Johnson & Johnson will be reducing its retirement benefits for new hires beginning Jan. 1, 2015, according to an internal company memo obtained by the Wall Street Journal.
The memo did not reveal the specifics of the reductions, or whether or not its defined benefit plans will be dropped all together.
Going forward, the new retirement benefits' structure will mirror the way the "benefit landscape has continued to evolve in recent years," wrote Peter Fasolo, J&J's global vice president for human resources.
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"The changes will more closely align with benefits offered by our competitors and maintain a retirement program that's above average among our peer companies. It will continue to support our efforts to attract and retain talent to drive innovation and growth across our family of companies, helping us manage for the long term," said Fasolo in the memo.
The company reported a 12 percent increase in earnings on a 9 percent increase in sales for the second quarter.
A recent working paper by Adam Cobb, a management professor at the University of Pennsylvania's Wharton School, attempts to correlate the influence of large investors in public companies with the decline in corporate defined benefit plans and the effort to streamline costs, much as Johnson & Johnson has done with this latest announcement.
Cobb writes that by 2006, only 5.5 percent of Fortune 500 firms did not have at least one owner that didn't hold at least 5 percent of a company's shares.
His paper's premise is that as ownership of company shares has grown more concentrated, those owners have had greater influence over management decisions, and have been able to influence company executives to reduce retirement benefits as a way of lowering costs, and increasing the company stock performance.
According to Yahoo Finance, no single person owns 5 percent or more of J&J shares.
But on the institutional side, both Vanguard and State Street own more than 5 percent of all outstanding shares.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
