOTE AGAINST THIS
PROPOSAL.
OTHER MATTERS
The Board of Directors does not intend to bring other matters before the
meeting except items incident to the conduct of the meeting, and the Company has
not received timely notice from any shareowner of an intent to present a
proposal at the meeting. On any matter properly brought before the meeting by
the Board or by others, the persons named as proxies in the accompanying proxy,
or their substitutes, will vote in accordance with their best judgment.
23
NOTICE OF
2002 ANNUAL
MEETING AND
PROXY
STATEMENT
[JOHNSON & JOHNSON LOGO]
PROXY
JOHNSON & JOHNSON
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREOWNERS ON APRIL 25,2002
The undersigned hereby appoints R.J. Darretta and R.S. Fine and each or
either of them as proxies, with full power of substitution and revocation, to
represent the undersigned and to vote all shares of the Common Stock of Johnson
& Johnson which the undersigned is entitled to vote at the Annual Meeting of
Shareowners of the Company to be held on April 25, 2002 at 10:00 a.m. at the
Hyatt Regency Hotel, Two Albany Street, New Brunswick, New Jersey, and any
adjournments or postponements thereof, upon the matters listed on the reverse
side hereof and, in their discretion, upon such other matters as may properly
come before the meeting. The proxies appointed hereby may act by a majority of
said proxies present at the meeting (or if only one is present, by that one).
Election of Directors. Nominees: (change of address/comments)
01. Gerard N. Burrow, 02. James G. Cullen, 03. Robert J. -------------------------------------------------------
Darretta, 04. M. Judah Folkman, 05. Ann D. Jordan, -------------------------------------------------------
06. Arnold G. Langbo, 07. James T. Lenehan, 08. Leo F. -------------------------------------------------------
Mullin, 09. Henry B. Schacht, 10. Maxine F. Singer, -------------------------------------------------------
11. John W. Snow, 12. William C. Weldon, 13. Robert N. (if you have written in the above space, please mark
Wilson. the corresponding box on the reverse side of this card)
If you do not plan to vote by telephone or the Internet, ----------------
please return this proxy card promptly using the enclosed see reverse
envelope. To vote in accordance with the Board of Directors' side
recommendations just sign the reverse side; no boxes need ----------------
to be marked.
--------------------------------------------------------------------------------
[UP ARROW] DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY [UP ARROW]
TELEPHONE OR THE INTERNET
ELECTRONIC DELIVERY OF PROXY MATERIALS
Sign up to receive next year's annual report and proxy materials via the
Internet. Next year when the materials are available, we will send you an e-mail
with instructions which will enable you to review these materials on-line. To
sign up for this optional service, visit http://www.econsent.com/jnj.
JOHNSON & JOHNSON EMPLOYEE SAVINGS PLANS
If you are an employee and hold stock in one of the Johnson & Johnson employee
savings plans, this proxy card covers those shares held for you in your savings
plan, as well as any other shares registered in your own name. By signing and
returning this proxy card (or voting by telephone or the Internet), you will
authorize the trustee of your savings plan to vote those shares held for you in
your savings plan as you have directed.
[x] Please mark your
votes as in this
example.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors,
FOR proposal 2 and AGAINST proposal 3.
--------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1 and 2
--------------------------------------------------------------------------------
FOR WITHHELD
1. Election of [ ] [ ]
Directors
(see reverse)
For, except vote withheld from the following nominee(s):
FOR AGAINST ABSTAIN
2. Ratification of [ ] [ ] [ ]
appointment of
PricewaterhouseCoopers
as independent auditors
--------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 3.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Proposal on pharmaceutical [ ] [ ] [ ]
pricing
--------------------------------------------------------------------------------
Special Discontinue [ ] Change of [ ]
Action Annual Report Address
Mailing for this Corrections on
Account Reverse Side:
Mark this box
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments or postponements thereof.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee, or guardian, please give
full title as such.
--------------------------------
--------------------------------
SIGNATURE(S) DATE
--------------------------------------------------------------------------------
[UP ARROW] DETACH HERE AND RETURN THIS PROXY IN THE ENCLOSED [UP ARROW]
ENVELOPE IF YOU ARE NOT VOTING BY TELEPHONE
OR THE INTERNET
VOTE BY TELEPHONE OR THE INTERNET
QUICK - EASY - IMMEDIATE
Johnson & Johnson encourages you to take advantage of two cost-effective and
convenient ways to vote your shares.
You may vote your proxy 24 hours a day, 7 days a week, using either a touch-
tone telephone or through the Internet. YOUR TELEPHONE OR INTERNET VOTE MUST
BE RECEIVED BY 12:00 MIDNIGHT NEW YORK TIME ON APRIL 24,2002.
Your telephone or Internet vote authorizes the proxies named on the above proxy
card to vote your shares in the same manner as if you marked, signed and
returned your proxy card.
VOTE BY PHONE: ON A TOUCH-TONE TELEPHONE DIAL 1-877-PRX-VOTE
------------- (1-877-779-8683) FROM THE U.S. AND CANADA OR DIAL
201-536-8073 FROM OTHER COUNTRIES
You will be asked to enter the VOTER CONTROL NUMBER located
in the box just below the perforation on the proxy card.
Then follow the instructions.
OR
VOTE BY INTERNET: POINT YOUR BROWSER TO THE WEB ADDRESS:
---------------- http://www.eproxyvote.com/jnj
Click on the "PROCEED" icon - You will be asked to enter the
VOTER CONTROL NUMBER located in the box just below the
perforation on the proxy card. Then follow the instructions.
OR
VOTE BY MAIL: Mark, sign and date your proxy card and return it in the
------------ postage-paid envelope. If you are voting by telephone or the
Internet, please do not mail your proxy card.