Johnson & Johnson on the Defensive for Reputation Hits

Update, October 1, 2010: Johnson & Johnson’s long reputation battle continues. CEO William C. Weldon admitted to a congressional committee that the company failed to maintain “our high quality standards” and is spending $100 million to fix quality problems that led to last spring’s recall, which are part of a series of recalls J&J has had in the last year. The McNeil plant producing Tylenol products was closed after that recall, pending correcting problems there. Weldon accepted “full accountability” for McNeil problems. At the October 1 hearing, The Food and Drug Administration continued its criticism that J&J moved too slowly to investigate and correct problems with its products. All of this challenges the reputation  J&J has built for social responsibility and raises the question of how quickly the company can re-ground itself.

Something stinks at Johnson & Johnson (J&J) according to the Food and Drug Administration (FDA). Add to that, J&J is accused by the U.S. Department of Justice of paying kickbacks to a company to promote its products. These charges are a disconnect for a company that has occupied a berth for nearly forever as one of the most admired in the world, who earned the gold standard for crisis response nearly 30 years ago for its handling of the Tylenol tampering murders consistent with its guiding principles (Credo).

It is not that J&J can’t make a mistake; it just seems initially harder to believe. That is the beauty of having built a reputation for trust and credibility; companies that don’t invest in building a culture and stakeholder relationships around values and strong reputation are more vulnerable to a rush to judgment before all the facts are in.

The downside, of course, to being known by your reputation is that if you fall short of what you say you stand for, you have to work much harder to regain trust. (Think Tiger Woods here.)

On Friday, January 15, 2010, J&J expanded its two previous recalls for Tylenol Arthritis in November and December to 50 million bottles of other Tylenol products as well as Motrin, St. Joseph’s, Benadryl, Rolaids, and Simply Sleep. The problem was a foul, moldy/mildew-like smell. Customers complained about having nausea, stomach pain, vomiting and diarrhea after taking the products.

In response to the products’ foul smell, also on that Friday, the FDA sent J&J’s subsidiary McNeil Consumer Healthcare Products a Warning Letter accusing the manufacturing facility of violating federal quality control standards, not being proactive in finding and resolving the cause of customer complaints, and taking a year to notify the FDA of problems. The letter criticized J&J management for knowing about the problem and not taking action to ensure the safety of its products. J&J has 15 days to respond.

In an unrelated matter but also on that fateful Friday, The Justice Department filed a complaint in federal court charging J&J with paying tens of millions of dollars in kickbacks from 1999 to 2004 to Omnicare to promote sales of J&J drugs to nursing home patients. J&J has responded that its conduct was “lawful and appropriate” and looks forward to dealing with the facts in court.

The FDA’s allegations that J&J wasn’t proactive and didn’t follow through to ensure product safety couldn’t have been said of J&J in 1982. Customers haven’t died here, but those affected have paid a high price for brand loyalty. The suspected problem (pesticide and fire retardant contaminate in shipping pellets leaching into product bottles) may be easily fixed but the FDA isn’t happy with how J&J handled the stink. “When something smells bad literally and figuratively, said Deborah Autor, director of FDA’s compliance office, “you aggressively investigate and solve the problem.”

Gael O’Brien,  January 17, 2010

The Week in Ethics

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