Johnson & Johnson ($JNJ) CEO Alex Gorsky got a multimillion-dollar pat on the back for 2014. J&J's board upped his pay package to almost $25 million, with more cash, more options, and a much bigger chunk of J&J stock.
The pay hike--almost half again as much as the $16.9 million Gorsky earned in 2013--puts his compensation on par with that of his predecessor, William Weldon, who for years was among the two or three highest-paid CEOs in the pharma business. Not that his previous tally fell far short, ranking-wise; Gorsky stood in 6th place on FiercePharma's CEO pay ranking last year.
J&J's board explained Gorsky's pay with a rundown of the ways the company met or beat its goals for last year. Earnings growth, check. Ditto for sales growth, particularly in pharma, but Gorsky's team also pulled off revenue and cost-cutting goals in its devices business, still digesting the Swiss orthopedics specialist it bought in 2011, Synthes. On the softer side of things, Gorsky grew J&J's stable of up-and-coming executives, won good grades internally for employee relations and helped polish its public image, the board's compensation committee said in J&J's proxy statement.
J&J has had a good run in prescription drugs, with a series of successful rollouts and a whopping 16% growth in sales for 2014. About a quarter of J&J's 2014 sales came from products launched since 2010. Devices and consumer health weren't quite as successful last year, but the company did pull off $74 billion in sales overall, a 4.2% increase.
As for J&J's rep? The board pointed out its ranking among Barron's most-respected companies and Fortune's most-admired companies lists. And it's true that J&J's McNeil unit has recovered somewhat from the disastrous series of recalls that began in 2009. But the company is still embroiled in litigation over alleged failures to warn about serious side effects of products such as the antipsychotic Risperdal, the now-notorious vaginal mesh devices, and DePuy's even more notorious artificial hips.
J&J has paid billions to settle lawsuits filed by consumers and government officials alike, and though it has successfully fought off billion-dollar-plus verdicts in certain state-court cases, the headlines haven't been pretty. And it wasn't so long ago that J&J agreed to shell out $2.3 billion to settle a long-standing investigation by the U.S. Justice Department, over a litany of alleged marketing violations, off-label and otherwise.
But then again, shareholder returns were 17%, as the proxy points out.
Gorsky's salary is about on par with his pharma peers at $1.5 million, and he doesn't collect any straight bonus pay. Incentive pay ticked slightly above $5 million, a 3% increase over 2013's $4.87 million. The big differences over 2013 came in stock awards--$9.47 million, up from $5.99 million--and options, which amounted to $4.17 million, up from $2.67 million. Plus, Gorsky saw his pension and deferred compensation grow by $4.6 million, more than twice the increase recorded for 2013. Total: $24.99 million.
Gorsky wasn't the only J&J exec to enjoy a big hike in stock awards, either. Paul Stoffels, the company's chief science officer and worldwide pharma chairman, netted $10.69 million in shares. That award, together with a sizable pension boost, more than doubled Stoffels' pay for the year, bringing his total to $18.34 million. For 2013, Stoffels' compensation totaled $7.82 million.
- see the J&J proxy
Special Reports: Top 15 highest-paid biopharma CEOs of 2013 - Alex Gorsky, J&J