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.
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[LOGO]
NOTICE OF ANNUAL MEETING AND
PROXY STATEMENT
March 12, 1996
The Annual Meeting of the Stockholders of Johnson & Johnson will be held on
April 25, 1996 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 Johnson & Johnson
Executive Incentive Plan to satisfy certain Internal Revenue Code
requirements;
3. Consider and act upon a proposal to ratify the appointment of Coopers &
Lybrand L.L.P. as the Company's independent auditors; and
4. Transact such other business 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
PLEASE SIGN, DATE AND RETURN YOUR PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE
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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 27, 1996 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
666,316,374 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 12, 1996 concurrently with the
mailing of the Company's 1995 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 January 31, 1996, 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 38,336,897 shares (5.9%) of the Company's
outstanding Common Stock.
STOCKHOLDER PROPOSALS. To be included in the Board of Directors' proxy
statement for the 1997 Annual Meeting of Stockholders, a stockholder proposal
must be received by the Company on or before November 12, 1996. 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. James G. Cullen, who was elected to the Board of Directors
in September of 1995, all of the nominees were elected to the Board at the last
Annual Meeting and all are currently serving as directors of the Company.
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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, 71, was elected to the Board of Directors in 1989. He is
Chairman of the Science and Technology Advisory Committee and is
employed by the Company as a consultant. Dr. Black is Professor and
(Photo) Head of the Department of Analytical 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, 63, was elected to the Board of Directors in 1993 and is a
member of the Benefits Committee and the Science and Technology
Advisory Committee. He was named to his present position at the Yale
(Photo) 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
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, 66, 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 in 1970 and
(Photo) 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 Metropolitan Life Insurance Company, the Museum of Television and
Radio and The Columbia Presbyterian Medical Center of New York, as
well as a Trustee of the Educational Broadcasting Corporation (Channel
13/WNET, New York City) and the National Child Labor Committee.
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JAMES G. CULLEN, Vice Chairman, Bell Atlantic Corporation.
Mr. Cullen, 53, was elected to the Board of Directors in September
1995 and is a member of the Compensation Committee and the Audit
(Photo) Committee. Mr. Cullen assumed his present position with Bell Atlantic
Corporation in February, 1995 after having been President since
February of 1993. He was President and Chief Executive Officer of Bell
Atlantic-New Jersey, Inc. from 1989 to 1993. He is a Director of
Prudential Life Insurance Company.
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PHILIP M. HAWLEY, Retired Chairman of the Board and Chief Executive
Officer, The Broadway Stores, Inc.
Mr. Hawley, 70, was elected to the Board of Directors in 1988 and is a
(Photo) 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, Inc.) from 1983 to his
retirement in 1993. Mr. Hawley is also a Director of AT&T Corp.,
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, 60, 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 & Johnson in 1953
(Photo) 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, 61, 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 Caseworker and then a Senior
(Photo) 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,
The Hechinger Company, Salant Corporation and Travelers Inc. Mrs.
Jordan is a Director of The Phillips Collection, The Child Welfare
League and of the National Symphony Orchestra.
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ARNOLD G. LANGBO, Chairman of the Board and Chief Executive Officer,
Kellogg Company.
Mr. Langbo, 58, was elected to the Board of Directors in 1991 and is a
member of the 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 Operating Officer since
(Photo) 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, 57, 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
(Photo) 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 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, The New York Stock Exchange and AT&T Corp. 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 Way of Tri-State.
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JOHN S. MAYO, PH.D., President Emeritus, AT&T Bell Laboratories.
Dr. Mayo, 66, 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
(Photo) President of Electronics Technology, Executive Vice President of
Network Systems and Senior Vice President, Network Systems and Network
Services. He 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
(Chairman), 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, Former Chairman of the Board and Chief Executive
Officer, Capital Cities/ABC, Inc.
Mr. Murphy, 70, 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 served as Chairman and Chief Executive
Officer from 1966 until its acquisition by The Walt Disney Company in
February 1996. From June 1990 to February 1994 he served as Chairman
(Photo) of the Board only. Capital Cities/ABC operates the ABC Television
Network and eight affiliated 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 The Walt Disney Company 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, 68, 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. He is a partner in Franklin St. Partners, an investment firm.
Mr. Rizzo is a director of The McGraw-Hill Companies, Inc., Ryder
Systems. Inc. and the Morgan Stanley Group.
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MAXINE F. SINGER, PH.D., President of the Carnegie Institution of
Washington.
Dr. Singer, 65, was elected to the Board of Directors in 1991 and is a
member of the Science and Technology Advisory Committee and the Public
Policy Advisory Committee. Dr. Singer became President of the Carnegie
(Photo) Institution of Washington in 1988 after serving for over thirty years
at the National Institutes of Health where she advanced to be Chief of
the Laboratory of Biochemistry at NIH's National Cancer Institute. Dr.
Singer is a member of the National Academy of Sciences, the American
Philosophical Society, the Pontifical Academy of Sciences and the
Governing Board of the Weizmann Institute of Science.
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ROGER B. SMITH, Retired Chairman of the Board and Chief Executive
Officer, General Motors Corporation.
Mr. Smith, 70, 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 in
(Photo) 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, 55, was elected to the Board of Directors in 1986. He
joined the Company in 1964, served in several sales and marketing
management positions and was appointed Company Group Chairman in 1981
(Photo) 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.
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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 co-trustees of two trusts which
hold stock for the benefit of others, Messrs. Larsen and Wilson "control" an
additional 5,218,864 shares of the Company's stock in which they have no
economic interest. In addition to such shares, the directors and executive
officers as a group own/control a total of 802,554 shares, the aggregate of
6,021,418 shares representing approximately 1% of the shares outstanding. All
stock ownership is as of January 31, 1996.
NUMBER OF COMMON SHARES UNDER
SHARES EXERCISABLE
NAME (1)(2) OPTIONS (3)
---- ----------------- -----------
James W. Black ......................... 2,664
Gerard N. Burrow ....................... 2,915
Joan Ganz Cooney ....................... 5,028
James G. Cullen ........................ 443
George S. Frazza ....................... 173,415 114,650
Ronald G. Gelbman ...................... 30,246 84,360
Philip M. Hawley ....................... 4,274
Clark H. Johnson ....................... 47,125 127,280
Ann Dibble Jordan ...................... 3,796
Arnold G. Langbo ....................... 5,013
Ralph S. Larsen ........................ 125,728 413,400
John S. Mayo ........................... 19,297
Thomas S. Murphy ....................... 62,418
Paul J. Rizzo .......................... 33,865
Maxine F. Singer ....................... 6,856
Roger B. Smith ......................... 20,527
Robert N. Wilson ....................... 223,332 244,620
All directors and executive
officers as a group (20),
including those named above ............ 802,554 1,138,130
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(1) Includes an aggregate of 123,231 Common Stock equivalent units credited to
nonemployee 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 January 31, 1996 and options
which become exercisable within 60 days thereafter.
DIRECTORS' FEES, COMMITTEES AND MEETINGS. Directors who are employees of
the Company receive no compensation for their services as directors or as
members of committees. Each director who is not an employee of the Company
receives an award valued at approximately $10,000 in the form of Company Common
Stock upon first becoming a member of the Board of Directors and receives an
annual fee of $60,000 for his or her services as director. Of such annual fee,
$15,000 is required to be deferred in Common Stock equivalent units under the
Deferred Fee Plan for Nonemployee Directors until termination of his or her
directorship. In addition, directors receive $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 of $1,500 per day for committee meetings held on
days other than Board of Directors meeting days. A director may
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elect to defer payment of all or a part of the fees until termination of his or
her directorship. Deferred fees (other than the required deferral referred to
above) 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. All Common Stock equivalent units held
in each nonemployee director's Deferred Fee Account receive dividend
equivalents.
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 seven times. Each
director attended at least 75% of the total meetings of the Board of Directors
and the committees on which they served, other than Mr. Hawley who attended 73%.
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 Mr. Cullen, 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. Cullen, 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), Wilson (Vice 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 three 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.
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,
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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 Standard & Poor's 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 judgement in evaluating these factors and in determining
appropriate compensation.
A discussion of 1995 performance reviewed by the Compensation Committee can
be found under "Decisions on 1995 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.
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 1995 was 3.8%
for merit increases plus 1% for market parity and 1% for promotion adjustments.
The domestic salary guideline for 1996 has been set at 4.0% for merit increases
plus 1% for market parity and 1% for promotion adjustments.
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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
divided between cash and 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, 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
11
<PAGE>
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 1995 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 Compensation
Committee's assessment of the Company's financial performance in the five areas
outlined above and its non-financial performance against the background of the
Credo as outlined above.
The above performance results were evaluated based on the overall judgement
of the Compensation Committee with no fixed or specific mathematical weighting
applied to each element of performance. Based on the Compensation Committee's
judgement, compensation awards for 1995 were made at target.
Mr. Larsen was awarded a salary increase for 1995 of 9.2% versus a 5.8%
total performance guideline. The 1995 annual incentive for the Chief Executive
Officer was approximately 10% above target reflecting the Company's outstanding
performance for 1995 and the sustained performance of the Company over the past
several years. Approximately one half of the annual incentive was provided in
cash with the balance paid in Johnson & Johnson Common Stock. Stock Option
grants were awarded during 1995 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 1996 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 "Act") and the final regulations interpreting the Act which
have recently been adopted by the Internal Revenue Service and the Department of
the Treasury. Based on this review, the Committee has determined that the
Johnson & Johnson Stock Option Plans, as previously approved by stockholders,
meet the requirements for deductibility under the Act. In order to permit the
future deductibility of cash bonus and stock incentive awards for certain
executive officers of the Company, the Committee and the Board of Directors have
adopted an Executive Incentive Plan which is subject to approval by
stockholders. See page 18. The Committee continues to be concerned that the
prerequisites for deductibility of compensation set forth under the Act could
impair the Committee's ability to exercise its discretion to act in the best
interests of the stockholders in establishing compensation. Therefore, the
Committee will continue to assess what further action, if any, may be
appropriate in the future to meet the deductibility requirements.
Thomas S. Murphy, Chairman
Joan G. Cooney
James G. Cullen
Philip M. Hawley
Arnold G. Langbo
12
<PAGE>
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, 1990 and ending
December 31, 1995. The graph and table assume that $100 was invested on December
31, 1990 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 --
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Johnson & Johnson $100.00 $162.31 $145.76 $132.60 $165.74 $263.71
- --------------------------------------------------------------------------------------------------
S&P 500 Stock Index $100.00 $130.47 $140.41 $154.56 $156.60 $215.45
- --------------------------------------------------------------------------------------------------
S&P Diversified Health Care $100.00 $148.12 $126.47 $120.52 $140.45 $208.37
- --------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, for each of the last three fiscal years, the
annual compensation paid by the Company, together with long term and other
compensation for the Chief Executive Officer and the other four most highly
compensated executive officers (the "Named Officers"), of the Company in all
capacities in which they served:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG TERM
---------------------------------- COMPENSATION
NAME OTHER AWARDS
AND ANNUAL ------- ALL OTHER
PRINCIPAL COMPEN- OPTIONS COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION($) (#) SATION($)
-------- ---- --------- -------- --------- ------- ----------
(1) (2) (3)
<S> <C> <C> <C> <C> <C> <C>
R. S. Larsen ....... 1995 $1,005,000 $1,135,931 $534,456 25,500 $ 6,750
Chairman/CEO ....... 1994 920,000 586,714 386,018 40,700 6,750
1993 890,000 448,125 331,740 142,500 10,613
R. N. Wilson ....... 1995 $ 750,000 $ 873,069 $541,788 22,100 $ 6,750
Vice Chairman ...... 1994 690,000 488,967 383,484 28,600 6,750
1993 665,000 388,750 341,693 109,100 10,613
C. H. Johnson ...... 1995 $ 437,500 $ 457,000 $342,280 17,500 $ 6,750
Vice President, .... 1994 395,000 247,087 271,233 13,700 6,750
Finance ............ 1993 380,000 200,000 218,687 47,700 10,613
G. S. Frazza ....... 1995 $ 425,000 $ 448,375 $431,415 24,500 $ 6,750
Vice President, .... 1994 350,000 214,484 320,629 18,100 6,750
General Counsel .... 1993 338,000 170,375 265,677 42,500 10,613
R. G. Gelbman ...... 1995 $ 390,000 $ 407,500 $168,873 13,700 $ 6,750
Worldwide Chairman . 1994 343,625 329,909 129,983 39,200 6,750
Pharmaceutical &
Diagnostics Group(4)
- ---------------
</TABLE>
(1) Bonus amounts include both cash bonuses and stock awards.
(2) Amounts include dividend equivalents paid under the Certificate of Extra
Compensation (CEC) Program (long term incentive plan).
(3) Amount shown is the Company's matching contribution to the 401(k) Plan.
(4) Mr. Gelbman became an executive officer of the Company during 1994.
14
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1995 Stock Option Plan to the Named Officers during
the Company's last fiscal year.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT DATE
UNDERLYING GRANTED TO EXERCISE PRESENT
OPTIONS EMPLOYEES PRICE EXPIRATION VALUE(2)
NAME GRANTED(#)(1) IN 1995 ($/SH) DATE ($)
---- -------------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Ralph S. Larsen ............... 25,500 0.3% $86.25 11/30/05 $558,705
Robert N. Wilson .............. 22,100 0.3% $86.25 11/30/05 $484,211
Clark H. Johnson .............. 17,500 0.2% $86.25 11/30/05 $383,425
George S. Frazza .............. 24,500 0.3% $86.25 11/30/05 $536,795
Ronald G. Gelbman ............. 13,700 0.2% $86.25 11/30/05 $300,167
</TABLE>
- -------------
(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. N. Wilson, Mr. C. H. Johnson
and Mr. G. S. Frazza 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 November 30, 1995.
(2) Based on a grant date present value of $21.91 per option share which was
derived using the Black-Scholes option pricing model in accordance with the
rules and regulations of the Securities and Exchange Commission and is not
intended to forecast future appreciation of the Company's stock price. The
Black-Scholes model was used with the following assumptions: volatility of
17.79% based on a historical weekly average over seven years; dividend
growth of 14.77%; risk free interest rate of 5.65% based on a U.S. Treasury
Strip of seven years; and a seven year option life.
15
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT YEAR END 1995(#) YEAR END 1995($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ralph S. Larsen ...... -- -- 413,400 168,100 $24,069,430 $5,429,958
Robert N. Wilson ..... 32,000 $1,579,300 255,420 153,180 $14,955,267 $5,093,044
Clark H. Johnson ..... 6,000 $ 239,620 127,280 59,820 $ 6,951,628 $1,606,318
George S. Frazza ..... -- -- 114,650 68,100 $ 6,343,162 $1,619,032
Ronald G. Gelbman .... 12,000 $ 620,400 84,360 79,740 $ 5,020,488 $2,330,254
- -------------
</TABLE>
(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
($85.50).
CERTIFICATE OF EXTRA COMPENSATION PROGRAM
The following table provides information concerning awards made during the
last fiscal year under the Company's Certificate of Extra Compensation (CEC)
Program.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
ESTIMATED
NUMBER OF PERIOD UNTIL FUTURE
NAME UNITS (#) PAYOUT PAYOUT ($)
---- --------- ------------ ----------
(1) (2)
Ralph S. Larsen ........ 92,000 $2,315,640
Robert N. Wilson ....... 114,000 2,869,380
Clark H. Johnson ....... 10,000 251,700
George S. Frazza ....... 30,000 755,100
Ronald G. Gelbman ...... 55,000 1,384,350
- -------------
(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
$25.17 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
$25.17 per CEC unit. The cumulative number of CEC units earned as of the end of
the last fiscal year by each of the Named Officers during their careers with the
Company, valued for illustrative purposes at the $25.17 per unit value as of the
end of the last fiscal year are: Mr. R. S. Larsen 326,200 CEC units
($8,210,454); Mr. R. N. Wilson 349,000 CEC units ($8,784,330); Mr. C. H. Johnson
196,600 CEC units ($4,948,422); Mr. G. S. Frazza 270,000 CEC units ($6,795,900)
and Mr. R. G. Gelbman 107,800 CEC units ($2,713,326).
16
<PAGE>
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.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
FIVE YEAR
AVERAGE ANNUAL BENEFITS FOR YEARS OF SERVICE
COVERED -------------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 400,000 $ 96,900 $129,200 $161,500 $ 193,800 $ 226,100 $ 258,400
500,000 121,900 162,600 203,200 243,800 284,500 325,100
600,000 146,900 195,900 244,900 293,800 342,800 391,800
700,000 171,900 229,200 286,500 343,900 401,200 458,500
800,000 196,900 262,600 328,200 393,900 459,500 525,100
900,000 221,900 295,900 369,900 443,900 517,800 591,800
1,000,000 246,900 329,300 411,600 493,900 576,200 658,500
1,100,000 271,900 362,600 453,200 543,900 634,500 725,200
1,200,000 297,000 395,900 494,900 593,900 692,900 791,900
1,300,000 322,000 429,300 536,600 643,900 751,200 858,500
1,400,000 347,000 462,600 578,300 693,900 809,600 925,200
1,500,000 372,000 496,000 619,900 743,900 867,900 991,900
1,600,000 397,000 529,300 661,600 793,900 926,300 1,058,600
1,700,000 422,000 562,600 703,300 844,000 984,600 1,125,300
1,800,000 447,000 596,000 745,000 894,000 1,043,000 1,191,900
1,900,000 472,000 629,300 786,600 944,000 1,101,300 1,258,600
2,000,000 497,000 662,709 828,300 994,000 1,159,600 1,325,300
2,100,000 522,000 696,000 870,000 1,044,000 1,218,000 1,392,000
</TABLE>
Covered compensation includes regular annual earnings, cash bonus, the
value of awards under the Stock Compensation Program, and dividend equivalents
paid on 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 $1,702,828;
Mr. R. N. Wilson $1,300,490; Mr. C. H. Johnson $722,097; Mr. G. S. Frazza
$660,049; and Mr. R. G. Gelbman $555,188. The approximate years of service for
each Named Officer as of the end of the last fiscal year is: Mr. R. S. Larsen 32
years; Mr. R. N. Wilson 31 years; Mr. C. H. Johnson 39 years; Mr. G. S. Frazza
30 years; and Mr. R. G. Gelbman 24 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.
17
<PAGE>
PROPOSAL FOR JOHNSON & JOHNSON EXECUTIVE INCENTIVE PLAN
In order to permit the deductibility under the Internal Revenue Code of
1986, as amended (the "Code"), of cash and/or stock bonuses awarded to certain
executive officers of the Company, the Board of Directors is recommending the
adoption of the Executive Incentive Plan (the "Plan") which would define and
limit amounts which may be awarded to certain executive officers of the Company
(the "Eligible Executives") and which amounts would qualilfy as
performance-based compensation under Section 162(m) of the Code.
The Plan would establish a performance goal prohibiting the payment of any
annual bonuses to Eligible Executives under the Plan unless there are positive
"Consolidated Earnings" (as defined in the Plan) for the year for which the
bonuses are paid. The maximum bonus payable to an individual who is Chairman or
Vice Chairman or is otherwise part of the Office of the Chairman during any part
of the year would be limited to .08% of Consolidated Earnings for such year. The
maximum bonus payable to any other person who is an Eligible Executive during
any part of the year would be limited to .04% of Consolidated Earnings for such
year. The Compensation Committee of the Board of Directors (the "Committee")
would exercise discretion within the above maximums in determining the amount of
individual awards.
As proposed, "Consolidated Earnings" would mean consolidated net income for
any year, adjusted to omit the effects of extraordinary items, discontinued
operations and the cumulative effects of changes in accounting principles, all
as shown on the audited consolidated statement of income of the Company and as
determined in accordance with generally accepted accounting principles.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE EXECUTIVE INCENTIVE PLAN.
The primary features of the Plan are summarized below. The summary is
qualified in its entirety by reference to the specific provisions of the Plan,
the full text of which is set forth as Exhibit I to this Proxy Statement.
SUMMARY OF PLAN
The Plan is administered by the Committee, which is composed of "outside
directors" who are "disinterested persons" as such terms are defined under the
Code and Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, respectively. The Plan defines eligible employees as the Chairman and
any Vice Chairman and any other officer of the Company who has been designated a
part of the Office of the Chairman or elected a Member of the Executive
Committee of the Company.
No awards will be made for any year unless there are Consolidated Earnings
(as described above) for that year. Following receipt of a report from the
Company's independent accountants of such maximum amount for any year, the
Committee shall determine the maximum amount available for individual awards
under the Plan for such year and shall certify that all awards granted under the
Plan are within the amount limitations described below.
The Eligible Executives to whom awards will be made and the amount of their
individual awards will be determined by the Committee, taking into consideration
the recommendations of the Chairman (for all Eligible Executives other than the
Chairman), the employee's contribution to the achievement of the Company's
objectives and such other matters as the Committee deems relevant. The maximum
award that may be payable for any year to an individual who is the Chairman or
Vice Chairman or is otherwise designated part of the Office of the Chairman
during any part of the year would be .08% of Consolidated Earnings for such
year. The maximum award that may be payable for any year to any other Eligible
Executive would be .04% of Consolidated Earnings for such year. Awards may be
made to Eligible Executives who retired or whose employment terminated during
such year or to the designee or estate of any such Eligible Executive who died
during such year.
All awards will be in cash or Common Stock of the Company, as determined by
the Committee, and will be paid currently, unless the Committee determines that
any award in cash or Common Stock or any portion of any such award shall be
deferred. Deferred awards may be paid in one lump sum or in
18
<PAGE>
installments and may bear interest or dividend equivalents, all as the Committee
determines. Any Common Stock awarded under the Plan will serve to reduce the 4
million shares of Common Stock which are available for distribution under the
1995 Stock Compensation Plan approved at the 1995 Annual Meeting of
Stockholders. Accordingly, approval of the Plan will not increase the aggregate
number of shares of Common Stock available for distribution under the Company's
compensation plans. Shares awarded under the Plan may, in the discretion of the
Committee, consist either in whole or in part of authorized but unissued shares
of Common Stock or shares of Common Stock held in the treasury of the Company.
Stockholders will have no preemptive rights with regard to these shares. The
number and kind of shares subject to the Plan, including shares of Common Stock
covered by any outstanding deferred award, would be appropriately adjusted in
the event of any change in the capital structure of the Company.
The Committee shall have the right to amend the Plan. Any amendment that
would (i) change the maximum award that might be payable to any Eligible
Executive, (ii) materially change the definition of Consolidated Earnings or
(iii) increase the number of shares available for award under the Plan (other
than as a result of a change in the capital structure of the Company) will be
subject to stockholder approval. The Committee may also repeal the Plan or
direct the discontinuance of awards on a temporary or permanent basis.
Based on the Company's interpretation of existing federal tax law,
including the regulations under Section 162(m) of the Code, all awards paid
pursuant to the Plan will be deductible by the Company. In each instance, the
award will be taxable to the employee in the year received.
There are currently eight Eligible Executives (two of whom are part of the
Office of the Chairman) who would be eligible for awards under the Plan for
1996. However, no determination has been made as to the amounts of awards that
will be granted to specific individuals in the future. (See the Summary
Compensation Table for information relating to prior incentive compensation
awards to named executive officers.) Other incentive compensation plans have
been established on a Company-wide or operating unit basis under which employees
(including Eligible Executives) may receive awards at the discretion of
management.
The affirmative vote of a majority of the shares of Common Stock voted at
the meeting is required for approval of the Executive Incentive Plan.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as the
independent auditors for the Company and its subsidiaries for the fiscal year
1996. 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 L.L.P. 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.
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.
19
<PAGE>
EXHIBIT I
JOHNSON & JOHNSON
EXECUTIVE INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1996)
I. PURPOSE
The purpose of the Johnson & Johnson Executive Incentive Plan (the "Plan")
is to attract and retain highly qualified individuals as executive officers; to
obtain from each the best possible performance; to underscore the importance to
them of achieving particular business objectives established for Johnson &
Johnson; and to include in their compensation package a bonus component which is
intended to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
which compensation would be deductible by Johnson & Johnson under the Internal
Revenue Code.
II. DEFINITIONS
For the purposes of the Plan, the following terms shall have the following
meanings:
A. AWARDS. The cash and/or stock bonus awards made pursuant to the
Plan.
B. BOARD OF DIRECTORS. The Board of Directors of Johnson & Johnson.
C. COMMITTEE. The Compensation Committee of the Board of Directors or
any successor thereto.
D. COMMON STOCK. The common stock of the Corporation, par value $1.00
per share.
E. CONSOLIDATED EARNINGS. Consolidated net income for the year for
which an Award is made, adjusted to omit the effects of extraordinary
items, discontinued operations and the cumulative effects of changes in
accounting principles, all as shown on the audited consolidated statement
of income of the Corporation and its subsidiaries and as determined in
accordance with generally accepted accounting principles.
F. CORPORATION. Johnson & Johnson.
G. ELIGIBLE EMPLOYEE. An Employee who is an Executive Officer of the
Corporation.
H. EMPLOYEE. An individual who is on the active payroll of the
Corporation or a subsidiary of the Corporation at any time during the
period for which an Award is made.
I. EXECUTIVE OFFICER. The Chairman and any Vice Chairman of the Board
of Directors and any other officer of the Corporation who has been
designated a part of the Office of the Chairman or elected a Member of the
Executive Committee of the Corporation.
J. FAIR MARKET VALUE. The average between the highest and lowest
quoted selling price per share of Common Stock on the New York Stock
Exchange Composite Transactions Tape on the grant date, provided that if
there shall be no sales of shares of Common Stock on such date, the Fair
Market Value shall be deemed equal to the average between the highest and
lowest sales price of a share of Common Stock on such Composite Tape for
the last preceding date on which sales of shares of Common Stock were
reported.
III. EFFECTIVE DATE; TERM
The Plan is effective as of January 1, 1996, subject to approval by the
Corporation's stockholders at the Corporation's 1996 Annual Meeting of
Stockholders, and shall remain in effect until such time as it shall be
terminated by the Board of Directors.
I-1
<PAGE>
IV. AMOUNTS AVAILABLE FOR AWARDS; SHARES SUBJECT TO THE PLAN
A. Awards with respect to any taxable year of the Corporation shall not
exceed the limitations specified in Section VI of the Plan.
B. Awards that are granted under the Plan in the form of stock, in whole or
in part, may be made in the aggregate of not more than 4 million shares of
Common Stock less the aggregate number of shares of Common Stock awarded under
the 1995 Stock Compensation Plan of the Corporation, subject in each case, to
adjustment as hereinafter provided. These shares may, in the discretion of the
Committee, consist either in whole or in part of authorized but unissued shares
of Common Stock or shares of Common Stock held in the treasury of the
Corporation.
C. In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, any separation
(including a spinoff or other distribution of stock or property), any partial or
complete liquidation or any other change in the corporate structure or shares of
the Corporation, the Committee shall make such adjustment as is equitably
required in the number and kind of shares authorized by and for the Plan or in
the number of shares of Common Stock covered by any outstanding deferred Award.
V. ELIGIBILITY FOR AWARDS
Awards for any period may be granted to those Eligible Employees who are
selected by the Committee. Such selections, except in the case of the
Corporation's Chairman, shall be made after considering the recommendations of
the Chairman. The Committee shall also give consideration to the contribution
made by the Eligible Employee to achievement of the Corporation's established
objectives and such other matters as it shall deem relevant.
In the discretion of the Committee, Awards may be made to Eligible
Employees who have retired or whose employment has terminated after the
beginning of the year for which an Award is made, or to the designee or estate
of an Eligible Employee who died during such period.
VI. DETERMINATION OF AMOUNTS OF AWARDS
The maximum Award payable with respect to any taxable year of the
Corporation to any Eligible Employee who is the Chairman or a Vice Chairman of
the Board of Directors or any other officer who has been designated a part of
the Corporation's Office of the Chairman during all or any portion of such
taxable year shall not exceed .08% of Consolidated Earnings for such year. The
maximum Award payable with respect to any taxable year of the Corporation to any
other Eligible Employee shall not exceed .04% of Consolidated Earnings for such
year. The amounts of Awards to Eligible Employees shall be determined by the
Committee acting in its discretion subject to the maximum amounts set forth
above. Such determinations, except in the case of the Award for the Chairman,
shall be made after considering the recommendations of the Chairman and such
other matters as the Committee shall deem relevant. The Committee, acting in its
discretion, may determine to pay a lesser award than the maximum specified
herein.
Awards may be made at any time following the end of the taxable year;
provided, however, that no Awards shall be made until the Committee receives
assurances from both the Corporation's Chief Financial Officer and its
independent accountants that the amount of such Award does not exceed the
applicable limitation under this Section VI and the Committee certifies in
writing that such limitation has not been exceeded. For purposes of making these
determinations, the value of the Common Stock component of any Award shall be
its Fair Market Value.
VII. FORM OF AWARDS
Awards under the Plan shall be made in cash or Common Stock, as the
Committee shall determine, subject to the limitations set forth in Section IV.
VIII. PAYMENT OF AWARDS
A. Awards under the Plan shall be paid currently, unless the Committee
shall determine that any Award in cash or Common Stock or any portion thereof
shall be deferred. Deferred Awards may be made in
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one lump sum or in installments and may bear interest in the case of any
deferred cash Award or dividend equivalents in the case of any deferred Common
Stock Award, all as the Committee shall determine.
B. When an Award is made, the Corporation shall cause the cash or Common
Stock to be paid or issued to the Eligible Employee at the time or times
specified by the Committee or, if no time or times is specified, as soon as
practicable after the Award is made.
IX. SPECIAL AWARDS AND OTHER PLANS
A. Nothing contained in the Plan shall prohibit the Corporation or any of
its subsidiaries from establishing other special awards or incentive
compensation plans providing for the payment of incentive compensation to
Employees (including Eligible Employees).
B. Payments or benefits provided to an Eligible Employee under any stock,
deferred compensation, savings, retirement or other employee benefit plan are
governed solely by the terms of such plan.
X. ADMINISTRATION, AMENDMENT AND INTERPRETATION OF THE PLAN
A. Except as otherwise provided in the Plan, the Committee shall administer
the Plan. The Committee shall consist of not less than three members of the
Board of Directors. No director shall be eligible 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. Committee members shall not be eligible to
participate in the Plan while members of the Committee. The Committee shall have
full power to construe and interpret the Plan, establish and amend rules and
regulations for its administration, and perform all other acts relating to the
Plan, including the delegation of administrative responsibilities, that it
believes reasonable and proper and in conformity with the purposes of the Plan.
B. The Committee shall have the right to amend the Plan from time to time
or to repeal it entirely or to direct the discontinuance of Awards either
temporarily or permanently; provided, however, that (i) no amendment of the Plan
shall operate to annul, without the consent of the Eligible Employee, an Award
already made hereunder, and (ii) no amendment of the Plan that (x) changes the
maximum Award payable to any Eligible Employee, as set forth in Section VI, (y)
materially amends the definition of Consolidated Earnings or (z) increases the
amount of shares available for awards under the Plan (except as contemplated by
Section IV.C.) shall be effective before approval by the affirmative vote of a
majority of shares voting at a meeting of the stockholders of the Corporation.
C. Any decision made, or action taken, by the Committee arising out of or
in connection with the interpretation and/or administration of the Plan shall be
final, conclusive and binding on all persons affected thereby.
XI. RIGHTS OF ELIGIBLE EMPLOYEES
A. Neither the Plan, nor the adoption or operation of the Plan, nor any
documents describing or referring to the Plan (or any part hereof) shall confer
upon any Employee any right to continue in the employ of the Corporation or a
subsidiary of the Corporation.
B. No individual to whom an Award has been made or any other party shall
have any interest in the cash or Common Stock, or any other asset of the
Corporation until such amount has been paid or issued. To the extent that any
party acquires a right to receive payments of cash and/or share certificates
under the Plan, such party shall have the status of unsecured creditor of the
Corporation with respect to such right.
C. No right or interest of any Eligible Employee in the Plan shall be
assignable or transferable, or subject to any claims of any creditor or subject
to any lien.
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XII. MISCELLANEOUS
A. All expenses and costs incurred in connection with the operation of the
Plan shall be borne by the Corporation, and no part therefor (other than the
amounts of Awards under the Plan) shall be charged against the maximum
limitation of Section VI.
B. All Awards under the Plan are subject to withholding, where applicable,
for federal, state and local taxes.
C. Any provision of the Plan that is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of the Plan.
D. The Plan and the rights and obligations of the parties to the Plan shall
be governed by, and construed and interpreted in accordance with, the law of the
State of New Jersey (without regard to principles of conflicts of law).
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J
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Notice of
& 1996 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, 1990 and ending December 31, 1995, which graph is
contained in the paper format of this Proxy Statement being sent to
Stockholders.
<PAGE>
JOHNSON & JOHNSON
Proxy Solicited by the Board of Directors for the
Annual Meeting of Stockholders on April 25, 1996
The undersigned hereby appoints G.S. Frazza, C.H. Johnson 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 25, 1996 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, James G. Cullen, Philip M.
Hawley, Clark H. Johnson, Ann D. Jordan, Arnold G. Langbo, Ralph S. Larsen,
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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<PAGE>
[X] Please mark your
votes as in this
example
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR election of directors, FOR
proposal 2 and FOR proposal 3.
The Board of Directors recommends a vote FOR proposals 1, 2 and 3.
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 the Johnson & Johnson [ ] [ ] [ ]
Executive Incentive Plan
3. Ratification of Coopers and Lybrand, [ ] [ ] [ ]
L.L.P. as independent auditors
Change of Address/Comments on Reverse Side [ ]
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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SIGNATURE(S) ____________________________________________ DATE ________________
PLEASE CAREFULLY DETACH HERE AND RETURN THIS PROXY
IN THE ENCLOSED REPLY ENVELOPE.
JOHNSON & JOHNSON
The Signature of Quality
