Johnson and Johnson was a billion dollar corporation that owned 149 companies, including the maker of Tylenol McNeil Consumer Product, in 1982 when disaster struck. In 1982, Tylenol was the largest single brand in the health category and had a 37% share of the painkiller market. Johnson and Johnson’s biggest product recall, and arguable the biggest in business history, involved the over the counter pain relief pills Tylenol. Seven people around the Chicago area were tragically killed in 1982 after taking Extra-Strength Tylenol laced with postassium cyanide. After the FBI investigation, it was discovered that the tampered bottles came from different factories and that the tampering occurred at the store level since it was all concentrated in one city. The only suspect was James William Lewis, who sent a letter to Johnson and Johnson demanding $1 million to “stop the cyanide-induced murders.” Although he served 13 years in prison because of the extortion charges, he could not be linked to the crimes. Extra-Strength Tylenol was Johnson and Johnson’s best-selling product at the time. The company knew that the future image of the company depended on how it responded to the crisis.
People thought that Tylenol would never make it back to the shelves and that Johnson and Johnson would forever be tarnished by this crisis. However just a year later, Tylenol’s share of the painkiller market had risen up to 30 percent from 7 percent at the time of the crisis, which is just eight percent shorter than before than crisis. Also, the stocks that previously took a dive when news about the deaths hit the public recovered in just two months. How did Johnson and Johnson actually benefit from the crisis?
Unlike most of the cases we have covered in class, such as BP or Apple, Johnson and Johnson did not cut regulation corners or choose money over ethnics. The company did not do anything physically wrong to cause this disaster. This case is unique because even though Johnson and Johnson knew that they were not responsible for the tampered product, the company still felt that they had a duty to the public and placed customers first. The company’s reaction stemmed from its company mission statement, which stated that the company’s responsibilities were to the “customers and medical professions using its products, employees, the communities were its people work and live, and its stockholders. To the company, it simply was the right thing to do.The company immediately issued a nationwide recall of over 31 million bottles of Tylenol, which carried a retail value of about $100 million. Pulling the product off of the shelves was more radical back then than it is today because in the 80s there was rarely if any product recalls. Also, the company offered replacement products in a safer tablet form free of charge to customers. The company also took various measure, such as tampering free lids, in order to ensure that this disaster would not repeat itself. Their positive reaction also helped in the future when the company reintroduced Tylenol to the market.
Many people admire James Burke, the company’s chairman, for his speedy yet calm actions during the crisis. And the amazing thing is, he told the public everything. It was reported that in a news conference only a month and a half after the crisis he told the public everything that happened. Burke never tried to withhold information from the public in order to make the company look better. These actions surprised me because in today’s business society transparency is very, very rare. The media and the public applauded the company for the honest way it handled the Tylenol crisis. The Washington Postsaid, “Johnson & Johnson has effectively demonstrated how a major business ought to handle a disaster.” Johnson and Johnson’s strong management and great corporate ethics helped soften the blow of the tragedy and helped the company bounced back quicker and better. Should we expect all companies to act this ethically because they have a duty to the public? Do you think Johnson and Johnson was pressured by the deaths to take action even though they were not responsible for the tampered product?