Weldon has received $150 million in compensation since 2006, the suit says, and he earns more than the next four highest-paid drug company CEOs combined. That "lavish and excessive" package, the suit says, came despite J&J's stock, revenues, and operating cash flow staying flat, its R&D declined and its liabilities increased. There have been 26 product recalls from all areas of the company (16 of those were Tylenol-related), including the recall of 93,000 artificial hips after they were implanted in patients.
The company paid kickbacks to the government of Saddam Hussein and operated a bribery scheme in Greece in which, a British judge said, "corruption was, in effect, a company policy." Yet during this period, Weldon's pay doubled from $14.3 million in 2005 to $28.7 million in 2010.
As I noted earlier this year, Weldon's pay is rigged to only go up, and the board conceals this scheme by making it fiendishly complicated -- it requires 37 pages in its annual SEC filing to describe it. Technically, Weldon only receives his bonuses if he meets certain performance requirements linked to the price of the stock, and the company's financial performance. But those bonuses are all based on a benchmark that rises every year, a benchmark that has nothing to do with Weldon's performance: That Weldon will always be paid more than the average drug CEO (see page 28):
The Company's target pay philosophy positions total compensation for its executive officers between the 50th and 75th percentiles of the Executive Peer Group.That's why Weldon's total compensation last year sank only 7 percent to $28.7 million despite his bonus award being cut 45 percent.
Interestingly, the suit uses Weldon's own words to justify its demand that he "disgorge the compensation which he has received" that was unlinked to his performance. When Weldon testified to Congress about the Tylenol recalls, he repeatedly said there was no excuse and that he would take full responsibility for the company's performance, the suit says:
I accept full accountability for the problems at McNeil and I will take full accountability for fixing these problems ... I do not want to make any excuses for what we should have done in 2008.The plaintiffs -- The George Leon Family Trust, which has owned JNJ stock since 2008 -- believe that J&J's board has made "materially false and misleading" statements about Weldon's pay because its compensation policy is to reward him based not just on results "but also for the manner in which they achieve them" (see page 22). The board continued to reward Weldon despite repeated violations of the J&J Credo, on which the compensation policy is based.
J&J has yet to file a response, but it defended Weldon's pay in an April disclosure to the SEC.