SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
JOHNSON & JOHNSON
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
[Johnson & Johnson Logo]
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
March 12, 2003
The Annual Meeting of the Shareowners of Johnson & Johnson will be held on
Thursday April 24, 2003 at 10:00 a.m. at the Hyatt Regency Hotel, Two Albany
Street, New Brunswick, New Jersey, to:
1. Elect directors;
2. Ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for 2003; and
3. Transact such other business as may properly come before the meeting.
Shareowners are cordially invited to attend the meeting. PLEASE NOTE THAT
WE HAVE CHANGED OUR ADMISSION CARD PROCEDURES THIS YEAR:
- If you are a registered shareowner, you will not find an enclosed Request
for Admission Card. Instead, there is a box on the proxy card which you
should mark to request an Admission Card if you plan to attend.
- If you are a registered shareowner and vote by telephone or the Internet,
there will be applicable instructions to follow when voting to indicate
if you would like to receive an Admission Card.
- If you are a shareowner whose shares are not registered in your own name
and you plan to attend, you must request an Admission Card by writing to
the Office of the Corporate Secretary, Johnson & Johnson, One Johnson &
Johnson Plaza, New Brunswick, New Jersey 08933. Evidence of your stock
ownership, which you can obtain from your bank or stockbroker, must
accompany your letter.
If you are unable to attend the meeting, you will be able to access the
meeting on the Internet. The Company will broadcast the meeting as a webcast
through the Johnson & Johnson website at www.jnj.com. The webcast will remain
available for replay for one month following the meeting. Visit the Johnson &
Johnson website at www.jnj.com and click on the Calendar of Events in the
Investor Relations section for details.
By order of the Board of Directors,
MICHAEL H. ULLMANN
Secretary
YOU CAN VOTE IN ONE OF THREE WAYS:
(1) Use the toll-free telephone number on your proxy card to vote by phone;
(2) Visit the website noted on your proxy card to vote via the Internet; or
(3) Sign, date and return your proxy card in the enclosed envelope to vote
by mail.
GENERAL INFORMATION
SHAREOWNERS ENTITLED TO VOTE. Holders of shares of the Common Stock of the
Company of record at the close of business on February 25, 2003 are entitled to
notice of and to vote at the Annual Meeting of Shareowners and at any and all
adjournments or postponements of the meeting. Each share entitles its owner to
one vote. The holders of a majority of the shares entitled to vote at the
meeting must be present in person or represented by proxy in order to constitute
a quorum for all matters to come before the meeting. On the record date there
were 2,969,972,365 shares outstanding.
Other than the election of directors, which requires a plurality of the
votes cast, each matter to be submitted to the shareowners requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Abstentions and broker non-votes are
counted only for purposes of determining whether a quorum is present at the
meeting.
HOW TO VOTE. Shareowners of record (that is, shareowners who hold their
shares in their own name) can vote any one of three ways:
(1) By Mail: Sign, date and return your proxy card in the enclosed
postage-paid envelope. If you sign and return your proxy card but do not
give voting instructions, the shares represented by that proxy will be
voted as recommended by the Board of Directors.
(2) By Telephone: Call the toll-free number on your proxy card to vote
by phone. You will need to follow the instructions on your proxy card and
the voice prompts.
(3) By Internet: Go to the website listed on your proxy card to vote
through the Internet. You will need to follow the instructions on your
proxy card and the website. If you vote through the Internet, you may incur
telephone and Internet access charges.
If you vote by telephone or the Internet, your electronic vote authorizes
the named proxies in the same manner as if you signed, dated and returned your
proxy card. IF YOU VOTE BY TELEPHONE OR THE INTERNET, YOU SHOULD NOT RETURN YOUR
PROXY CARD.
If your shares are held in the name of a bank, broker or other holder of
record (that is, "street name"), you will receive instructions from the holder
of record that you must follow in order for your shares to be voted. Telephone
and Internet voting also will be offered to shareowners owning shares through
most banks and brokers.
PROXY SOLICITATION. The accompanying proxy is solicited by the Board of
Directors of the Company. In that connection, this Proxy Statement is being
mailed to the shareowners on or about March 12, 2003 concurrently with the
mailing of the Company's 2002 Annual Report. In addition to this solicitation by
mail, several regular employees of the Company may solicit proxies in person or
by telephone. The Company has also retained the firm of Georgeson Shareholder
Communications, Inc. to aid in the solicitation of brokers, banks and
institutional and other shareowners for a fee of approximately $11,500, plus
reimbursement of expenses. All costs of the solicitation of proxies will be
borne by the Company. On the accompanying proxy a shareowner may substitute the
name of another person in place of those persons presently named as proxies. In
order to vote, a substitute must present adequate identification to the
Secretary before the voting occurs.
CHANGING YOUR VOTE. You may change your vote at any time before the proxy
is exercised. If you voted by mail, you may revoke your proxy at any time before
it is voted by executing and delivering a timely and valid later-dated proxy, by
voting by ballot at the meeting or by giving written notice to the Secretary. If
you voted by telephone or the Internet you may also change your vote with a
timely and valid later telephone or Internet vote, as the case may be.
Attendance at the meeting will not have the effect of revoking a proxy unless
you give proper written notice of revocation to the Secretary before the proxy
is exercised or you vote by written ballot at the meeting.
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ELECTRONIC DELIVERY OF PROXY MATERIALS AND ANNUAL REPORT. This Proxy
Statement and the Company's 2002 Annual Report are available on the Company's
Internet site at www.jnj.com. Instead of receiving paper copies of next year's
Proxy Statement and Annual Report in the mail, shareowners can elect to receive
an e-mail message which will provide a link to these documents on the Internet.
By opting to receive your proxy materials online, you will save the Company the
cost of producing and mailing documents to you, reduce the amount of mail you
receive and help preserve environmental resources. Johnson & Johnson shareowners
who enrolled in the electronic proxy delivery service last year will receive
their materials online this year.
Shareowners of record may enroll in the electronic proxy delivery service
for future Annual Meetings of Shareowners by registering online at
www.econsent.com/jnj. If you vote by Internet, simply follow the prompts that
will link you to www.econsent.com/jnj. Beneficial or "street name" shareowners
should see the information provided in the proxy materials mailed to them by
their bank or broker.
JOHNSON & JOHNSON EMPLOYEE SAVINGS PLANS. If you are an employee and hold
stock in one of the Johnson & Johnson employee savings plans, you will receive
one proxy card which covers those shares held for you in your savings plan, as
well as any other shares registered in your own name. If you vote in any of the
three ways described above, the Trustee of your savings plan will vote your
shares as you have directed. In accordance with the terms of the Johnson &
Johnson Savings Plan and the Johnson & Johnson Puerto Rico Retirement Savings
Plan, if you hold shares in that Plan and do not vote, the Plan Trustee will
vote those shares in direct proportion to the shares held in that Plan for which
votes have been cast. If you hold shares in any other Johnson & Johnson employee
savings plan, including the Savings Plan for Union Represented Employees, and do
not vote, the Plan Trustee will not vote those shares.
REDUCE DUPLICATE MAILINGS. The Company is required to provide an Annual
Report to all shareowners who receive this Proxy Statement. If you are a
shareowner of record and have more than one account in your name or at the same
address as other shareowners of record, you may authorize the Company to
discontinue mailings of multiple Annual Reports. To do so, mark the designated
box on each proxy card for which you wish to discontinue receiving a duplicate
Annual Report. If you are voting by telephone or the Internet you can either
follow the prompts when you vote or give us instructions to discontinue mailings
of future duplicate Annual Reports.
SHAREOWNER PROPOSALS. To be included in the Board of Directors' proxy
statement and proxy card for the 2004 Annual Meeting of Shareowners, a
shareowner proposal must be received by the Company on or before November 12,
2003. In addition, under the terms of the Company's By-Laws, a shareowner who
intends to present an item of business at the 2004 Annual Meeting of Shareowners
(other than a proposal submitted for inclusion in the Company's proxy materials)
must provide notice of such business to the Company on or before November 12,
2003. Proposals and other items of business should be directed to the attention
of the Secretary at the principal office of the Company, One Johnson & Johnson
Plaza, New Brunswick, New Jersey 08933.
ELECTION OF DIRECTORS
NOMINEES. There are 11 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 which is not anticipated, the proxy will be
voted for such person as shall be designated by the Board of Directors to
replace such nominee or, in lieu thereof, the Board of Directors may reduce the
number of directors.
All of the nominees were elected to the Board at the last Annual Meeting
and all are currently serving as directors of the Company. In accordance with
the Board's policy on retirement of directors, Dr. Maxine Singer is not standing
for re-election. In addition, Mr. Robert N. Wilson, Senior
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Vice Chairman of the Board, has announced his intention to retire from the
Company and will not stand for re-election to the Board. Mr. John W. Snow was
also elected to the Board of Directors at the last Annual Meeting, but resigned
from the Board in January 2003 in order to serve as the U.S. Secretary of the
Treasury.
Following are summaries of the background and business experience and
descriptions of the principal occupations of the nominees.
[Gerard N. Burrow, GERARD N. BURROW, M.D., President and Chief Executive
M.D. Photo] Officer, Sea Research Foundation.
Dr. Burrow, 70, was elected to the Board of Directors in
1993 and is a member of the Nominating & Corporate
Governance Committee and Chairman of the Science and
Technology Advisory Committee. He has been serving in his
current position since January 1, 2002, following 10 years
at Yale University. Dr. Burrow had served as Special Advisor
to the President of Yale University for Health Affairs since
1997, following service since 1992 as Dean of the Yale
University School of Medicine. He previously served as Vice
Chancellor for health sciences and Dean of the University of
California, San Diego School of Medicine. Dr. Burrow is a
member of the Institute of Medicine of the National Academy
of Sciences and a Fellow of the American Association for the
Advancement of Science. He is also a Director of SURx, Inc.
and Sea Research Foundation and on the Corporation
Sub-Committee for Brown University School of Medicine.
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[James G. Cullen JAMES G. CULLEN, Retired President and Chief Operating
Photo] Officer, Bell Atlantic Corporation.
Mr. Cullen, 60, was elected to the Board of Directors in
1995 and is Chairman of the Audit Committee and a member of
the Compensation Committee. Mr. Cullen retired as President
and Chief Operating Officer of Bell Atlantic Corporation in
2000. He had assumed those positions in 1998, after having
been Vice Chairman since 1995 and, prior to that, President
since 1993. He was President and Chief Executive Officer of
Bell Atlantic-New Jersey, Inc. from 1989 to 1993. He is a
Director of Prudential Life Insurance Company, Agilent
Technologies, Inc. and Quantum Bridge Communications Inc.
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[Robert J. Darretta, ROBERT J. DARRETTA, JR., Executive Vice President; Chief
Jr. Photo] Financial Officer and Member, Executive Committee.
Mr. Darretta, 56, was elected to the Board of Directors in
2002. Mr. Darretta joined the Company in 1968 and held
several accounting and finance positions before becoming
Managing Director of Ethicon Italy in 1985. He was named
President of IOLAB Corporation in 1988 and in 1995 became
Treasurer of the Company. Mr. Darretta was named Vice
President, Finance and Chief Financial Officer and appointed
to the Executive Committee in 1997. He assumed additional
responsibilities in his current position in April 2002.
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[M. Judah Folkman, M. JUDAH FOLKMAN, M.D., Senior Associate in Surgery and
M.D. Photo] Director, Surgical Research Laboratory, Children's Hospital
and Andrus Professor of Pediatric Surgery and Professor of
Cell Biology, Harvard Medical School, Department of Surgery.
Dr. Folkman, 70, was elected to the Board of Directors in
1998 and is a member of the Science and Technology Advisory
Committee and the Public Policy Advisory Committee. Dr.
Folkman has been with Children's Hospital since 1967, having
served as Surgeon-in-Chief of Children's Hospital from 1967
to 1981, and with Harvard Medical School since 1967. He is a
member of the National Academy of Sciences and the American
Academy of Arts and Sciences. In recognition of his founding
the field of angiogenesis research he has received numerous
honorary degrees and awards, including, the 2002 Ronald
McDonald House Charities Award of Excellence, The Franklin
Institute's 2001 Benjamin Franklin Award in Life Science,
the 1998 Keio University (Tokyo) Medical Science Prize and
the 1997 Charles S. Mott Prize of the General Motors Cancer
Research Foundation.
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[Ann Dibble Jordan ANN DIBBLE JORDAN, Former Director, Social Services
Photo] Department, Chicago Lying-In Hospital, University of Chicago
Medical Center.
Mrs. Jordan, 68, was elected to the Board of Directors in
1981 and is a member of the Nominating & Corporate
Governance Committee and the Chairman of the Public Policy
Advisory Committee. She assumed her previous
responsibilities at Chicago Lying-In Hospital in 1970 after
having served as a Caseworker and then a Senior Caseworker
at the University of Chicago Hospital. She is also a former
Assistant Professor at the University of Chicago School of
Social Service Administration. She is a Director of
Automatic Data Processing, Catalyst and Citigroup Inc. Mrs.
Jordan is also a Director of The Phillips Collection, The
National Symphony Orchestra, Sloan Kettering Medical Center
and The University of Chicago.
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[Arnold G. Langbo ARNOLD G. LANGBO, Retired Chairman of the Board and Chief
Photo] Executive Officer, Kellogg Company.
Mr. Langbo, 65, was elected to the Board of Directors in
1991 and is a member of the Audit Committee and Chairman of
the Compensation Committee. Mr. Langbo retired as Chairman
of the Board of Kellogg Company in 2000. He had held that
position since 1992 after having been President and Chief
Operating Officer of Kellogg since 1990. He also served as
Chief Executive Officer from 1992 until 1999. Mr. Langbo
joined Kellogg Canada Inc. in 1956 and served in a number of
management positions in Canada and the United States before
being named President of Kellogg International in 1986. Mr.
Langbo is a Director of Weyerhaeuser Company, Whirlpool
Corporation and The International Youth Foundation.
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[James T. Lenehan JAMES T. LENEHAN, Vice Chairman, Board of Directors;
Photo] President and Member, Executive Committee.
Mr. Lenehan, 54, was elected to the Board of Directors
and named Vice Chairman of the Board in 2001 and
President in April 2002. Mr. Lenehan joined the Company
in 1976 and held several marketing management positions
before becoming President of McNeil Consumer Products
Company in 1990. He became a Company Group Chairman in
1993 and was appointed to the Executive Committee in
1994. Mr. Lenehan was named Worldwide Chairman, Consumer
Pharmaceuticals & Professional Group in 1994 and
Worldwide Chairman, Medical Devices & Diagnostics Group
in 1999. He is a member of the Board of Trustees of the
Healthcare Leadership Council.
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[Leo F. Mullin Photo] LEO F. MULLIN, Chairman and Chief Executive Officer,
Delta Air Lines, Inc.
Mr. Mullin, 60, was elected to the Board of Directors
in 1999 and is a member of the Audit Committee and the
Nominating & Corporate Governance Committee. Mr. Mullin
has been President and Chief Executive Officer of Delta
since 1997 and was named Chairman in 1999. Mr. Mullin
was Vice Chairman of Unicom Corporation and its
principal subsidiary, Commonwealth Edison Company, from
1995 to 1997. He was an executive of First Chicago
Corporation from 1981 to 1995, serving as that company's
President and Chief Operating Officer from 1993 to 1995,
and as Chairman and Chief Executive Officer of American
National Bank, a subsidiary of First Chicago
Corporation, from 1991 to 1993. Mr. Mullin is also a
Director of BellSouth Corporation. He is a member of the
board of the Air Transport Association of America and a
former Chairman of the International Air Transport
Association. He is also a member of The Business Council
and The Business Roundtable.
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[David Satcher, M.D., DAVID SATCHER, M.D., Ph.D., Director, National Center for
Ph.D. Photo] Primary Care, Morehouse School of Medicine.
Dr. Satcher, 62, was elected to the Board of Directors in
April 2002 and is a member of the Science and Technology
Advisory Committee and the Public Policy Advisory
Committee. Dr. Satcher assumed his current post at
Morehouse School of Medicine in September 2002. In
February 2002, Dr. Satcher completed his four-year term
as the Surgeon General of the United States. He also
served as the U.S. Assistant Secretary for Health from
February 1998 to January 2001. From 1993 to 1998, Dr.
Satcher served as Director of the Centers for Disease
Control and Prevention and Administrator of the Agency
for Toxic Substances and Disease Registry. Dr. Satcher
served as President of Meharry Medical College in
Nashville, Tennessee from 1982 to 1993. Dr. Satcher is a
fellow of the American Academy of Family Physicians, the
American College of Preventive Medicine and the American
College of Physicians. He has received numerous honorary
degrees and awards, including the Jimmy and Rosalynn
Carter Award for Humanitarian Contributions to the Health
of Humankind, the New York Academy of Medicine Lifetime
Achievement Award and the National Association of Mental
Illness Distinguished Service Award.
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HENRY B. SCHACHT, Senior Advisor and Director and
Former Chairman of the Board and Chief Executive
Officer, Lucent Technologies Inc.; Managing
Director and Senior Advisor, E.M. Warburg, Pincus
& Co. (currently on non- paid leave of absence).
Mr. Schacht, 68, was elected to the Board of
Directors in 1997 and is a member of the Audit
Committee and the Chairman of the Nominating &
Corporate Governance Committee. At Lucent
[Henry B. Schacht Photo] Technologies, Mr. Schacht served as Chairman of
the Board from April 1996 until February 1998 and
Chief Executive Officer from February 1996 to
October 1997. He returned to Lucent in October
2000 as Chairman and Chief Executive Officer and
served in the latter position until January 2002,
and as Chairman of Lucent until February 2003. Mr.
Schacht will continue to serve as a Senior Advisor
and Director of Lucent. Mr. Schacht served as
Chairman of the Lucent spin-off, Avaya Inc., in
2000 until his return to Lucent. Mr. Schacht was
Chairman (1977-1995) and Chief Executive Officer
(1973-1994) of Cummins Engine Company, Inc. He is
also a Director of Aluminum Company of America,
The New York Times Company and Knoll, Inc., as
well as a member of The Business Council. Mr.
Schacht is a former Chairman of the Board of
Trustees of The Ford Foundation and a Trustee of
the Metropolitan Museum of Art.
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[William C. Weldon WILLIAM C. WELDON, Chairman, Board of Directors
photo] and Chief Executive Officer; Chairman, Executive
Committee.
Mr. Weldon, 54, was elected to the Board of
Directors and named Vice Chairman of the
Board in 2001 and assumed his current
responsibilities in April 2002. Mr. Weldon joined
the Company in 1971, and served in several sales,
marketing and international management positions
before becoming President of Ethicon Endo-Surgery
in 1992 and Company Group Chairman of Ethicon
Endo-Surgery in 1995. He was appointed to the
Executive Committee and named Worldwide Chairman,
Pharmaceuticals Group in 1998. Mr. Weldon is a
member of The Business Council and The Business
Roundtable and a Trustee of Quinnipiac University.
STOCK OWNERSHIP/CONTROL
The following table sets forth information regarding beneficial ownership
of the Company's Common Stock owned by each director and each executive officer
named in the Summary Compensation Table (excluding Mr. Ralph S. Larsen, who
retired in 2002, as described in footnote (3) below) and by all directors and
executive officers as a group. Each of the individuals/groups listed below is
the owner of less than one percent of the Company's outstanding shares. Because
they serve as co-trustees of two trusts which hold stock for the benefit of
others, Messrs. Weldon and Wilson "control" an additional 12,733,266 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
2,673,113 shares, the aggregate of 15,406,379 shares representing less than 1%
of the shares outstanding. All stock ownership is as of February 12, 2003
(except shares held in the Company's Savings Plan, which are listed as of
January 31, 2003).
SHARES UNDER
NUMBER OF COMMON EXERCISABLE
NAME SHARES(1)(2)(3) OPTIONS(4)
---- ---------------- ------------
Gerard N. Burrow............................. 15,400 19,350
James G. Cullen.............................. 80,940 19,350
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SHARES UNDER
NUMBER OF COMMON EXERCISABLE
NAME SHARES(1)(2)(3) OPTIONS(4)
---- ---------------- ------------
Robert J. Darretta.................................. 193,677 418,600
M. Judah Folkman.................................... 9,496 14,350
Ann Dibble Jordan................................... 20,209 19,350
Arnold G. Langbo.................................... 34,481 19,350
James T. Lenehan.................................... 142,685 893,600
Leo F. Mullin....................................... 11,682 12,350
Per A. Peterson..................................... 26,711 222,900
David Satcher....................................... 1,013 --
Henry B. Schacht.................................... 11,807 17,150
Maxine F. Singer.................................... 37,878 17,150
William C. Weldon................................... 183,374 420,600
Robert N. Wilson.................................... 1,220,446 1,310,000
All directors and executive officers as a
group(21)........................................... 2,673,113 5,071,500
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(1) Includes an aggregate of 127,294 Common Stock equivalent units credited to
non-employee directors under the Deferred Fee Plan for Nonemployee Directors
and an aggregate of 43,927 Common Stock equivalent units credited to the
named executive officers (69,488 units to all executive officers as a group)
under the Executive Income Deferral Plan for an aggregate of 196,782 units
to all directors and executive officers as a group. In addition, 101,030 of
the shares listed as owned by Mr. Wilson, represent the net gain of shares
of Common Stock resulting from the exercise of stock options, of which the
actual distribution of these shares to him has been deferred under the terms
of the Company's Stock Option Gain Deferral Plan.
(2) The shares described as "owned" are shares of the Company's Common Stock
owned by each listed person and by members of his or her household and are
held either individually, jointly or pursuant to a trust arrangement. The
directors and executive officers disclaim beneficial ownership of an
aggregate of 175,679 of these shares, including, 400 shares listed as owned
by Dr. Burrow, 30,000 shares listed as owned by Mr. Cullen, 900 shares
listed as owned by Mr. Langbo, 1,075 shares listed as owned by Mr. Lenehan,
72 shares listed as owned by Dr. Singer and 100,800 shares listed as owned
by Mr. Wilson.
(3) Mr. Larsen has served as neither a director nor an executive officer since
April 25, 2002, but is named in the Summary Compensation Table because he
served as chief executive officer during part of fiscal year 2002. Mr.
Larsen's stock ownership is not included in this table, but he was deemed to
have beneficial ownership of 1,328,137 shares of Common Stock, as of October
25, 2002, and 2,586,800 shares under exercisable options, as of December 31,
2002. Mr. Larsen disclaimed beneficial ownership of 229,758 of those shares
deemed to be owned by him and an additional 532,246 of those shares
represent the net gain of shares resulting from the exercise of stock
options, of which the actual distribution of such shares to Mr. Larsen has
been deferred until 2004.
(4) Includes shares under options exercisable on February 12, 2003 and options
which become exercisable within 60 days thereafter.
DIRECTORS' FEES, COMMITTEES AND MEETINGS. Directors who are employees of
the Company receive no compensation for their services as directors or as
members of committees. Each director who is not an employee of the Company
receives an award valued at approximately $10,000 in the form of the Company's
Common Stock upon first becoming a member of the Board of Directors and receives
an annual fee of $65,000 for his or her services as director. Of such annual
fee, $20,000 is required to be deferred in Common Stock equivalent units under
the Deferred Fee Plan for Nonemployee Directors until termination of his or her
directorship. Directors also receive non-retainer equity compensation each year
in the form of a stock option grant. The number of options
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granted is determined annually. In February 2003, the non-employee directors
were each granted options to acquire 6,300 shares under the Company's 2000 Stock
Option Plan, which was amended by the Board of Directors to allow the grant of
stock options to non-employee directors. All grants under the Plan to
non-employee directors will be from within the allotment of shares under the
Plan, as approved by shareowners in 2000. Previously, non-employee directors
were granted stock options under a 1997 plan which had not been approved by
shareowners. In addition, directors receive $5,000 for service on a committee of
the Board of Directors, or $8,000 if chairperson of the committee. Non-employee
directors may receive a meeting fee of $1,500 per day if they attend a committee
meeting held on a day other than a Board of Directors meeting day. In fiscal
year 2002, a total of $15,000 was paid to four directors for attending such
additional committee meetings. A director may elect to defer payment of all or a
part of the fees until, or beyond, termination of his or her directorship.
Deferred fees (other than the required deferral referred to above) may earn
additional amounts based on a hypothetical investment in the Company's Common
Stock or, in the case of directors who have served on the Board since prior to
January 1, 1996, on the increase in value of units under the Certificate of
Extra Compensation Program, up to the time of termination of his/her
directorship. Deferred fees beyond termination of directorship can only earn
additional amounts based on a hypothetical investment in the Company's Common
Stock. All Common Stock equivalent units held in each non-employee director's
Deferred Fee Account receive dividend equivalents.
During the last fiscal year the Board of Directors met nine times. Each
director attended at least 75% of the total regularly scheduled and special
meetings of the Board of Directors and the committees on which they served,
except Dr. Folkman, who did, however, attend more than 75% of the meetings of
the Board of Directors.
The Board of Directors has a standing Audit Committee, Compensation
Committee and Nominating & Corporate Governance Committee.
The members of the Audit Committee are Mr. Langbo, Mr. Mullin, Mr. Schacht
and Mr. Cullen (Chairman). The Audit Committee is comprised entirely of
non-employee, independent members of the Board of Directors and operates under a
written charter adopted by the Board of Directors, which is required to be
provided to shareowners every three years, unless amended earlier. A copy of the
Charter of the Audit Committee, as amended in February 2003, is attached as
Exhibit 1. 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 (including in private sessions) 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 five times during the last fiscal year.
The members of the Compensation Committee in fiscal year 2002 were Mr.
Cullen, Mr. Snow and Mr. Langbo (Chairman). Mr. Snow resigned from the Board in
January 2003. 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. Weldon (Chairman), Lenehan (Vice
Chairman), Darretta (Executive Vice President) and Deyo (Vice President,
Administration) which determines management and executive compensation (except
for executive officers of the Company) and establishes fringe benefit and other
compensation policies. The compensation and benefits of the executive officers
of the Company (which includes the members of the Management Compensation
Committee) is determined by the Compensation Committee. The Compensation
Committee is also responsible for the administration of the Company's stock
option plans and is the approving authority for management recommendations
9
with respect to option grants. During the last fiscal year there were four
meetings of the Compensation Committee. A copy of the Charter of the
Compensation Committee, which will become effective on March 31, 2003, is
attached as Exhibit 2.
The members of the Nominating & Corporate Governance Committee are Dr.
Burrow, Mrs. Jordan, Mr. Mullin and Mr. Schacht (Chairman). The Nominating &
Corporate Governance Committee is responsible for overseeing matters of
corporate governance, including the evaluation of the performance and practices
of the Board of Directors. The Committee also oversees the process for
performance evaluations of each of the Committees of the Board. It is also
within the Charter of the Nominating & Corporate Governance Committee to review
the Company's management succession plans and executive resources. In addition,
the Nominating & Corporate Governance Committee reviews possible candidates for
the Board of Directors and recommends the nominees for directors to the Board of
Directors for approval. The Nominating & Corporate Governance Committee
considers suggestions from many sources, including shareowners, regarding
possible candidates for director. Such suggestions, together with appropriate
biographical information, should be submitted to the Secretary of the Company.
The Nominating & Corporate Governance Committee met four times during the last
fiscal year. A copy of the Charter of the Nominating & Corporate Governance
Committee, which will become effective on March 31, 2003, is attached as Exhibit
3.
CORPORATE GOVERNANCE. Each of the Audit, Compensation and Nominating &
Corporate Governance Committees met during 2002 in Executive Sessions without
members of management present and each of those Committees will do so at least
twice during 2003. The non-employee directors will meet at least four times
during 2003 in Executive Sessions without the Chairman/CEO or any other member
of management present. Under their Charters, each of these Committees is
authorized to retain and consult with external advisors, consultants and
counsel. A discussion of the role of the Board of Directors in the Company's
strategic planning process can be found on the Company's website at www.jnj.com
in the Investor Relations section.
In February 2003, the non-employee members of the Board selected Mr. Cullen
to serve as the Presiding Director to chair Executive Sessions of the
non-employee directors. The Presiding Director will also be looked upon to act
as an intermediary between the non-employee directors and management of the
Company when special circumstances exist or communication out of the ordinary
course is necessary. In addition, the Presiding Director will review the
schedule of and agendas for Board meetings.
Shareowners are invited to access the new Corporate Governance section of
the Johnson & Johnson website, which is expected to be online in April at
www.jnj.com.
CONSULTING AGREEMENT. The Company has entered into a consulting agreement
with Dr. Folkman, a member of the Board, pursuant to which, at the Company's
request, he may attend and participate in occasional scientific meetings of the
Company and its affiliates. In 2002, Dr. Folkman attended one such meeting and
received a payment of $3,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 2002 all reports for the Company's
executive officers and directors that were required to be filed under Section 16
of the Securities Exchange Act of 1934 were filed on a timely basis, except
that: Dr. Burrow, a member of the Board, failed to file a report to reflect a
purchase of common stock by his wife in 1996, which has subsequently been
reported; and Mr. Langbo, a member of the Board, failed to file seven reports to
reflect ten purchases of an aggregate of 303 shares of common stock and three
sales of an aggregate of 59 shares of common stock executed by brokers for Mr.
Langbo's Living Trust and Individual Retirement Accounts between January 2001
and October 2002. These transactions on behalf of Mr. Langbo have subsequently
been reported.
10
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reports to and acts on behalf of the Board of Directors
by providing oversight of the financial management, independent auditors and
financial reporting procedures of the Company. The Company's management is
responsible for preparing the Company's financial statements and the independent
auditors are responsible for auditing those financial statements. The Audit
Committee is responsible for overseeing the conduct of these activities by the
Company's management and the independent auditors.
In this context, the Committee has met and held discussions with management
and the independent auditors (including private sessions with the internal
auditors, the independent auditors, the Chief Financial Officer and the General
Counsel). Management represented to the Committee that the Company's
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the Committee has reviewed and discussed the
consolidated financial statements with management and the independent auditors.
The Committee has discussed with the independent auditors matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication With
Audit Committees), as amended (including significant accounting policies,
alternative accounting treatments and estimates, judgments and uncertainties).
In addition, the independent auditors provided to the Audit Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee and the
independent auditors have discussed the auditors' independence from the Company
and its management, including the matters in those written disclosures.
Additionally, the Committee considered the management consulting services, the
financial and other information systems design and implementation services and
other non-audit services provided by the independent auditors and the fees and
costs billed and expected to be billed by the independent auditors for those
services (as shown on page 23 of this Proxy Statement). The Committee has
discussed with management the procedures for selection of consultants and the
related competitive bidding practices and fully considered whether those
services provided by the independent auditors are compatible with maintaining
auditor independence.
In addition, the Committee discussed with management, and took into
consideration when issuing this Report, the policy adopted by the Company in
January 2002, which prohibits the Company or any of its affiliates from entering
into most non-audit related management consulting arrangements with its
independent auditors on a going-forward basis. (This policy is discussed in
further detail on page 22 of this Proxy Statement.)
The Committee has discussed with the Company's internal and independent
auditors, with and without management present, their evaluations of the
Company's internal accounting controls and the overall quality of the Company's
financial reporting.
In reliance on the reviews and discussions with management and the
independent auditors referred to above, the Committee believes that the
non-audit services provided by the independent auditors are compatible with, and
did not impair, auditor independence.
In further reliance on the reviews and discussions with management and the
independent auditors referred to above, the Audit Committee recommended to the
Board of Directors on February 10, 2003, and the Board has approved, the
inclusion of the audited financial statements in the Company's Annual Report on
Form 10-K for the fiscal year ended December 29, 2002, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended to the
Board of Directors, and the Board has approved, subject to shareowner
ratification, the selection of the Company's independent auditors.
Mr. James G. Cullen, Chairman
Mr. Arnold G. Langbo
Mr. Leo F. Mullin
Mr. Henry B. Schacht
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE OF THE BOARD
The Compensation Committee is composed entirely of non-employee,
independent members of the Board of Directors. It is the Compensation
Committee's responsibility to review and approve all compensation actions for
the Chief Executive Officer and other executive officers of the Company.
JOHNSON & JOHNSON COMPENSATION POLICY AND OBJECTIVES
Johnson & Johnson's executive compensation programs are designed to enable
the Company to attract, retain and motivate the high caliber of executives
required for the success of the business. Overall, the intent of Johnson &
Johnson's Executive Compensation Program is to provide compensation
opportunities that are comparable to the opportunities provided by a select
group of high performing companies similar to Johnson & Johnson, as described
below. This objective is achieved through a variety of compensation programs,
summarized below, which support both the current and long-term performance of
the business.
The primary responsibility of the Company's Chief Executive Officer and
executive officers is to ensure the long-term health and growth of the Company.
This responsibility is summarized in the Johnson & Johnson Credo, which defines
the obligations of Johnson & Johnson employees to strengthen the ethical, human
and business foundations of the Company. The Credo describes the
responsibilities of the Company to its customers and others with whom it does
business, to its employees, to the communities in which the Company has a
presence as well as to the world community, and to its shareowners. The Credo
merges these business and ethical responsibilities by stating: "When we operate
according to these principles, the stockholders should realize a fair return."
The compensation of Johnson & Johnson's Chief Executive Officer is
determined by the Compensation Committee of the Board of Directors based on its
assessment of the Company's financial and non-financial performance against the
background of the factors and principles outlined in the Credo. With respect to
financial performance, the Committee has identified several factors that are
critical to the success of the business, including Sales Growth, Earnings Per
Share (EPS) Growth, increase in Cash Flow, New Product Flow and growth in
Shareowner Value. In evaluating performance against these factors, Johnson &
Johnson's results are compared to results of a premium group of high performing
companies in the consumer, pharmaceutical, medical device and diagnostics health
care fields with comparable sales volumes and above average EPS growth rates and
financial strength. There are currently forty-five companies in this comparison
group, which is subject to occasional change as the Company or its competitors
change their focus, merge or are acquired, or as new competitors emerge.
Sales Growth is measured as the percentage increase in sales volume from
one year to the next. EPS Growth is assessed in the same manner. Cash Flow is
measured as the Net Cash Flows from Operating Activities as reported in the
Consolidated Statement of Cash Flows. New Product Flow is assessed by reviewing
the percentage of sales resulting from the sale of new products introduced in
the past five years. Shareowner Value is measured as the increase in stock price
plus dividend return over a five-year period.
The Committee also reviews non-financial factors as part of the overall
evaluation of performance. Such non-financial factors typically include managing
Credo responsibilities, talent management (including developing a diverse
superior talent pool), Process Excellence and progress in research and
development.
The Compensation Committee believes it is crucial that these financial and
non-financial factors are managed well, in order to ensure superior return to
Johnson & Johnson's shareowners over the long-term. Therefore, while performance
in these areas is reviewed on an annual basis, the primary
12
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 2002 performance reviewed by the Compensation Committee can
be found under "Decisions on 2002 Compensation."
JOHNSON & JOHNSON'S COMPENSATION PROGRAMS
BASE SALARY
The Base Salary for all employees exempt from the Fair Labor Standards Act,
which includes executives, is managed through the Johnson & Johnson Salary
Administration Program. Under this Program, increases in Base Salary are
governed by guidelines covering three factors: Merit (an individual's
performance); Market Parity (to adjust salaries of high performing individuals
based on the competitive market); and Promotions (to reflect increases in
responsibility). In assessing Market Parity, the Company targets to pay base
salaries that are, overall, equal on average to the select group of premium
companies referred to above.
These guidelines are set each year and vary from year to year to reflect
the competitive environment and to control the overall cost of salary growth.
Merit increases are based on individual performance and can range from 0% to
over 200% of the merit guideline.
The domestic salary guideline for all exempt employees for 2002 was 4.5%
for merit increases and will be 4.0% for 2003. Guidelines for market parity and
promotion adjustments are as approved in each operating company's budget. Those
guidelines are determined based on each unit's overall competitive position with
respect to salaries paid versus the marketplace.
CASH AND STOCK INCENTIVE COMPENSATION PROGRAMS
To reward performance, Johnson & Johnson provides its executive officers
with additional current compensation in the form of executive cash bonus and
stock awards which is competitive with annual incentives provided by other
companies in the premium community. No fixed weighting or formula is applied by
the Compensation Committee to corporate performance versus individual
performance in determining incentive cash bonus and stock awards for the Chief
Executive Officer and executive officers. The amounts of Awards to executive
officers are determined by the Committee acting in its discretion subject to the
maximum amounts specified in the Company's Executive Incentive Plan. Such
determination, except in the case of the Award for the Chairman, is made after
considering the recommendations of the Chairman and such other matters as the
Committee deems relevant. The Committee, acting in its discretion, may determine
to pay a lesser Award than the maximum specified. For the Chief Executive
Officer and other executive officers the amount of the total incentive is
divided between cash and stock at the discretion of the Committee.
STOCK OPTIONS
The Stock Option Plan is a long-term plan designed to link executive
rewards with shareowner value over time. Johnson & Johnson's award practice uses
a percentage of each year's base salary, expressed as a range of opportunity, to
arrive at the range of option shares available to be granted. Individual grants
are made annually and vary within that range based on performance. This "annual
multiple" approach results in grants which vary from year to year based on
assessed performance, stock price and base salary.
No stock option awards are made in the absence of satisfactory performance.
Performance is evaluated by the Compensation Committee based on the executive's
individual contribution to the long-term health and growth of the Company and
the Company's performance based on the factors
13
discussed above. No fixed weighting or formula is applied to corporate
performance versus individual performance in determining stock option awards.
Specifically, for the Chief Executive Officer and other named executive
officers, the Committee does not apply a mathematical formula that relates
financial and/or non-financial performance to the number of options awarded.
In the event that the stock price declines to a level below the option
grant price, options are not revalued or reissued. Vesting in awards made prior
to December 1997 generally occurred over a period from two to six years. Vesting
in awards granted in or after December 1997 generally occurs three years from
grant.
CERTIFICATES OF EXTRA COMPENSATION
Certificates of Extra Compensation (CECs) provide deferred compensation
that is paid at the end of an executive's career. CECs are performance units
that measure the Company's value based on a formula composed of one-half of the
Company's net asset value and one-half of its earning power value, relative to
the number of shares of Johnson & Johnson Common Stock outstanding. Earning
power value is calculated by taking the capitalized value of earnings averaged
over the previous five years.
The CEC program uniquely reflects Johnson & Johnson's commitment to the
long-term. No awards are paid out to executives during employment. Although the
units vest over a five-year period from grant, the final value of those units is
not determined until retirement or termination of employment. The value of the
program is purely performance driven. The Company pays dividend equivalents on
units awarded. Dividend equivalents are paid at the same rate provided to
shareowners on a share of Johnson & Johnson Common Stock, and are paid
quarterly.
Awards of CECs to the Chief Executive Officer and executive officers are
targeted to provide an above average long-term compensation opportunity as
compared to the premium community. Award amounts are based on the Compensation
Committee's evaluation of individual performance, based on the executive's
individual contribution to the long-term health and growth of the Company and
the Company's performance based on the factors discussed above. No fixed
weighting or formula is applied to corporate performance versus individual
performance in determining CEC awards.
DECISIONS ON 2002 COMPENSATION
In reviewing and approving compensation actions for the Chief Executive
Officer and the other executive officers, the Compensation Committee of the
Board evaluated Johnson & Johnson's performance in 2002 versus goals identified
for both financial and non-financial factors.
Johnson & Johnson's performance for the most recent five year period ranked
in the upper third of the premium community companies in all financial factors
considered: Sales Growth, Shareowner Value, EPS Growth Rate and increase in Cash
Flow. The Company met its goal for New Product Flow.
With respect to non-financial performance, management continued to excel in
the areas of managing Credo responsibilities, talent management, Process
Excellence and progress in research and development. Various initiatives
undertaken by Johnson & Johnson embody the principles of the Credo by addressing
its responsibilities to its customers, employees and the community. Progress was
made in developing a high performing, superior talent pool that is also diverse
in many ways, including race, gender, cultural background and experiences. The
Company realized significant results from various Process Excellence
initiatives, and progress was documented in new product development.
The Compensation Committee of the Board also reviewed Johnson & Johnson's
compensation philosophy and strategy during 2002 to validate and reaffirm the
basis of the program. The Committee met with members of an external compensation
consulting firm as part of this review
14
both with internal staff and in Executive Session. Additionally, the Committee
reviewed, discussed and considered the Conference Board Commission's findings
and recommendations on Executive Compensation, and the compensation-related
issues in the Sarbanes-Oxley Act and the proposed listing requirements for the
New York Stock Exchange.
The Committee met in Executive Session to discuss all these matters and to
discuss compensation decisions.
Mr. Weldon was awarded an annual salary increase in March 2002 of 31% which
reflected his annual merit increase and a promotional increase to recognize his
appointment as Chief Executive Officer and Chairman of the Board of Directors.
His other 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 2002 annual incentive (comprised of cash bonus and stock
award) paid to Mr. Weldon was slightly above the target amount. Awards under the
Stock Option and Certificate of Extra Compensation program were based on Mr.
Weldon's new position and reflect the Compensation Committee's assessment of
performance. The stock option awards and CECs shown in the Summary Compensation
Table reflect awards made in February 2003 for 2002 performance.
The above performance results were evaluated based on the overall judgment
of the Compensation Committee with no fixed or specific mathematical weighting
applied to each element of performance. Based on the Compensation Committee's
judgment, compensation awards for 2002, in total, were consistent with
established targets.
During 2002, Mr. Larsen served as Chief Executive Officer until April 25,
2002, and retired from the Company as of July 1, 2002. In anticipation of his
retirement, no compensation actions were taken in 2002 with respect to his base
salary, nor did he receive a bonus payment, stock option or CEC grant for 2002
performance.
TAX DEDUCTIBILITY CONSIDERATIONS
The Compensation Committee has reviewed the Company's compensation plans
with regard to the deduction limitation under the Omnibus Budget Reconciliation
Act of 1993 (the "Act") and the final regulations interpreting the Act which
have been adopted by the Internal Revenue Service and the Department of the
Treasury. Based on this review, the Committee has determined that the Johnson &
Johnson Stock Option Plans, as previously approved by shareowners, meet the
requirements for deductibility under the Act. In order to permit the future
deductibility of cash bonus and stock incentive awards for certain executive
officers of the Company, the Committee and the Board of Directors have adopted
an Executive Incentive Plan that was approved by shareowners. As a result, all
bonus and stock awards qualify as performance based and are not subject to the
tax deductibility limitation of Section 162(m). In addition, the Committee has
approved the Executive Income Deferral Plan that allows an individual to elect
to defer a portion of Base Salary, CEC Dividend Equivalents and Cash and Stock
Bonus Awards. Participation in the Plan is limited to Executive Committee
members and is voluntary. Accordingly, any amounts that would otherwise result
in non-tax deductible compensation may be deferred under the Plan. As a result
of the implementation of the Johnson & Johnson Executive Incentive Plan and
elections made under the Executive Income Deferral Plan, the Company maximizes
the tax deduction available under Section 162(m). However, in some cases, the
Compensation Committee may elect to exceed the tax-deductible limits. This may
be necessary for the Company to meet competitive market pressures and to ensure
that it is able to attract and retain top talent to successfully lead the
organization.
Arnold G. Langbo, Chairman
James G. Cullen
15
SHAREOWNER RETURN PERFORMANCE GRAPHS
Set forth below are line graphs comparing the cumulative total shareowner
return on the Company's Common Stock for periods of five years and eight years
ending December 31, 2002 against the cumulative total return of the Standard &
Poor's 500 Stock Index, the Standard & Poor's Pharmaceutical Index and the
Standard & Poor's Health Care Equipment Index. The graphs and tables assume that
$100 was invested on December 31, 1997 and December 31, 1994 in the Company's
Common Stock, the Standard & Poor's 500 Stock Index, the Standard & Poor's
Pharmaceutical Index and the Standard & Poor's Health Care Equipment Index and
that all dividends were reinvested. The Standard & Poor's Pharmaceutical Index
and Health Care Equipment Index are not available for periods prior to January
1, 1995.
FIVE-YEAR CUMULATIVE TOTAL SHAREOWNER RETURN (1997-2002)
[LINE GRAPH]
--------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------
Johnson & Johnson $100.00 $129.02 $145.09 $165.78 $188.69 $173.84
S&P 500 Index $100.00 $128.58 $155.63 $141.46 $124.66 $ 97.12
S&P Pharm Index $100.00 $149.00 $131.14 $178.75 $152.76 $122.16
S&P H/Care Equip
Index $100.00 $141.57 $130.50 $191.53 $181.79 $158.78
16
EIGHT-YEAR CUMULATIVE TOTAL SHAREOWNER RETURN (1994-2002)
[LINE GRAPH]
--------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------------------
Johnson & Johnson $100.00 $159.10 $187.92 $252.42 $325.67 $366.21 $418.47 $476.31 $438.81
S&P 500 Index $100.00 $137.54 $169.09 $225.49 $289.93 $350.93 $318.99 $281.11 $219.00
S&P Pharm Index $100.00 $159.95 $200.73 $308.30 $459.36 $404.32 $551.08 $470.98 $376.61
S&P H/C Equip Index $100.00 $168.83 $196.37 $241.44 $341.81 $315.08 $462.43 $438.91 $383.35
17
EXECUTIVE COMPENSATION
The following table shows, for each of the last three fiscal years, the
annual compensation paid to or earned by the Company's Chief Executive Officer,
the other four most highly compensated executive officers and the Company's
former Chief Executive Officer who retired in 2002 (the "Named Officers") in all
capacities in which they served:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1) LONG TERM
------------------------------------ COMPENSATION
NAME OTHER AWARDS
AND ANNUAL ------------ ALL OTHER
PRINCIPAL COMPEN- OPTIONS COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION($) (#) SATION($)
--------- ---- ---------- ---------- ---------- ------------ ---------
(2) (3) (4)(5)(6) (7)
W. C. Weldon 2002 $1,097,115 $1,207,500 $ 786,924 450,000 $ 49,370
Chairman/CEO 2001 863,462 871,761 415,144 600,000 38,856
2000 712,500 675,385 298,171 240,000 32,063
R. N. Wilson(8) 2002 $1,050,000 $ 557,000 $2,216,844 -- $ 47,250
Senior Vice 2001 1,050,000 1,113,508 1,952,601 100,000 47,250
Chairman 2000 980,000 1,049,689 1,420,374 500,000 44,100
J. T. Lenehan 2002 $ 930,769 $ 897,750 $ 841,734 250,000 $ 41,885
Vice Chairman 2001 842,308 864,965 644,161 400,000 37,904
2000 730,000 625,385 440,471 240,000 32,850
R. J. Darretta 2002 $ 790,385 $ 640,000 $ 515,569 135,000 $ 35,567
Executive Vice 2001 750,000 604,679 452,689 150,000 33,750
President/CFO 2000 650,000 575,479 343,227 200,000 29,250
P.A. Peterson 2002 $ 672,385 $ 558,250 $ 327,598 135,000 $ 30,257
Chairman, R&D 2001 596,554 431,743 179,785 150,000 26,845
Pharmaceuticals 2000 462,538 311,518 126,160 93,000 20,006
Group
R. S. Larsen(9) 2002 $ 791,827 $ -- $1,194,300 -- $126,012
Former Chairman/ 2001 1,525,000 1,610,868 2,143,569 -- 68,625
CEO 2000 1,435,000 1,550,287 1,653,620 1,500,000 64,575
------------------
(1) Includes amounts paid and deferred.
(2) Bonus amounts are comprised of cash and the fair market value of stock
awards on the date award is issued.
(3) Amounts include dividend equivalents paid under the Certificate of Extra
Compensation (CEC) Program (long-term incentive plan).
(4) Adjusted to reflect Company's two-for-one stock split in May 2001.
(5) Stock option awards listed for 2002 were granted on February 10, 2003 as
compensation for fiscal year 2002. The options were granted at an exercise
price equal to the fair market value of the Company's Common Stock on the
date of grant. All of the options become exercisable on the third
anniversary of date of grant, which is the same vesting schedule for all
executives granted options on such date.
18
(6) In 2001, the Compensation Committee changed the timing of granting annual
stock option grants to all eligible employees, including executive officers
of the Company. For fiscal year 2000 and prior years, annual stock option
awards were granted to executive officers in December of each year. Starting
with fiscal year 2001, stock option awards are granted in February of the
following year. As a result, no stock options were granted to the Named
Officers in fiscal year 2001. However, the stock option awards granted to
the Named Officers in February 2002, as compensation for performance in
2001, are listed as compensation for 2001.
(7) Amount shown is the Company's matching contribution to the 401(k) Savings
Plan and related supplemental plan. In addition, the amount shown for Mr.
Larsen for 2002 also includes the incremental cost to the Company of his
retirement perquisites, as described in footnote (9) below, which were
$90,380 in the aggregate, and consisted of use of Company aircraft ($10,600)
and office space and equipment and secretarial support ($79,780).
(8) Mr. Wilson's 2002 compensation reflects a change in responsibilities in
April 2002 when he left the Executive Committee in anticipation of his
retirement in early 2003.
(9) Mr. Larsen retired from the Company in 2002 having served as Chairman/CEO
and a member of the Board of Directors until April 25, 2002. Mr. Larsen
receives retirement perquisites of office space and equipment, secretarial
support and occasional use of Company aircraft, pursuant to a letter of
understanding with the Company, but receives no severance or retirement
payments, other than his Company pension as described in the Pension Plan
Table. As part of this arrangement, Mr. Larsen has agreed to participate in
events and activities on behalf of the Company for the next five years for
no fee or payment, other than reimbursement of costs and expenses incurred.
All taxes arising from use of Company aircraft are the responsibility of Mr.
Larsen.
STOCK OPTIONS
Starting with fiscal year 2001, stock option awards are granted to all
eligible employees, including executive officers of the Company, in February, as
compensation for performance in the prior fiscal year. The following table
contains information with respect to the grant of stock options under the
Company's 2000 Stock Option Plan to the Named Officers in February 2003, as
compensation for performance in 2002.
OPTION GRANTS WITH RESPECT TO LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FOR 2002 ($/SH) DATE VALUE($)(2)
---- ------------- ---------- -------- ---------- -----------
William C. Weldon... 450,000 1.0% $52.20 2/8/13 $6,277,500
Robert N. Wilson.... -- -- -- -- --
James T. Lenehan.... 250,000 0.6% $52.20 2/8/13 $3,487,500
Robert J. Darretta.. 135,000 0.3% $52.20 2/8/13 $1,883,250
Per A. Peterson..... 135,000 0.3% $52.20 2/8/13 $1,883,250
Ralph S. Larsen..... -- -- -- -- --
------------------
(1) The options were granted at an exercise price equal to the fair market value
of the Company's Common Stock on February 10, 2003, the date of grant. All
of the options become exercisable on the third anniversary of the date of
grant, which is the same vesting schedule for all executives granted options
on such date.
(2) The grant date present values per option share were derived using the
Black-Scholes option pricing model in accordance with the rules and
regulations of the Securities and Exchange Commission and are not intended
to forecast future appreciation of the Company's stock price.
19
The options expiring on February 8, 2013 had a grant date present value of
$13.95 per option share. The Black-Scholes model was used with the following
assumptions: volatility of 29% based on a historical weekly average over
five years; dividend yield of 1.35%; risk free interest of 3.04% based on a
U.S. Treasury rate of five years; and a five year option life.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT YEAR END IN-THE-MONEY OPTIONS AT
SHARES 2002(#) YEAR END 2002($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ------------ ----------- ------------- ----------- -------------
William C. Weldon......... 39,400 $ 1,354,162 460,400 840,000 $ 7,735,220 $ 580,800
Robert N. Wilson.......... 225,200 $10,789,580 1,310,000 600,000 $29,747,456 $1,210,000
James T. Lenehan.......... -- $ -- 893,600 680,000 $21,891,640 $1,400,000
Robert J. Darretta........ -- $ -- 418,600 364,400 $ 7,753,826 $ 827,584
Per A. Peterson........... 64,600 $ 3,394,506 222,900 243,000 $ 5,493,687 $ 480,660
Ralph S. Larsen........... -- $ -- 2,586,800 1,500,000 $58,936,700 $3,630,000
------------------
(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
($53.11).
CERTIFICATE OF EXTRA COMPENSATION PROGRAM
The following table provides information concerning awards made in February
2003 as compensation for performance during the last fiscal year to the Named
Officers under the Company's Certificate of Extra Compensation (CEC) Program.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
ESTIMATED
NUMBER PERIOD UNTIL FUTURE
NAME OF UNITS(#) PAYOUT(2) PAYOUT($)(3)
---- ----------- ------------ ------------
William C. Weldon............................ 306,000 $4,351,320
Robert N. Wilson............................. -- --
James T. Lenehan............................. 120,000 1,706,400
Robert J. Darretta........................... 110,000 1,564,200
Per A. Peterson.............................. 25,000 355,500
Ralph S. Larsen.............................. -- --
---------------
(1) Since 2001 annual long-term incentive compensation has been awarded to all
eligible employees, including executive officers of the Company, in
February, as compensation for performance in the prior fiscal year.
Accordingly, this table shows the CEC units awarded to the Named Officers in
February 2003, as compensation for performance in 2002.
(2) Awards are paid out upon retirement or other termination of employment.
(3) The value used is the value as of the end of the last fiscal year and was
$14.22 per CEC unit. The value of the CEC units is subject to increase or
decrease based on the performance of the Company.
20
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
$14.22 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 $14.22 per unit value, are: Mr.
W. C. Weldon 435,200 CEC units ($6,188,544); Mr. R. N. Wilson 2,396,000 CEC
units ($34,071,120); Mr. J. T. Lenehan 718,400 CEC units ($10,215,648); Mr. R.
J. Darretta 516,000 CEC units ($7,337,520) and Dr. P. A. Peterson 136,000 CEC
units ($1,933,920). Upon Mr. Larsen's retirement, he had earned 2,646,400 CEC
units valued at $33,302,752.
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
------------ -------- -------- -------- -------- -------- --------
800,000 195,800 261,000 326,300 391,500 456,800 522,100
1,050,000 258,300 344,400 430,500 516,600 602,700 688,800
1,300,000 320,800 427,700 534,700 641,600 748,500 855,500
1,550,000 383,300 511,100 638,800 766,600 894,400 1,022,200
1,800,000 445,800 594,400 743,000 891,600 1,040,200 1,188,900
2,050,000 508,300 677,800 847,200 1,016,700 1,186,100 1,355,600
2,300,000 570,800 761,100 951,400 1,141,700 1,332,000 1,522,300
2,550,000 633,400 844,500 1,055,600 1,266,700 1,477,800 1,689,000
2,800,000 695,900 927,800 1,159,800 1,391,700 1,623,700 1,855,700
3,050,000 758,400 1,011,200 1,264,000 1,516,800 1,769,600 2,022,400
3,300,000 820,900 1,094,500 1,368,200 1,641,800 1,915,400 2,189,100
3,550,000 883,400 1,177,900 1,472,300 1,766,800 2,061,300 2,355,800
Covered compensation includes regular annual earnings, dividend equivalents
paid on non-vested CEC units, amounts paid under the Company's Standards of
Leadership Award Program, amounts paid under the Company's Executive Incentive
Plan and amounts deferred under the Company's Executive Income Deferral Plan.
The calculation of retirement benefits is based upon final average earnings (the
average of the highest covered compensation during the five consecutive years
out of the last ten years of employment with the Company). The benefits are
subject to an offset based on the Age 65 Primary Social Security Benefit.
Five-Year Average Covered Compensation for the Named Officers as of the end of
the last fiscal year is: Mr. W. C. Weldon $1,645,256; Mr. R. N. Wilson
$2,141,303; Mr. J. T. Lenehan $1,594,697; Mr. R. J. Darretta $1,246,130; Dr. P.
A. Peterson $919,567 and Mr. R. S. Larsen $3,184,883. The approximate years of
service for each Named Officer as of the end of the last fiscal year is: Mr. W.
C. Weldon 31 years;
21
Mr. R. N. Wilson 38 years; Mr. J. T. Lenehan 26 years; Mr. R. J. Darretta 35
years; Dr. P. A. Peterson 9 years; and Mr. R. S. Larsen 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 benefits 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.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as the
independent auditors for the Company and its subsidiaries for the fiscal year
2003. Shareowner ratification of the appointment is not required under the laws
of the State of New Jersey, but the Board has decided to ascertain the position
of the shareowners on the appointment. The Board of Directors will reconsider
the appointment if it is not ratified. The affirmative vote of a majority of the
shares voted at the meeting is required for ratification.
During fiscal years 2001 and 2002, PricewaterhouseCoopers not only acted as
the independent auditors for the Company and its subsidiaries (work related to
auditing the annual financial statements for those fiscal years and reviewing
the financial statements included in the Company's Forms 10-Q), but also
rendered on behalf of the Company and its subsidiaries other services, including
management consulting services, litigation support/dispute analysis services,
tax services, regulatory/contractual compliance and risk assessment services,
information technology controls projects, employee benefit services and other
accounting and auditing services. The following table sets forth the aggregate
fees billed or expected to be billed by PricewaterhouseCoopers for audit
services rendered in connection with the financial statements and reports for
fiscal years 2001 and 2002 and for other services rendered during those fiscal
years on behalf of the Company and its subsidiaries, as well as all
"out-of-pocket" costs incurred in connection with these services, which have
been or will be billed to the Company.
In January 2002, in response to public concerns about the integrity of
independent audits, Johnson & Johnson adopted a policy which prohibits the
Company or any of its affiliates from entering into most non-audit related
management consulting arrangements with its independent auditors. The policy
applies to all "Management Consulting Services," "Financial Information Systems
Design and Implementation" services and "Other Information Systems Design and
Implementation" services, as shown in the table below. The policy does not
affect pre-existing arrangements, which can continue, but cannot be expanded in
scope or renewed. The fees listed below as incurred in 2002 for "Management
Consulting Services," "Financial Information Systems Design and Implementation"
services and "Other Information Systems Design and Implementation" services were
all incurred pursuant to arrangements which were in effect prior to January
2002. In addition, substantially all of those fees listed below as incurred in
2002 for "Management Consulting Services," "Financial Information Systems Design
and Implementation" services and "Other Information Systems Design and
Implementation" services were incurred in connection with services provided by
PricewaterhouseCoopers Consulting, the management consulting division of
PricewaterhouseCoopers, which was divested by PricewaterhouseCoopers and
acquired by IBM as
22
of October 1, 2002. It is expected that the independent auditors will continue
to provide certain accounting, additional auditing, tax and other services to
Johnson & Johnson and its affiliates.
2001(1) 2002
----------- -----------
Audit Fees.............................................. $ 9,000,000 $10,200,000
Financial Information Systems Design and
Implementation........................................ $ 6,700,000 $39,400,000
All Other Fees:
Management Consulting Services........................ $14,300,000 $ 2,800,000
Other Information Systems Design and Implementation... 12,300,000 15,800,000
Tax Services.......................................... 11,800,000 12,600,000
Litigation Support/Dispute Analysis Services.......... 8,400,000 5,000,000
Employee Benefit Services............................. 2,400,000 1,500,000
Compliance and Risk Assessment Services............... 600,000 1,320,000
Information Technology Controls Projects.............. -- 780,000
Other Accounting and Auditing Services................ 3,300,000 3,500,000
----------- -----------
Total All Other Fees.................................. $53,100,000 $43,300,000
---------------
(1) Certain amounts for fiscal year 2001 have been reclassified to conform to
the current year presentation. In addition, the amount listed for "Tax
Services" for 2001 includes fees of approximately $2,000,000 which were
inadvertently omitted from the calculation of fees for last year's Proxy
Statement.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting of Shareowners and will be allowed to make a statement if
they wish. Additionally, they will be available to respond to appropriate
questions from shareowners during the meeting.
OTHER MATTERS
The Board of Directors does not intend to bring other matters before the
meeting except items incident to the conduct of the meeting, and the Company has
not received timely notice from any shareowner of an intent to present a
proposal at the meeting. On any matter properly brought before the meeting by
the Board or by others, the persons named as proxies in the accompanying proxy,
or their substitutes, will vote in accordance with their best judgment.
23
EXHIBIT 1
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF JOHNSON & JOHNSON
The Audit Committee (the "Committee") shall report to and assist the Board
of Directors (the "Board") of Johnson & Johnson (the "Company") by providing
oversight of the financial management, independent auditors and financial
reporting procedures of the Company, as well as such other matters as directed
by the Board or this Charter.
MEMBERSHIP OF THE COMMITTEE
1. The Committee shall be comprised of not less than three members of the
Board.
2. The composition of the Committee shall meet all the requirements of the
Audit Committee Policy of the New York Stock Exchange, which, among
other things, prohibits any officer or employee of the Company from
serving on the Committee.
3. Each Committee member shall have no other relationship to the Company
that may interfere with the exercise of his or her independence from
management and the Company, including the receipt from the Company of
any compensation other than directors' fees and other compensation
related to their service as a director.
4. Each Committee member shall be financially literate or shall become
financially literate within a reasonable period of time after
appointment to the Committee.
MEETINGS OF THE COMMITTEE
1. The Committee will meet formally at least four times each fiscal year.
2. The Committee will hold separate private meetings at least twice each
fiscal year with each of the Vice President of Internal Audit, a
representative of the independent auditors, the General Counsel and the
Chief Financial Officer.
KEY RESPONSIBILITIES
The Company's management is responsible for preparing the Company's
financial statements and the independent auditors are responsible for auditing
those financial statements. The Committee is responsible for overseeing the
conduct of these activities by the Company's management and the independent
auditors. The financial management and the independent auditors of the Company
have more time, knowledge and more detailed information on the Company than do
Committee members. Consequently, in carrying out its oversight responsibilities,
the Committee is not providing any expert or special assurance as to the
Company's financial statements or any professional certification as to the
independent auditors' work. The Committee is also responsible for preparing the
Report of the Audit Committee that SEC rules require be included in the
Company's annual proxy statement.
In carrying out its oversight responsibilities, the Committee shall perform
the following functions:
Oversight of Independent Auditors.
In the course of its oversight of the independent auditors as provided
under this Charter, the Committee will be guided by the premise that the
independent auditors are ultimately accountable to the Board and the Committee.
24
1. The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent auditors. The
Committee shall assist the Board in its oversight of the
qualifications, independence and performance of the independent
auditors.
2. The Committee shall:
(i) receive from the independent auditors annually, a formal written
statement delineating the relationships between the auditors and
the Company consistent with Independence Standards Board Standard
Number 1;
(ii) discuss with the independent auditors the scope of any such
disclosed relationships and their impact or potential impact on
the independent auditors' independence and objectivity; and
(iii) recommend that the Board take appropriate action in response to
the independent auditor's report to satisfy itself of the
auditors' independence.
3. The Committee shall review and approve the original proposed scope of
the annual independent audit of the Company's financial statements and
the associated engagement fees, as well as any significant variations
in the actual scope of the independent audit and the associated
engagement fees.
4. The Committee shall set hiring policies for employees or former
employees of the independent auditors.
5. The Committee shall review the independent auditors' report relating to
reportable conditions in the internal control structure and financial
reporting practices.
6. The Committee shall review with the independent auditors any
difficulties the auditors encountered in the course of the audit work,
including restrictions on the scope of work or access to requested
information, and any significant disagreements with management.
Oversight of Internal Auditors.
The Committee shall review and discuss with management and the independent
auditors:
1. The quality and adequacy of the Company's internal accounting controls.
2. The organization of the internal audit department, the adequacy of its
resources and the competence and performance of the internal audit
staff.
3. The audit risk assessment process and the proposed scope of the
internal audit department for the upcoming year and the coordination of
that scope with independent auditors.
4. Results of the internal auditors' examination of internal controls
including summaries of inadequate reports issued and/or management
improprieties together with management's response thereto.
Oversight of Management's Conduct of the Company's Financial Reporting Process.
1. Audited Financial Statements. The Committee shall discuss with
management and the independent auditors the audited financial
statements to be included in the Company's Annual Report on Form 10-K
(or the Annual Report to Shareowners if distributed prior to the filing
of Form 10-K) and review and consider with the independent auditors the
matters required to be discussed by the applicable Statement of
Auditing Standards ("SAS"). Based on these discussions, the Committee
will advise the Board of Directors whether it recommends that the
audited financial statements be included in the Annual Report on Form
10-K (or the Annual Report to Shareowners).
25
2. Interim Financial Statements. The Committee, through its Chairman or
the Committee as a whole, will review with management and the
independent auditors, prior to the filing thereof, the Company's
interim financial results to be included in the Company's quarterly
reports on Form 10-Q and the matters required to be discussed by the
applicable SAS.
3. Financial Reporting Practices. The Committee shall review:
(i) Changes in the Company's accounting policies and practices and
significant judgments that may affect the financial results.
(ii) The nature of any unusual or significant commitments or contingent
liabilities together with the underlying assumptions and estimates
of management.
(iii) The effect of changes on accounting standards that may materially
affect the Company's financial reporting practices.
Assist the Board in Oversight of the Company's Compliance with Policies and
Procedures Addressing Legal and Ethical Concerns.
1. The Committee shall review and monitor, as appropriate:
(i) Results of compliance programs, including the Company's Policy on
Business Conduct.
(ii) Litigation or other legal matters that could have a significant
impact on the Company's financial results.
(iii) Significant findings of any examination by regulatory authorities
or agencies, in the areas of securities, accounting or tax, such
as the Securities and Exchange Commission or the Internal Revenue
Service.
(iv) The Company's process for the completion of the CEO and CFO SEC
certification requirements.
2. The Committee shall report regularly to the Board on its meetings and
discussions and review with the Board significant issues or concerns
that arise at Committee meetings.
3. The Committee shall conduct an annual evaluation of its performance in
fulfilling its duties and responsibilities under this Charter.
4. The chairman or any one or more members of the Committee, as designated
by the Committee, may act on behalf of the Committee.
5. The Committee shall have authority to retain and consult with outside
legal, accounting or other advisors as the Committee may deem
appropriate.
6. The adequacy of this Charter shall be reviewed by the Committee on an
annual basis. The Committee will recommend to the Board any
modifications to this Charter, which the Committee deems appropriate,
for approval by the Board.
26
EXHIBIT 2
CHARTER OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
OF JOHNSON & JOHNSON
COMMITTEE'S PURPOSE
The Compensation Committee is appointed by the Board of Directors ("Board")
to discharge the Board's duties and responsibilities relating to compensation of
the Company's directors and executive officers.
COMMITTEE MEMBERSHIP
The Compensation Committee shall be composed entirely of not less than
three non-employee, independent members of the Board of Directors. All members
of the Committee shall meet the "independence" requirements of the New York
Stock Exchange and any applicable laws, rules and regulations.
The Board, by resolution of a majority of the non-employee directors, shall
appoint the members of the Committee. Each member of the Committee shall be
literate in compensation-related matters. Such literacy shall be determined by
the Board in its business judgment.
COMMITTEE CHAIRMAN
The Board, by resolution of a majority of the non-employee directors, shall
designate one member of the Compensation Committee to act as the Chairman of the
Compensation Committee. The Compensation Committee member so designated shall
(a) chair all meetings of the Compensation Committee; (b) coordinate the
evaluation of the performance of the Chief Executive Officer ("CEO"); and (c)
perform such other activities as from time to time are requested by the other
directors or as circumstances indicate.
COMMITTEE'S DUTIES AND RESPONSIBILITIES
1. The Committee shall produce an annual report on executive compensation
for inclusion in the Company's proxy statement.
2. The Committee shall assess the Company's financial and non-financial
performance against the background of the factors and principles
outlined in the Credo, evaluate the CEO in light of this performance,
and set the CEO's compensation level based on this evaluation. Such
non-financial factors typically include managing Credo
responsibilities, talent management (including developing a diverse
superior talent pool), Process Excellence and progress in research and
development.
3. The Committee shall review and provide oversight of the Company's
compensation philosophy and composition of the peer company community
used for market comparison, and shall approve the establishment of
competitive targets versus the peer community and all equity-based
plans requiring shareholder approval.
4. The Committee shall review eligibility criteria and award guidelines
for corporate-wide compensation programs in which management level
employees participate, including Stock Compensation, Stock Options and
Certificates of Extra Compensation.
5. The Committee shall conduct an annual evaluation of its performance in
fulfilling its duties and responsibilities under this Charter.
6. The Committee shall make regular reports to the Board.
27
7. The Committee shall review and approve any recommended compensation
actions for the Company's Executive Committee members, including base
salary, annual incentive bonus, stock option awards, Certificates of
Extra Compensation and Standards of Leadership awards.
8. The Committee may form and delegate authority to subcommittees when
appropriate.
9. The Committee has delegated to the Company's Management Compensation
Committee, comprised of members of the Executive Committee, the
responsibility for the review and approval of the compensation of
non-Executive Committee officers and other key executives of the
Company.
10. The Committee shall review verification from the Company's independent
auditors that compensation awards to members of the Executive
Committee, including the CEO, comply with all requirements of the
Company's Executive Incentive Plan.
11. The Committee shall determine and/or approve awards to employees of
stock options pursuant to any of the Company's employee Stock Option
Plans and to exercise such other power and authority as may be
permitted or required under such Stock Option Plans. At the
Committee's discretion, the approval of stock option awards to
employees, other than to members of the Executive Committee, may be
delegated to the Management Compensation Committee.
12. The Committee shall from time to time review and approve compensation
(fees and equity) for the non-employee directors.
13. The Committee shall have the responsibility to comply with applicable
requirements as established by the Securities and Exchange Commission,
New York Stock Exchange or other governing regulatory authority
regarding compensation consultants used to assist in the evaluation of
the CEO, other executive officers or non-employee members of the
Board.
14. The Committee shall have the authority to obtain advice and assistance
from internal or external legal, accounting or other advisors.
15. The Committee shall, on an annual basis, review and reassess the
adequacy of this Charter and recommend any proposed changes to the
Board for approval.
28
EXHIBIT 3
CHARTER OF THE NOMINATING & CORPORATE GOVERNANCE
COMMITTEE OF THE BOARD OF DIRECTORS
OF JOHNSON & JOHNSON
PURPOSE OF THE COMMITTEE
The Nominating & Corporate Governance Committee (the "Committee") shall
report to and assist the Board of Directors (the "Board") of Johnson & Johnson
(the "Company"). The purpose of the Committee shall be to identify qualified
individuals for membership on the Board; recommend to the Board the director
nominees for the next annual meeting of shareowners; develop and recommend to
the Board a set of corporate governance guidelines for the Board; and provide
oversight of the corporate governance affairs of the Board and the Company.
MEMBERSHIP ON THE COMMITTEE
1. The Committee shall be comprised of not less than three members of the
Board.
2. All members of the Committee shall be independent directors, as
independence is defined in accordance with the rules, regulations and
standards of the New York Stock Exchange, and as determined in the
business judgment of the Board.
3. Members of the Committee shall be appointed and may be removed by the
Board.
DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
1. Criteria for Nomination to the Board: The Committee shall set general
criteria for nomination to the Board.
2. Nomination of Directors: The Committee shall annually consider the
size, composition and needs of the Board and consider and recommend
candidates for membership on the Board. The Committee shall recommend
to the Board each year the director nominees for election at the next
annual meeting of shareowners. Upon the recommendation of the
Committee, the Board may elect a director to the Board during the
course of the year to serve until the next annual meeting of
shareowners.
3. Committees of the Board: The Committee shall review annually the
purpose of the Committees of the Board, recommend to the Board any
changes deemed necessary or desirable to the purpose of the Committees
and whether any Committees should be created or discontinued, and
recommend to the Board the directors and Chairman to be appointed to
each Committee.
4. Corporate Governance Guidelines: The Committee shall develop and
recommend to the Board for approval a set of corporate governance
guidelines for the Board. The Committee shall review these guidelines
on an annual basis and recommend to the Board any changes deemed
necessary or desirable. The Committee shall also have oversight of the
corporate governance affairs of the Company and shall review annually
the corporate governance practices and policies of the Company.
5. Evaluation Process: The Committee shall develop and recommend to the
Board an annual performance evaluation process for the Board and its
Committees. The Committee shall oversee the process which the Board
and its Committees use to conduct annual performance evaluations.
6. Self-Evaluation: On an annual basis, the Committee shall conduct a
self-evaluation of its performance in fulfilling its duties and
responsibilities under this Charter.
29
7. Conflicts of Interest: The Committee shall consider questions of
possible conflicts of interest of the Board members, as such questions
arise.
8. Succession Planning: The Committee shall review at least annually
with the Chairman/ CEO the succession plans relating to the positions
of Chairman/CEO, Vice Chairman and other members of the Executive
Committee, and shall make recommendations to the Board with respect to
the selection of individuals to hold the positions of Chairman/CEO and
Vice Chairman.
9. Reports to the Board: The Committee shall report regularly to the
Board on its meetings and review with the Board significant issues and
concerns that arise at meetings of the Committee.
10. Director Orientation: The Committee shall review and recommend, as
appropriate, director orientation and continuing orientation programs
for members of the Board.
11. Charter Review: On an annual basis, the Committee shall review the
adequacy of this Charter, and recommend to the Board any modifications
or changes hereto for approval by the Board.
MEETINGS OF THE COMMITTEE
The Committee will meet at least three times each year. The Chairman/CEO
shall attend at least a portion of each meeting of the Committee. In the
discretion of the Chairman of the Committee, but at least once each year, the
members of the Committee shall meet in Executive Session.
ADDITIONAL AUTHORITY OF THE COMMITTEE
1. The Committee shall have the authority to delegate any of its
responsibilities to subcommittees as the Committee may deem appropriate
in its discretion.
2. The Committee shall have authority to retain outside counsel and other
advisors as the Committee may deem appropriate in the conduct of its
duties and responsibilities under this Charter.
30
NOTICE OF
2003 ANNUAL
MEETING AND
PROXY
STATEMENT
[JOHNSON & JOHNSON LOGO]
[JOHNSON & JOHNSON LOGO]
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREOWNERS ON APRIL 24, 2003
PROXY
The undersigned hereby appoints R.J. Darretta and R.S. Fine and each or
either of them as proxies, with full power of substitution and revocation, to
represent the undersigned and to vote all shares of the Common Stock of Johnson
& Johnson which the undersigned is entitled to vote at the Annual Meeting of
Shareowners of the Company to be held on April 24, 2003 at 10:00 a.m. at the
Hyatt Regency Hotel, Two Albany Street, New Brunswick, New Jersey, and any
adjournments or postponements thereof, upon the matters listed on the reverse
side hereof and, in their discretion, upon such other matters as may properly
come before the meeting. The proxies appointed hereby may act by a majority of
said proxies present at the meeting (or if only one is present, by that one).
Election of Directors. Nominees:
01. Gerard N. Burrow, 02. James G. Cullen, 03. Robert J. Darretta, 04. M. Judah
Folkman, 05. Ann D. Jordan, 06. Arnold G. Langbo, 07. James T. Lenehan, 08. Leo
F. Mullin, 09. David Satcher 10. Henry B. Schacht, 11. William C. Weldon.
(change of address/comments)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(If you have written in the above space, please mark the corresponding box on
the reverse side of this card)
IF YOU DO NOT PLAN TO VOTE BY TELEPHONE OR THE INTERNET, PLEASE RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. TO VOTE IN ACCORDANCE WITH THE
BOARD OF DIRECTORS' RECOMMENDATIONS JUST SIGN THE REVERSE SIDE; NO BOXES NEED TO
BE MARKED.
-----------
SEE REVERSE
SIDE
-----------
- DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR THE INTERNET -
ELECTRONIC DELIVERY OF PROXY MATERIALS
SIGN UP TO RECEIVE NEXT YEAR'S ANNUAL REPORT AND PROXY MATERIALS VIA THE
INTERNET. NEXT YEAR WHEN THE MATERIALS ARE AVAILABLE, WE WILL SEND YOU AN E-MAIL
WITH INSTRUCTIONS WHICH WILL ENABLE YOU TO REVIEW THESE MATERIALS ON-LINE. TO
SIGN UP FOR THIS OPTIONAL SERVICE, VISIT HTTP:// WWW.ECONSENT.COM/JNJ.
JOHNSON & JOHNSON EMPLOYEE SAVINGS PLANS
IF YOU ARE AN EMPLOYEE AND HOLD STOCK IN ONE OF THE JOHNSON & JOHNSON EMPLOYEE
SAVINGS PLANS, THIS PROXY CARD COVERS THOSE SHARES HELD FOR YOU IN YOUR SAVINGS
PLAN, AS WELL AS ANY OTHER SHARES REGISTERED IN YOUR OWN NAME. BY SIGNING AND
RETURNING THIS PROXY CARD (OR VOTING BY TELEPHONE OR THE INTERNET), YOU WILL
AUTHORIZE THE TRUSTEE OF YOUR SAVINGS PLAN TO VOTE THOSE SHARES HELD FOR YOU IN
YOUR SAVINGS PLAN AS YOU HAVE DIRECTED.
PLEASE MARK YOUR
/X/ 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 AND
FOR PROPOSAL 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
FOR WITHHELD
1. Election of
Directors / / / /
(see reverse)
FOR AGAINST ABSTAIN
2. Ratification of
appointment of / / / / / /
PricewaterhouseCoopers
as independent auditors
For, except vote withheld from the following nominee(s):
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1 2 NONE
REQUEST FOR
ADMISSION TICKET(S) / / / / / /
TO ANNUAL MEETING.
SPECIAL Discontinue Change of
ACTION Annual Report / / Address/ / /
Mailing for this Comments on
Account Reverse Side;
Mark this box
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments or postponements thereof.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
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SIGNATURE(S) DATE
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- DETACH HERE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE IF YOU ARE NOT
VOTING BY TELEPHONE OR THE INTERNET.
VOTE BY TELEPHONE OR THE INTERNET
QUICK - EASY - IMMEDIATE
Johnson & Johnson encourages you to take advantage of two cost-effective and
convenient ways to vote your shares.
You may vote your proxy 24 hours a day, 7 days a week, using either a touch-tone
telephone or through the Internet. YOUR TELEPHONE OR INTERNET VOTE MUST BE
RECEIVED BY 12:00 MIDNIGHT NEW YORK TIME ON APRIL 23, 2003.
Your telephone or Internet vote authorizes the proxies named on the above proxy
card to vote your shares in the same manner as if you marked, signed and
returned your proxy card.
If you are a registered shareowner and vote by telephone or the Internet, there
will be applicable instructions to follow when voting to indicate if you would
like to receive an Admission Card for the Annual Meeting.
VOTE BY PHONE: ON A TOUCH-TONE TELEPHONE DIAL 1-877-PRX-VOTE
(1-877-779-8683) FROM THE U.S. AND CANADA OR DIAL
201-536-8073 FROM OTHER COUNTRIES.
OR
VOTE BY INTERNET: POINT YOUR BROWSER TO THE WEB ADDRESS:
HTTP://WWW.EPROXYVOTE.COM/JNJ
OR
VOTE BY MAIL: Mark, sign and date your proxy card and return it in the
postage-paid envelope. IF YOU ARE VOTING BY TELEPHONE OR THE
INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.