Johnson & Johnson CEO Steps Down in April, After Consumer Product Recalls

From Canadian Press DataFile (February 21, 2012)

By Linda A. Johnson

TRENTON, N.J. _ Johnson & Johnson's longtime CEO, Bill Weldon, is stepping down as the health care giant's top executive after an embarrassing string of recalls of everything from Tylenol to Benadryl has cost the company hundreds of millions of dollars and consumer trust.

The maker of Band-Aids and biotech drugs said Tuesday that Alex Gorsky, head of the company's largest business by revenue, will become CEO on April 26, the day of its annual shareholder's meeting. But Weldon will remain chairman of the board for the time being.

"I'm honoured that the board has placed such confidence in me, and I am also aware of the serious responsibilities that come with this office," said Gorsky, 51, who oversees 140 manufacturing facilities globally as part of J&J's medical device and diagnostics unit.

Weldon, who has spent his entire 31-year career at J&J, became chief executive in 2002. His departure is being described by the company as normal succession planning. But Weldon has repeatedly said he had no plans to leave unless asked to do so by the board of directors, which has long been loyal to him.

"I look forward to the transition of leadership and to a bright future for Johnson & Johnson," Weldon, 63, said in a statement.

Weldon's long tenure has been tarnished by more than two dozen recalls of non-prescription Tylenol, Motrin, Benadryl and other drugs began in 2009. The recalls involve problems from contamination and a nauseating smells on containers to liquid medicines that may contain tiny metal shavings.

J&J's McNeil Consumer Healthcare unit has had about 25 product recalls since September 2009. Federal regulators have had three of its factories under increased scrutiny for nearly two years, and one of those, in Fort Washington, Pa., has been shut and is being rebuilt from the ground up. Meanwhile, the prescription drug division has had at least two drugs, for seizures and HIV, recalled over that time.

Medical devices and consumer products also have been recalled. Gorsky's medical device unit, the company's biggest by revenue, has had faulty hip implants that were painful to patients recalled, along with contact lenses that sting the eyes.

While there haven't been reports of patients harmed by the recalled products, the sheer volume of them is probably unrivaled in the industry. Weldon has repeatedly said he had the problems under control, only to have another recall pop up.

Last April, for instance, Weldon charmed shareholders with a pledge that the recalls were behind and brighter days were coming, along with another increase in the company's generous dividend and news of a huge acquisition. But as recently as last week, the company announced that it would recall 574,000 bottles of infant Tylenol because of complaints about the dosing syringe.

Congress has been probing J&J's handling of the recalls, including a "stealth recall" in 2008 in which the company secretly paid a third party to quietly buy up packages of faulty medication from stores. New Brunswick, N.J.-based Johnson & Johnson also faces lawsuits over the recalls, including a recent one in which a family alleges its young son died shortly after ingesting a super dose of Tylenol.

Amid the recalls, several executives below Weldon have departed suddenly, including former consumer health business head Colleen Goggins, as the company worked to resolve the problems.

"The way I read it is, he wouldn't have left on his own if he didn't think the company was on its way to recovery," said Miller Tabak & Co. analyst and fund manager Les Funtleyder.

Pharmaceutical manufacturing expert Girish Malhotra said he considered the move an overdue firing of Weldon. Malhotra wrote that the heads of manufacturing and accounting should also be fired, and the members of the board should be removed because they "exonerated J&J management."

"How a global icon of care and quality could not control its practices is just beyond imagination," he wrote. "I am not sure Mr. Alex Gorsky would be able to clean the house quickly to restore confidence in the company. Time will tell."

Weldon joined Johnson & Johnson in 1971 in sales and marketing at its McNeil Pharmaceutical subsidiary. A decade later, he started moving up the management ranks, first overseas and then in the U.S. He was promoted to the executive committee and named worldwide chairman of the pharmaceuticals group in 1998.

A Brooklyn, N.Y. native, he is chairman of the CEO Roundtable on Cancer, vice chair of The Business Council and a member of The Sullivan Commission on Diversity in the Health Professions Workforce.
 

Posted: February 2012


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