INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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
JOHNSON & JOHNSON
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
JOHNSON & JOHNSON
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or Rule
14a-6(i)(2).
/ / $500 per each party per Exchange Act Rule 14a-6(i)(3), or Rule
14a-6(i)(2).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
JOHNSON & JOHNSON
Notice of Annual Meeting
and Proxy Statement
March 9, 1995
The Annual Meeting of the Stockholders of Johnson & Johnson will be held on
April 27, 1995 at 10:00 A.M. at the Hyatt Regency Hotel, Two Albany Street, New
Brunswick, New Jersey, to:
1. Elect directors;
2. Consider and act upon a proposal to approve the 1995 Stock Option
Plan;
3. Consider and act upon a proposal to approve the 1995 Stock
Compensation Plan;
4. Consider and act upon a proposal to ratify the appointment of
Coopers & Lybrand as the Company's independent auditors; and
5. Transact such other business, including action on stockholder
proposals, as may properly come before the meeting.
Stockholders are cordially invited to attend the meeting. If you are a
stockholder of record and plan to attend, please complete and return the
enclosed Request for Admission Card. If you are a stockholder 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.
By order of the Board of Directors,
PETER S. GALLOWAY
Secretary
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* PLEASE SIGN, DATE AND RETURN YOUR PROXY *
* CARD PROMPTLY IN THE ENCLOSED ENVELOPE *
*******************************************
GENERAL INFORMATION
Stockholders Entitled to Vote. Holders of shares of the Common Stock of the
Company of record at the close of business on February 28, 1995 are entitled to
notice of and to vote at the Annual Meeting of Stockholders and at any and all
adjournments 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
643,101,424 shares outstanding.
Other than the election of directors, which requires a plurality of the
votes cast, each matter to be submitted to the stockholders 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.
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 stockholders on or about March 9, 1995 concurrently with the
mailing of the Company's 1994 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 & Company,
Inc. to aid in the solicitation of brokers, banks, institutional and other
stockholders for a fee of approximately $11,500. All costs of the solicitation
of proxies will be borne by the Company. Stockholders who execute proxies may
revoke them at any time before they are voted by executing a later dated proxy,
by voting by ballot at the meeting or by giving written notice to the Secretary
of the Company. On the accompanying proxy a stockholder 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.
Principal Stockholder. As of February 15, 1995, The Robert Wood Johnson
Foundation, located at Princeton Forrestal Center, Plainsboro Township, New
Jersey, was the only stockholder known to the Company to have the power to vote
or to direct the voting and/or the power to dispose or to direct the disposition
of more than 5% of the Company's outstanding Common Stock. On that date the
Foundation was the holder of 41,771,897 shares (6.5%) of the Company's
outstanding Common Stock. Mr. R. E. Campbell, who has retired as Vice Chairman
of the Board of Directors of the Company, is one of 17 Trustees of the
Foundation.
Stockholder Proposals. To be included in the Board of Directors' proxy
statement for the 1996 Annual Meeting of Stockholders, a stockholder proposal
must be received by the Company on or before November 10, 1995. Proposals 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 15 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.
Except for Mr. Peter N. Larson, who was elected to the Board of Directors
in October of 1994, all of the nominees were elected to the Board at the last
Annual Meeting and all are currently serving as directors of the Company.
2
Following are summaries of the background and business experience and
descriptions of the principal occupations of the nominees.
JAMES W. BLACK, M.D., FRS, FRCP, Professor of Analytical
Pharmacology, Rayne Institute, King's College School of Medicine,
London, England.
Dr. Black, 70, was elected to the Board of Directors in 1989. He
is Chairman of the Company's Science and Technology Advisory
Committee and is employed by the Company as a consultant. Dr.
Black is Professor and Head of the Department of Analytical
(Photo) Pharmacology at the Rayne Institute, King's College School of
Medicine where he has been since 1984. He is also Chairman of the
James Black Foundation, a non-profit research foundation, which
is associated with the King's College School of Medicine and is
funded by the Company. Dr. Black has previously held University
teaching positions and research positions with Imperial Chemical
Industries Ltd., Smith Kline and French Laboratories Limited and
The Wellcome Foundation, Ltd. Dr. Black was awarded the Nobel
Prize for Medicine in 1988.
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GERARD N. BURROW, M.D., Dean of the Yale University School of
Medicine.
Dr. Burrow, 62, was elected to the Board of Directors in 1993. He
was named to his present position at the Yale Medical School in
1992 following service since 1988 as Vice Chancellor for health
sciences and Dean of the University of California, San Diego
School of Medicine. He previously served as a Professor and
(Photo) Chairman of the Department of Medicine at the University of
Toronto and as Physician-in-Chief at Toronto General Hospital
following earlier work in medical education, research and
clinical practice. Dr. Burrow is a member of the Institute of
Medicine of the National Academy of Sciences, the Society for
Clinical Investigation and a Fellow of the American Association
for the Advancement of Science.
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JOAN GANZ COONEY, Chairman, Executive Committee, Children's
Television Workshop.
Mrs. Cooney, 65, was elected to the Board of Directors in 1978
and is a member of the Compensation Committee and the Benefits
Committee. She co-founded the Children's Television Workshop as
its Executive Director in 1968 and was named its President-CEO
(Photo) in 1970 and Chairman-CEO in 1988. She assumed her present
responsibilities in 1990. The Workshop's activities include
production of the well-known children's educational television
programs Sesame Street, 3-2-1 Contact and Square One T.V. and
Ghostwriter. Mrs. Cooney is a Director of The Chase Manhattan
Corporation and The Chase Manhattan Bank, N.A., Metropolitan Life
Insurance Company and Xerox Corporation, as well as a Trustee of
the Educational Broadcasting Corporation (Channel 13/WNET, New
York City) and the National Child Labor Committee.
3
PHILIP M. HAWLEY, Retired Chairman of the Board and Chief
Executive Officer, The Broadway Stores, Inc.
Mr. Hawley, 69, was elected to the Board of Directors in 1988 and
is a member of the Compensation Committee and the Benefits
Committee. He served as Chairman and Chief Executive Officer of
The Broadway Stores, Inc. (formerly Carter Hawley Hale Stores,
(Photo) Inc.) from 1983 to his retirement in 1993. On February 11, 1991,
The Broadway Stores, Inc. filed for bankruptcy court protection
under Chapter 11 of the federal bankruptcy laws. Broadway's Plan
of Reorganization was confirmed on September 14, 1992, and became
effective October 8, 1992. Mr. Hawley is also a Director of
American Telephone and Telegraph Company, Atlantic Richfield
Company, BankAmerica Corporation and Weyerhaeuser Company. He is
a member of the Conference Board and a member of The Business
Council.
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CLARK H. JOHNSON, CMA, Member, Executive Committee; Vice
President, Finance.
Mr. Johnson, 59, was elected to the Board of Directors in 1988.
He was named Chief Financial Officer in 1988 after having been
General Controller since 1977. Mr. Johnson joined Johnson &
(Photo) Johnson in 1953 and held a variety of financial positions with
several affiliated companies before being named Assistant
Corporate Controller of Johnson & Johnson in 1975 and General
Controller in 1977. Mr. Johnson serves as a Trustee of
Fairleigh Dickinson University and on the Executive Committee of
the Institute of Management Accountants. He served as Chairman of
the Institute of Certified Management Accountants and as a
Trustee of the Financial Accounting Foundation.
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ANN DIBBLE JORDAN, Former Director, Social Services Department,
Chicago Lying-In Hospital, University of Chicago Medical Center.
Mrs. Jordan, 60, was elected to the Board of Directors in 1981
and is a member of the Audit Committee and the Public Policy
Advisory Committee. She assumed her previous responsibilities at
Chicago Lying-In Hospital in 1970 after having served as a
(Photo) 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, Capital
Cities/ABC, Inc., The Hechinger Company, National Health
Laboratories Inc., Salant Corporation and Travelers Inc. Mrs.
Jordan is a Director of The Phillips Collection, The Child
Welfare League and of the National Symphony Orchestra.
4
ARNOLD G. LANGBO, Chairman of the Board and Chief Executive
Officer, Kellogg Company.
Mr. Langbo, 57, was elected to the Board of Directors in 1991. He
is a member of the Company's Audit Committee and the Compensation
Committee. Mr. Langbo assumed his present position with Kellogg
Company in January of 1992 after having been President and Chief
(Photo) Operating Officer since December of 1990. 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 Kellogg Company and Whirlpool Corporation. He is also
a member of the Advisory Board of the J. L. Kellogg Graduate
School of Management at Northwestern University and a member of
the Board of Trustees of Albion College.
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RALPH S. LARSEN, Chairman, Board of Directors and Chief Executive
Officer; Chairman, Executive Committee.
Mr. Larsen, 56, was elected to the Board of Directors in 1987 and
appointed to the Executive Committee in 1986. He assumed his
present responsibilities in 1989. He joined the Company in 1962
as a manufacturing trainee with Johnson & Johnson Products, Inc.
and was named Vice President of Marketing for the McNeil Consumer
Products Company in 1980. He left Johnson & Johnson for two years
as President of Becton Dickinson's Consumer Products Division and
(Photo) returned to Johnson & Johnson as President of its Chicopee
subsidiary in 1983. Mr. Larsen was appointed Company Group
Chairman in 1986 before being appointed Vice Chairman of the
Executive Committee and Chairman of a Sector Operating Committee
later in 1986. Mr. Larsen is a Director of Xerox Corporation and
The New York Stock Exchange. He is also Vice Chairman of The
Business Council and a member of the Policy Committee of The
Business Roundtable. He serves on the Board of the U.S. Committee
for UNICEF and the United Ways of Tri-State.
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PETER N. LARSON, Member, Executive Committee and Worldwide
Chairman, Consumer and Personal Care Group.
Mr. Larson, 55, was elected to the Board of Directors in 1994 and
appointed to the Executive Committee and Chairman of the Consumer
Sector Operating Committee in 1992. Mr. Larson joined Johnson &
Johnson in 1967. He left Johnson & Johnson in 1978 to join
Kimberly-Clark where, until 1988, he served in a variety of
(Photo) positions, including President of its Health Care Sector and
Director. From 1989 to 1990 he was a member of a partnership
managing consumer businesses. Mr. Larson rejoined Johnson &
Johnson in 1991 as a Company Group Chairman. Mr. Larson is
Chairman of the Advertising Education Foundation and a member of
the Board of Directors of the Foreign Policy Association and
Compaq Computer Corporation.
5
JOHN S. MAYO, PH.D., President Emeritus, AT&T Bell Laboratories.
Dr. Mayo, 65, was elected to the Board of Directors in 1986 and
is a member of the Science and Technology Advisory Committee and
Chairman of the Public Policy Advisory Committee. He became
President of AT&T Bell Laboratories in 1991 after having served
as Director of the Ocean Systems Laboratory, Executive Director
of the Ocean Systems Division, Executive Director of the Toll
Electronic Switching Division, Vice President of Electronics
Technology, Executive Vice President of Network Systems and
Senior Vice President, Network Systems and Network Services. He
(Photo) became President Emeritus in 1995. Dr. Mayo is a member of the
National Academy of Engineering and a fellow of the Institute of
Electrical and Electronic Engineers. He is a member of the Boards
of Trustees of Polytechnic University, the Liberty Science
Center, the Kenan Institute for Engineering, Technology and
Science; the Board of Overseers for the New Jersey Institute of
Technology; and served on the Board of Directors of the National
Engineering Consortium, Inc. Dr. Mayo was awarded the National
Medal of Technology in 1990, the Industrial Research Institute
Medal in 1992, and the Navy League New York Council Roosevelts
Gold Medal for Science in 1993.
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THOMAS S. MURPHY, Chairman of the Board and Chief Executive
Officer, Capital Cities/ABC, Inc.
Mr. Murphy, 69, was elected to the Board of Directors in 1980,
and is Chairman of the Compensation Committee. He joined Capital
Cities when it was founded in 1954 and was elected Chairman and
Chief Executive Officer in 1966. From June 1990 to February 1994
he served as Chairman of the Board only. Capital Cities/ABC
operates the ABC Television Network and eight affiliated
(Photo) television stations, radio networks and radio stations; provides
programming for cable television; is partnered with international
broadcasters in program production and distribution ventures as
well as broadcast and cable television services overseas; and
publishes daily and weekly newspapers and trade publications. Mr.
Murphy is a Director of International Business Machines
Corporation and Texaco Inc. He is Chairman of the New York
University Medical Center Board and a member of the Board of
Overseers of Harvard College.
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PAUL J. RIZZO, Retired Vice-Chairman, International Business
Machines Corporation.
Mr. Rizzo, 67, was elected to the Board of Directors in 1982, and
is Chairman of the Benefits Committee and a member of the Audit
Committee. He first retired from International Business Machines
(Photo) Corporation as Vice-Chairman in 1987, and became Dean of the
Kenan-Flagler Business School at the University of North
Carolina-Chapel Hill. He returned to International Business
Machines Corporation in 1993 as Vice Chairman and retired from
that position in 1994. Mr. Rizzo is a director of McGraw-Hill,
Inc. and Ryder Systems. Inc.
6
MAXINE F. SINGER, PH.D., President of the Carnegie Institution of
Washington.
Dr. Singer, 64, was elected to the Board of Directors in 1991.
She is a member of the Company's Science and Technology Advisory
Committee and the Public Policy Advisory Committee. Dr. Singer
became President of the Carnegie Institution of Washington in
(Photo) 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.
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ROGER B. SMITH, Retired Chairman of the Board and Chief Executive
Officer, General Motors Corporation.
Mr. Smith, 69, was elected to the Board of Directors in 1985 and
is Chairman of the Audit Committee and a member of the Benefits
Committee. He retired as Chairman of General Motors Corporation
(Photo) in 1990. He is a member of the Business Council and serves as a
Trustee of the Alfred P. Sloan Foundation. Mr. Smith also serves
on the Board of Directors of Citicorp/Citibank, N.A.,
International Paper Company and PepsiCo, Inc.
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ROBERT N. WILSON, Vice Chairman, Board of Directors and Vice
Chairman, Executive Committee.
Mr. Wilson, 54, 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
(Photo) 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 his expanded responsibilities as Vice Chairman of the
Executive Committee in 1994. Mr. Wilson is also a Director of
U.S. Trust Corporation.
7
Stock Ownership/Control
The following table sets forth information regarding beneficial ownership
of the Company's Common Stock owned by each nominee for 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,
except as described below. Because they serve as trustees of institutions or
trusts which hold stock for the benefit of others, certain of those listed below
"control" additional shares of the Company's stock in which they have no
economic interest. See also "General Information--Principal Stockholder".
Messrs. Larsen and Wilson are co-trustees of two trusts holding a total of
5,255,564 shares; Mr. Campbell is one of several trustees of an institution
holding 3,190,792 shares and an institution holding 13,700 shares. In addition
to the 8,460,056 shares so controlled, the Directors and executive officers as a
group own/control a total of 880,857 shares, the aggregate of 9,340,913 shares
representing approximately 1.5% of the shares outstanding. All stock ownership
is as of February 15, 1995.
Number of Common Shares Under
Shares Exercisable
Name (1)(2) Options (3)
- ---- ---------------- ------------
James W. Black ......................... 2,381
Gerard N. Burrow ....................... 2,746
Robert E. Campbell (4) ................. 140,676 264,000
Joan Ganz Cooney ....................... 4,688
Philip M. Hawley ....................... 3,844
Clark H. Johnson ....................... 44,742 95,800
Ann Dibble Jordan ...................... 3,462
Arnold G. Langbo ....................... 3,913
Ralph S. Larsen ........................ 122,844 308,000
Peter N. Larson ........................ 10,786 52,160
John S. Mayo ........................... 17,843
Thomas S. Murphy ....................... 60,649
Paul J. Rizzo .......................... 32,235
Maxine F. Singer ....................... 5,675
Roger B. Smith ......................... 19,121
Robert N. Wilson ....................... 189,622 219,600
All Directors and Executive
Officers as a group (20),
including those named above ............ 880,857 1,184,950
- ----------
(1) Includes an aggregate of 25,517 Common Stock equivalent units credited to
nonemployee nominees under the Retirement Plan for Nonemployee Directors
and an aggregate of 87,411 Common Stock equivalent units credited to such
nominees under the Deferred Fee Plan for Nonemployee Directors.
(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.
(3) Includes shares under options exercisable on February 15, 1995 and options
which become exercisable within 60 days thereafter.
(4) Mr. Campbell retired as a Director and from the Company effective January
1, 1995.
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 Company Common
Stock upon first becoming a member of the Board of Directors and receives an
annual fee of $45,000 for his or her services as director, plus an additional
$5,000 for service on a committee of the Board of Directors; $8,000 if
chairperson of the committee. Nonemployee directors receive a meeting fee
8
of $1,500 per day for committee meetings held on days other than Board of
Directors meeting days. A director may elect to defer payment of all or a part
of the fees until termination of his or her directorship. Deferred fees may earn
additional amounts based either on the increase in value of units under the
Certificate of Extra Compensation Program or on a hypothetical investment in the
Company's Common Stock. Under the Retirement Plan for Nonemployee Directors,
each nonemployee director is credited with Common Stock equivalent units in the
actuarially determined amount required to provide at retirement an annual
benefit of $25,000 payable for a period equal to the number of years the
director has served on the Board of Directors. The Common Stock units held in
each nonemployee director's account receive dividend equivalents. Upon
retirement, the amounts held in a nonemployee director's account will be paid in
cash in a lump sum to the director or, in the event of the director's death
prior to retirement, to the director's beneficiary.
Sir James Black serves as a scientific consultant to the Company at an
annual fee of $10,000. Dr. Black is also a member of the Company's Bio-Science
Advisory Committee and receives a fee of $3,000 for attendance at each meeting
of the Committee.
During the last fiscal year the Board of Directors met eight times. All
directors attended at least 75% of the Board of Directors meetings and meetings
of the committees on which the directors served.
The Board of Directors has a standing Audit Committee and Compensation
Committee. The Board of Directors has no standing Nominating Committee;
however, the Board of Directors serves as a Nominating Committee of the whole.
The Board considers suggestions from many sources, including stockholders,
regarding possible candidates for director. Such suggestions, together with
appropriate biographical information, should be submitted to the Secretary of
the Company.
The members of the Audit Committee are Mrs. Jordan, Mr. Langbo, Mr. Rizzo
and Mr. Smith (Chairman). 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
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 three times during the last fiscal year.
The members of the Compensation Committee are Mrs. Cooney, Mr. Hawley, Mr.
Langbo and Mr. Murphy (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), Fine (Vice President, Administration) and Johnson (Vice President,
Finance) which determines management and executive compensation and establishes
fringe benefit and other compensation policies. The compensation of the members
of the Executive Committee (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. The members of the Compensation
Committee are not eligible to become optionees under the plans. During the last
fiscal year there were four meetings of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Committee of the Board
The Compensation Committee is comprised entirely of nonemployee,
independent members of the Board of Directors. It is the Compensation
Committee's responsibility to review, recommend and approve changes to the
Company's compensation policies and programs. It is also the Committee's
responsibility to review and approve all compensation actions for the Chief
Executive Officer and members of the Executive Committee.
9
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, growth companies similar to Johnson & Johnson. 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 stockholders. 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
Stockholder 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 and professional health care fields
with comparable sales volumes and above average EPS growth rates and financial
strength. These companies include those in the S&P Diversified Health Care Index
referred to in the Stockholder Return Performance Graph which meet these
criteria.
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. Stockholder Value is measured as the
increase in stock price plus dividend return over a five year period. New
Product Flow is assessed by reviewing the percentage of sales resulting
from the sale of new products introduced in the past five years.
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 stockholders 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.
A discussion of 1994 performance reviewed by the Compensation Committee can
be found under "Decisions on 1994 Compensation".
Johnson & Johnson's Compensation Programs
Base Salary
The Base Salary for all employees exempt from the Fair Labor Standards Act
(FLSA), 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 which are, overall, at the median of the select group of premium
companies referred to above.
10
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.
Individual merit increases are based on performance and can range from 0% to
200% of the merit guideline.
The domestic salary guideline for all exempt employees for 1994 was 3.5%
for merit increases plus 1% for market parity and 1% for promotion adjustments.
The domestic salary guideline for 1995 has been set at 3.8% for merit increases
plus 1% for market parity and 1% for promotion adjustments.
Cash and Stock Incentive Compensation Programs
To reward performance, Johnson & Johnson provides eligible executives with
additional current compensation in the form of executive bonus and stock awards.
The total target value of the Cash Bonus plus the Stock Compensation Award is
set at a level that is at a median position compared with annual incentives
provided by other companies in the premium community. Actual awards against
target vary based on the financial and non-financial performance factors
discussed above and individual contribution. 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. Such incentive bonus and stock awards
can range from zero, in the case of poor performance, up to 200% of the target
amount if the performance is judged to be exceptional. For the Chief Executive
Officer and executive officers the amount of the total target incentive is split
evenly between cash and stock (i.e., 50% paid in cash, 50% paid in stock).
Stock Options
The Stock Option Plan is a long-term plan designed to link executive
rewards with stockholder value over time. Johnson & Johnson's award practice is
unique in comparison to other companies. Stock Option awards are not based on
an annual value. They are designed around the concept of a "career multiple" of
salary.
Under a career multiple, awards are granted to maintain an executive's
total option holdings at a specified multiple of salary. Option holdings are the
sum of all unexpired option grants (i.e., less than 10 years old), valued at the
market price on the original date of grant.
When an executive becomes eligible, the appropriate option holdings
multiple is determined based on the range available and performance. Once the
performance based option multiple is determined, the value of that multiple is
awarded in the first year of eligibility. In subsequent years, the executive's
option value multiple is reassessed based upon the applicable range that year
and performance. Additional grants are made, if necessary, to bring the
executive's option holdings to the multiple of pay determined for that year. As
a result, awards can, and typically do, vary significantly from year to year.
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 which relates financial and/or non-financial
performance to the number of options awarded.
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 generally
occurs over a period of six years.
Certificates of Extra Compensation
Certificates of Extra Compensation (CECs) provide deferred compensation
which 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,
11
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 stockholders 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 1994 Compensation
Johnson & Johnson's performance for the most recent five year period
exceeded that of the premium community companies in all financial factors
considered: Sales Growth, Stockholder 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.
Mr. Larsen's compensation awards were made based upon the Compen- sation
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 judgement
of the Compensation Committee with no fixed or specific mathematical weighting
applied to each element of performance. Based on the Compensation Committees'
judgement, compensation awards for 1994 were made at target.
Mr. Larsen was awarded a salary increase for 1994 of 3.4% versus a 3.5%
guideline for merit increase. The 1994 annual incentive was approximately 100%
of the target percentage for the Chief Executive Officer, with one half provided
in cash and one half provided in Johnson & Johnson common stock. Stock Option
grants were awarded during 1994 to the Chief Executive Officer which maintain
his holdings value at the target multiple of pay. A grant of Certificate of
Extra Compensation was made to Mr. Larsen to maintain his 1995 accrual at the
competitive target.
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 Committee has determined that the 1995 Johnson & Johnson Stock
Option Plan, submitted in this Proxy Statement for the approval of stockholders,
meets the requirements for deductibility under the Act. Since the particular
requirements of the Act applicable to other elements of compensation have not
yet been definitively established by final regulations and since the
Compensation Committee is concerned that the requirements of the Act could
effectively divest the Compensation Committee of the ability to exercise its
discretion to act in the best interests of the stockholders in establishing
compensation, the Compensation Committee has decided for the present not to
alter the other compensation plans to attempt to meet the deductibility
requirements. The Compensation Committee will continue to review the issue and
evaluate whether the compensation plans should be altered in the future to meet
the deductibility requirements.
Thomas S. Murphy, Chairman
Joan G. Cooney
Philip M. Hawley
Arnold G. Langbo
12
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock against the cumulative total return of the
Standard & Poor's 500 Stock Index and the Standard & Poor's Diversified Health
Care Index for the period of five years commencing December 31, 1989 and ending
December 31, 1994. The graph and table assume that $100 was invested on December
31, 1989 in each of the Company's Common Stock, the Standard & Poor's 500 Stock
Index and the Standard & Poor's Diversified Health Care Index and that all
dividends were reinvested. This data was furnished by Standard & Poor's
Compustat Services, Inc.
----GRAPHICAL REPRESENTATION OF DATA TABLE BELOW----
- -------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------
Johnson & Johnson $100.00 $123.38 $200.26 $179.83 $163.60 $204.49
- -------------------------------------------------------------------------------
S&P Diversified
Health Care $100.00 $121.46 $179.89 $153.60 $146.38 $170.58
- -------------------------------------------------------------------------------
S&P 500 Index $100.00 $ 96.90 $126.42 $136.05 $149.76 $151.74
- -------------------------------------------------------------------------------
13
EXECUTIVE COMPENSATION
The following table shows, for each of the last three fiscal years, the
annual compensation paid by the Company, together with long term and other
compensation for the Chief Executive Officer and the other four most
highly compensated executive officers (the "Named Officers"), of the Company in
all capacities in which they served:
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
--------------------------------- Awards
Name Other ----------------------
and Annual Restricted All Other
Principal Compen- Stock Options Compen-
Position Year Salary($) Bonus($) sation($) Awards($) (#) sation($)
--------- ---- --------- -------- --------- ---------- ------- ---------
(1) (2) (3) (4)
R. S. Larsen ................... 1994 $920,000 $586,714 $386,018 $ 0 40,700 $ 6,750
Chairman/CEO ................... 1993 890,000 448,125 331,740 0 142,500 10,613
1992 850,000 290,000 290,200 287,138 6,000 10,299
R. N. Wilson ................... 1994 $690,000 $488,967 $383,484 $ 0 28,600 $ 6,750
Vice Chairman .................. 1993 665,000 388,750 341,693 0 109,100 10,613
1992 630,000 275,000 299,380 211,575 6,000 10,299
R. E. Campbell ................. 1994 $670,000 $407,169 $533,189 $ 0 4,200 $ 6,750
Vice Chairman .................. 1993 645,000 324,375 457,415 0 96,500 10,613
1992 615,000 200,000 383,928 211,575 8,000 10,299
P. N. Larson ................... 1994 $550,000 $346,253 $125,675 $ 0 37,100 $ 6,750
Chairman, ...................... 1993 435,000 280,625 109,060 0 64,000 10,613
Consumer & ..................... 1992 415,000 140,000 49,582 136,013 26,400 10,299
Personal Care Group
C. H. Johnson .................. 1994 $395,000 $247,087 $271,233 $ 0 13,700 $ 6,750
Vice President, ................ 1993 380,000 200,000 218,687 0 47,700 10,613
Finance ........................ 1992 360,000 120,000 152,285 120,900 0 10,299
<FN>
- ---------
(1) Bonus amounts for 1992 have been restated to comply with Securities and
Exchange Commission guidelines and include only cash payments for that
year. 1993 and 1994 bonus amounts include stock compensation since the plan
has been changed to a one year unrestricted stock award from the previous
long term (3 year) restricted stock award.
(2) Amounts include dividend equivalents paid under the Certificate of Extra
Compensation (CEC) Program (long term incentive plan).
(3) Until December 1, 1994, shares of Restricted Stock (awarded in 1992) were
held as follows: Mr. R. S. Larsen, 1,900; Mr. R. N. Wilson, 1,400; Mr. R.
E. Campbell, 1,400; Mr. P. N. Larson, 900 and Mr. C. H. Johnson, 800.
Dividend equivalents were paid on such shares when paid on the Company's
Common Stock. As of December 2, 1994 no Restricted Stock remained
outstanding.
(4) Amount shown is the Company's matching contribution to the 401(k) Plan.
</FN>
14
Stock Options
The following table contains information concerning the grant of stock
options under the Company's 1991 Stock Option Plan to the Named Officers during
the Company's last fiscal year.
Option Grants in Last Fiscal Year
Individual Grants Potential
------------------------------------------------- Realizable Value at
Number of % of Total Assumed Annual
Securities Options Rates of Stock Price
Underlying Granted to Exercise Appreciation For OptionTerm (2)
Options Employees Price Expiration -----------------------------------
Name Granted(#)(1) In 1994 ($/Sh) Date 0%($) 5% ($) 10% ($)
---- -------------- ------- ------ -------- ----- ------ -------
Ralph S. Larsen ......... 40,700 0.7% $53.63 12/01/04 $0 $1,372,811 $3,478,629
Robert N. Wilson ........ 28,600 0.5% $53.63 12/01/04 $0 $ 964,678 $2,444,442
Robert E. Campbell ...... 4,200 0.1% $53.63 12/01/04 $0 $ 141,666 $ 358,974
Peter N. Larson ......... 37,100 0.6% $53.63 12/01/04 $0 $1,251,383 $3,170,937
Clark H. Johnson ........ 13,700 0.2% $53.63 12/01/04 $0 $ 462,101 $1,170,939
All Stockholders ........ -- -- -- -- $0 $11.9 billion $39.3 billion
<FN>
- ------------
(1) The options were granted at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. The options
become exercisable over a six year period in increments of 20% per year
beginning with the second anniversary of the date of grant except for the
options granted to Mr. R. S. Larsen, Mr. R. E. Campbell, Mr. P. N. Larson
and Mr. C. H. Johnson which, like the vesting schedule for all executives
in the Stock Option Plan over age 55, become exercisable over a four year
period in increments of 40% beginning with the second anniversary of the
date of grant and an additional 30% per year for each of the next two
years. The grant date of the options was December 1, 1994.
(2) The amounts shown under these columns are the result of calculations at 0%
and at the 5% and 10% rates required by the Securities and Exchange
Commission and are not intended to forecast future appreciation of the
Company's stock price.
</FN>
15
Option Exercises and Fiscal Year-End Values
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
Aggregated Option Exercises In Last Fiscal Year and
Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Year End 1994 (#) Year End 1994 ($) (1)
Acquired On Value ---------------------------- --------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Ralph S. Larsen ........... -- -- 308,000 248,000 $9,520,244 $2,882,144
Robert N. Wilson .......... 15,400 $528,920 235,600 182,900 $7,350,552 $2,001,404
Robert E. Campbell ........ -- -- 294,000 109,100 $9,038,140 $1,019,264
Peter N. Larson ........... -- -- 38,160 171,540 $ 603,930 $1,706,340
Clark H. Johnson .......... 5,940 $203,478 101,800 73,800 $2,866,482 $ 698,604
- --------
<FN>
(1) 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
($54.75).
</FN>
Certificate of Extra Compensation Program
The following table provides information concerning awards made during the
last fiscal year under the Company's Certificate of Extra Compensation (CEC)
Program.
Long-Term Incentive Plans--Awards In Last Fiscal Year
Estimated
Number of Period Until Future
Name Units(#) Payout Payout($)
- ---- --------- ------------ ----------
(1) (2)
Ralph S. Larsen .................... 75,000 $1,607,250
Robert N. Wilson ................... 86,000 1,842,980
Robert E. Campbell ................. -- --
Peter N. Larson .................... -- --
Clark H. Johnson ................... 15,000 321,450
- --------
(1) Awards are paid out upon retirement or other termination of employment.
(2) The value used is the value as of the end of the last fiscal year and was
$21.43 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
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
$21.43 per CEC unit. The 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 $21.43 per unit value as of the end of
the last fiscal year are: Mr. R. S. Larsen 286,200 CEC units ($6,133,266); Mr.
R. N. Wilson 319,000 CEC units ($6,836,170); Mr. R. E. Campbell 423,600 CEC
units ($9,077,748); Mr. P. N. Larson 60,000 CEC units ($1,285,800) and Mr. C. H.
Johnson 178,600 CEC units ($3,827,398).
16
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
------------ -------- -------- -------- -------- ---------- ----------
$ 600,000 $146,900 $195,900 $244,900 $293,900 $ 342,900 $ 391,900
700,000 172,000 229,300 286,600 343,900 401,200 458,500
800,000 197,000 262,600 328,300 393,900 459,600 525,200
900,000 222,000 295,900 369,900 443,900 517,900 591,900
1,000,000 247,000 329,300 411,600 493,900 576,300 658,600
1,100,000 272,000 362,600 453,300 543,900 634,600 725,300
1,200,000 297,000 396,000 495,000 594,000 692,900 791,900
1,300,000 322,000 429,300 536,600 644,000 751,300 858,600
1,400,000 347,000 462,600 578,300 694,000 809,600 925,300
1,500,000 372,000 496,000 620,000 744,000 868,000 992,000
1,600,000 397,000 529,300 661,700 794,000 926,300 1,058,700
1,700,000 422,000 562,700 703,300 844,000 984,700 1,125,300
1,800,000 447,000 596,000 745,000 894,000 1,043,000 1,192,000
1,900,000 472,000 629,300 786,700 944,000 1,101,400 1,258,700
Covered compensation includes regular annual earnings, cash bonus, the
value of awards under the Stock Compensation Program, and dividend equivalents
paid on both undelivered Restricted Stock awards (which cease after 1994) and
non-vested CEC units. 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 $1,517,500;
Mr. R. N. Wilson $1,162,300; Mr. R. E. Campbell $1,106,400; Mr. P. N. Larson
$780,700 (Mr. Larson's Average Covered Compensation reflects Covered
Compensation from December, 1990 when he rejoined the Company); and Mr. C. H.
Johnson $657,100. The approximate years of service for each Named Officer as of
the end of the last fiscal year is: Mr. R. S. Larsen 31 years; Mr. R. N. Wilson
30 years; Mr. R. E. Campbell 40 years; Mr. P. N. Larson 14 years; and Mr. C. H.
Johnson 38 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 benefit which cannot be paid from the Retirement Plan by reason of
certain Internal Revenue Code limitations on qualified plan benefits. The
amounts shown in the Pension Plan Table include the amounts payable under the
supplemental plan.
PROPOSAL FOR 1995 STOCK OPTION PLAN
The Compensation Committee, recognizing that insufficient shares are
available to provide further grants of stock options under existing Company
plans, advised the Board of Directors that it is in the interest of the Company
to continue its longstanding practice of making stock options available to those
employees responsible for significant contributions to the Company's business.
The Compensation Committee believes that the equity stake in the growth and
success of the Company afforded by stock options provides such key employees
with an incentive to continue to energetically apply their talents within the
Company. Accordingly, on February 13, 1995, the Board of Directors, acting on
the recommendation of the Compensation Committee, unanimously approved the 1995
Stock Option Plan (the "Plan") and directed that it be submitted for
consideration and action at the meeting. For adoption of
17
the Plan, it will be necessary that it be approved by the affirmative vote of a
majority of the shares voted at the meeting. If the Plan is approved by
Stockholders, no further options will be granted under the Company's existing
Stock Option Plan.
The Board recommends a vote FOR approval of the 1995 Stock Option Plan.
The following is a brief but not comprehensive summary of the proposed 1995
Stock Option Plan which continues a practice that began at the Company in 1952.
The complete text is attached as Exhibit 1 and reference is made to such Exhibit
for a complete statement of the provisions of the Plan. The Plan provides for
the granting of options to purchase up to 28 million shares of the Company's
Common Stock, to be drawn from authorized but unissued shares and/or from
Treasury shares. The number and kind of shares subject to the Plan would be
appropriately adjusted in the event of any change in the capital structure of
the Company. Stockholders would have no preemptive rights with regard to shares
allotted to the Plan. The Plan would be administered by the Company's
Compensation Committee which is composed of four directors who are not employees
of the Company. Each member of the Compensation Committee must be a
"disinterested person" within the meaning of Rule 16b-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended from time
to time, and an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). No
member of the Compensation Committee is eligible to receive options under the
Plan. Participants would be selected by the Compensation Committee itself or,
upon the recommendation of the Management, from directors who are employees of
the Company or its domestic subsidiaries; key employees of the Company and its
domestic subsidiaries (including executive officers and officers of the Company)
and key employees of international subsidiaries. Optionees would be selected on
the basis of demonstrated ability to contribute substantially to the effective
management of the Company. The Compensation Committee would determine both the
number of optionees and the number of shares to be optioned to any individual
under the Plan. The total number of shares which may be awarded under the Plan
to any optionee in any one year shall not exceed 5% of the total shares
allocated to such Plan. The Board of Directors would be able to amend the Plan
without further approval by the Stockholders, except insofar as such approval is
required by law.
The Plan would enable the Company to grant either "non-qualified options"
or "incentive stock options". No options could be granted under the Plan later
than April 26, 2000. Incentive stock options could have an exercise period of up
to ten years. Non-qualified options could have an exercise period as specified
by the Committee at the time of grant.
The Plan would allow the Compensation Committee to establish in its
discretion the time or times within the period of the option when the option
could be exercised and the percentage of the option that could be exercised at
such times. In its discretion, the Compensation Committee could accelerate the
vesting of options held by employees whose employment has terminated by reason
of death, disability or retirement. However, no option could be exercised later
than ten years following the date of grant in the case of an incentive stock
option or later than the period specified by the Committee from the date of
grant in the case of a non-qualified stock option. Provision is made in the
proposed Plan for progressive exercise of the options during their terms.
The Plan provides that upon termination of employment of the optionee for a
cause other than death, disability or retirement, the rights to exercise the
option which have accrued at the date of termination may be exercised within
three months following that date or such longer period (not to exceed three
years) as the Compensation Committee shall provide, and that thereafter all
further rights to exercise the option cease, whether or not accrued at the date
of termination, unless the Compensation Committee otherwise specifies. In the
event of termination of employment due to death, disability or retirement, the
same provisions apply except that the period of time for exercise is three
years. In its discretion the Compensation Committee may extend the exercise
period for stock options held by employees whose employment has terminated by
reason of death, disability or retirement. In no event, however, can an
incentive stock option be exercised after 10 years following the date of grant
or a non-qualified option be exercised after the period specified by the
Compensation Committee from the date it is granted, or such earlier date as may
be specified in the option.
18
The options would not be transferable, except in the event of death. The
Compensation Committee may provide, however, for the transfer, without payment
of consideration, of a non-qualified option to immediate family members of the
optionee or to trust or partnerships for such family members.
The exercise price per share for each option would be not less than the
fair market value on the date of grant, determined as prescribed by the
Internal Revenue Code and Regulations. It is provided that payment for the
portion exercised may be made in whole at the time of exercise of the option or
in installments, within the discretion of the Compensation Committee. Payment
could be made in cash or in Johnson & Johnson Common Stock valued at its current
fair market value.
The aggregate fair market value (determined as of the time such option is
granted) of the Common Stock for which any employee may have incentive stock
options vest in any calendar year may not exceed $100,000.
All nominees for election as directors who are employees of the Company
would be eligible to participate as determined by the Compensation Committee
itself or upon the recommendation of the Management. No determination has been
made with respect to future recipients of options under the Plan and it is not
possible to specify the names or positions of the key executives to whom options
may be granted, or the number of shares, within the limitations of the Plan, to
be covered by such options. As of January 31, 1995, fifteen officers, four of
whom are also directors, and 3,562 employees (other than directors and officers)
held stock options issued under former plans.
Proceeds received from optioned shares will be used for general corporate
purposes.
The Company has been advised by its Tax Department that under currently
applicable provisions of the Internal Revenue Code of 1986, an optionee will not
be deemed to receive any income for Federal tax purposes upon the grant of an
option under the Plan, nor will the Company be entitled to a tax deduction at
that time. However, upon the exercise of an option the tax consequences are as
follows:
1. Upon the exercise of a non-qualified option, the optionee will be
deemed to have received ordinary income in an amount equal to the
difference between the option price and the market price of the shares on
the exercise date. The Company will be allowed an income tax deduction
equal to the excess of market value of the shares on the date of exercise
over the cost of such shares to the optionee.
2. Upon the exercise of an incentive stock option, there is no income
recognized by the optionee at the time of exercise. If the stock is held at
least one year following the exercise date and at least two years from the
date of grant of the option, the optionee will realize a long-term capital
gain or loss upon sale, measured as the difference between the option
exercise price and the sale price. If either of these holding period
requirements are not satisfied, ordinary income tax treatment will apply to
the amount of gain at sale or exercise, whichever is less. No income tax
deduction will be allowed the Company with respect to shares purchased by
an optionee upon the exercise of an incentive stock option, provided such
shares are held for the required periods as described above.
There is no charge against the Company in connection with the grant of an
option or the exercise of an option for cash. The exercise of an option for
stock may result in a charge against income. The Plan is intended to comply with
Section 162(m) of the Internal Revenue Code by qualifying payments under the
Plan as performance-based compensation.
Under the Internal Revenue Code, an option will generally be disqualified
from receiving incentive stock option treatment if it is exercised more than
three months following termination of employment. However, if the optionee is
disabled, such statutory treatment is available for one year following
termination. If the optionee dies while employed by the Company or within three
months thereafter, the statutory time limit is waived altogether. In no event do
these statutory provisions extend the rights to exercise an option beyond those
provided by its terms.
The Plan may be amended by the Board of Directors. The closing price of the
Common Stock of the Company on February 28, 1995, based on composite trading
data published in the Wall Street Journal, was $56.75 per share.
19
PROPOSAL FOR 1995 STOCK COMPENSATION PLAN
On February 13, 1995, the Board of Directors, upon the recommendation of
the Compensation Committee, unanimously approved the adoption and submission to
a vote at the Annual Meeting of Stockholders of the 1995 Stock Compensation Plan
(the "Plan"). For adoption of this Plan, it will be necessary that it be
approved by the affirmative vote of a majority of the shares voted at the
meeting.
The Board recommends a vote FOR approval of the 1995 Stock Compensation
Plan.
The Plan provides, in general, for the awarding of shares of Common Stock
of the Company to employees of the Company, (including executive officers and
officers) its subsidiaries and affiliates, both in the United States and abroad.
The Plan continues a practice of the Company which began in 1922. An award is by
way of a bonus to the employee and is not regarded as part of the employee's
regular compensation. The Plan, in the judgment of the Board of Directors,
promotes the interests of the Company by insuring continuity of management and
increased incentive on the part of the participants by insuring their
acquisition of an equity interest in the Company and by providing an adequate
overall compensation level. If the Plan is approved by Stockholders, no further
awards will be made under the Company's existing Stock Compensation Plan.
The Common Stock to be distributed in the operation of the Plan would not
exceed 4 million shares of the Company's authorized but unissued shares (to be
reduced in all events by the number of Treasury shares used for the Plan).
Stockholders will have no preemptive rights with regard to these shares.
Participants would be selected by the Board of Directors of the Company
from the group of key management personnel, generally at the supervisor level
and above, and sales personnel of the Company and its domestic and international
subsidiaries and affiliates. The executive officers named in the Summary
Compensation Table would be eligible. Under certain conditions, and with the
approval of the Management Compensation Committee of the Company, or its
delegate, awards may be granted to employees not meeting the above criteria.
Participants would be selected on the basis of demonstrated ability and
potential to contribute substantially to the Company's success. It is not
possible to state the number of employees who will participate in the Plan. In
1994, fifteen officers, four of whom are also directors, and 8,742 employees
(other than directors and officers) received awards under the former plan.
The term of the Plan would expire on April 26, 2000. The Plan does not
provide any maximum on the number of shares which can be awarded to an employee.
Conditioned upon Stockholder approval of the Plan, the Board of Directors,
or a committee appointed thereby, will have full power and authority to
administer the Plan, including the authority to select participants and to
determine the number of shares to be awarded to each participant. The number and
kind of shares subject to the Plan would be appropriately adjusted in the event
of any change in the capital structure of the Company.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand as the independent
auditors for the Company and its subsidiaries for the fiscal year 1995.
Stockholder 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 stockholders 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.
Representatives of Coopers & Lybrand are expected to be present at the
meeting and will be allowed to make a statement if they wish. Additionally, they
will be available to respond to appropriate questions from stockholders during
the meeting.
STOCKHOLDER PROPOSAL ON PHARMACEUTICAL PRICING
The following stockholder proposal has been submitted to the Company for
action at the meeting by the Mercy Consolidated Assets Management Program, 20
Washington Square North, New York, NY 10011, owner of 4,000 shares of the
Company's Common Stock. Nine other groups whose names,
20
addresses and shareholdings will be supplied upon oral or written request to the
Secretary of the Company have co-sponsored the proposal. The affirmative vote of
a majority of the votes cast at the meeting by or on behalf of the stockholders
is required for approval of a stockholder proposal. The text of the proposal
follows:
Stockholder Proposal Regarding Pharmaceutical Pricing
WHEREAS: During the 1980's, prescription drug prices increased at almost
three times the rate of general inflation in the United States and these prices
have not been readjusted;
The companies who produce pharmaceuticals have been criticized by citizens,
organizations, and the U.S. government agencies as being unjust in the reaping
of "excessive profits at the expense of millions of U.S. citizens";
The burden of these cost increases have been borne by vulnerable individual
consumers such as the elderly and the under-insured in the retail market as well
as increased costs for some institutional health care facilities;
Our company's policy to limit average price increases for all health
related products has failed to significantly benefit retail customers of Johnson
& Johnson prescription drugs due to the discounted prices offered to volume
purchasers such as HMO's and large purchasing groups;
The price of a drug is determined by several factors, only one of which is
the cost of research;
We believe U.S. citizens want reasonable limits on pharmaceutical prices;
Our company enlisted our aid at the 1994 annual meeting to defeat mandatory
price controls; and meaningful health care reform was defeated;
RESOLVED: the shareholders request the Board to create and implement a
policy of price restraint of pharmaceutical products for both the
individual consumer and institutional purchasers in order to keep drug
prices at a reasonable level.
The Board will report to the shareholders on positive changes in
policy and procedures for our pharmaceutical products by September 1995.
SUPPORTING STATEMENT: Our company's Credo defines our first responsibility
is to those who use our products and services. As a health care company our
products and services are often essential for maintaining life itself and/or a
high quality of life. This places an additional responsibility to ensure that
our products are affordable. The negative impact of escalating drug prices on
vulnerable members of our society is a major concern for the filers of this
resolution. We feel that our company's successful lobbying to defeat mandatory
price controls on pharmaceuticals also obligates us to develop a meaningful
voluntary price restraint policy.
We suggest that the policy include a restraint on each individual drug and
that it not be based on averages. Averages can mask tremendous disparities: a
low price increase for one compound and a high price increase for another; one
price for a major HMO (usually low) and another for the elderly or uninsured
retail customer (usually high).
We appreciate the role that our company has played in the development of
new medicines of great benefit, and we understand the need for ongoing research.
However, we are well aware that the cost of research is only one determinant for
the final price of a drug. The manufacturing, selling, marketing and
administrative costs contribute far more to the price of the drug than research
costs. Thus, we believe price restraint can be achieved without sacrificing the
necessary research effort of Johnson & Johnson.
If you agree, please mark your proxy FOR this resolution.
Management's Statement in Opposition to Stockholder Proposal
The Board of Directors favors a vote AGAINST the adoption of this proposal
for the following reasons:
The Board of Johnson & Johnson recommends voting against the proposal on
pharmaceutical pricing.
21
The Board does so in the context of Johnson & Johnson's unique position as
a comprehensive health care products company. As has been noted to stockholders
before, we are keenly aware of the concern about the rising costs of health care
and will continue our practice of pricing our products responsibly. For the last
14 years, the weighted average compound growth rate of price increases in the
United States for our health care products (prescription and over-the-counter
drugs, hospital and professional products) has been slightly below the U.S.
Consumer Price Index.
The future of our pharmaceutical business depends on continued intensive
investment in research and development that will yield new and innovative
medicines for the treatment of disease and will bring down the cost of health
care over the long term. In order to continue this research and assure the
future of its business, the Company must have the latitude to price its products
based on marketplace forces and in a way that yields the required revenue. The
steadily increasing cost of research and development makes this particularly
important.
The pharmaceutical marketplace in the U.S. is already undergoing profound
change. The rapid growth of managed care organizations has created large,
sophisticated purchasers and intense competition that has significantly reduced
the rate of price increases on prescription medicines.
Capping individual prices on prescription drugs in the U.S. based on a
formula or on arbitrary comparisons with selected world markets would inhibit
our ability to compete in the marketplace and is contrary to the best interests
of the patients we serve, as well as the Company and its shareholders.
It is, therefore, recommended that the stockholders vote AGAINST this
proposal.
STOCKHOLDER PROPOSAL ON NON-EMPLOYEE
DIRECTOR RETIREMENT PLAN
The following stockholder proposal has been submitted to the Company for
action at the meeting by William Steiner, 4 Radcliff Drive, Great Neck, New York
11024, owner of 100 shares of the Company's common stock. The affirmative vote
of a majority of the votes cast at the meeting by or on behalf of the
stockholders is required for approval of a stockholder proposal. The text of the
proposal is as follows:
Stockholder Proposal On Non-Employee Director Retirement Plan
RESOLVED, that the shareholders assembled in person and by proxy,
recommend (i) that all future non-employee directors not be granted pension
benefits and (ii) current non-employee directors voluntarily relinquish
their pension benefits.
SUPPORTING STATEMENT: Aside from the usual reasons, presented in the past,
regarding "double dipping", that it is outside (non-employee) directors who are
in almost all cases amply rewarded with their pension at their primary place of
employment, and in many instances serving as outside pensioned directors with
other companies, there are other more cogent reasons that render this policy as
unacceptable.
Traditionally, pensions have been granted in both the private and public
sectors for long term service. The service component usually represents a
significant number of hours per week. The practice of offering pensions for
consultants is a rarity. Outside directors' service could logically fit the
definition of consultants and pensions for this type of service is an abuse of
the term.
But more importantly, outside directors, although retained by corporate
Their purpose is to serve as an impartial group to which management is
accountable. Although outside directors are certainly entitled to compensation
for their time and expertise, pensions have the pernicious effect of
compromising their impartiality. In essence, pensions are management's grant to
outside directors to insure their unquestioning loyalty and acquiescence to
whatever policy management initiates, and at times, serving their own self
interest. Thus, pensions become another device to enhance and entrench
management's controls over corporate policies while being accountable only to
themselves. As a founding member of the Investors Rights Association of America
I feel this practice perpetuates a culture of corporate management "cronyism"
that can easily be at odds with shareholder and company interest.
A final note in rebuttal to management's contention that many companies
offer their outside directors pension, so they can attract and retain persons of
the highest quality. Since there are also companies that
22
do not offer their outside directors pensions, can management demonstrate that
those companies that offer pensions have a better performance record then their
non-pensioned peers? In addition, do we have any evidence of a significant
improvement in corporate profitability with the advent of pensions for outside
directors?
I urge your support, vote for this resolution.
If you agree, please mark your proxy FOR this resolution.
Management's Statement In Opposition To Stockholder Proposal
The Board of Directors favors a vote AGAINST the adoption of this proposal
for the following reasons:
The Company competes against many other companies in its efforts to attract
and retain exceptional individuals who are leaders in business, academia and the
medical/scientific community to serve as Directors. To do this the Company must
provide a competitive compensation package. Most of the companies against which
the Company competes provide retirement benefits. The Company regularly monitors
the total value of compensation and benefits provided its Directors among its
peer companies. The Company's objective is to be at the median of the companies
with which it compares itself. The Company is meeting this objective based on
the combined value of all elements of the compensation package. Consequently, if
the Company eliminated the retirement program, it would be at a disadvantage in
attracting and retaining highly qualified Directors.
In light of the significant obligations and responsibilities of the
Company's outside Directors, the Company believes that its total compensation
package for non-employee Directors, which includes a retirement plan, is
appropriate and fair.
It is, therefore, recommended that the stockholders vote AGAINST this
proposal.
STOCKHOLDER PROPOSAL ON
MAQUILADORA--MARKET BASKET SURVEY
The following stockholder proposal has been submitted to the Company for
action at the meeting by the Benedictine Resource Center, 3120 W. Ashby, San
Antonio, Texas 78228, owner of 16,000 shares of the Company's common stock. Ten
other groups whose names, addresses and shareholdings will be supplied upon oral
or written request to the Secretary of the Company have co-sponsored the
proposal. The affirmative vote of a majority of the votes cast at the meeting by
or on behalf of the stockholders is required for approval of a stockholder
proposal. The text of the proposal is as follows:
Stockholder Proposal On Maquiladora--Market Basket Survey
WHEREAS, NAFTA, the North American Free Trade Agreement and GATT, the
General Agreement on Trade and Tariffs, have emphasized the debate surrounding
U.S. corporations in Mexican maquiladora operations. Critics deplore marginal
survival wages paid Mexican maquiladora employees by a majority of U.S.
companies, even though those employees work productively and efficiently.
A 1994 market basket study reveals a maquiladora worker labors 69.0 minutes
to purchase 5 lbs. of rice in comparison to the 13.5 minutes of a U.S. worker.
The purchasing power required by the maquiladora worker for aspirin is 153.8
minutes versus 19.3 minutes for the U.S. worker; American cheese, 214.3 to 12.6;
chicken legs, 54.5 to 5.0; bananas, 20.4 to 2.3. (Market Basket Survey, Ruth
Rosenbaum, 1994)
An MIT study declares the Ford factory in Hermosillo, Mexico has the
highest quality of any auto plant in North America. Yet it pays on average
one-tenth of U.S. wages. Even in Mexico, these wages are barely enough to feed a
family, let alone buy a refrigerator or one of the cars the workers assemble.
("Policy Advocate," The Center for Ethics and Economic Policy, Spring 1994)
In 1982, the average Mexican blue collar employee worked 8.1 hours to buy
the basic basket of food: beef, beans, tortillas, tomatoes, sugar, eggs and
milk. In 1986, it was 12.7 hours and by 1993, 21.9 hours. (Dallas Morning News,
8/14/94)
23
WHEREAS, the U.S. and Mexico could build a healthy model of North-South
integration for the 21st century IF Mexico is recognized not just as a trading
partner but as a country that contains fellow workers and global citizens with
whom we share much more than trade.
WHEREAS, the socially-concerned proponents of this resolution firmly
believe there is a need for strict, enforceable standards of conduct for
corporations operating in Canada, Mexico and the United States. One expectation,
based on NAFTA, is that Mexican wages will rise, thereby raising the standard of
living of Mexican workers and their families. However, we believe this will not
happen unless corporations commit to paying wages substantially higher than
marginal survival wages paid in maquiladora. We find it ironic that some of the
same companies that publicly committed to paying entry-level workers 50% above
the poverty datum line in South Africa in 1974, are unresponsive when challenged
with the reality of the poverty level wages that pay employees in Mexico.
It is important that our company review maquiladora operations including:
minimum and average wages paid to employees; how these compare with local cost
of living and poverty level; other methods of compensation such as profit
sharing, special trust funds to finance infrastructure improvements in nearby
neighborhoods where employees live. The religiously-affiliated proponents of
this resolution recommend the review contain a market basket survey.
RESOLVED, the shareholders request management to initiate a review of wages
and benefits paid and environmental standards upheld in its maquiladora
operations. A summary report of findings of the review and recommendations for
changes in policy or performance in light of the survey should be available to
shareholders upon request within six months of the 1995 annual meeting.
Management's Statement In Opposition To Stockholder Proposal
The Board of Directors favors a vote AGAINST the adoption of this
proposal for the following reasons:
The workers at our maquiladora operations in Mexico are valued and
productive members of the Johnson & Johnson worldwide group of employees. They
are treated with the same concern for their personal well being and individual
fulfillment as are other members in the United States and around the world.
Besides providing a clean, safe work place, our companies in the maquiladora
facilities provide health, nutritional and transportation services to meet the
special needs of the people. In addition, we are deeply involved in programs in
the community that include support for improved housing, health, medical care
and education. Our work places do not harm the environment and all materials and
waste products are safely and efficiently disposed of.
We have for the past several years offered to our shareholders a report on
our maquiladora operations, providing a discussion in Spanish and English, of
our policies and practices. This has included a discussion of our compensation
and benefits program and details of our relations with trade unions.
Management in our maquiladora operations regularly measures and assesses
compensation and benefits relative to the competition and local markets. We do
not think that conducting a special "market basket study" comparing Mexican
wages and costs of living with U.S. standards and reporting its results to
shareholders is necessary or appropriate. As the bulk of our maquiladora
operations could not economically function in the U.S., the alternative would be
exiting those businesses altogether or seeking another country elsewhere in the
world where operating costs could enable our continuance in that industry.
It is, therefore, recommended that the stockholders 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. However, on all
matters 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.
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EXHIBIT 1
JOHNSON & JOHNSON
1995 STOCK OPTION PLAN
1. Purpose
The purpose of the Johnson & Johnson 1995 Stock Option Plan (the "Plan") is
to promote the interests of Johnson & Johnson (the "Company") by ensuring
continuity of management and increased incentive on the part of officers and
executive employees responsible for major contributions to effective management,
through facilitating their acquisition of an equity interest in the Company on
reasonable terms.
2. Administration
The Plan shall be administered by the Compensation Committee of the Board
of Directors (the "Committee"). The Committee shall consist of not less than
three directors. No person shall be eligible to continue to serve as a member of
such Committee unless such person is a "disinterested person" within the meaning
of Rule 16b-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended, and an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"). Committee members shall not be eligible to participate
in the Plan while members of the Committee. It shall have the power to select
optionees, to establish the number of shares and other terms applicable to each
such option, to construe the provisions of the Plan, and to adopt rules and
regulations governing the administration of the Plan.
The Board of Directors, within its discretion, shall have authority to
amend the Plan and the terms of any option issued hereunder without the
necessity of obtaining further approval of the stockholders, unless such
approval is required by law.
3. Eligibility
Those eligible to participate in the Plan will be selected by the Committee
from the following:
(1) Directors who are employees of the Company or its domestic
subsidiaries (excluding members from time to time of the Committee).
(2) Officers and other key employees of the Company and its domestic
subsidiaries.
(3) Key employees of subsidiaries outside the United States.
In all cases, optionees shall be selected on the basis of demonstrated
ability to contribute substantially to the effective management of the Company.
In no event shall an option be granted to any individual who, immediately
after such option is granted, is considered to own stock possessing more than
10% of the combined voting power of all classes of stock of Johnson & Johnson or
any of its subsidiaries within the meaning of Section 422 of the Internal
Revenue Code.
4. Allotment of Shares
A maximum of 28,000,000 authorized but unissued shares of the Common Stock
of the Company (par value $1.00) will be allotted to the Plan, subject to the
required approval by the stockholders. The total number of shares which may be
awarded under the Plan to any optionee in any one year shall not exceed 5% of
the total shares allotted to the Plan. The Committee may, in its discretion, use
Treasury shares in lieu of authorized but unissued shares for the options. To
the extent this is done, the number of authorized but unissued shares to be used
for the Plan will be reduced.
Shares covered by options which lapse or have been terminated during the
duration of this Plan may be reallocated by the Committee.
5. Effective Date and Term of Plan
The Plan shall become effective on April 27, 1995. No option shall be
granted pursuant to this Plan later than April 26, 2000, but options theretofore
granted may extend beyond that date in accordance with their terms.
25
6. Terms and Conditions
A. All Options
The following shall apply to all options granted under the Plan:
(i) Option Price
The option price per share for each stock option shall be determined
by the Committee and shall not be less than the fair market value on the
date the option is granted. The fair market value shall be determined as
prescribed by the Internal Revenue Code and Regulations.
(ii) Time of Exercise of Option
The Committee shall establish the time or times within the option
period when the stock option may be exercised in whole or in such parts as
may be specified from time to time by the Committee. With respect to an
optionee whose employment has terminated by reason of death, disability or
retirement, the Committee may in its discretion accelerate the time or
times when any particular stock option held by said optionee may be so
exercised so that such time or times are earlier than those originally
provided in said option. In all cases exercise of a stock option shall be
subject to the provisions of Section 6B(ii) or 6C(iii), as the case may be.
(iii) Payment
The entire option price may be paid at the time the option is
exercised. When an option is exercised prior to termination of employment,
the Committee shall have the discretion to arrange for the payment of such
price, in whole or in part, in installments. In such cases, the Committee
shall obtain such evidence of the optionee's obligation, establish such
interest rate and require such security as it may deem appropriate for the
adequate protection of the Company.
(iv) Non-Transferability of Option
Unless otherwise specified by the Committee to the contrary, an option
by its terms shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution and shall be exercisable
during the optionee's lifetime only by the optionee. The Committee may, in
the manner established by the Committee, provide for the transfer, without
payment of consideration, of a non-qualified option by an optionee to a
member of the optionee's immediate family or to a trust or partnership
whose beneficiaries are members of the optionee's immediate family. In such
case, the option shall be exercisable only by such transferee. For purposes
of this provision, an optionee's "immediate family" shall mean the holder's
spouse, children and grandchildren.
(v) Adjustment in Event of Recapitalization of the Company
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, rights offering, or
any other change in the corporate structure or shares of the Company, the
Board of Directors shall make such adjustment as it may deem equitably
required in the number and kind of shares authorized by and for the Plan,
in the number and kind of shares covered by the options granted, in the
number of shares which may be awarded to an optionee in any one year, and
in the option price.
B. Non-Qualified Stock Options
The Committee may, in its discretion, grant options under the Plan
which, in whole or in part, do not qualify as incentive stock options under
Section 422 of the Internal Revenue Code. In addition to the terms and
conditions set forth in Section 6A above, the following terms and
conditions shall govern any option (or portion thereof) to the extent that
it does not so qualify.
(i) Form of Payment
Payment of the option price of any option (or portion thereof) not
qualifying as an incentive stock option shall be made in cash or, in the
discretion of the Committee, in the Common Stock of the Company valued at
its fair market value (as the same shall be determined by the Committee),
or a combination of such Common Stock and cash.
26
(ii) Rights after Termination of Employment
In the event of termination of employment due to any cause including
death, disability or retirement, rights to exercise the stock option shall
cease, except for those which have accrued to the date of termination,
unless the Committee shall otherwise specify. These rights shall remain
exercisable for a period of three months, or such longer period (not to
exceed three years) as the Committee shall provide, following termination
for any cause other than death, disability or retirement and for a period
of three years following termination due to death, disability or
retirement, unless the Committee otherwise specifies. The Committee may, in
its discretion, extend the period within which any particular option may be
exercised beyond the expiration date originally provided in said option.
However, no stock option shall, in any event, be exercised after the
expiration of the full term of the option as may be specified in the
option.
(iii) Period of Option
The exercise period of each non-qualified stock option shall be
specified by the Committee at the time of grant.
C. Incentive Stock Options
The Committee may, in its discretion, grant options under the Plan
which qualify in whole or in part as incentive stock options under Section
422 of the Internal Revenue Code. In addition to the terms and conditions
set forth in Section 6A above, the following terms and conditions shall
govern any option (or portion thereof) to the extent that it so qualifies:
(i) Maximum Fair Market Value of Incentive Stock Options
The aggregate fair market value (determined as of the time such option
is granted) of the Common Stock for which any optionee may have stock
options which first become vested in any calendar year (under all incentive
stock option plans of the Company and its parent and subsidiary
corporations) shall not exceed $100,000.
(ii) Form of Payment
Payment of the option price for incentive stock options shall be made
in cash or in the Common Stock of the Company valued at its fair market
value (as the same shall be determined by the Committee), or a combination
of such Common Stock and cash. Where payment of the option price is to be
made with Common Stock acquired under a Company compensation plan (within
the meaning of paragraph 11(g) of Opinion No. 25 of the Accounting
Principles Board), such Common Stock will not be accepted as payment unless
the optionee has beneficially owned such Common Stock for at least six
months (increased to one year if such Common Stock was acquired under an
incentive stock option) prior to such payment.
(iii) Rights after Termination of Employment
In the event of termination of employment due to any cause including
death, disability or retirement, rights to exercise the stock option shall
cease, except for those which have accrued to the date of termination,
unless the Committee shall otherwise specify. These rights shall remain
exercisable for a period of three months, or such longer period (not to
exceed three years) as the Committee shall provide, following termination
for any cause other than death, disability or retirement and for a period
of three years following termination due to death, disability or
retirement, unless the Committee otherwise specifies. However, no incentive
stock option shall, in any event, be exercised after the expiration of 10
years from the date such option is granted, or such earlier date as may be
specified in the option.
(iv) Period of Option
The exercise period of each incentive stock option by its terms shall
not be more than 10 years from the date the option is granted as specified
by the Committee.
27
J
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Notice of
& 1995 Annual
Meeting and
Proxy
Statement
J
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APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 13 contains a description in tabular form of a graph entitled
"Stockholder Return Performance Graph" which represents the comparison of the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the Standard and Poor's 500 Stock Index and the
Standard and Poor's Diversified Health Care Index for the period of five years
commencing December 31, 1989 and ending December 31, 1994, which graph is
contained in the paper format of this Proxy Statement being sent to
Stockholders.
JOHNSON & JOHNSON
Proxy Solicited by the Board of Directors for the
Annual Meeting of Stockholders on April 27, 1995
The undersigned hereby appoints C.H. Johnson, P.N. Larson and R.N.
Wilson and each or any of them as proxies, with full power of
P substitution and revocation, to represent the undersigned and to vote
R all shares of the Common Stock of Johnson & Johnson which the
O undersigned is entitled to vote at the Annual Meeting of Stockholders
X of the Company to be held on April 27, 1995 at 10:00 A.M. at the Hyatt
Y Regency Hotel, Two Albany Street, New Brunswick, New Jersey, and any
adjournment 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:
James W. Black, Gerard N. Burrow, Joan G. Cooney, Philip M. Hawley, Clark H.
Johnson, Ann D. Jordan, Arnold G. Langbo, Ralph S. Larsen, Peter N. Larson, John
S. Mayo, Thomas S. Murphy, Paul J. Rizzo, Maxine F. Singer, Roger B. Smith,
Robert N. Wilson.
(change of address/comments)
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(If you have written in the above space, please mark the
corresponding box on the reverse side of this card.)
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxies cannot vote your
shares unless you sign and return this card.
SEE REVERSE SIDE
Detach Proxy Card Here
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[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
proposals 2, 3 and 4 and AGAINST proposals 5, 6 and 7.
The Board of Directors recommends a vote FOR proposals 1, 2, 3 and 4.
FOR WITHHELD
1. Election of Directors (see reverse) [ ] [ ]
For, except vote withheld from the following nominee(s):
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FOR AGAINST ABSTAIN
2. Approval of 1995 Stock Option Plan [ ] [ ] [ ]
3. Approval of 1995 Stock Compensation Plan [ ] [ ] [ ]
4. Ratification of Coopers and Lybrand as [ ] [ ] [ ]
Independent Auditors
The Board of Directors recommends a vote AGAINST proposals 5, 6 and 7.
FOR AGAINST ABSTAIN
5. Proposal on Pharmaceutical Pricing [ ] [ ] [ ]
6. Proposal on Non-Employee Director [ ] [ ] [ ]
Retirement Plan
7. Proposal on Maquiladora Market Basket [ ] [ ] [ ]
Survey
Change of Address/Comments on Reverse Side [ ]
SIGNATURE(S) ____________________________________________ DATE ________________
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments 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.
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JOHNSON & JOHNSON