By Mina Kimes, writer
FORTUNE -- Every year, shareholders at public companies vote on whether their board members deserve another term or not. It's typically a non-event; the average director of an S&P 500 company wins 96% of the vote, according to proxy advisory firm ISS. But the directors of healthcare giant Johnson & Johnson, which hosts its annual shareholders' meeting Thursday, may face a rockier path to reelection. Investors have begun to turn against the board, with a growing contingent of shareholders voting against J&J's nominees.
In 2011, the average J&J (JNJ) director won approval from just 88% of shareholders, down from 94% in 2009. That may not sound like a steep decline, but it's actually quite low for a large corporation, according to Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. "When you get into the 80s, that's a real problem," he says.
Two J&J directors -- Charles Prince, the former CEO of Citigroup (C), and Michael Johns, the chancellor of Emory University -- received support from about 80% of voters, which is well inside the "danger zone," according to Paul Hodgson, a senior research associate at GMI, a corporate governance ratings firm. "That's a very substantial proportion of shareholders," he says. "It should be enough to make a board sit up and take notice."
A spokesperson for J&J wrote in an email that the board will analyze voting results after its annual meeting, as it does every year.
Red flags: Disappointing financials, recalls
It's easy to see why J&J's shareholders are frustrated. In recent years, the company has been charged with several legal violations and endured a seemingly endless series of product recalls. Its reputation has taken a hit. Back in 2009, before the recalls began, J&J was ranked fifth on Fortune's World's Most Admired Companies list. In 2012, J&J's overall rank dropped to 12.
The company's financial results have also been underwhelming. J&J's stock has delivered a total return of 5.3% over the last two years, while the S&P 500 has returned 17.5%. Its net income declined in both 2009 and 2011, in part because the company lost more than $1 billion in sales because of recalls of over the counter drugs. More
It takes the right blend of good ideas and good leadership to make the CEO of General Electric's own list of Most Admired Companies.
FORTUNE -- We asked three prominent business leaders -- Jeffrey Immelt, Ursula Burns, and John Donahoe -- which companies they hold in high esteem, and why. Immelt, CEO of General Electric, (No. 15 on our list of Most Admired Companies) talked with reporter Daniel Roberts and listed a veritable Who's Who of companies MOREMar 1, 2012 5:00 AM ET
|China's fastest-growing cities for millionaires|
|Google files First Amendment court case against NSA surveillance secrecy|
|Chrysler relents, agrees to recall 2.7 million Jeeps|
|Immigration bill could cut deficits by $175 billion - CBO|
|Stocks rally as Fed looms large|