Johnson & Johnson Names New CEO
It’s been a difficult month for Johnson & Johnson. First came the Feb. 13 poor showing in Harris Interactive’s annual consumer poll of corporate images, where the company ranked seventh (falling from one of the top two spots for the first time 13 years). Then there was the Feb. 17 recall of more than 500,000 bottles of infants’ Tylenol due to complaints with the dosing system. And in the midst of all the tumult was the constant barrage of lawsuits over faulty replacement hips and potentially dangerous vaginal mesh products.
With such troubles plaguing the New Brunswick, N.J.-based healthcare conglomerate, few analysts were surprised to learn earlier this week that the company appointed a new chief executive and reduced William C. Weldon’s role to chairman, effective April 26. His replacement will be Alex Gorsky, 51, a former army captain and endurance athlete who has spent two decades at J&J, most recently leading the Medical Devices & Diagnostics Group, Global Supply Chain, Health Care Compliance & Privacy and Government Affairs & Policy. He also currently serves as vice chairman of the company’s executive committee.
“Gorsky is a conservative choice and the strongest internal candidate,” Erik Gordon, a business professor at the University of Michigan in Ann Arbor, told Bloomberg. “That’s a big deal at a company that always taps an insider as its next CEO—even if what they need is someone from outside the team that led the company into so much trouble.”
Weldon, 63, has been blamed for much of J&J’s troubles of late. The son of a Broadway stagehand and seamstress, Weldon became CEO in 2002 after spending his entire career at the company. Critics have accused Weldon of allowing the company’s once-staunch attention to quality erode through the years, resulting in the manufacture of drugs with foul odors, adulterated ingredients and/or bad labeling as well as metal hips that wore out and failed long before they should have. J&J’s DePuy unit faces more than 4,500 lawsuits over the ASR XL Acetabular System, a hip socket used in traditional replacement surgery, and the ASR Hip Resurfacing System, a partial hip replacement that involves placing a metal cap on the ball of the femur to preserve more bone. Both products were recalled in August 2010; to date, J&J has recalled 93,000 hips worldwide, including 37,000 in the United States, warning that more than 12 percent failed within five years.
In the wake of those recalls and others, J&J initiated a public relations campaign aimed at restoring consumer confidence and revised its quality control mandates to create a single framework for the company’s drug, medical device and consumer healthcare divisions.
“From Johnson & Johnson’s perspective, our response…was the most responsible it could possibly be,” Weldon claimed in a 2010 New York Times interview.
That response included a comprehensive plan to improve conditions and quality standards at the manufacturing plant that produced many of the adulterated products.
When he assumes leadership of the company in late April, Gorsky will become only the ninth CEO in J&J’s 126-year history, according to Bloomberg. He joined the firm’s Janssen Pharmacutica unit in 1988 as a sales representative and then worked in various positions in sales, marketing and management over the next 15 years. In 2001, Gorsky became president of Janssen and was promoted two years later to company group chairman of J&J’s pharmaceuticals business in Europe, the Middle East and Africa.
Gorsky left J&J in 2004 to become head of North American pharmaceuticals for Basel, Switzerland-based Novartis AG. He returned four years later, however, as company group chairman and worldwide franchise chairman for Ethicon in the medical devices business. In 2009, Gorsky was appointed worldwide chairman of the surgical care group and to J&J’s executive committee. He became vice chairman of the committee in January 2011. As CEO, he’ll be paid $1.2 million, according to a company filing.
Jeff Jonas, an analyst with Gabelli & Co. in Rye, N.Y., called Gorsky a “natural choice” for the CEO post. “I don’t think there’s going to be a huge change; he’s been involved in a lot of their recent decisions anyway,” he told Bloomberg.
Some critics feel those decisions should have prompted J&J’s leadership to find a more competent replacement for Weldon. Michael A. Kelly, a San Francisco, Calif.-based attorney suing the company, said he was shocked by J&J’s change in leadership.
“It’s clear that the medical device division was not being well supervised, managed or run, certainly from 2006 through 2010, when the entire ASR debate was going forward,” Kelly, of Walkup, Melodia, Kelly & Shoenberger, noted to Bloomberg reporters. “I would think somebody would say at what cost are we making the profits and what message does it send that we promote the person who was in charge of this division to an even higher job, given the way that the entire ASR issue was handled.”
Sheri S. McCoy, a competitor of Gorsky’s for CEO, will continue in her role as head of the pharmaceutical and consumer group, according to J&J.