Johnson & Johnson has faced numerous controversies in recent years—including its talc and opioid litigation—and at least one shareholder group is unhappy. It's calling for a split of the CEO and chairman roles, both currently held by Alex Gorsky, to provide better management oversight.
In J&J’s proxy, the company disclosed a shareholder proposal from Trillum Asset Management to require an independent board chair. As it stands, Gorsky is both CEO and board chair, and Trillum says requiring an independent chair would improve the board's functioning.
“In our view, shareholders are best served by an independent board chair who can provide a balance of power between the CEO and the Board,” the group said in its proposal. “We believe that Johnson & Johnson's Board should adopt best practice governance policies, including having an independent board chair.”
The group cited a PwC survey from last year of more than 700 directors. It found that found 57% of the directors said it was difficult to voice dissent when there’s a CEO/chair in the group.
Further, Trillum pointed to some of J&J’s recent controversies as evidence the company could use better oversight. They included an opioid trial loss in Oklahoma last year, the ongoing talc litigation, a DOJ investigation over J&J’s talc statements and an $8 billion Risperdal verdict that was later reduced to $6.8 million.
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J&J is recommending shareholders vote against the proposal, saying it’s “crucial that the board maintain the flexibility to tailor its leadership structure to best fit the company’s needs as they evolve, as well as to best respond to the challenges facing the company.”
The drugmaker already has a lead director and its committees are made up of independent directors, the company argued. The lead director manages the information flow between management and the board, plus agendas and schedules for board meetings. J&J’s lead director can also call executive meetings of independent directors and leads the CEO/chair performance evaluation process, plus the CEO succession process.
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Of course, J&J isn’t alone in facing calls to split its chairman and CEO roles. Allergan last year faced a push from investors over the roles of CEO and chairman Brent Saunders. AbbVie did as well, and both of those companies are set to merge under a massive deal that just cleared European antitrust regulators this week.