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Critical Analysis On Johnson And Johnson Ethical Issues

Question

Task: You are required to write a report which addresses the deteriorating reputation of Johnson and Johnson. As a means of illustrating this, you are to:
-identify and explain the areas of corporate governance and ethics that have failed
-explain the attitude of the company to the stakeholders
-explain and discuss ethical issues from a Utilitarian perspective
-explain and discuss ethical issues from a Virtue Ethics perspective
-provide a reflection on the best practices of corporate governance and ethics that would have minimised/avoided the failures, using the latest version of the Australian Stock Exchange Corporate Governance Principles and Recommendations

Answer

Executive Summary
The purpose of this report is to address the deteriorating reputation of the company and Johnson and Johnson ethical issues from various perspectives. Johnson and Johnson is a multinational corporation from America which is involved in the development of consumer packaged and pharmaceutical goods and medical devices. The reputation of the company has deteriorated in the past few years as a result of the erosion of the company’s promise to put its customers ahead of its shareholders.

This report identified that there are a few corporate governance and ethics related areas where the company has failed such as credo, transparency, compliance, regulations and standards. Along with this, the company has also failed in providing standard quality products to the customers. The attitude of the company is bad towards its customers as it does not give due consideration to the health of the customers and is only concerned with the maximization of returns for the investors. This report further examined the Johnson and Johnson ethical issues from the perspective of Utilitarianism and Virtue Ethics theory. At the end of this report, three best practices has been identified which should be followed by the company in order to avoid failure. It includes instilling an ethical and responsible culture, making balanced and timely disclosures, and recognizing and managing risk.

Introduction
Johnson and Johnson is a multinational corporation from America which is involved in the development of consumer packaged and pharmaceutical goods and medical devices. The company was founded in the year 1886 and is headquartered in New Jersey, United States. Since 2014, the reputation of the company has dropped from 9th position to 57th position out of the 58 leading companies in the pharmaceutical sector. The deteriorating reputation of Johnson and Johnson is the result of erosion of the company’s promise to put its customers ahead of its shareholders (Edward, 2019).

The purpose of this report is to address the deteriorating reputation of the company Johnson and Johnson. For this, the report identifies the corporate governance and ethics areas where the company encountered Johnson and Johnson ethical issues. Moreover, it focuses on the attitude of the organization towards its stakeholders along with making discussion regarding the Johnson and Johnson ethical issues from Utilitarian and Virtue Ethics perspective. At the end, this report provides a reflection on the best practices of ethics and corporate governance that would have avoided the failure occurred by Johnson and Johnson ethical issues.

Areas of Corporate Governance and Ethics that have failed
As per the views of Ducassy and Montandrau (2015), the term corporate governance deals with the collection of processes, mechanisms and relations by which the organizations are operated and controlled. Moreover, according to Crane, Matten, Glozer and Spence (2019), sethics refers to the implementation of appropriate policies and practices in the business while considering arguably controversial subjects. It is concerned with the set of principles or rules which an organization should follow. Taking into consideration the case of Johnson and Johnson, the company has significantly failed in some corporate governance and ethics related areas which has been identified and discussed below:

johnson and johnson corporate governance

Credo- According to Hussain, Rigoni and Orij (2018), credo is a concept of business ethics which can be defined as the set of values or belief that guides all the actions of an organization. The credo of Johnson and Johnson makes a promise to put its customers before the shareholders. It clearly specified that the company has the primary responsibility towards the patients, doctors, nurses, mothers and patients who utilizes the products and services of the company. For several years, Johnson and Johnson has shown its commitment towards its credo. However, the company has now eroded this promise made to the customers or patients and is giving more preference to the profits. In other words, it has failed in this area as the credo oriented corporate culture of the company has failed to give protection to its customers from questionable marketing and defective products which is causing harm to the customers.

Harmful Ingredients and No Standard Quality- There are various claims and lawsuits against the company which claims that the baby talcum powder product of the company has resulted in ovarian cancer. This has resulted due to the presence of asbestos in the products of the company. It is further found in this Johnson and Johnson ethical issues assignment that seven people died after taking Tylenol capsules supplied by the company. These people became the first victims who died as a result of product tampering. Therefore, it can be said that the company is only focusing on its profits and is not giving priority to the health of the customers. In order words, Johnson and Johnson is involved in ethical behaviors as it is not considering what is right and what is wrong while conducting the business activities (Mintz, 2019).

Lack of Transparency- Company has failed to make the required disclosures regarding the problems and risks associated with the usage of its products. Some reports claims that Johnson and Johnson were aware of the presence of asbestos in its baby powder for years. However, the company has always denied that the products contain asbestos (Dyer, 2018). Moreover, 700 women also suffered from infection, scarring and pain after making the use of vaginal mesh implants. It is also found that the company was aware of such risk related to Johnson and Johnson ethical issues but still went the product available in the market. Transparency is an important area of corporate governance and the company has failed to maintain the required transparency relating to the products (James, et. al. 2019).

Compliance, Regulation and Standards- As per the views of García- Sánchez, Rodríguez- Domínguez and Frías- Aceituno (2015), compliance, regulation and standards all the three criteria play a significant part in the corporate governance of an organization. However, Johnson and Johnson have failed in this area as it is has recalled the products from the market due to their non- conformity with the quality standard. The products of the company have also caused severe harm to the consumers. The compliance with the safety requirements was also not seen in case of this company. The company has not adopted proper policies and regulations for the purpose of ensuring safety of the products throughout the supply chain.

Attitude of the Organization towards the Stakeholders
As per the views of Garcia- Torea, Fernandez- Feijoo and de la Cuesta (2016), stakeholders are the parties having interest in an organization that can either impact or be impacted by the business. The stakeholders of Johnson and Johnson include employees, socially responsible investors, customers, suppliers, government, creditors, media, health care providers, local communities, academic institutions/ quasi- governmental organizations, etc. (Johnson & Johnson, 2018). The credo of this organization clearly indicates that it is the obligation of the company to provide due support to all the stakeholders and the communities which are impacted by the operations of the organization for doing the right thing and not for maximizing the profit opportunities (Sims and Qautro, 2016).

Johnson and Johnson adopt a holistic approach towards the wellbeing and health of the employees educates them and aims at creating a peaceful work environment. It is also found to comply with all the regulations, policies and laws framed by another stakeholder i.e. government. It also takes into consideration the expectations of the local communities relating to Johnson and Johnson ethical issues, environmental issues, transportation, local community issues, etc. However, in the recent years, the company has shown a bad attitude towards its most important stakeholders i.e. the consumers and healthcare providers (Gatzert, 2015). The company has not fulfilled its responsibility towards its stakeholders which, in turn, has caused them to suffer from severe consequences. Some of the consumers have suffered from cancer while some have even died as a result of negligence on the part of the company. It can be analysed that the company is focusing only on the benefits of its stakeholders and the profits of the organization due to which it has not disclosed the risks associated with the products and the consequences of its usage. Moreover, it is further identified that the company has not taken charge of its acts and the harm caused by its products. Such attitude has deteriorated the reputation of the company over the years due to which the consumers have also lost trust in the company (Casey and Larkin, 2019).

Johnson and Johnson ethical issues from a Utilitarian Perspective
Utilitarianism ethics used to discuss the study of Johnson and Johnson ethical issues is a theory which makes decision regarding right and wrong by focusing on the outcomes. This theory is often referred to as the form of consequentialism. Utilitarianism provides that the choice which is capable of producing the greatest good for greatest number is the most ethical choice. This approach is adopted by the businesses for moral reasoning in order to account for the benefits and costs. Utilitarianism also faces difficulties while accounting for values such as individual rights and justice. One of the limitation of Utilitarianism theory is that it cannot predict the future and therefore, it is difficult know in advance whether the actions will result in good or bad repercussions (Shaw, 2016).

By considering the Johnson and Johnson ethical issues from a Utilitarianism perspective, it can be identified that the company has made the decisions to supply such products in the market in order to make profits for the company and to offer returns on the investment of the investors. Moreover, it operates in the market for fulfilling the needs of the customers which are met by the supply of such products. Providing knowledge about the risks associated with the products could have harmed the objective and reputation of the company and therefore, Johnson and Johnson have always denied having knowledge about such defects. Therefore, the company was able to make profits by supplying such products in the market at that time and was not able to predict the future that it will cause such a huge deterioration in the reputation of the company and loss of trust of the consumers. The acts of the company disregarded the greater good people and showed that the company has only put profits over ethics (Barrow, 2015).

Can you explain Johnson and Johnson ethical issues from a Virtue Ethics Perspective?
Virtue ethics is a character based approach to morality which provides that virtue is acquired through practice. In simple words, virtue ethics theory provides judgement on a person on the basis of character and not on the basis of action which can deviate from his normal behaviour. This theory assists in understanding what it means to be a virtuous human being. Moral and honourable character is developed by a person by way of practicing being brave, honest, generous, just and so on. It further provides a guide for living life without offering rules for the resolution of ethical dilemmas. The major weakness of virtue ethics theory is that the change in the moral character of an individual is not given any importance (Sison, Beabout and Ferrero, 2017).

Considering the Johnson and Johnson ethical issues from the perspective of virtue ethics theory, it can be identified that there was a time when the intention of Johnson and Johnson was to help people and for several years, the organization fostered the virtue of self- control and caring in the face of profits. However, the corporate culture of the company has took a turn where it is introducing such products in the market which are injurious to the health of the consumers. The actions of the company over a period of time have shown that they have not deviated once from the normal behaviour. The company has not taken the responsibility of its harmful products and did not provide the necessary knowledge to the customers. In fact, the character of the company now gives preference to greed, selfishness and callousness over providing quality products to the customers (Segon and Booth, 2015).

Reflection on Best Practices of Corporate Governance and Ethics to overcome Johnson and Johnson ethical issues
The unethical behaviour undertaken by Johnson and Johnson need to be controlled by the company through the adoption of best practices of corporate governance and ethics that would have avoided such failures. In my opinion, Johnson and Johnson should consider the Australian Stock Exchange Corporate Governance Principles and Recommendations

corporate governance for johnson and johnson

Firstly, the company should follow the principle that requires to instil a culture of acting ethically, lawfully and responsible. It is the responsibility of Johnson and Johnson to act responsibly while producing the products for the customers and should ensure that the products do not cause harm to them. It is recommended that the company should articulate and disclose the values which act as the guiding principles and norms while making decisions. If the decisions will be made according to the values, then the failures can be minimized (ASX Corporate Governance Council, 2019).

Secondly, in order to cope up with Johnson and Johnson ethical issues, company should adopt the principle for making balanced and timely disclosures regarding all the matters that can create a material impact on the value or price of its securities. The company should further disclose a written policy for the compliance with continuous disclosure obligations. In my opinion, the adoption of such practice relating to corporate governance and ethics would not allow the company to hide such material information from the investors and public. This practice will play an important role for the company in regaining the lost trust of the investors and customers (ASX Corporate Governance Council, 2019).

Thirdly, as a best practice, Johnson and Johnson ethical issues should adopt the principle of ASX which requires recognizing and managing risk through the establishment of a sound risk management framework and reviewing it periodically of its effectiveness. The company will be able to avoid such risks in the future by identifying them in advance along with taking proper control and mitigation measures in order to deal with them on timely basis. It will also require the company to make all the necessary disclosures regarding material exposure to social and environmental risks and how it will be managed. In other words, the company will be able to maintain greater transparency by adopting these principles and its recommendations (ASX Corporate Governance Council, 2019).

In my opinion, the adoption of the above best practices will assist Johnson and Johnson ethical issues in avoiding or minimizing such failures. Moreover, the company will be able to gain the trust of its customers again by maintaining transparency and making decisions as specified by its credo and values only. It must be ensured that the values of the organizations are implemented as a part of the organizational culture. The company can sustain in the society only when it will produce products that benefits the customers and maintain a standard quality. I further believe that the company should reinstate the mission, vision, objectives and goals in the corporate strategy along with fully comprehending its responsibilities towards the stakeholders. It is necessary for such an old and renowned company to take the needed steps in the ethical direction in order to deal with its deteriorating reputation in the market all across the world.

Conclusion
This report focused on Johnson and Johnson Company whose reputation deteriorated significantly in the past few years due to its unethical behaviour. It can be concluded that this deterioration is the result of the occurrence of Johnson and Johnson ethical issues on the part of the company to put the customers ahead of its shareholders. In other words, the company has given primary preference to the profits and not to the health and safety of the customers. As a result, the customers suffered from severe repercussions such as ovarian cancer, pain, swelling and infections due to the harmful products of the company. The company did not comply with its credo and standards and failed in the area of maintaining transparency regarding material facts and the ingredients of the products.

The report further highlighted that the company has a bad attitude towards the customers and only focuses on the profits of the company. It further discussed the Johnson and Johnson ethical issues from the perspective of virtue ethics and utilitarianism theory. At the end, this report provided a reflection on the best practices of corporate governance and ethics that would have minimized the failures to a great extent.

References
ASX Corporate Governance Council. 2019. Corporate Governance Principles and Recommendations, [Online]. Available from https://www.asx.com.au/documents/regulation/cgc-principles-and-recommendations-fourth-edn.pdf [Accessed 26 March 2020].

Barrow, R., 2015. Utilitarianism: A contemporary statement. Johnson and Johnson ethical issues Routledge.

Casey, R. and Larkin, T.P., 2019. Ovarian Cancer and “Tainted Talc”: What Treating Physicians Need to Know. Missouri Medicine, 116(2), p.83.

Crane, A., Matten, D., Glozer, S. and Spence, L., 2019. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press, USA.

Ducassy, I. and Montandrau, S., 2015. Corporate social performance, ownership structure, and corporate governance in France. Research in International Business and Finance, 34, pp.383-396.

Dyer, O., 2018. Johnson & Johnson knew for decades talcum powder contained asbestos, reports allege. BMJ: British Medical Journal (Online), 363, pp. 1-2.

Edward, H. 2019. Lawsuits, payouts, opioids crisis: what happened to Johnson & Johnson?, [Online]. Available from https://www.theguardian.com/business/2019/oct/18/johnson-and-johnson-opioids-lawsuits-product-recalls [Accessed 26 March 2020].

García-Sánchez, I.M., Rodríguez-Domínguez, L. and Frías-Aceituno, J.V., 2015. Board of directors and ethics codes in different corporate governance systems. Journal of Business Ethics, 131(3), pp.681-698.

Garcia-Torea, N., Fernandez-Feijoo, B. and de la Cuesta, M., 2016. Board of director's effectiveness and the stakeholder perspective of corporate governance: Do effective boards promote the interests of shareholders and stakeholders?. Johnson and Johnson ethical issues BRQ Business Research Quarterly, 19(4), pp.246-260.

Gatzert, N., 2015. The impact of corporate reputation and reputation damaging events on financial performance: Empirical evidence from the literature. European Management Journal, 33(6), pp.485-499.

Hussain, N., Rigoni, U. and Orij, R.P., 2018. Corporate governance and sustainability performance: Analysis of triple bottom line performance. Journal of Business Ethics, 149(2), pp.411-432.

James, M.M.A., Kee, D.M.H., Xian, T.H., Han, K.C., Ching, K.K. and Alshammari, M.S., 2019. Johnson & Johnson’s Product Safety Issues and Ways the Company Can Address Those Issues. Asia Pacific Journal of Management and Education, 2(3), pp.7-18.

Johnson & Johnson. 2018. 2018 Health for Humanity Report, [Online]. Available from https://healthforhumanityreport.jnj.com/our-approach/engaging-with-our-stakeholders [Accessed 26 March 2020].

Mintz. S. 2019. What Ever Happened to Johnson & Johnson?, [Online]. Available from https://www.workplaceethicsadvice.com/2019/01/what-ever-happened-to-johnson-johnson.html [Accessed 26 March 2020].

Segon, M. and Booth, C., 2015. Virtue: The missing ethics element in emotional intelligence. Journal of Business Ethics, 128(4), pp.789-802.

Shaw, W.H., 2016. Utilitarianism and the Ethics of War. Routledge.

Sims, R.R. and Qautro, S.A. 2016. Executive Ethics II: Ethical Dilemmas and Challenges for the C Suite, 2nd Edition. Information Age Publishing Inc.

Sison, A.J.G., Beabout, G.R. and Ferrero, I. eds., 2017. Handbook of virtue ethics in business and management. Johnson and Johnson ethical issues New York: Springer.

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