How Did Johnson and Johnson’s Corporate Responsibility Policy Pay Off in 1982?

Johnson & Johnson is one of the largest and most successful companies in the world, and Tylenol is one of its most popular brands of medicine. In late September 1982, Johnson & Johnson recalled all of its Tylenol products after seven people in the Chicago area died after taking Extra-Strength Tylenol capsules. The company’s chair at the time, James E. Burke, abided by corporate responsibility and made the difficult and expensive decision to recall 30 million Tylenol products voluntarily. This cost the company over $100 million.

How did Johnson and Johnson’s commitment to corporate social responsibility remedy the situation and place the company in a positive light, even after suffering a financial loss by their swift actions to fix the problem?

Corporate Social Responsibility

Corporate social responsibility is part of a company’s business model. It focuses on a company taking accountability for all of the decisions it makes as well as the impact that all of its goods and services have. It concentrates on a business being socially accountable to itself, the public, and all stakeholders.

A strong corporate social responsibility policy is good for a company’s brand. If the company takes responsibility for all of its actions that impact all areas of society as a whole, including economic, environmental, and social, it can be seen in a positive light that individuals are happy and comfortable doing business with. In the long term, this helps the growth of the company.

Corporate social responsibility does not only need to include the day-to-day operations of a business but can also include any volunteer work the company does or philanthropy projects it is a part of.

Note

J&J’s Principles of Corporate Governance sets forth the duties and responsibilities of the Company and the Board of Directors to ensure effective governance of the company.

Johnson & Johnson’s Product Recall

Johnson & Johnson was not deemed responsible for the contamination of its product. The pills were tampered with after the products had reached the market shelves. The perpetrator(s) introduced enough potassium cyanide in each altered capsule to kill thousands of people. This crime caused nationwide panic, copycat crimes, and even the suspicion that Halloween candy might be poisoned as well. No one was ever found guilty of adding the poison into the capsules. Time magazine lists this as one of its top unsolved crimes.

The company’s actions epitomized the true meaning of corporate social responsibility. Even though Tylenol products were generating approximately 17% of Johnson & Johnson’s annual income, the company acted quickly and decisively to remedy the situation. It removed the products from shelves, offering refunds and safer tablets as replacements, free of charge.

Chair Burke adhered to the company’s credo that outlines its ideal of corporate social responsibility. The first sentence of this, written by former chair Robert Wood Johnson, states, “We believe our first responsibility is to the doctors, nurses, and patients, to mothers and fathers, and all others who use our products and services.”

The end result of these incidents was that Johnson & Johnson became the first manufacturer to begin using tamper-proof packaging. When Tylenol products were reintroduced into the market two months later, they included seals around and beneath a child-proof cap. The company also launched an extensive marketing campaign touting the new packaging.

Many believed these events would deal a devastating blow to Johnson & Johnson, but the company’s quick, honest, and responsible handling of the incident was viewed extremely positively by both the general public and investors. As a result, the company quickly recovered from the financial losses incurred, and regained the trust of consumers.

Johnson & Johnson Today

Today, J&J outlines its corporate responsibility through robust corporate governance practices. The company emphasizes the importance of transparency, accountability, and stakeholder engagement in its decision-making processes. J&J’s Board of Directors oversees the company’s operations and ensures compliance with its governance framework.

The foundation of J&J’s corporate responsibility lies in its Code of Business Conduct, which provides clear guidance for ethical behavior and decision-making. This code applies to all employees, ensuring a consistent commitment to integrity, honesty, and compliance across the organization. It includes policies on anti-corruption, conflicts of interest, and responsible marketing practices, reinforcing the company’s dedication to ethical operations in every market it serves. These same premises were the baseline for the product recall decades ago and still guide the company today.

What Happened During the 1982 Tylenol Crisis?

In 1982, seven individuals in the Chicago area tragically died after consuming Extra-Strength Tylenol capsules that had been tampered with and laced with cyanide. Despite there being no fault in J&J’s manufacturing process, the company faced a major challenge in addressing the situation while ensuring the safety of its consumers.

How Did Johnson & Johnson Discover the Problem?

The problem was discovered when the victims’ families and law enforcement linked the deaths to Tylenol capsules purchased at local stores in the Chicago area. Upon investigation, authorities found that the capsules had been laced with cyanide, which led Johnson & Johnson to take swift action.

What Actions Did Johnson & Johnson Take in Response to the Crisis?

Johnson & Johnson responded to the crisis by recalling 30 million bottles of Tylenol from stores nationwide. The recall was voluntary, which reflected the company’s commitment to consumer safety and its ethical responsibility.

How Did the Company Prioritize Public Safety Over Profits?

Johnson & Johnson’s leadership made the decision to put consumer safety above short-term financial interests. By recalling millions of bottles of Tylenol, the company sacrificed significant revenue, as Tylenol was a major product for them at the time. This decision reflected a long-term vision of protecting public health and maintaining the company’s integrity, even at the cost of immediate financial losses.

The Bottom Line

Corporate social responsibility is when a company takes ownership of the impact it has on the larger public and all of its stakeholders. It includes social, economic, and environmental issues that a company attempts to have a positive effect on.

Johnson & Johnson taking ownership of the situation that arose with its Extra-Strength Tylenol product is one of the best examples of corporate social responsibility, where a company takes ownership of its own product, even if the issue was not caused by the company, and demonstrates leadership in rectifying the situation.

Though in the short run, fixing the situation as Johnson & Johnson did, can be financially devastating to a company, in the long run, it creates goodwill with the public and stakeholders, painting the company in a positive light, that inadvertently sets it up for financial success.