Institutional and individual investors of Johnson & Johnson are suing
the company's management branch for its continuous neglect in fixing
numerous management and marketing problems for years. The management group
has over 10 members of the J&J board, including the current CEO Alex
Gorsky and predecessor Bill Weldon.
The plaintiffs claim that the decentralized management hierarchy of the
company gave both top executives and board members "plausible deniability."
The neglected problems that the plaintiffs have stated include kickback
payments to doctors and pharmacists to boost product sales, dozens of
product recalls due to manufacturing deficiencies and inadequate packing
that have left glass and metal shards in liquid medications; some of these
problems that the defendants claim to have been "unaware" of
date all the way back to the late 1990s.
This lawsuit is much more than a mere monetary settlement issue between
the two parties; in fact, the proposed settlement calls for several changes
that will attempt to save the once-stellar company's reputation. One
is the creation of the Regulatory, Compliance and Government Affairs Committee
that will be independent of the board--this committee will receive direct
reports from top executives and hold the responsibility of reporting back
to shareholders each year regarding all significant compliance and quality
issues. Another is the full adoption of new quality and compliance goals
that the company must follow in operating and delivering high-quality
products. All of the company's 120,000 employees, including top senior
management members, will undergo evaluations regarding their adherence
to the new quality and compliance goals.
The plaintiffs seek up to $10.5 million in monetary compensation as the
tentative settlement is under review by U.S. District Judge Freda Wolfson
in Trenton, NJ. The J&J company stated that it "continues to
deny the claims in the plaintiff's lawsuit."