Document

DEF 14A 1 a2018jnjproxy.htm DEF 14A Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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The Story Behind the Cover Photo

Johnson & Johnson has a long-standing, 132-year legacy in innovation. Our approach to innovation is unique: we relentlessly pursue the best breakthroughs in science and technology-whether it is from within our own laboratories or from our powerful network of scientists and entrepreneurs all over the world. Our goal is to address some of the biggest health care needs of humanity. We do this by being a leader in R&D investment. In 2017 we invested $10.6 Billion in research and development, leading to the development of lifesaving and life enhancing products that make a difference for patients and consumers all over the world. We envision a world where all disease is treatable, curable or preventable. We believe our investment in research and development is the best way to benefit patients, consumers and our shareholders.




		March 14, 2018
Notice of Annual Meeting and Proxy Statement
You are invited to attend the Annual Meeting of Shareholders of Johnson & Johnson.
	When: Thursday, April 26, 2018 10:00 a.m., Eastern Time Doors to Meeting Open at 9:15 a.m.		Where: Hyatt Regency New Brunswick Two Albany Street New Brunswick, New Jersey
We will broadcast the meeting as a live webcast at www.investor.jnj.com, under “Webcasts & Presentations”. The webcast will remain available for replay for three months following the meeting.

Items of Business:
	1. Elect the 11 nominees named in this Proxy Statement to serve as Directors for the coming year; 2. Vote, on an advisory basis, to approve named executive officer compensation; 3. Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018; 4. Vote on the two (2) shareholder proposals contained in this Proxy Statement, if properly presented at the meeting; and 5. Transact such other matters as may properly come before the meeting, and at any adjournment or postponement of the meeting.

Voting:
You are eligible to vote if you were a shareholder of record at the close of business on February 27, 2018. Ensure that your shares are represented at the meeting by voting in one of several ways:
		Go to the website listed on your proxy card or Notice to vote VIA THE INTERNET
		Call the telephone number specified on your proxy card or on the website listed on your Notice to vote BY TELEPHONE
		If you received paper copies of your proxy materials, mark, sign, date and return your proxy card in the postage-paid envelope provided to vote BY MAIL
		Attend the meeting to vote IN PERSON (see “Annual Meeting Attendance” and “Admission Ticket Procedures” on page 96 of this Proxy Statement)

By order of the Board of Directors,

THOMAS J. SPELLMAN III Assistant General Counsel and Corporate Secretary




	A MESSAGE FROM OUR LEAD DIRECTOR	5
	2018 PROXY STATEMENT – SUMMARY	8
	Voting Overview	8


	BOARD OF DIRECTORS

	Item 1: Election of Directors	11

	Nominees	11
	Director Nomination Process and Board Composition	17
	Board Leadership Structure	19
	Director Independence	21
	Shareholder Engagement	23
	Risk Oversight	25
	Additional Governance Features	27
	Board Committees	29
	Board Meetings and Processes	32
	Related Person Transactions	33
	Stock Ownership and Section 16 Compliance	35
	Director Compensation	37


	COMPENSATION OF EXECUTIVES

	Item 2: Advisory Vote to Approve Named Executive Officer Compensation	40

	Compensation Committee Report	41
	Compensation Discussion and Analysis	42
	2017 Performance and Compensation	43
	Executive Compensation Philosophy	56
	Components of Executive Compensation	57
	Peer Groups for Pay and Performance	61
	Compensation Decision Process	63
	Governance of Executive Compensation	64
	Additional Information Concerning Executive Compensation	66
	Executive Compensation Tables	68
	Summary Compensation Table	68
	Grants of Plan-Based Awards	73
	Outstanding Equity Awards at Fiscal Year-End	76
	Option Exercises and Stock Vested	79
	Pension Benefits	80
	Non-Qualified Deferred Compensation	81
	Potential Payments Upon Termination	83
	Ratio of the Annual Total Compensation of the Median-Paid Employee to the CEO	85




	AUDIT MATTERS

	Audit Committee Report	86
	Item 3: Ratification of Appointment of Independent Registered Public Accounting Firm	87


	SHAREHOLDER PROPOSALS & OTHER MATTERS

	Item 4: Shareholder Proposal - Accounting for Litigation and Compliance in Executive Compensation Performance Measures	89
	Item 5: Shareholder Proposal - Amendment to Shareholder Ability to Call Special Shareholder Meeting	91
	Other Matters	93


	GENERAL INFORMATION	94

	Shareholders Entitled to Vote and Voting Standard	94
	How to Vote	94
	Notice and Access	95
	Proxy Voting	95
	Effect of Not Casting Your Vote	95
	Revoking Your Proxy or Changing Your Vote	95
	Johnson & Johnson Employee Savings Plans	96
	Annual Meeting Attendance	96
	Admission Ticket Procedures	96
	Proxy Solicitation	97
	Electronic Access to Proxy Materials	97
	Reduce Duplicate Mailings	97
	Corporate Governance Materials	97
	Shareholder Proposals, Director Nominations by Shareholders and Other Items of Business	98
	Contacting Our Board, Individual Directors and Committees	98
	Helpful Websites	98




EXECUTIVE COMPENSATION					13.1% per year 2015 - 2017 Total Shareholder Return (TSR) performance as compared to a 7.1% TSR per year for our peers (TSR calculated using 20-day average stock prices. See page 54 for detail)
Our Credo
		When we assess performance, we review not only what results were achieved but also how they were achieved and whether they were achieved consistent with the values embodied in Our Credo. In 2017, we upheld our Credo values by focusing on the needs and well-being of: our patients, consumers, and health care professionals who use our products; our employees; the communities in which we live and work; and our shareholders.
Company Performance
	We delivered solid performance in 2017. We largely met or exceeded our combined financial and strategic goals. This was driven by strong performance in our Pharmaceutical business. We made good progress on many important strategic initiatives that will benefit our company in future years.				34 Consecutive years of adjusted operational earnings increases (See page 46 for detail on non-GAAP measures)


	Financial Goal		Goal	Results
	Met our operational sales growth goal		4.0% - 5.0%	4.0%
	Met our adjusted operational EPS growth goal		4.8% - 7.0%	6.5%
	Exceeded our free cash flow goal ($ Billions)		$14.8 - $15.6	$17.8
	Note: Operational sales growth, adjusted operational EPS growth, and free cash flow are non-GAAP measures. See page 46 for details. Our sales growth and EPS results do not include the impact of our Actelion Ltd. acquisition since it was not included in the goals. We summarize our performance against our financial and strategic goals and the performance of each of our businesses on pages 44 to 46.				55 Consecutive years of dividend increases
Compensation Decisions for 2017					55 Consecutive years of dividend increases
	The Board believes the company largely met or exceeded its combined financial and strategic goals. It recognized Mr. Gorsky’s 2017 performance by awarding him an annual performance bonus at 110% of target and long-term incentives at 115% of target. After reviewing market data and other factors, the Board adjusted Mr. Gorsky’s salary rate by 3.1% to $1,650,000 (effective February 26, 2018).				22% Of 2017 sales from products launched in the past five years




			2017 Amount ($)	Percent of Target (%)
		Salary Earned	$1,600,000		More than $10 Billion Invested in R&D in 2017
		Annual Performance Bonus	3,080,000	110%
		Long-Term Incentive Awards	14,352,000	115%
		Total Direct Compensation	$19,032,000
	We describe the performance and compensation of our Chairman/CEO on page 47 and our named executive officers on pages 48 to 51.

Compensation Program Changes					17 Acquisitions & Licenses in 2017
	In 2017, we increased the weight of our PSUs to 60% for our 2018 long-term incentive grant based on: shareholder feedback, competitive data, and our objective of increasing the focus on long-term performance. The weighting is: 60% PSUs, 30% options, and 10% RSUs. See page 55 for more detail.




		MARY C. BECKERLE, Ph.D. Chief Executive Officer and Director, Huntsman Cancer Institute at the University of Utah; Distinguished Professor of Biology, College of Science, University of Utah With her expertise in scientific research and organizational management in the healthcare arena, and her active participation in national and international scientific affairs, Dr. Beckerle provides a perspective crucial to a global healthcare company. Director since 2015; Independent Chairman, Science, Technology & Sustainability Committee; Member, Regulatory, Compliance & Government Affairs Committee

Dr. Beckerle, 63, has served as CEO and Director of Huntsman Cancer Institute since 2006, and she was appointed in 2009 to an additional key health sciences leadership role as Associate Vice President for Cancer Affairs at the University of Utah. Dr. Beckerle joined the faculty of the University of Utah in 1986 and is a distinguished professor of biology and oncological sciences, holding the Ralph E. and Willia T. Main Presidential Professorship. Dr. Beckerle has served on the National Institute of Health (NIH) Advisory Committee to the Director, on the Board of Directors of the American Association for Cancer Research, as president of the American Society for Cell Biology, and as the Chair of the American Cancer Society Council for Extramural Grants. She currently serves on a number of scientific advisory boards, including the Medical Advisory Board of the Howard Hughes Medical Institute and the Scientific Advisory Boards of the National Center for Biological Sciences at the Tata Institute of Fundamental Research in India, the Mechanobiology Institute in Singapore, and the Dana Farber/Harvard Cancer Center. Dr. Beckerle held a Guggenheim Fellowship at the Curie Institute in Paris, received the Utah Governor’s Medal for Science and Technology in 2001, the Sword of Hope Award from the American Cancer Society in 2004 and is an elected Fellow of the American Academy of Arts and Sciences and the American Philosophical Society. Dr. Beckerle was also named a National Association of Corporate Directors (NACD) Governance Fellow in 2012. Other Public Company Board Service: Huntsman Corporation (2011 to present)




		D. SCOTT DAVIS Former Chairman and Chief Executive Officer, United Parcel Service, Inc. Having served as Chairman and CEO of the world’s largest publicly-traded logistics company, and given his knowledge and passion for emerging markets and international operations, deep understanding of public policy and global economic indicators, and expertise in management, strategy, finance and operations, Mr. Davis brings to our Board his unique expertise in supply chain logistics at a time of rapid global expansion in the healthcare industry. Director since 2014; Independent Chairman, Audit Committee; Member, Compensation & Benefits Committee

Mr. Davis, 66, served as Chairman and Chief Executive Officer of United Parcel Service, Inc. (UPS) (shipment and logistics) from 2008 to 2014, and as Chairman from 2014 to 2016. Previously, Mr. Davis held various leadership positions with UPS, primarily in the finance and accounting area, including Vice Chairman and Chief Financial Officer. Prior to joining UPS, he was Chief Executive Officer of II Morrow Inc., a developer of general aviation and marine navigation instruments. Mr. Davis is a Certified Public Accountant. He previously served on the Board of the Federal Reserve Bank of Atlanta from 2003 to 2009, serving as Chairman in 2009. Mr. Davis is a trustee of the Annie E. Casey Foundation and a member of The Carter Center Board of Councilors. Other Public Company Board Service: Honeywell International, Inc. (2005 to present) Recent Past Public Company Board Service: United Parcel Service, Inc. (2008 to 2016); EndoChoice, Inc. (2014 to 2016)




		IAN E. L. DAVIS Chairman, Rolls-Royce Holdings plc; Former Chairman and Worldwide Managing Director, McKinsey & Company Having served as Chairman and Worldwide Managing Director of one of the world’s leading management consulting firms, and as a consultant to a range of global organizations across the public, private and not-for-profit sectors, Mr. Davis brings considerable global experience, management insight and business knowledge to our Board. Director since 2010; Independent Member, Audit Committee; Member, Regulatory, Compliance & Government Affairs Committee

Mr. Davis, 67, is currently non-executive Chairman, Rolls-Royce Holdings plc. Mr. Davis retired from McKinsey & Company (management consulting) in 2010 as a Senior Partner, having served as Chairman and Worldwide Managing Director from 2003 until 2009. In his more than 30 years at McKinsey, he served as a consultant to a range of global organizations across the public, private and not-for-profit sectors. Prior to becoming Chairman and Worldwide Managing Director, he was Managing Partner of McKinsey’s practice in the United Kingdom and Ireland. His experience included oversight for McKinsey clients and services in Asia, Europe, the Middle East and Africa, as well as expertise in the consumer products and retail industries. Mr. Davis is a Director of Teach for All, Inc., a global network of independent social enterprises working to expand educational opportunities in their nations; BP plc., a global energy group; and Majid Al Futtaim Holding LLC; and a Senior Advisor at Apax Partners, a private equity firm. Other Public Company Board Service: BP plc (2010 to present); Rolls-Royce Holdings plc (2013 to present)




		JENNIFER A. DOUDNA Professor of Chemistry; Professor of Biochemistry & Molecular Biology; Li Ka Shing Chancellor's Professor in Biomedical and Health, University of California, Berkeley As a pioneer in the field of biochemistry, having co-discovered the simplified genome editing technique Crispr-Cas9, and with her vast academic experience and her steadfast concern for ethics in science, Dr. Doudna will bring a global, ethical and scientific perspective to our Board. Director Nominee; Independent

Dr. Doudna, 54, joined the faculty at University of California, Berkeley, as a Professor of Biochemistry & Molecular Biology in 2002. She directs the Innovative Genomics Institute, a joint UC Berkeley-UC San Francisco center, holds the Li Ka Shing Chancellor’s Professorship in Biomedicine and Health, and is the chair of the Chancellor’s Advisory Committee on Biology at UC Berkeley. Dr. Doudna is Principal Investigator at the Doudna Lab at UC Berkeley and has founded and serves on the scientific advisory boards of Caribou Biosciences, Inc. and Intellia Therapeutics, Inc., leading CRISPR genome engineering companies. She has been an Investigator with the Howard Hughes Medical Institute since 1997. Dr. Doudna is the recipient of numerous scientific awards in biochemistry and genetics, including: the Alan T. Waterman Award (2000); the Eli Lilly Award in Biological Chemistry of the American Chemical Society (2001); a co-recipient of the Breakthrough Prize in Life Sciences (2015); a co-recipient of the Gruber Prize in Genetics (2015); a co-recipient of the Canada Gairdner International Award (2016); the Heineken Prize for Biochemistry and Biophysics (2016); the Tang Prize (2016); the Japan Prize (2017); and the Albany Medical Center Prize (2017). Dr. Doudna was elected to the National Academy of Sciences (2002); the American Academy of Arts and Sciences (2003); the National Academy of Medicine (2010); the National Academy of Inventors (2014); and as a Foreign Member of the Royal Society (2016). Dr. Doudna is a Trustee for Pomona College and serves on the Board of Directors of Driver Inc., a treatment access platform for cancer patients. Other Public Company Board Service: None




		ALEX GORSKY Chairman, Board of Directors; Chief Executive Officer; Chairman, Executive Committee, Johnson & Johnson Having started his career at Johnson & Johnson in 1988 and having been promoted to positions of increasing responsibility across business segments, culminating in his appointment to CEO and election to our Board of Directors in 2012, Mr. Gorsky brings a full range of strategic management expertise, a broad understanding of the issues facing a multinational business in the healthcare industry, and an in-depth knowledge of the company’s business, history and culture to our Board and the Chairman position. Director since 2012; Management Chairman, Finance Committee

Mr. Gorsky, 57, was appointed as Chairman, Board of Directors in December 2012. He was named Chief Executive Officer, Chairman of the Executive Committee and joined the Board of Directors in April 2012. Mr. Gorsky began his Johnson & Johnson career with Janssen Pharmaceutica Inc. in 1988. Over the next 15 years, he advanced through positions of increasing responsibility in sales, marketing, and management. In 2001, Mr. Gorsky was appointed President of Janssen Pharmaceutical Inc., and in 2003 he was named Company Group Chairman of the Johnson & Johnson pharmaceutical business in Europe, the Middle East and Africa. Mr. Gorsky left Johnson & Johnson in 2004 to join Novartis Pharmaceuticals Corporation, where he served as head of the company’s pharmaceutical business in North America. Mr. Gorsky returned to Johnson & Johnson in 2008 as Company Group Chairman for Ethicon. In early 2009, he was appointed Worldwide Chairman of the Surgical Care Group and member of the Executive Committee. In September 2009, he was appointed Worldwide Chairman of the Medical Devices and Diagnostics Group. Mr. Gorsky became Vice Chairman of the Executive Committee in January 2011. Mr. Gorsky also serves on the boards of the Travis Manion Foundation, the Congressional Medal of Honor Foundation and the National Academy Foundation; the Wharton Board of Overseers; and as a member of the Business Roundtable Board of Directors and as the Chairman of its Corporate Governance Committee. Other Public Company Board Service: International Business Machines Corporation (IBM) (2014 to present)




		MARK B. McCLELLAN, M.D., Ph.D. Director, Duke-Robert J. Margolis, MD, Center for Health Policy With his extensive experience in public health policy, including as Commissioner of the United States Food and Drug Administration and Administrator for the United States Centers for Medicare & Medicaid Services, Dr. McClellan possesses broad knowledge of, and unique insights into, the challenges facing the healthcare industry, making him a valuable member of the board of a broad-based healthcare company. Director since 2013; Independent Member, Regulatory, Compliance & Government Affairs Committee; Member, Science, Technology & Sustainability Committee

Dr. McClellan, 54, became the inaugural Director of the Duke-Robert J. Margolis, MD, Center for Health Policy and the Margolis Professor of Business, Medicine and Policy at Duke University in January 2016. He is also a faculty member at Dell Medical School at The University of Texas in Austin. Previously, he served from 2007 to 2015 as a Senior Fellow in Economic Studies and as Director of the Initiatives on Value and Innovation in Health Care at the Brookings Institution. Dr. McClellan served as Administrator of the Centers for Medicare & Medicaid Services for the U.S. Department of Health and Human Services from 2004 to 2006 and as Commissioner of the U.S. Food and Drug Administration from 2002 to 2004. He served as a member of the President’s Council of Economic Advisers and as senior director for healthcare policy at the White House from 2001 to 2002 and, during President Bill Clinton’s administration, held the position of Deputy Assistant Secretary for Economic Policy for the Department of the Treasury. Dr. McClellan previously served as an associate professor of economics and medicine with tenure at Stanford University, where he also directed the Program on Health Outcomes Research. Dr. McClellan is the founding chair and a current board member of the Reagan-Udall Foundation for the Food and Drug Administration, is a member of the National Academy of Medicine and chairs the Academy’s Leadership Consortium for Value and Science-Driven Health Care, and co-chairs the guiding committee of the Health Care Payment Learning and Action Network. Other Public Company Board Service: None Recent Past Public Company Board Service: Aviv REIT, Inc. (2013 to 2015)





BOARD NOMINEE COMPOSITION AND REFRESHMENT (see page 18)




		ANNE M. MULCAHY Former Chairman and Chief Executive Officer, Xerox Corporation Having served as Chairman and CEO of a large, global manufacturing and services company with one of the world’s most recognized brands, Ms. Mulcahy provides to our Board valuable insight into organizational and operational management issues crucial to a large public company, as well as a strong reputation for leadership in business innovation and talent development. Lead Director since 2012 Director since 2009; Independent Member, Audit Committee; Member, Nominating & Corporate Governance Committee; Member, Finance Committee

Ms. Mulcahy, 65, was Chairman and Chief Executive Officer of Xerox Corporation (business equipment and services) until July 2009, when she retired as CEO after eight years in the position. Prior to serving as CEO, Ms. Mulcahy was President and Chief Operating Officer of Xerox. She also served as President of Xerox’s General Markets Operations, which created and sold products for reseller, dealer and retail channels. Earlier in her career at Xerox, which began in 1976, Ms. Mulcahy served as Vice President for Human Resources with responsibility for compensation, benefits, human resource strategy, labor relations, management development and employee training; and as Vice President and Staff Officer for Customer Operations, covering South America and Central America, Europe, Asia and Africa. Ms. Mulcahy was the U.S. Board Chair of Save the Children from March 2010 to February 2017, and was reappointed as a Board member in February 2018. Other Public Company Board Service: Graham Holdings Company (2008 to present); LPL Financial Holdings Inc. (2013 to present) Recent Past Public Company Board Service: Target Corporation (1997 to 2017)




		WILLIAM D. PEREZ Retired President and Chief Executive Officer, Wm. Wrigley Jr. Company With his experience as CEO of several large, consumer-focused companies across a wide variety of industries, Mr. Perez contributes to our Board significant organizational and operational management skills, combined with a wealth of experience in global, consumer-oriented businesses vital to a large public company in the consumer products space. Director since 2007; Independent Chairman, Nominating & Corporate Governance Committee; Member, Audit Committee

Mr. Perez, 70, served as President and Chief Executive Officer for the Wm. Wrigley Jr. Company (confectionary and chewing gum) from 2006 to 2008. He was a Senior Advisor at Greenhill & Co., Inc. from 2010 to 2017. Before joining Wrigley, Mr. Perez served as President and Chief Executive Officer of Nike, Inc. Previously, he spent 34 years with S.C. Johnson & Son, Inc., including eight years as its President and Chief Executive Officer. Mr. Perez is a Director at Northwestern Memorial Hospital. Other Public Company Board Service: Whirlpool Corporation (2009 to present)




		CHARLES PRINCE Retired Chairman and Chief Executive Officer, Citigroup Inc. Having served as Chairman and CEO of the nation’s largest and most diversified financial institution, Mr. Prince brings to our Board a strong mix of organizational and operational management skills combined with well-developed legal, global business and financial acumen critical to a large public company. Director since 2006; Independent Chairman, Regulatory, Compliance & Government Affairs Committee; Member, Nominating & Corporate Governance Committee

Mr. Prince, 68, served as Chief Executive Officer of Citigroup Inc. (financial services) from 2003 to 2007 and as Chairman from 2006 to 2007. Previously he served as Chairman and Chief Executive Officer of Citigroup’s Global Corporate and Investment Bank from 2002 to 2003 and Chief Operating Officer from 2001 to 2002. Mr. Prince began his career as an attorney at U.S. Steel Corporation in 1975. Mr. Prince is a member of the Council on Foreign Relations and The Council of Chief Executives. Other Public Company Board Service: Xerox Corporation (2008 to present)




		A. EUGENE WASHINGTON, M.D., M.Sc. Duke University’s Chancellor for Health Affairs; President and Chief Executive Officer, Duke University Health System Dr. Washington brings to our Board his distinct expertise born of significant achievements as a senior executive in academia, an accomplished clinical investigator, an innovator in health care, and a leader in shaping national health policy. With his unique combination of knowledge, skills and experience in organizational management, medical research, patient care, and public health policy, Dr. Washington provides an invaluable perspective for a company in the healthcare industry. Director since 2012; Independent Member, Compensation & Benefits Committee; Member, Science, Technology & Sustainability Committee

Dr. Washington, 67, is currently Duke University’s Chancellor for Health Affairs and the President and Chief Executive Officer of the Duke University Health System. Previously he was Vice Chancellor of Health Sciences, Dean of the David Geffen School of Medicine at UCLA; Chief Executive Officer of the UCLA Health System; and Distinguished Professor of Gynecology and Health Policy at UCLA. Prior to UCLA, he served as Executive Vice Chancellor and Provost at the University of California, San Francisco (UCSF) from 2004 to 2010. Dr. Washington co-founded UCSF’s Medical Effectiveness Research Center for Diverse Populations in 1993 and served as Director until 2005. He was Chair of the Department of Obstetrics, Gynecology, and Reproductive Sciences at UCSF from 1996 to 2004. Dr. Washington also co-founded the UCSF-Stanford Evidence-based Practice Center and served as its first Director from 1997 to 2002. Prior to UCSF, Dr. Washington worked at the Centers for Disease Control and Prevention. Dr. Washington was elected to the National Academy of Sciences’ Institute of Medicine in 1997, where he served on its governing Council. He was founding Chair of the Board of Governors of the Patient-Centered Outcomes Research Institute, served as a member of the Scientific Management Review Board for the NIH, and also served as Chair of the Board of Directors of both the California HealthCare Foundation and The California Wellness Foundation. Dr. Washington currently serves on the Boards of Directors of the Kaiser Foundation Hospitals and Kaiser Foundation Health Plan, Inc. Other Public Company Board Service: None




		RONALD A. WILLIAMS Former Chairman and Chief Executive Officer, Aetna Inc. With his long and distinguished career in the healthcare industry, from his experience leading one of Fortune’s Most Admired healthcare companies to his career-long role as an advocate for meaningful healthcare reform, Mr. Williams provides our Board with an exceptional combination of operational management expertise and insight into both public healthcare policy and the healthcare industry critical to a large public company in the healthcare industry. Director since 2011; Independent Chairman, Compensation & Benefits Committee; Member, Nominating & Corporate Governance Committee

Mr. Williams, 68, served as Chairman and Chief Executive Officer of Aetna Inc. (managed care and health insurance) from 2006 to 2010, and as Chairman from 2010 until his retirement in April 2011. He is also an advisor to the private equity firm, Clayton, Dubilier & Rice, LLC. In addition, Mr. Williams serves on the boards of MIT Corporation, Peterson Institute for International Economics, the Advisory Board of Peterson Center on Healthcare and is Vice Chairman of the Board of Trustees of The Conference Board. Previously, Mr. Williams served on President Obama's Management Advisory Board from 2011 to January 2017, as Chairman of the Council for Affordable Quality Healthcare from 2007 to 2010, and as Vice Chairman of The Business Council from 2008 to 2010. Other Public Company Board Service: The Boeing Company (2010 to present), American Express Company (2007 to present) Recent Past Public Company Board Service: Envision Healthcare Holdings, Inc. (2011 to 2017)
The Board of Directors recommends a vote FOR election of each of the above-named nominees.




Below are the General Criteria for Nomination to the Board of Directors, which, as part of the Principles of Corporate Governance, are posted at www.investor.jnj.com/gov.cfm:

	l	The highest ethical character and shared values with Our Credo
	l	Reputation, both personal and professional, consistent with our image and reputation
	l	Accomplishment within candidate’s field, with superior credentials and recognition
	l	Active and former chief executive officers of public companies and leaders of major complex organizations, including scientific, government, educational and other non-profit institutions
	l	Widely recognized leaders in the fields of medicine or biological sciences, including those who have received the most prestigious awards and honors in their fields
	l	Relevant expertise and experience and the ability to offer advice and guidance to the CEO based on that expertise and experience
	l	Independence, without the appearance of any conflict in serving as a Director, and independence of any particular constituency with the ability to represent all shareholders
	l	Ability to exercise sound business judgment
	l	Diversity, reflecting differences in skills, regional and industry experience, background, race, ethnicity, gender and other unique characteristics




Throughout 2017, the Chairman and Lead Director collaborated to:

	l	Create the agendas for Board and Committee meetings
	l	Evaluate the successes and opportunities from past meetings
	l	Handle a range of board governance issues such as board refreshment and succession planning
	l	Meet with large shareholders and proxy voting advisory firms
	l	Address key corporate transactions, capital allocation, and talent management
	l	Ensure the effective functioning of the board/management relationship consistent with Our Credo values



Board Agendas, Information and Schedules	•	Approves information sent to the Board and determines timeliness of information flow from management.
	•	Periodically provides feedback on quality and quantity of information flow from management.
	•	Participates in setting, and ultimately approves, the agenda for each Board meeting.
	•	Approves meeting schedules to assure that there is sufficient time for discussion of all agenda items.
	•	With the Chair/CEO, determines who attends Board meetings, including management and outside advisors.
Committee Agendas and Schedules	•	Reviews in advance the schedule of committee meetings.
Committee Agendas and Schedules	•	Monitors flow of information from Committee Chairs to the full Board.
Board Executive Sessions	•	Has the authority to call meetings and Executive Sessions of the Independent Directors.
Board Executive Sessions	•	Presides at all meetings of the Board at which the Chair/CEO is not present, including Executive Session of the Independent Directors.
Communicating with Management	•	After each Executive Session of the Independent Directors, communicates with the Chair/CEO to provide feedback and also to effectuate the decisions and recommendations of the Independent Directors.
Communicating with Management	•	Acts as liaison between the Independent Directors and the Chair/CEO and management on a regular basis and when special circumstances exist or communication out of the ordinary course is necessary.
Communicating with Stakeholders	•	As necessary, meets with major shareholders or other external parties, after discussions with the Chair/CEO.
	•	Is regularly apprised of inquiries from shareholders and involved in correspondence responding to these inquiries.
	•	Under the Board’s guidelines for handling shareholder and employee communications to the Board, is advised promptly of any communications directed to the Board or any member of the Board that allege misconduct on the part of company management, or raise legal, ethical or compliance concerns about company policies or practices.
Chair and CEO Performance Evaluations	•	Leads the annual performance evaluation of the Chair/CEO, distinguishing as necessary between performance as Chair and performance as CEO.
Board Performance Evaluation	•	Leads the annual performance evaluation of the Board.
New Board Member Recruiting	•	Interviews Board candidates, as appropriate.
CEO Succession	•	Leads the CEO succession planning process.
Crisis Management	•	Plays an increased role in crisis management oversight, as appropriate.
Limits on Leadership Positions of Other Boards	•	May only serve as chair, lead or presiding director, or similar role, or as CEO or similar role at another public company if approved by the full Board upon recommendation from the Nominating & Corporate Governance Committee.



Director	Organization	Type of Organization	Relationship to Organization	Type of Transaction or Relationship	2017 Aggregate Magnitude
M. C. Beckerle	Huntsman Cancer Institute	Healthcare Institution	Executive Officer	Sales of healthcare products	<1%; <$1 million
M. C. Beckerle	University of Utah	Educational Institution	Employee	Investigator payments, sales of healthcare products and grants	<1%
J. A. Doudna	University of California - Berkeley	Educational Institution	Employee	Research-related payments; sponsorship and grants	<1%; <$1 million
M. B. McClellan	Duke University	Educational Institution	Employee	Sales of healthcare products and services; research- related payments; grants	<1%
M. B. McClellan	Research! America	Public Education and Advocacy Organization	Director	Annual dues; sponsorship and contributions	<$1 million
A. M. Mulcahy	Save the Children	Non-profit Organization	Trustee	Contributions	<1%
W. D. Perez	Cornell University	Educational Institution	Trustee	Grants and fellowships	<1%; <$1 million
W. D. Perez	Northwestern Memorial Hospital	Healthcare Institution	Director	Research grants	<1%; <$1 million
A. E. Washington	Duke University	Educational Institution	Employee	Sales of healthcare products and services; research- related payments; grants; tuition reimbursements	<1%
A. E. Washington	Duke University Health System	Healthcare Institution	Executive Officer	Sales of healthcare products and services; rebates	<1%
R. A. Williams	The Cleveland Clinic Foundation	Non-profit Organization	Trustee	Grants; sponsorship; research contribution	<1%; <$1 million
R. A. Williams	The Conference Board	Non-profit Organization	Trustee	Sponsorships	<1%; <$1 million
R. A. Williams	The MIT Corporation/Massachusetts Institute of Technology	Educational Institution	Trustee	Sponsorships	<1%; <$1 million
R. A. Williams	National Academy Foundation	Non-profit Organization	Trustee	Contributions and grants	<1%; <$1 million
Note: Any transaction or relationship under $25,000 is not listed above.
In the event of Board-level discussions pertaining to a potential transaction or relationship involving an organization with which a Director is affiliated, that Director would be expected to recuse him or herself from the deliberation and decision-making process. In addition, other than potential review and approval of related person transactions under our Policy on Transactions with Related Persons described on page 33 of this Proxy Statement, none of the non-employee Directors has the authority to review, approve or deny any grant to, or research contract with, an organization.




In 2017, our engagement took a number of forms:

	l	During the proxy season, we reached out to our top 100 shareholders, who represent approximately 45% of our outstanding shares, and sought a dialogue and feedback on issues raised in our 2017 Proxy Statement.
	l	We included a section on our voting card inviting all of our shareholders to give us comments. We were pleased that over 250 shareholders did so. This supplemented the means we provide—and highlight in our Proxy Statement—to contact our Board at any time throughout the year.
	l	At the direction of our Lead Director, we also greatly expanded from 13 to 24 the number of individual, personal engagement meetings we held with shareholders and key proxy advisers




Shareholder Engagement Topics
	l	Board Skills and Skills Matrix	l	Board-Shareholder Engagement
	l	Board Composition and Diversity	l	Executive Compensation and Compensation Metrics
	l	Board Size	l	Shareholder Proposal Process
	l	Board Tenure	l	Cybersecurity
	l	Overboarding	l	Environment, Sustainability and Governance Reporting
	l	Board Share Ownership Requirements	l	Materiality and Transparency
	l	Separation of the Chairman and CEO Roles	l	Tax Policy
	l	Board Oversight of Risk	l	Pharmaceutical Pricing Transparency
	l	Board Evaluation Process, Outcomes and Refreshment	l	Pharmaceutical Pricing and Access
		Board Evaluation Process, Outcomes and Refreshment	l	Opioid Marketing




Shareholder Feedback Received	Actions Taken	Page #

You should continue to seek even greater diversity on your Board.	We strengthened our diversity by adding a new Board nominee, Dr. Jennifer A. Doudna. Her deep scientific background, vast academic experience and enduring concern for ethics in science will add to the global, ethical and scientific perspective and diversity of our Board.	13

Your Board skills and diversity matrices were good in last year’s Proxy Statement, but can you make them even better by being more transparent?	We enhanced our Proxy Statement’s Board Nominee Composition and skills disclosures by adding separate and more detailed graphics setting out the qualities, attributes, skills and experiences of our Board, including separate representations of gender and racial diversity.	18

You give arguments about why you believe your current Board structure with a combined Chairman & CEO works best for your company. But how do we know your Board is actually taking the appropriate time on a systemic basis to review the issue in light of all circumstances?	We amended our Principles of Corporate Governance to reflect that our Nominating & Corporate Governance Committee reviews the Board’s leadership structure on an annual basis, and at other appropriate times, including whether the roles of Chairman and Chief Executive Officer should be combined or separate. See www.investor.jnj.com/gov.cfm.	19

How do the roles of Lead Director and Chairman differ from one another and how do they work together?	We discussed our Leadership Structure extensively in shareholder engagement and we enhanced our disclosure to be more transparent about how the two roles collaborate at our company. See Board Leadership Structure.	19

How does your Board Evaluation Process work?	We discussed our Board Evaluation Process and the insights from feedback coming out of our Board Evaluation Process, and we added disclosure in the Proxy Statement to provide transparency to all our shareholders about Board and Committee evaluation processes and outcomes. See Board Meetings and Processes.	32

Could you be more transparent about your drug pricing practices?	In early 2017, the Janssen Pharmaceutical Companies of Johnson & Johnson released a ground-breaking 2016 U.S. Transparency Report with information on pharmaceutical pricing and other business practices, covering everything from discovery to the commercialization of pharmaceuticals. Janssen released a follow up report in March 2018 available at Janssen.com/2017USTransparencyReport.

Tell us about your efforts in Citizenship & Sustainability.	In September 2016, we announced a comprehensive United Nations Sustainable Development Goals (UN SDG) commitment focused on five key areas where we are uniquely positioned to create sustainable and scalable impact: Global Disease Challenges, Essential Surgery, Women’s & Children’s Health, Health Workforce, and Environmental Health. We also have worked to improve and expand the content of our Health for Humanity Report, which provides transparency to our Citizenship & Sustainability commitments. See our Health for Humanity Report available at http://healthforhumanityreport.jnj.com/downloads.




Characteristics		Description	Page #

Balanced Approach to Performance‑Based Awards	Performance targets are tied to multiple financial metrics, including operational sales growth, free cash flow, adjusted operational earnings per share growth, and long-term total shareholder return		57
	Performance-based awards are based on the achievement of strategic and leadership objectives in addition to financial metrics
	See “Base Salary, Annual Performance Bonus, and Long-Term Incentives”

Performance Period and Vesting Schedules	The performance period and vesting schedules for long-term incentives overlap and, therefore, reduce the motivation to maximize performance in any one period. Performance Share Units, Restricted Share Units, and Stock Options vest three years from the grant date. See "Long Term Incentives"		58

Balanced Mix of Pay Components	The target compensation mix is not overly weighted toward annual incentive awards and represents a balance of cash and long-term equity-based compensation vesting over three years. See “2017 Pay Mix at Target”		60

Capped Incentive Awards	Annual performance bonuses and long-term incentive awards are capped at 200% of target. See “Aligning Compensation to "The What" & "The How""		63

Stock Ownership Guidelines	These guidelines require our CEO to directly or indirectly own equity in our company equal to six times salary, and the other members of our Executive Committee (the principal management group) to own equity equal to three times salary, and to retain this level of equity at all times while serving as an Executive Committee member. See “Stock Ownership Guidelines for Named Executive Officers”		66

Executive Compensation Recoupment Policy	This Policy gives our Board authority to recoup executive officers’ past compensation in the event of a material restatement of our financial results and for events involving material violations of company policy relating to the manufacturing, sales or marketing of our products. See “Executive Compensation Recoupment Policy”		67

No Change-in-Control Arrangements	None of our executive officers have in place any change-in-control arrangements that would result in guaranteed payouts. See "Potential Payments Upon Termination"		83



In 2015, as part of our long-standing shareholder outreach program, we engaged with a number of our shareholders regarding proxy access and the potential terms of proxy access provisions that our shareholders would view as appropriate for Johnson & Johnson. After taking into account the feedback provided as part of these discussions and considering developments in market practice, in January 2016, we amended our By-Laws to implement proxy access with the following key parameters:



Ownership threshold:	3% of outstanding shares of our common stock
Holding period:	Continuously for 3 years
Number of nominees:	Up to 20% of our Board, with a minimum of up to two nominees if Board size is less than 10
Nominating group size:	Up to 20 shareholders may group together to reach the 3% ownership threshold


We continue to believe this proxy access framework reflects a thoughtfully designed and balanced approach to proxy access that mitigates the risk of abuse and protects the interests of all of our shareholders, while affording a meaningful proxy access right in light of our size and shareholder base. Shareholders who wish to nominate directors for inclusion in our Proxy Statement in accordance with the proxy access procedures in our By-Laws should see “General Information—Notice and Access” on page 95.




In response to shareholder engagement on this topic, we have provided the following on our website:

	l	A breakdown of our trade association dues by dollar range, including the percentage of dues that is utilized for federal lobbying, for U.S. trade associations to which we paid annual dues of $50,000 or more
	l	A description of our approach and processes to impact trade associations of which we are members when we do not align on an issue
	l	The annual total amount of federal lobbying expenditures for the last fiscal year
	l	The aggregate annual total amount of state lobbying expenditures for the last fiscal year, based on amounts disclosed pursuant to lobbying regulations of the various state ethics oversight agencies
	l	A direct link to the most current filing of the Johnson & Johnson Political Action Committee federal campaign finance report
	l	A direct link to the most current quarterly filing of Johnson & Johnson’s federal lobbying disclosure report



Directors			Audit	Compensation & Benefits	Nominating & Corporate Governance	Regulatory, Compliance & Government Affairs	Science, Technology & Sustainability	Finance
Mary C. Beckerle	I					a	C
D. Scott Davis⁽¹⁾	I		C	a
Ian E. L. Davis	I		a			a
Alex Gorsky		CH						C
Mark B. McClellan	I					a	a
Anne M. Mulcahy	I	LD	a		a			a
William D. Perez	I		a		C
Charles Prince	I				a	C
A. Eugene Washington	I			a			a
Ronald A. Williams	I			C	a
Number of Meetings in 2017			9⁽²⁾⁽³⁾	7	4	5⁽³⁾	5	—
Chairman of the Board: CH Lead Director: LD Independent Director: I Chair: C Member: a


⁽¹⁾	Designated as an “audit committee financial expert.”


⁽²⁾	Does not include teleconferences held prior to each release of quarterly earnings (4 in total)


⁽³⁾	Includes an annual joint meeting of the Audit and Regulatory, Compliance & Government Affairs Committees



	l	Oversees the company’s financial management and accounting and financial reporting processes and practices
	l	Appoints, retains, compensates and evaluates independent auditor
	l	Oversees the company’s internal audit organization, reviews its annual plan and reviews results of its audits
	l	Oversees the quality and adequacy of the company’s internal accounting controls and procedures
	l	Reviews and monitors the company’s financial reporting compliance and practices and its disclosure controls and procedures
	l	Discusses with management the processes used to assess and manage the company’s exposure to risk and monitors risks related to tax, treasury, IT and cybersecurity

In performing these functions, the Audit Committee meets periodically with the independent auditor, management, and internal auditors (including in private sessions) to review their work and confirm that they are properly discharging their respective responsibilities. For more information on Audit Committee activities in 2017, see the Audit Committee Report on page 86.