Wednesday, July 7, 2021

J&J chief Gorsky’s $29.6M pay package prompts pushback from top proxy advisers ISS and Glass Lewis: report

With J&J chief Alex Gorsky’s 2020 pay now on the record, a pair of top proxy advisers are hitting back. 

Institutional Shareholder Services (ISS) and Glass Lewis put the pressure on Johnson & Johnson investors to reject CEO Gorsky’s 2020 pay package worth nearly $30 million, Reuters reports. At the heart of the matter, the advisers argue that Gorsky is partially shielded from some $9 billion in costs that J&J has amassed amid legal fights over opioids and talc.

Gorsky’s pay jumped 17% in 2020, hitting $29.58 million. The chief executive snared a salary of $1.65 million, with the majority of his pay package fueled by $18.14 million in stock and option awards, a recent proxy filing showed. 

Glass Lewis made its recommendation last week, suggesting J&J had shielded leadership from the financial fallout of its talc and opioid litigation. ISS has issued a similar call. The proxy adviser wrote to shareholders Thursday that investors may “expect an explanation from the company of how the compensation committee considered the extraordinarily large litigation charges when making compensation decisions,” according to Reuters.

RELATED: Johnson & Johnson’s $2B talc verdict stands after Missouri Supreme Court turns away its appeal

In the past, J&J has said it doesn’t weigh one time costs, like those for litigation, when deciding C-suite stock awards, the news outlet wrote. 

Early this month, J&J gained the support of the Chamber of Commerce, PhRMA and more in its quest to challenge a $2.1 billion verdict over claims that its talc-based powders cause ovarian cancer. The business groups asked the Supreme court to review the verdict, which has climbed to $2.5 billion with interest.

Meanwhile, J&J is still staring down some 25,000 talc lawsuits, the company said in a February SEC filing. 

RELATED: Judges slam J&J’s ‘reprehensible’ talc defense, cut massive 2018 verdict to $2.11B

On the opioid front, J&J in October said it would throw in another $1 billion as it looks to settle nearly 2,000 lawsuits claiming it contributed to the opioid crisis by overstating the benefits of its pain meds. The company had previously set aside $4 billion as part of a larger settlement “framework” proposed alongside Teva Pharmaceutical and distributors McKesson, Cardinal Health and Amerisource Bergen. 

Gorsky’s situation resembles that of Bayer’s chief executive Werner Baumann, who received a historic no confidence vote back in 2019 over the German conglomerate’s Monsanto acquisition and subsequent Roundup weed killer litigation. Both ISS and Glass Lewis supported the move. 

By 2020, Baumann had partially redeemed himself in investors’ eyes. While Glass Lewis again recommended a no confidence vote in April of 2020, ISS saw things differently. At Bayer’s 2020 shareholder meeting, roughly 92.6% of shareholders’ votes came in favor of ratifying management’s actions for the previous year. Meanwhile, Bayer’s supervisory board in September extended Baumann’s contract by three years to the end of April 2024. 

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