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Law360 (April 14, 2021, 9:43 PM EDT) -- Illinois' state treasurer has urged Johnson & Johnson shareholders to vote against a $29.6 million 2020 compensation package for the company's CEO, arguing that the proposed sum was calculated without consideration for the billions in dollars that opioid and cancer litigation cost the company.
In a letter filed Wednesday with the U.S. Securities and Exchange Commission, the Office of the Illinois State Treasurer, which is a Johnson & Johnson shareholder and a member of the group Investors for Opioid and Pharmaceutical Accountability, told its fellow J&J shareholders that in the past two years, opioid-related litigation caused $5 billion in charges to be booked the the company's earnings, adding that the company's 2020 financials also reflect a $4 billion charge related to litigation over claims the company's talcum powder contained cancer-causing asbestos.
But according to the Illinois treasurer's office, the company's latest executive pay packages didn't factor those sums into determinations about how much money the company's brass should earn.
"By excluding these costs from the earnings calculations used in the incentive plans, the [Compensation & Benefits] Committee has inexplicably chosen to insulate named executives from the fallout of Johnson & Johnson's role in the opioid crisis," the state treasurer said in the letter, noting that as a result, J&J CEO Alex Gorsky had his pay boosted by over $2 million in the past two years.
"Compensation plans work more effectively when they take both successes and failures into account. We believe the issue of linking executives' pay to the costs of the opioid crisis is both singularly important and separate from the question of whether executives merit recognition in the development of a vaccine," the treasurer added.
The treasurer's letter also noted that it was "mindful of the important role Johnson & Johnson has played in combating the COVID-19 pandemic." The letter was filed the day after federal health officials recommended a pause in the administration of the J&J coronavirus vaccine after six cases of a rare form of blood clot affected women who had recently received it.
Gorsky received $25.4 million in compensation in 2019, records show. The $29.6 compensation package for 2020 represents a roughly 17% increase.
J&J characterizes the annual shareholder "say on pay" vote as an advisory vote as opposed to a binding vote. In a proxy statement the company filed in March, the company told shareholders it hadn't changed its incentive goals due to the pandemic.
"Our investors generally support the overall design of our executive compensation program with its focus on performance-based and long-term, equity-based compensation that aligns with our shareholders' interests," the company said in March, noting that when the compensation vote was held last year, 93% of the votes were cast in favor of the executive compensation the company described.
The shareholder vote is scheduled for April 22.
Representatives for J&J and for the Office of the Illinois State Treasurer did not immediately respond to requests for comment.
--Editing by Andrew Cohen.
For a reprint of this article, please contact reprints@law360.com.
