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Le point de vue du secrétaire corporatif de Johnson et Johnson sur les priorités en gouvernance

12 mars 2013

J’ai récemment pris connaissance d’une entrevue conduite par   avec Douglas K. Chia*, secrétaire corporatif de la firme Johnson & Johnson. Cette entrevue aborde essentiellement quatre sujets très importants pour les parties prenantes de l’entreprise : (1) les pratiques de planification de la relève de la direction, surtout du PCD (2) les pratiques de rémunération et la préparation du document CD&A (Compensation Discussion and Analysis), (3) les relations et les discussions avec les investisseurs institutionnels et (4) les communications avec les actionnaires, notamment les aspects concernant le Say on Pay et la création de valeur à long terme.

Voici un compte rendu de cette entrevue. Vos commentaires sont appréciés. Bonne lecture.

C-Suite Insight: What are the big issues that you’re considering as Johnson & Johnson prepares for proxy season?

Doug: Like many other high-profile companies, executive compensation is a critical item for us during proxy season, and we are looking at the continuum of the story that we’ve been telling for the last few years in our proxy statements. As you may have seen, there have been some major changes in our executive suite from last year to this year, specifically a succession from a long-tenured CEO, who is retiring after a remarkable 41-year career at J&J, to a new CEO. So, obviously this recent leadership succession will be a big focus area. We’ll also continue to emphasize the changes in the design of our compensation programs that have been made over the past few years, which we put a lot of effort into describing in last year’s proxy statement.

Headquarters of the Johnson & Johnson Company,...

Headquarters of the Johnson & Johnson Company, One Johnson & Johnson Plaza, New Brunswick, New Jersey, USA. Architect: Henry N. Cobb of the I. M. Pei Company, built 1983. (Photo credit: Wikipedia)

CSI: Succession planning is a weakness in a lot of companies. So could you take us through succession planning at Johnson & Johnson, when it started, and how you worked your way through it?

Doug: For us, succession planning has always been something which has gone smoothly because it’s been thought out in advance. J&J has had only seven CEOs since becoming a public company in the early 1940s, and each one has come from the internal ranks. In the current case, we have an outgoing CEO who had served in the position for the past decade. The process of identifying potential successors for him started a number of years ago, in the 2010-2011 timeframe, and the lead candidates became apparent to the public. Our major investors were familiar and quite comfortable with the individuals who were being considered.

CSI: In succession planning and other major processes at J&J, how do you view long-term sustainable value and how do you view your engagement with shareholders?

Doug: We’ve always managed our business for the long-term, which is reflected in our culture by the fact that people tend to have very long careers at Johnson & Johnson. So, we have the benefit of being able to train up-and-coming leaders in a variety of business situations and give our Board exposure to them along the way. In terms of shareholder engagement, our major investors get exposed to many of our senior business leaders through investor conferences and meetings where they can talk in-depth about the businesses they are running. Over time, investors get familiar with a small cadre of J&J senior business leaders.

CSI: We have to mention Say on Pay. How did this issue affect you initially, and how do you address it when you’re writing a CD&A?

Doug: You cannot write the CD&A only thinking about the Say on Pay vote. This reminds me of what my teachers in school used to say: You shouldn’t “study to the test.” Instead, study the subject, master the subject, and then you will do fine on the test. So for us, writing the CD&A each year is about making sure we tell the story that reflects what’s taking place at the company, our compensation philosophy, the values we are trying to instill through our compensation plans, how our executives are paid, and what performance is being rewarded. We try to illustrate that we manage our business for the long-term and thus place a lot of focus on aligning executive compensation with our long-term investors. That being said, you do want to consider the vote outcome, keeping in mind the “advisory” nature of the vote. Suffice it to say that ours have not been where we want them to be, although we did gain support from over a majority of the votes cast in each of the last two years.

CSI: What have you done about this?

Doug: Over the past summer and fall, we had some of our Board members and senior management sit down with a diverse mix of investors, in one-on-one settings, specifically to talk about executive compensation. Through those discussions, we have been able to better understand the parts of our executive compensation program and our disclosure that could be enhanced. One point the investor discussions drove home that is important for all of us to remember when writing the CD&A is that for investors, the proxy statement is really all they have to rely on for information; they likely know very little else about the company’s pay programs.

So, we have to take a critical eye to what we’ve presented in the past and ask ourselves, “How can we tell our story better in order to make people understand the important context and rationale underlying these compensation decisions?” I think it’s fair to say that this process has helped us identify specific areas where we could have done a more effective job of telling our story. That’s something we’ll continue to work on this year and every year.

CSI: We’ve talked to major institutional investors such as TIAA-CREF and CalPERS, and also companies like BlackRock. They’ve stressed to us the importance of private engagement. In many cases, they think it’s more effective if they engage you privately. Is that your experience and what’s your view, how much do you welcome that sort of private engagement?

Doug: I think that’s right. One-on-one engagement is a very effective method of communication between companies and investors. The advantage of this direct engagement is the candid nature of the discussion that ensues when there is not an “audience” of outsiders. Over time, you can build strong relationships this way. In particular, “real-time” engagement, either by phone or in-person, provides the opportunity for the kind of constructive back-and-forth discussion that helps tease out critical issues. It helps both sides more precisely identify areas that need to be clarified. In the one-on-one meetings we had over the summer and fall, the investors we met with were able to get a real sense of just how much time and thought our Board members put into the decisions around executive compensation and how many factors come into play. Those are hard things to effectively illustrate to investors through a written document like a proxy statement.

CSI: Have these private dialogues increased in the last few years, in the era of Dodd-Frank?

Doug: Yes, I can say they have for us. We are more proactive than we had been in the past, and many of our investors have also become more proactive. Some who were not inclined to talk to us in the past are now more receptive to having a conversation.

CSI: How do you balance the tension between short-term results and a long-term commitment to spending money on R&D and creating long-term value?

Doug: It’s a tricky balance, but J&J has a long-term philosophy. It’s no secret to the investment community as we constantly emphasize that we manage the business for the long-term. So, to a certain extent, we’re expecting investors who have made significant investments in our company to have that same mindset. Most are investing in the company as a long-term play. However, when you have so many shareholders, they are not all going to agree with you on everything, so naturally there are going to be some shareholders who have a shorter-term outlook for a variety of reasons.

CSI: What sort of big picture advice would you give public companies, and in particular corporate secretaries, as they prepare for proxy season?

Doug: As far as corporate secretaries go, we exchange know-how quite a bit. One of the most rewarding parts of my job is establishing the kinds of relationships with my counterparts where we can help each other be better at what we do. On the subject of engagement, the basic message I like to convey to my peers is that they should be open to engagement with those investors who want to have real constructive dialogue. It’s a dynamic environment out there right now and you have to be thinking about how to make strategic adjustments.

Also, don’t be afraid to make a break with your past practices on what your disclosure looks like, or how much disclosure you want to give. We should all take a fresh look every year and ask ourselves, “What are people asking for and what makes sense to give to them?” These days, you can’t approach every disclosure requirement as something for which you’re only going to provide what a rule demands. If you do, your company will be missing a huge opportunity to tell its story.

Finally, for all of us, and corporate secretaries in particular, the key to the debate around executive compensation is creating an environment where your board members have everything they need to make well thought-out decisions. That’s what I think of when I hear people refer to “good governance.” We need to keep the focus on the integrity of the decisions, the underlying decision-making process, and the people who have the duty to make those decisions.


*Douglas K. Chia is Assistant General Counsel & Corporate Secretary at Johnson & Johnson, the world’s most comprehensive and broadly-based manufacturer of health care products, headquartered in New Brunswick, New Jersey. His responsibilities include providing legal counsel to the corporation on matters of corporate governance, securities regulation, public company disclosure, and Sarbanes-Oxley Act compliance. Prior to joining Johnson & Johnson, Mr. Chia was Assistant General Counsel, Corporate at Tyco International. In private practice, Mr. Chia was an associate at the law firms of Simpson Thacher & Bartlett and Clifford Chance, practicing in the New York and Hong Kong offices of each firm. While in private practice, Mr. Chia provided legal counsel to issuers and underwriters on securities offerings and cross-border transactions. Mr. Chia is a member of the Board of Directors, Executive Steering Committee, Corporate Practices Committee, and Policy Advisory Committee of the Society of Corporate Secretaries & Governance Professionals, and is Chairman of the Society’s Membership Committee. Mr. Chia is also a member of the Corporate & Securities Law Committee of the Association of Corporate Counsel, as well as a member of the National Asian Pacific American Bar Association (NAPABA).

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