Merit Pay In the "Real" World

Everybody knows that in the "real" world, you get fired if you don't do your job. Teachers have been coddled with "jobs for life" where they are not rewarded or punished for their proficiency, while everyone else gets paid based on how well they do their job.

Right?

When it comes to Johnson & Johnson's CEO William Weldon, things are even less clear. The largest consumer health care company has beenplagued by a huge amount of recallssince 2009 that cost it $900 million in sales last year. J&J also took a product-liability charge related to the recall of certain DePuy hip implants of $922 million.

Only Wednesday, another recall came to light, this time of surgical sutures in December because of potentially faulty packaging seals that raised a contamination risk,Reuters reported. The staggering number of recalls range from potentially harmful products reaching consumers to a simple typo on package instructions and involved products from children's medicines to contact lenses.

What did Weldon get in return? A pay raise. The New Brunswick, N.J.-based company hiked the CEO's salary 3% to $1.92 million effective Jan. 1, up from $1.86 million in the previous year, according to aSecurities & Exchange Commission filing. However, the company cut Weldon's annual bonus 45% to $1.97 million from $3.6 million in 2009, which seems the least it could do in light of J&J's troubles.

A Top Job-Cutter

For 2009, Weldon was the second-highest paid CEO with a total compensation of $25.6 million -- three times the average for CEOs of S&P 500 companies -- and over 500 times the median household income (of $49,777 in 2009 according to theCensus Bureau). In that year, J&J laid off 9,000 people, which landed Weldon a mention as one of the CEOs who earned significantly more than their peers as theycut the most jobs during the recession.

J&J is expected to release Weldon's total compensation for 2010 next month,according to the Associated Press, but we already know it includes 560,691 stock options at $62.20 each, and 1,357,855 Certificates of Long-Term Performance at $5.03 each. It will be interesting to hear the reasoning behind this "pay-for-performance."

Clearly, we need to implement a program of standardized testing for all J&J employees; Weldon's salary should be based on the results.

But they cut his pay: that proves the system works, right?

But J&J’s board gave Weldon overwhelmingly positive marks for the year, saying he "provided strong leadership during a very demanding year." In commenting on the string of recalls — 20 since September 2009 — the board said "Weldon’s leadership and engagement with employees, legislators, regulators, investors and the news media enabled the company to deal with the issues." 

[...]

Competitors Pfizer Inc. and Merck & Co. each named new CEOs in recent months, generating speculation that J&J’s board would follow suit and replace Weldon. But analysts have pointed out that many directors on the J&J board were nominated to their positions by Weldon, who is also chairman.

I read this stuff, and then I listen to our governor bloviate on and on about how teacher accountability doesn't exist like it does in the "real" world, and it just makes me want to punch a hole in the wall.

Were I as bad at my job as William Weldon, I never would have earned tenure. My annual evaluations wouldn't be as glowing as Weldon's, because I didn't get to appoint my boss to his job. I'd have parents running to my principal, complaining about my teaching. My supervisor and superintendent would be having regular conversations with me. I'd be quietly encouraged to find other work, as happens in schools all the time.

And I sure as hell wouldn't get a bonus - ANY bonus. And that's fine: I knew what I was signing up for going in. I knew stock options and corporate perks would be off the table. It was worth it to me: I made a conscious choice. And I have every right to be mad as hell that the deal I made to get into this profession is now being broken while incompetent clowns like William Weldon make insane amounts of money while sending jobs overseas.

Let's be honest: this lack of responsibility happens all the time, at all levels up and down the corporate ladder. There's a reason "The Office" and "Dilbert" ring true with people: they're based on the way things really are in American business. Incompetent people are rewarded all the time.

So cut the crap about my lack of accountability. I'm far, far more accountable than William Weldon ever was. J&J would be much better off - and so would its shareholders - if Weldon ever had to answer for his ability the same way teachers have to answer for theirs.