Wednesday, March 14, 2012

WSJ Under-Estimates J&J CEO Weldon's Walk-Away Package By 38 Percent. . .

. . .But, at $197 Million, Weldon's is still almost 20 percent smaller than Ex-CEO Fred Hassan's was, as granted at the end of 2009!

And Mr. Weldon -- say whatever else you like aout the man, but he worked for 40 years to earn it. Hassan? A little more than five years. [So, Weldon worked eight times longer to earn about 20 percent less.]

The MSM reports calculate only the cash values for soon to be Ex-CEO Weldon, not the present value of his stock options, at today's NYSE closing price for J&J of $65.08. So, that -- plus the vesting of his February 2012 JNJ RSUs and Stock Option awards [see page 45 of the link (but such amounts are ommitted from the year end 2011 proxy, on which the WSJ relied)] -- add about $53.47 million to the Weldon walkaway haul.

But even so -- it is still well shy of Fred Hassan's deal, just as Ex-CEO Clark's deal (after 36 years at legacy Merck) was dwarfed by Hassan's $235 million, all-in -- for five years of mismanagement. From tonight's Wall Street Journal reporting, then:

. . . .CEO Weldon's pension valued at $48.4 million, deferred compensation at $95.1 million

J&J says Weldon earned benefits over a 40-year career

J&J changes executive-pay practices after shareholder-advisory vote last year

J&J spokesman Al Wasilewski said Weldon, who started working at the company in 1971, earned his post-retirement benefits over "a very long career at J&J, 10 of those years as CEO."

Weldon, who will be succeeded as CEO by Vice Chairman Alex Gorsky, stands to collect benefits from two main buckets. The present value of his accumulated pension benefit is $48.4 million, portions of which are paid out as a monthly annuity for life, according to a proxy statement filed Wednesday with the Securities and Exchange Commission.

Weldon's pension value ranks well into the top 10% of CEOs of S&P 500 companies, said Paul Hodgson, chief communications officer and senior research associate at GMI Ratings, which tracks corporate-governance information.

In addition, Weldon has accumulated $95.1 million in nonqualified deferred-compensation plans. This represents portions of his salary and bonus that have been deferred in prior years, as well as company contributions to savings plans. Parts of his deferred compensation have been recorded each year as part of Weldon's total annual compensation.

Of the $95.1 million, more than $70 million represents Weldon's accumulated balance from a legacy cash incentive plan that J&J has discontinued and replaced with a new executive-compensation plan. This amount would be paid to Weldon at retirement, Wasilewski said. All deferred compensation is subject to taxes. . . .

Here is my spread sheet [an Excel file] on his option- and RSU- values, by the way. Break out your tiny violins, folks. But -- if you do -- be sure not to play them for Mr. Hassan. Sheesh.


Anonymous said...

Not that I agree with his compensation but, it isn't Fred's fault. It is the BoD who allowed this to happen.

And where is S/P now?

Just Big Business and Free Market Capitalism.

Very sad, very sad.

Condor said...

Actually, Anon., permit me to politely disagree with you, here:

It IS Fred's fault. He was the reigning CEO and Chairman -- the one person MOST responsible for "setting the course" from March 2004 to November 2009.

Yes, Hans Becherer, the Committee chairman of the board compensation committee is also to be faulted, but we all remember when Lee Iacocca took $1 per year in salary to turn a much bigger problem around. We remember that Steve Jobs took $1 in salary.

That is what leadership looks like.

Mr. Hassan forcefully negotiated his employment agreement in the spring of 2004, to wring out every last perk and penny he could, from a then-struggling Schering-Plough.

That's all good capitalism in my book. But after ENHANCE -- a wound Hassan himself inflicted -- true LEADERSHIP whould have required that he waive the bulk of his compensation, voluntarily, as Jobs and Iacocca did.

What did he do? The opposite -- just a few days after he said that the press (and the NYSE) was over-reacting to ENHANCE's delayed results -- in early May 2008, he persuaded the compensation committee to grant him, and five other top insiders, MEGA-grants of stock options at $18.15 -- a price he was saying at the same time was "undervauling" SGP. Remember -- these were a pure gift -- he paid nothing to get them.

That grant alone represented north of $20 million in additional cash to Hassan when he walked away.

Don't kid yourself here, Anon. -- he influenced the agenda on compensation, as a former Schering HR/comp. guy was the lead at Wyatt Wheeler -- Hans Becherer's chosen "outside, independent" compensation expert firm.

Do stop back, and. . .


Anonymous said...

Sorry that mega grant was at $18.85.


Anonymous said...


I love the debate. Though, I think we're on the same side. Yes, Fred could have but wasn't required to do so. I do believe he and his cronies 'drove S/P' to its end.

Now as you said "That's all good capitalism in my book. But after ENHANCE -- a wound Hassan himself inflicted -- true LEADERSHIP whould have required that he waive the bulk of his compensation..."

Leadership is the key word. Again, Free Market Capitalism doesn't require it. It is a 'nice and ethical' item but not required.

Personally, I think many corporations lack Leadership right now. Actually, I think Congress could use a dose of it too.

Sadly, those that offer true Leadership are often forced out because they are seen as 'soft.'

Alas, lately, "GREED is good" seems to carry the day.

Blessings back atcha.

Anonymous said...

Interesting news:

As a point in history, S/P used to have a research facility there when it bought Canji. I believe that during the Hassan years it was consolidated into S/P Biotech with the Dnax group outside of SF.

Anonymous said...

for completeness: Plough Biopharma

Anonymous said...

Not to be inappropriate but I've always been repulsed by that portrait of Weldon. It's as if we are peeking in on him through an open bathroom door. Yuck.