Editor's note: A previous version of this article cited an incorrect amount for J&J CEO William Weldon's 2010 bonus. The Fool regrets the error.
The piles of shame heaped on serial recaller Johnson & Johnson
In 2010, Weldon's bonus fell 45% to $1.98 million. Awards of stock options and other stock-based compensation also decreased. However, Weldon still got a 3% raise in his base salary for 2011, bringing his base pay to $1.9 million.
The company will reveal more details in its proxy statement, which it will file with the Securities and Exchange Commission in March. According to The Wall Street Journal, J&J has acknowledged that Weldon's bonus changes stem from a pay-for-performance model.
Docking Weldon's performance bonus is the least Johnson & Johnson could do after such a messed-up phase for the company. J&J has issued a mind-boggling number of product recalls in the last 12 months, most recently involving a typo on the packaging for Sudafed. While that particular example's relatively minor, serious quality control issues clearly persist at this pharmaceutical and consumer products giant. It no longer seems like the safe-haven stock for orphans and widows it once was.
Furthermore, Johnson & Johnson joined companies like Schering-Plough (now owned by Merck
Clearly, Weldon's pay wasn't exactly decimated. It's reasonable to question whether he warranted a performance bonus at all, after Johnson & Johnson's annus horribilis. Last quarter, the company revealed that its product recalls had significantly dented sales.
A relatively modest reduction in Weldon's pay is better than a compensation package that implies everything's A-OK at J&J. Still, given J&J's lousy performance, I'd say his compensation deserved even a harsher smackdown. At the very least, investors ought to question whether Johnson & Johnson still merits their interest as a long-term investment.
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Alyce Lomax does not own shares of any of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.