Johnson & Johnson CEO Takes Pay Cut Amid Industry Challenges

Johnson & Johnson's CEO Joaquin Duato saw a significant reduction in his compensation package for 2024, reflecting broader challenges facing the pharmaceutical giant and the industry at large. This development comes as J&J continues to grapple with ongoing litigation and faces increased scrutiny over executive pay in the healthcare sector.

Duato's Compensation Decrease

In his third year as CEO, Joaquin Duato received a total compensation package of $24.3 million for 2024, marking a 14% decrease from his 2023 earnings of $28.4 million. The reduction was primarily attributed to changes in pension value calculations and decreases in bonus and equity awards.

Key components of Duato's 2024 compensation include:

• A $2.7 million increase in estimated pension value, down from $6.2 million in 2023
• A bonus of $4 million, reduced from $4.4 million the previous year
• Equity awards totaling $15.7 million, a slight decrease from $16 million in 2023

Additionally, J&J reported expenditures of $145,381 for Duato's personal aircraft use and $102,779 for home security services.

Company Performance and Challenges

Despite the CEO's pay cut, Johnson & Johnson reported strong financial performance in 2024, with sales reaching $88.8 billion, a 4.3% increase year-over-year. This solidified J&J's position as the top revenue generator in the life sciences industry.

However, the company continues to face significant challenges, particularly regarding its talc litigation. J&J recorded a $5.1 billion accounting charge related to talc matters in 2024, marking its third bankruptcy effort to resolve the ongoing legal issues. The company stated that this charge was excluded from executive compensation considerations, citing that the underlying events occurred before current executives assumed their roles.

Industry Comparisons and Shareholder Returns

J&J's performance relative to its peers has shown some concerning trends. A graph charting shareholder returns revealed that J&J's returns have declined over the past two years, while returns for peer group companies have increased. An investment of $100 in J&J in 2019 would have been worth approximately $115 in 2024, compared to $155 for an index of other large-cap pharmaceutical companies.

This discrepancy in shareholder returns may contribute to increased scrutiny of executive compensation practices within the company and the broader pharmaceutical industry.