AFSCME is recommending that shareholders of both Pfizer and Johnson & Johnson vote against the executive compensation proposals at the annual meetings of both companies, which take place on April 28, 2011.
AFSCME has led the charge to get shareholders of U.S. companies the right to vote on executive pay. Thanks to the Wall Street Reform Act, shareholders now have a voice. “Now shareowners can use Say on Pay at all companies to register their disapproval of CEO pay,” said President Gerald W. McEntee, whose 1.6 million members participate in public pension funds with combined assets worth more than $1 trillion. “It’s up to investors to use this tool judiciously and send a clear message to boards of directors: pay needs to be tied to performance.”
Johnson & Johnson paid Chairman and CEO William Weldon nearly $29 million in spite of eleven recalls of JNJ drugs at a cost of $900 million. The company lost $7 billion in market value last year. JNJ also benchmarks its executive pay above the pay of its peers.
Pfizer’s retired CEO Jeffrey Kindler received nearly $25 million, a 60 percent increase over his 2009 compensation. During Kindler’s tenure, he received over $72 million in compensation during which time the stock price dropped by more than a third and Pfizer lost approximately $68 billion in market value.
“Pfizer’s CEO pay is indefensible,” added McEntee. “CEOs should not get massive rewards after shareholder value is destroyed on their watch. This lavish reward for failure is simply madness.”
I don’t have stock in either company but if I did I would also vote against the compensation plans using MoxyVote.com. As I said in CEO Pay: Ready to Draw the Line?, I’m concerned about the “Lake Woebegone Effect.” As former DuPont CEO Edward S. Woolard, Jr. speaking at a Harvard Business School roundtable on CEO pay said,
The main reason (CEO) compensation increases every year is that most boards want their CEO to be in the top half of the CEO peer group, because they think it makes the company look strong. So when Tom, Dick, and Harry receive compensation increases, I get one too, even if I had a bad year…. (This leads to an) upward spiral.
$9 million, last year’s median, is my current limit. What’s yours?