Joaquin Duato
JOHNSON & JOHNSONAbout Joaquin Duato
Joaquin Duato (age 62) is Chairman of the Board and Chief Executive Officer of Johnson & Johnson and has served as a management director since 2022; he also chairs the Board’s Finance Committee . Under his leadership in 2024, J&J exceeded enterprise financial goals used for incentive determination: operational sales, adjusted operational EPS, and free cash flow all surpassed targets (enterprise financial payout factor 128.8%) and annual incentives paid at 115% of target; 2022–2024 PSUs paid at 63.6% due to below-threshold relative TSR despite above‑target cumulative adjusted operational EPS . Shareholders supported Say‑on‑Pay at ~90% in 2024, reflecting alignment of pay and performance and ongoing engagement .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Johnson & Johnson | Vice Chairman of the Executive Committee | — | Senior enterprise leadership spanning segments, geographies, and functions; “globally minded, purpose‑driven” leader . |
| Johnson & Johnson | EVP, Worldwide Chairman, Pharmaceuticals | — | Led Pharmaceuticals with focus on pipeline and global execution . |
| Johnson & Johnson | Worldwide Chairman, Pharmaceuticals | — | Oversaw global pharma operations . |
| Johnson & Johnson | Company Group Chairman, Pharmaceuticals | — | Multi‑business and multi‑region leadership foundation . |
Note: Specific years for internal roles are not disclosed in the proxy .
External Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Hess Corporation | Director | 2019–2022 | Public company board experience in energy sector . |
| Business Council | Member | — | Senior CEO policy forum participation . |
| Business Roundtable | Member | — | Engagement on corporate policy and governance matters . |
| New Jersey CEO Council | Member | — | Regional economic and workforce initiatives . |
Fixed Compensation
| Component | 2024 Amount | Notes |
|---|---|---|
| Base salary | $1,600,000 | 2025 base salary rate unchanged . |
| Annual incentive (actual) | $3,220,000 | Paid at 115% enterprise factor for 2024 . |
| Target annual incentive (dollar) | $2,800,000 (target opportunity) | Ceiling $5,600,000 max shown for plan range . |
Performance Compensation
Annual Incentive Framework and 2024 Results
| Metric | Weight | Threshold | Target | Maximum | Result | Payout |
|---|---|---|---|---|---|---|
| Operational sales ($mm) | — | $84,170 | $88,600 | $93,030 | $89,385 | 117.7% (39.2% weighted) |
| Adjusted operational EPS | — | $10.12 | $10.65 | $11.18 | $10.91 | 148.8% (49.6% weighted) |
| Free cash flow ($mm) | — | $15,300 | $17,000 | $18,700 | $17,341 | 120.1% (40.0% weighted) |
| Financial payout factor | 70% | — | — | — | — | 128.8% |
| Strategic goals payout factor | 30% | — | — | — | — | 94.0% |
| Calculated enterprise factor | — | — | — | — | — | 118.4% |
| Discretionary reduction | — | — | — | — | — | (3.4) pts → 115.0% |
Notes: Talc litigation charge of $5.1B was excluded from incentive metrics; committee cited alignment, behavioral incentives, and lack of admission of wrongdoing in determining treatment .
Long‑Term Incentive (LTI) Design and 2022–2024 PSU Outcome
- Mix: PSUs 60%, stock options 30%, RSUs 10%; PSUs vest 0–200% at 3 years; options/RSUs vest 1/3 per year; 10‑year option term .
- PSU metrics: 50% three‑year cumulative adjusted operational EPS, 50% three‑year relative TSR CAGR vs competitor composite .
| PSU Performance Cycle | EPS Goal (3‑yr) | Relative TSR vs Composite | Result | PSU Payout |
|---|---|---|---|---|
| 2022–2024 | Above target (actual $32.38 vs $31.52 target) | (11.1) points vs composite, below threshold | Mixed: strong EPS, weak relative TSR | 63.6% of target |
2024 LTI Grants (granted Feb 15, 2024 based on 2023 performance)
| Instrument | Shares/Options Granted | Terms | Grant‑date FV |
|---|---|---|---|
| PSUs (2024–2026) | Target 68,383; max 136,766 | 3‑yr cliff; 50% EPS, 50% relative TSR | $9,147,115 |
| RSUs | 11,046 | Vest 1/3 per year (post‑2023 practice) | $1,640,044 |
| Stock options | 177,816 @ $157.92 strike | Vest 1/3 per year; 10‑yr term | $4,919,991 |
Valuation assumptions (Feb 15, 2024): stock $157.92; option fair value $27.669; PSUs weighted FV per unit $133.763; dividend yield 3.10% .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial ownership (common) | 407,765 shares . |
| Options/stock units (within 60 days) | 987,499 underlying shares . |
| Total beneficial incl. underlying | 1,395,264 shares . |
| Unvested RSUs at FYE 2024 | 5,053 (2022 grant); 6,939 (2023); 11,046 (2024); market values $732,938; $1,006,502; $1,602,222 respectively (12/27/24 close $145.05) . |
| Unearned PSUs (indicative) | 2023–2025: 0–51,768 est.; 2024–2026: 0–46,055 est.; market/payout values $7,508,948; $6,680,278 (assumptions detailed in proxy) . |
| 2024 option exercises | 130,969 shares; value realized $8,685,864 . |
| 2024 stock vested | 45,313 shares; value $7,128,237 . |
| Ownership guidelines | CEO required to hold ≥12x base salary; Duato in compliance as of 12/29/2024 . |
| Pledging/hedging | Prohibited for directors and executive officers . |
| Holding requirements | After‑tax shares from LTI cannot be sold until guideline met; options/unearned PSUs don’t count toward ownership . |
Vesting cadence and potential supply overhang: options/RSUs from 2023+ grants vest ratably each Feb on grant anniversaries; PSUs vest at 3‑year cliff, concentrating vesting‑related liquidity windows in mid‑February cycles .
Employment Terms
| Topic | Key provisions |
|---|---|
| Employment agreements | No employment agreements with named executive officers . |
| Non‑compete / non‑solicit | Company maintains non‑competition and non‑solicitation provisions (policy references) . |
| Severance (U.S.) | U.S. Severance Pay Plan max cash severance 2.0x salary; Company adopted Executive Officer Cash Severance Policy requiring shareholder approval for cash severance of the nature in the “excessive golden parachutes” proposal . |
| Change‑in‑control | No individual CIC agreements; under 2022 LTIP, if awards are not assumed/substituted upon CIC, they vest with performance deemed at greater of target or actual; if assumed, they continue to vest (no single‑trigger) . |
| Clawback/recoupment | Robust recoupment policies plus SEC‑rule compliant clawback for restatements (3‑year lookback; mandatory) . |
| Tax gross‑ups | No tax gross‑ups except standard relocation practices . |
| Perquisites | CEO required (effective Dec 2024) to use company aircraft for all business/personal travel and an armed driver/secure vehicle for all travel including commuting; home and cybersecurity support provided; executives pay taxes on perqs; no tax assistance . |
| Pension/Deferred | 2024 change in pension value for Duato: $2,694,000; CLC legacy plan details and non‑equity comp treatment disclosed (no new CLCs since 2009) . |
Board Governance and Service
- Role/Status: Chairman & CEO; management director (not independent) .
- Committee roles: Chair, Finance Committee (Finance Committee is composed of the Chairman & CEO and Lead Director) .
- Board structure: Combined Chair/CEO with a robust independent Lead Director model; all main committees (Audit, Compensation & Benefits, Nominating & Corporate Governance, Regulatory Compliance & Sustainability, Science & Technology) are fully independent .
- Lead Director responsibilities: Agenda setting, executive sessions, shareholder outreach, CEO evaluation, succession, crisis oversight (extensive duties enumerated) .
- Attendance: Board held 14 meetings in 2024; each director attended at least 75% of meetings and executive sessions of independent directors occurred at every regular Board meeting .
Say‑on‑Pay & Shareholder Feedback
- 2024 Say‑on‑Pay approval ~90%; ongoing direct engagement with large holders (outreach to ~55% of outstanding shares; meetings with holders of ~39%) .
- Committee underscores use of non‑GAAP metrics for incentive plans to avoid windfalls/penalties unrelated to controllable performance; talc charge exclusion rationale detailed .
Compensation Structure Analysis
- Alignment: Majority of CEO pay at risk and equity‑based; 2024 annual incentive tied 70% to financial metrics (operational sales, adjusted operational EPS, FCF) and 30% to strategic goals, with capped payouts at 200% .
- LTI risk profile: Mix shifted toward PSUs with relative TSR and EPS; options remain 30% weighting, reinforcing long‑term price appreciation focus .
- Governance protections: No CIC agreements; no option repricing without shareholder approval; anti‑pledging/hedging; strong clawbacks .
Investment Implications
- Pay‑for‑performance: 2024 bonus at 115% on strong financial execution while PSUs (2022–2024) paid 63.6% due to relative TSR underperformance, signaling multi‑year alignment and potential sensitivity to share‑price/peer relative returns .
- Supply/vesting dynamics: Ratable option/RSU schedules and three‑year PSU cliffs cluster vesting/settlement around mid‑February, historically coinciding with potential insider exercises/settlements (Duato realized $8.7m from option exercises in 2024), which can create episodic selling pressure absent plan‑driven withholding; watch blackout windows and post‑vesting trading periods .
- Governance balance: Combined Chair/CEO mitigated by strong Lead Director/independent committees; Duato’s Finance Committee chair role centralizes capital allocation oversight alongside Lead Director, supporting decisive M&A/R&D deployment (e.g., Shockwave, pipeline progress) but elevates concentration risks if oversight falters .
- Retention/ownership: CEO exceeds rigorous 12x salary ownership guideline; anti‑pledging/hedging and mandatory holding enhance alignment and reduce financing‑driven forced sales risk .
- Downside protection limits: Absence of guaranteed CIC payouts and strong clawbacks reduce “pay insulation,” aligning with shareholder‑friendly practices; however, committee discretion to exclude large legal charges from bonus metrics can partially buffer management from litigation volatility, though equity exposure still transmits stock‑price effects .