J&J Reputation Going Down the Tubes
February 14th, 2012 // 2:14 pm @ jmpickett
The latest corporate reputation poll from Harris Interactive is out and the results for Johnson & Johnson are not so good. This is a classic a case of the glass being half full or half empty. On one hand, the health care giant ranked 7th, which is not too shabby. Yet, this was the first time that J&J did not rank in first or second place; last year, J&J notched second on the list (see this).
This is what can happen when your company experiences embarrassing manufacturing gaffes; a stream of product recalls and shortages; a consent decree; government probes; highly publicized congressional hearings; a closed plant and accompanying job losses; managerial changes; shareholder lawsuits; hundreds of millions of dollars in lost sales, and persistent calls for the ceo to resign.
The J&J rep sunk even lower when several advocacy groups complained about the use of two potentially harmful chemicals in its venerable Baby Shampoo, which the healthcare giant was selling in the US with traces of those ingredients, but not in several other countries. J&J began back peddling not before calls for a boycott and another public black eye (see here).
The health care giant also took a beating in a Texas court last month before agreeing to pay $158 million to settle a lawsuit brought state officials over charges of surreptitiously creating and funding a state program to boost sales of its Risperdal antipsychotic. An expert witness for the state testified that J&J hid three studies showing some patients using Risperdal developed diabetes, even as the drugmaker claimed its antipsychotic did not cause the disease (read more here and here).
Investors are unlikely to be perturbed by the poll results, though. Over the past year, J&J stock has gained more than 18 percent, reflecting a steadfast belief that the health care giant is greater than the sum of its parts and that the worst of this crisis may be over. In other words, the corporate reputation may have suffered but the ranking may be considered to be a lagging indicator.
Nonetheless, this is a mixed bag, at best, for ceo Bill Weldon. Rewarding investors is paramount, of course, for publicly traded companies, but the health care giant has suffered a stain on its famed credo, which is etched on the outside of its New Jersey headquarters. To rescue his legacy, Weldon will have to do more than boost the stock, he will have to restore the J&J reputation.
The pharmaceutical industry, by the way, did not fare so well, in general. Forty-four percent of respondents had a negative perception compared with 31 percent who reacted positively to pharma. The positive reaction has remained largely constant over the past three years.
