Johnson & Johnson as a Model for Corporate Social Responsibility - Research Paper Example

? Table of Contents Introduction 4 2. Company’s CREDO 4 3. Responsibility towards the Environment 6 4. Responsibility towards the Consumers 7 4 Allegations against the Company 8 4.2 Company’s Response to Allegations 10 5. Responsibility towards the Communities 11 6. Responsibility towards the shareholders 12 7. Consumer response towards J&J products 12 8. Conclusion 13 References 14 Outline Introduction – importance of CSR, position of J&J, hypothesis statement Company’s Credo – Explains their claims – gathered from their annual statement and Fact Sheet Responsibility towards the environment – the claims in their Sustainability Report and secondary search Responsibility towards the Consumers – charges leveled against the company, and the company’s response towards these allegations. Responsibility towards the Communities – comparison of their claims and secondary search Responsibility towards the shareholders Consumer response towards J&J products – how consumers react to the allegations against the company Conclusion 1. Introduction Being socially conscious and socially responsible is now a strategic decision taken by most global organizations as consumers also recommend socially responsible companies to others. The Corporate Social Responsibility Index (CSRI) identified Johnson & Johnson (J&J) among the top three American companies that public see as most socially responsible (Marketing Charts, 2008). Three responsibility-related dimensions are taken into account to calculate the combined effect on reputation of social programs, management practices, and employee relations. These include corporate citizenship, governance and workplace practices. An organization’s reputation is closely linked to the public perception of its Corporate Responsibility. Public perception includes dimensions such as trust, admiration and esteem. J&J makes certain claims in its annual reports and other official publications. However, an examination of their activities disproves the hypothesis that Johnson & Johnson is a model for Corporate Social Responsibility. 2. Company’s CREDO The company – J&J follows a definite CSR strategy outlined in OUR CREDO which was initiated 60 years ago by the founder. The Credo describes of the organization’s responsibility towards its customers, employers, communities and shareholders (Fact Book, 2007). Their first responsibility is to the doctors, nurses and patients, and all others who use their products and services. This includes product quality, product prices, prompt service, and a fair opportunity to the suppliers and distributors to make profits. Toward the employees their responsibility lies in providing job security, respecting individual dignity, and also helping employees fulfill their responsibilities towards their families (CSR Globe, n.d.). They claim to be equal opportunity employers and hence provide development and advancement for all those qualified. Towards the communities they feel responsible in supporting charities and encouraging civic improvements including better health and education. Protection of environment and natural resources is a part of their responsibility towards the society and communities. They have a worldwide Tobacco-Free Work Place policy which has helped improve the health and work environment for the employees. For the employees they have other programs such as the Employee Assistance program and the Occupational Health Program which influences the employees’ ability to work safely and effectively keeping in mind the laws and regulations. The company asserts that if it has taken care of the first three - customers, employers, communities - the responsibility to the stakeholders is automatically assured. The Credo is the central document that ties many operating companies together. The positive effect of all its CSR strategy is that the company practices decentralization across J&J group of companies. Their focus areas are health, education, environment, art & culture, and disaster relief. They align their corporate strategies with their Credo, or so they claim. The company has received several rewards and recognition and was named one of the top 100 places to work for mothers; for its commitment to equality at the work place the Human Rights Campaign Foundation named J&J one of the best places to work (Fact Book, 2007). The key ingredient to the success of J&J is its decentralized environment. Their Credo guides the employees, reflects the expectations and common values of management; the Credo provides the basic belief system and this is evaluated twice every year through employees survey which helps improve organizational culture and business (Atherton & Kleiner, 1998). 3. Responsibility towards the Environment The company claims to review its environmental goals every five years which is meant to drive improvement in environmental performance, align environmental considerations with business objectives and strive to be among the most environmentally responsible companies in the world. With the Healthy Planet 2010 program they intend to minimize the environmental impact in such areas as energy use, waste use and waste generation, sourcing of paper and packaging and take-back programs for electronic equipment (Sustainability Report, 2010). They have also made efforts to reduce carbon dioxide emissions by 16.8 percent by improving energy efficiency in their operations. Absolute water consumption and total waste generation has decreased. The American Chamber of Commerce in Shanghai awarded showcase organizations that have made notable contributions to further the corporate citizenship in Shanghai and China (AMCHAM, 2010). J&J received awards under different categories including strategy, strategic commitment, under corporate governance, under social issues, and under workplace practices. The organization helps midwifery institutions and train health care professionals in China. They even make donations for disaster relief. However, they did not receive any award for their commitment towards environmental issues or for their commitment to ecologically sustainable development as per this report. Nevertheless, J&J has kept their promise for concern for environment as is evident from the new building at Northwest Arkansas. The design elements of the building not only enhance productivity but also comply with the standards established by the US Green Building Council (Anonymous, 2009). This building has light and water sensors that turn on only when in use, meant to conserve energy. The design reflects the company’s corporate culture and the entire space have been designed keeping in mind the comforts of the employees. Apart from plenty of natural light and fresh air, there is also provision for bike racks and shower facilities for those who bike to work. Another example to testify their commitment to the environment has been reported in the ICCA (2009) which states that J&J has cut emissions at its company-owned and larger leased facilities by as much as 9 percent between 1990 and 2008 during which period its sales have grown by 400 percent. Their carbon footprint did marginally increase in 2008 partly because of the older vehicles that were not replaced but they are confident of meeting their goal despite challenges. 4. Responsibility towards the Consumers J&J has provided grants, donations and patience assistance to people round the world. The company claims that they are not perfect and will make mistakes but they hold themselves accountable to correct them. The character of the people is their enduring strength. The chairman in the Annual Report (2010) conceded that they would seek to restore confidence and quality in their products thereby acknowledging that there had been flaws and even mistakes beyond their control. However, they accept responsibility for all that has occurred but accepting responsibility demonstrates that they have allowed mistakes to happen. While they have been responding to major natural disasters with donations and relief packages, and contributing in cash and products towards philanthropic programs across 50 countries, in addition to providing safe driving tips to everyone (Sustainability Report, 2010), J&J has not maintained its Credo towards its consumers. They offer occupational health, absence and disability management, and health promotion and wellness. They have a global culture of health for employees although the program varies across nations. They have been encouraging civic improvements and maintaining their responsibility towards protection of environment but overall they have given preference to business profit over concern for consumers and patients. 4.1 Allegations against the Company J&J has been facing major manufacturing problems at its facilities. It has been charged with quality control problems by the US Food and Drug Administration inspectors. Apparently some pesticides used as a wooden pallet treatment was found to be causing a musty, mouldy smell. This resulted in recall of 70 products in 2010 (Anonymous, 2011). In 2009 the company had to recall Motrin, a painkiller and again in 2009 and early 2010 they had to recall over-the-counter drugs such as Tylenol, Rolaid and Benadryl (The Economist, 2011). All these drugs had traces of chemicals used to treat wood. Even artificial hips had to be recalled. Such product recalls can ruin a company and it is also against their CREDO which lays emphasis on product quality. J&J claims to be fair in business, which is a part of their CREDO. However, they now have to pay $70m to US regulators towards prosecution in the pharmaceutical industry (Jack & Scannell, 2011). Their product-recall of Tylenol was bad enough and now they have admitted to “improper payments” to healthcare employees, in Poland, Greece and Romania as well as kickbacks to the former Iraq regime of Saddam Hussein. J&J& sought to bribe foreign officials for preferential treatment of their products. Earlier subsidiaries of J&J were accused of paying bribes to public doctors in Greece for preference of its surgical implants and in Romania for prescribing its medicines (Reuters, 2011). Even in Poland J&J has been accused of bribing the public doctors and hospital administrators to win contracts. They also paid kickbacks in Iraq to win 19 contracts under UN’s Oil and Food Program. Iraq demanded ten percent fee which was agreed upon, argue Jack & Scanell. At each instance J&J claims to take full responsibility for the actions done by its agents and employees who made the improper payments but merely accepting responsibility does not absolve them of the crime committed. There could perhaps be even more instances which have not come to light. This also suggests that making profit is definitely the first and the only concern for businesses, as has been emphasized upon by Milton Friedman (1970). Whether it is the company or its agents or employees, they have violated the Foreign Corrupt Practices Act which prohibits companies from bribing foreign officials to get business (Fierce Markets, 2011). Apart from Tylenol J&J has knowingly discarded public safely in order to push its products in the case of at least four drugs – Zomax, Suprol, Ortho-Novum and Retin-A (Mintz, 1991). Such short-sighted greed can commonly be associated with the makers of generic drugs and not organizations of repute such as J&J. The free-market system can drive the noblest businessmen to push long-term common good behind short-term profits, emphasizes Mintz. Mintz explains that soon after J&J introduced Tylenol in 1970s, an inexpensive pain-relieving device was also introduced in the market. This was a one-time intervention which involved no pill taking at all. If J&J adhered to its business principles it would also take care of its competitors. However, J&J bought this small company with limited resources not to provide relief to the consumers and the society but to kill competition, argues Mintz. J&J was charged with violating the Sharman Anti-Trust Act. J&J is known for settling cases out of court which it did in this case as well as in several cases such as Zomax product-liability lawsuits. They even prescribe drug for use other than for what it has been approved. They advertise for Retin-A as wrinkle remover but they applied for the approval of the drug for that purpose only two years after they started advertising for it, as per Mintz. Moreover, they keep dermatologists on their payroll to advertise for such product, says Mintz, which is another instance of unethical practice and does little to justify their corporate citizenship. 4.2 Company’s Response to Allegations J&J pursues a course of action because ‘it is the right thing to do’. When several deaths were reported due to cyanide-laced Tylenol, the company withdrew all Tylenol from all shelves across the country (Davidson, 2009) even though the FDA had merely issued a warning against the use of the drug (Mendes, 2007). The company was not sure at which point the tampering had taken place but they accepted full responsibility of the tampered drugs sold across the counters. The cost of the decision was huge but the company believed that this was the right thing to do. J&J knew that the news of tampering would affect its reputation, affect the market share and result in sizeable drop in share values but they dispensed with any hard cost benefit analysis to avoid a recall (Davidson, 2009). Myddleton and Mour (2011) justify that through product recall they have amply demonstrated that pure economic motive is not the sole determinant of business decisions. However, this action of theirs was only to escape harsher outcome and to present a philanthropic image to its consumers. The truth is that they wanted to make a silent recall without creating any publicity (Sunflower Naturals, n.d.) but the FDA detected the anomalies before they could recall. They have been sued for deceptive marketing and for suppressing oral cancer test to prevent lost revenue from potentially carcinogeneric Listerine sales. J&J group is a conglomeration of 250 companies and has many sub-companies but it is responsible for the recall and defects by each of these companies. J&J would also have to pay $1bn to resolve a long-running probe into marketing of Risperdal – an antipsychotic drug (Rockoff & Lublin, 2011). The company had been using the drug for unapproved uses and this has been one of its best-selling drugs. This started as a whistleblower case in which the insiders can receive a cut if the government recovers money, explain Rockoff & Lublin. Disgruntled employees often take to whistle blowing which suggests that employees are unhappy with the company. 5. Responsibility towards the Communities Different firms have different ways of expressing their CSR. J&J believes that 'to be fair and honest, trustworthy and respectful, in dealing with all our constituents’ is the best expression of their responsibilities (WECOMP, 2010). In their efforts to help towards the development of communities, J&J has announced Every Mother, Every Child, a five-year comprehensive program to help improve the health of women and children in developing countries. This program is in conjunction with United Nations Millennium Development Goals Summit. WECOEMP (2010) further discloses that J&J partners with 200 organizations to improve the health and well-being of women and children round the globe. They are making all efforts to live their Credo and be a global corporate citizen which can serve as an example for others to follow. However, their efforts to maintain their Credo is limited to the environment and philanthropic activities towards the under privileged. 6. Responsibility towards the shareholders The CSR approach at J&J does not reflect an outcome as has been claimed by Roitstein (2005). Their Credo maybe guiding their actions and value system across several continents and in a number of languages but it is certainly not ingrained in their culture. They claim to be consistently making efforts to raise awareness and making their best efforts to prevent corruption but they themselves have violated the Foreign Corrupt Practices Act. Such incidents definitely cause embarrassment to the organization while also affecting the reputation and market share. However, it is evident that their responsibility lies only towards the shareholders as the prime concern is economic benefit. 7. Consumer response towards J&J products J&J has lost its market share and diluted the brand value. Consumers will no more pay for a branded product as consumer no more believe that a product with J&J label is of good quality (James, 2011). Their focus has shifted from product quality to maintaining their brand image and in enhancing the brand value thereby deviating from their Credo. Perception can trump reality and this is precisely what has happened in the case of J&J. The company topped a list of companies perceived by American consumers as having the best CSR initiatives. J&J has since admitted that it misled consumers and regulators when it used company-paid contractors to buy Motrin pain killers from the shelves rather than recalling the product (Connor, 2010). The company has lost the trust and admiration of its consumers, purportedly the most important stakeholders. 8. Conclusion Thus it is evident that J&J presents a picture of benevolence and philanthropy to the public and to its consumers but they have not been able to sustain their strategy for long. They have been accused of drug abuse for long and have several lawsuits against them. Violating regulations and misleading the regulators and the consumers alike certainly does not demonstrate that they are maintaining their social responsibility in right earnest. They are not the global corporate citizen they claim to be and their Credo is not ingrained in their culture either. There is a gap between what they claim and the reality. It would be difficult for them to sustain profits based on their brand name for long. J&J is certainly not a model of social responsibility when it earns the CSR index by misleading consumers and regulators. The company claims that if the customers, employers, communities are taken care of, their responsibility towards the shareholders is automatically assured. However, the truth is that their prime concern is the shareholders! References AMCHAM.(2010). Best Practices from the 2010 Corporate Social Responsibility Awards, The American Chamber of Commerce in Shanghai, Retrieved from http://www.amcham-shanghai.org/NR/rdonlyres/06031619-581E-4D22-BB90-CDA6A1FFA453/13585/BestPracticesfromAmChamShanghai2010CorporateSocial.pdf Annual Report. (2010). Johnson & Johnson Anonymous. (2009, Oct/Nov). WHERE PRODUCTIVITY MEETS SUSTAINABILITY. Retailing Today, 21 Anonymous. (2011). Chemical Business NewsBase - Chemistry and Industry: J&J is still haunted by production problems. Chemical Business Newsbase Atherton, E., & Kleiner, B. H. (1998). Practices of the best companies in the medical industry. International Journal of Health Care Quality Assurance, 11 (5), 173 Connor, M. (2010). Johnson & Johnson, Under Investigation, Tops CSR Index. Retrieved from http://business-ethics.com/2010/10/13/1602-johnson-johnson-under-investigation-topscsr-reputation-index CSR Globe. (n.d). Johnson & Johnson. Retrieved from http://www.csrglobe.com/login/companies/johnson_johnson.html Davidson, K. (2009). ETHICAL CONCERNS AT THE BOTTOM OF THE PYRAMID: WHERE CSR MEETS BOP. Journal of International Business Ethics, 2 (1), 22 Fact Book. (2007). Johnson & Johnson Fierce payments. (2011). Pfizer reports 'potentially improper' payments to feds. Retrieved from http://www.fiercepharma.com/story/pfizer-reports-potentially-improper-payments-feds/2011-08-12 Friedman, M. (1970, September 13). The Social Responsibility of Business is to Increase its Profits. The New York Times Magazine, Retrieved from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html ICCA. (2009). USA: Johnson & Johnson (J&J) On Track to Meet 2010 Climate Goal, Retrieved from http://www.cca-institute.org/pdf/twicsr/27_07_09_eng.pdf Jack, A., & Scannell, K. (2011, April 9). J&J to pay US regulators $70m. Financial Times, London (UK): 10 James, G. (2011). How Brand Marketing Is Destroying J&J. Retrieved from http://www.bnet.com/blog/salesmachine/how-brand-marketing-is-destroying-j-j/14074 Marketing Charts. (2008). Google, Campbell Soup, J&J Tops in CSR. Retrieved from http://www.marketingcharts.com/topics/branding/google-campbell-soup-jj-tops-in-csr-6760/ Mendes, E.P. (2007). The Moral Argument against the Business Case for Corporate Social Responsibility: A Call for a New Moral and Spiritual Approach. Retrieved from http://www.ucalgary.ca/christchair/files/christchair/Mendes-detailed-paper.pdf Mintz, M. (1991, December). Drug Fiends. The Washington Monthly, 23 (12), 20 Myddleton, D.R., & Mour, L. (2011). The Debate: Corporate Social Responsibility. Retrieved from https://www.som.cranfield.ac.uk/som/som_applications/somapps/contentpreview.aspx?pageid=13273&apptype=think&article=18 Reuters. (2011). J&J pays fine to settle US bribery, kickback charges. Taipei Times, Retrieved from http://www.taipeitimes.com/News/biz/archives/2011/04/10/2003500337 Rockoff, J.D., & Lublin, J.S. (2011, May 13). U.S. Is Seeking $1 Billion Over J&J's Marketing, Wall Street Journal. B1 Roitstein, F. (2005). Analysis of Corporate Social Responsibility Training Initiatives in Multinational Enterprises: The challenge of localizing CSR. Retrieved from http://siteresources.worldbank.org/INTLM/Publications/20385474/AnalysisCSRTrainingFINAL.pdf Sunflower Naturals. (n.d.). Irresponsible, Unethical, Corrupt and Illegal Practices of Johnson and Johnson Management. Retrieved from http://www.sunflowernaturals.com/article_jnj.shtml Sustainability Report. (2010). Our Responsibility. WECOEMP. (2010). Johnson & Johnson Aims to Help Up to 120 Million Women and Children Each Year Through Five-Year Commitment to U.N. Millennium Development Goals. Retrieved from http://www.wecoemp.com/index.php/csr-link/26-johnson-a-johnson-aims-to-help-up-to-120-million Read More