Commentary: J&J is a company of the 'highest integrity.' Investors overreact to asbestos report

  • Reuters published a story Friday charging that J&J knew back in 1971 that "its iconic baby power sometimes contained asbestos and failed to alert authorities."
  • The story and stock drop seem like an overreaction.
  • I feel confident J&J will put the interests of its customers first and maintain its reputation for the highest integrity.
J&J provides scientists with shared lab work space at its JLAB facility in San Francisco.
Source: Johnson & Johnson
J&J provides scientists with shared lab work space at its JLAB facility in San Francisco.

On Friday, Reuters published a story charging that Johnson & Johnson knew back in 1971 that "its iconic baby power sometimes contained asbestos and failed to alert authorities."

The story also cited a Missouri court of 22 women who said their use of baby powder "caused them to develop ovarian cancer." The stock market reacted immediately by taking 10 percent off J&J's stock, causing a drop of almost $40 billion in J&J's market capitalization.

The story and subsequent stock drop seem like an overreaction to a narrow set of information based on the Missouri court verdict, fueled by a group of plaintiff attorneys, and pursuing 9,000 additional cases against the company.

In a similar case in California, a jury cleared J&J of any liability a month ago. They also ignore a U.S. Food and Drug Administration statement that a study found "no asbestos fibers or structures in any of the samples of cosmetic-grade raw material talc."

To prove their case, plaintiffs would have to show scientifically that a causal link between baby powder and ovarian cancer exists, something that has never been done and seems highly improbable.

The larger issue at stake here is Johnson & Johnson's integrity.

I have known this company and its CEOs and senior leaders for more than thirty years, competed against them, and worked with them over a decade ago. J&J is one of the highest integrity companies in the world.

Its leaders — led by current CEO Alex Gorsky, as well as predecessors Bill Weldon, Ralph Larson and Jim Burke — put the famous J&J Credo at the forefront of every decision they make.

Written in 1943 by then-Chairman Robert Wood Johnson, the Credo states in its opening lines, "We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality."

It is not plausible that these leaders knew nearly five decades ago that their iconic baby powder caused cancer and continued to market the product. This is a company whose leaders consistently try to do the right thing, admit their mistakes, and continue to develop life-saving products that restore the health of millions of people around the world.

While the plaintiffs' attorneys may continue to pursue their cases, I feel confident that J&J will be shown to put the interests of its customers first, and maintain its reputation for the highest integrity.

Commentary by Bill George, a senior fellow at Harvard Business School, former Chairman & CEO of Medtronic, and the author of "Discover Your True North." He has taught in Unilever education programs in the past decade. While he doesn't hold any individual shares of J&J, the company has paid him as a speaker in the past, although not in the last decade. Follow him on Twitter @Bill_George .

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