Johnson & Johnson Shareholders Want Its Directors to Pay Up

Johnson & Johnson TylenolA group of Johnson & Johnson (JNJ) shareholders has filed a complaint against the company, Bloomberg reported. They accuse directors of ignoring warnings signs pertaining to J&J's massive product recalls and government probes of manufacturing defects and marketing practices. Shareholders want the directors to pay damages to the company.

In an amended derivative lawsuit filed Dec. 17 in federal court in Trenton, N.J., shareholders asked a judge to find that directors and top executives mismanaged J&J. They also want J&J to "improve its corporate governance and internal procedures."

"Years of Red Flag Warnings"

While J&J once set "the gold standard for integrity and excellence," the directors' "utter disregard for their fiduciary duties, including permitting and fostering a culture of systemic, calculated and widespread legal violations has destroyed J&J's hard-earned reputation," Bloomberg quotes the shareholders' claim.

The board received "years of red flag warnings of systemic misconduct," according to the complaint, including regulatory investigations, subpoenas, U.S. Food and Drug Administration warning letters, news articles and, of course, the recalls itself.

The world's biggest maker of health care products recalled more than 135 million bottles of over 40 different over-the-counter medicines in late April because of manufacturing deficiencies at its plant in Fort Washington, Pa., and suspended its operations since then. The FDA investigated and sent the company warning letters and lacking-inspection reports.

J&J issued many other recalls after the April actions, prompting two Senate investigations. The Oversight Committee hearings revealed cover-ups and phantom recalls. Not only did the recalls tarnish J&J's reputation but they also hurt its financial results: Sales in its consumer health care unit declined a whopping 25% in the last quarter.

J&J also faces government investigations into kickback payments and off-label marketing -- the practice of marketing pharmaceuticals for unapproved uses by the FDA. Bloomberg says the company had no comment while it reviews the complaint.

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This has been a long time comming! Any one of these foul ups would have been enough to raise serious questions about managements competence, but the repeated lack of quality control, and potential harm to consumers is mind bogeling. Its a wonder there hasn't been a catastrophic event and huge law suits. I think there needs to be a significant change in management, and serious consequences for both manegement and the board of directors. No golden parachutes!

December 22 2010 at 6:24 PM Report abuse +1 rate up rate down Reply

Here comes another slap on the hand and an admission of "We didn't do anything wrong and we won't do it again". At what point does the law decide to punish these people and I don't mean a fine but imprisonment?

December 22 2010 at 5:48 PM Report abuse +2 rate up rate down Reply

Excellent comment dlnovitske. Why are so many Americans outraged with Washington and yet they would trust Wall Street and American Corporations even with their health care? If I hear another Republican defend Wall Street and the "market" after Enron, Worldcom, Global Crossings, Lehman Bros. etc. etc. etc. I am going to vomit on the nearest Republican.

December 22 2010 at 1:35 PM Report abuse rate up rate down Reply

Well, it is about time shareholders find their voices. I am not specifically referring to J&J; I own no stock directly, probably own in mutual funds. And as a shareholder in may other companie; I do not follow strictly the idea that it is all about money. All stakeholders - shareowners, employees, customers, etc., must be treated fairly, and appropriately morally and ethically.
I think our country would be in a lot better shape if we could get the message across that all citizens can be stockholders in corporations, and that all stockholders in any company want it to be managed prudently. For too many corporations, the mindset of executive management and a co-conspirator BOD is to get as much money for themselves as possible. The same mindset that drives politicians to be in it "for themselves" is the same mindset that applies corporate executives and BOD. It is up to we stockholders and voters to take our companies and country back and this requires responsible action on our part. Being an owner of stock, and being a responsible citizen is no longer a spectator sport. All corp. executives and politicians need a refresher course in ethics, morality and fidcuciary responsibility.
I do own stock in Alliant Energy, a company that deems it okay to pay directors pay for a full term, even if they only serve part of that term. Not acceptable, not even a common sense decision, and I am trying to get that changed.
Stockholders - it is time for us to get tough with directors/executives who are of the "its all about me" mindset. Best of luck to the J&J shareholders in their lawsuit calling out the BOD and their lack of fiduciary responsible actions.

December 22 2010 at 11:16 AM Report abuse +4 rate up rate down Reply

Going after the CEO and the DOB may have a positive effect on the stock price of J&J, which, by the way, has not done anything this year, when both the Nasdaq and Dow have increased. Owning J&J this year has been a bust IMO.

December 22 2010 at 10:42 AM Report abuse +2 rate up rate down Reply


December 22 2010 at 10:31 AM Report abuse +3 rate up rate down Reply