The American Federation of State, County, and Municipal Employees (AFSCME) announced Monday that the union pension fund will urge other investors to vote against the executive compensation practices at Johnson & Johnson and Pfizer.
The campaigns are the first public “vote no” efforts of the 2011 U.S. proxy season, which so far has seen limited activism by labor and public pension funds other than shareholder proposals.
Johnson & Johnson and Pfizer both will hold their annual meetings on April 28. AFSCME is urging investors to vote against management during the pharmaceutical firms’ non-binding votes on compensation, which are now mandated at large and mid-cap U.S. companies.
“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,” Gerald McEntee, president of AFSCME, said in a press release on the “vote no” campaigns.
At Johnson and Johnson, the union pension fund objects to the $29 million in total compensation received by CEO William Weldon in 2010 while the company had to undertake 11 drug recalls at a cost of $900 million. According to AFSCME, the company lost $7 billion in market value last year, and benchmarks its compensation above the pay of its peers.
“The Board believes that Mr. Weldon provided strong leadership during a very demanding year and has worked to resolve multiple challenging issues and position the Company for future growth,” the company said its proxy statement. “The Board’s decisions on Mr. Weldon’s compensation for 2010 reflect the Company’s mixed performance, with short-term successes and disappointments, as well as continued strong positioning of the Company for long-term growth.”
At Pfizer, the union pension fund complains that retired CEO Jeffrey Kindler received almost $25 million in 2010, a 60 percent increase from his total pay in 2009. During his four-and-a-half-year tenure, he received over $72 million in compensation, while Pfizer lost approximately $68 billion in market value, according to the union.
“Pfizer’s CEO pay is indefensible,” McEntee said. “CEOs should not get massive rewards after shareholder value is destroyed on their watch.”
AFSCME also objects to what it describes as a “golden hello” for new CEO Ian Read, who was promoted to that post in December. His compensation rose from $9.4 million to $17.4 million, primarily because of increases in pension and deferred compensation benefits, the union said.
In its proxy statement, Pfizer describes the various steps the compensation committee has taken in 2010 and early 2011 to address shareholder concerns, including implementing annual assessments of pay risk, increasing the CEO’s stock-holding requirement, targeting executive pay to the 50 percentile of the company’s peer group, and replacing short-term incentives with seven-year “total shareholder return” units.
“The Compensation Committee and the Board of Directors believe that the information provided in [CD&A] section demonstrates that our executive compensation program aligns our executives’ compensation with Pfizer’s short-term and long-term performance and provides the compensation and incentives needed to attract, motivate, and retain key executives who are crucial to Pfizer’s long-term success,” the company said.