J&J execs reassure shareholders on quality issues

AP News
Posted: Apr 26, 2012 4:56 PM
J&J execs reassure shareholders on quality issues

NEW BRUNSWICK, N.J. _ Johnson & Johnson shareholders, upset over the health giant's battered image amid unprecedented product recalls and ethical lapses, peppered its new CEO with questions and criticism during J&J's annual meeting Thursday.

Others among the 1,800 J&J retirees and other shareholders attending raised concerns over serious side effects of some J&J prescription medicines.

Outgoing CEO Bill Weldon, stepping down after a decade, and successor Alex Gorsky tried to reassure the audience that the company is resolving its quality problems and focused on helping patients.

Both noted J&J has instituted new quality procedures as it works to fix problems that have led to about 30 recalls of consumer health products, hip replacements and prescription drugs. The causes have included nauseating packaging odors, wrong levels of active ingredients in pills, and glass and metal shards in liquid medicines.

"It is encouraging to see that through our actions we are regaining our standing with both our employees and the public," Weldon said.

Gorsky and Weldon both repeatedly stressed that J&J is sticking to the values in its corporate credo, which puts patients, doctors, nurses and employees ahead of profits. Gorsky, the seventh J&J CEO since the company went public in 1932, said he is "resolute in his determination to keep our credo as the foundation for Johnson & Johnson."

The meeting included about an hour's worth of videos showing how Johnson & Johnson products have helped patients, from an old man with prostate cancer to a young woman with severe spine damage, and others with luminaries including former president George H.W. Bush giving tribute to Weldon's charitable efforts and focus on patients.

Weldon noted that J&J started growing again last year, with revenue climbing 5.6 percent to $65 billion. That followed two years of sales declines, partly because recalls have kept Tylenol, Motrin, Rolaids and other nonprescription medicines off store shelves for a couple of years.

But some shareholders didn't seem satisfied, asking pointed questions during the meeting's comment segment.

"Are you going to be implementing more careful procedures to ensure that Johnson & Johnson continues to be the honorable company that it's always been?" one woman asked.

A man said that after cringing the past few years over television news reports on the recalls and quality problems he hopes Gorsky will "lead us back to the point where we will all be happy to hear the name Johnson & Johnson on the evening news."

Two patients, who said they had been given J&J's powerful antibiotic Levaquin inappropriately for minor infections and ended up with painful, disabling tendon damage, urged the company to have sales representatives stress the drug's risks to doctors. One urged that sales reps no longer get bonuses based on how many prescriptions they nudge doctors to write for J&J products, but Gorsky dismissed that idea.

Weldon drew applause a few times, though _ the loudest when he announced J&J is raising its quarterly dividend by 7 percent, to 61 cents share, marking the 50th straight annual dividend increase.

Meanwhile, in an advisory vote, 57 percent of votes cast backed J&J's generous compensation of top executives and the company's compensation policies, which Weldon said now link pay and performance more closely.

Stockholders rejected one shareholder proposal, 43 percent to 57 percent, to require that the J&J board chairman be independent, meaning without material ties to the company. J&J management opposed that, and Weldon is to remain chairman of the board for the time being.

The other two shareholder proposals each were supported by less than 5 percent of votes cast. One would have required J&J to get approval from owners of 75 percent of outstanding shares to make any political contributions; the other would have required the company to use simulators or other methods without animals for demonstrations and training on use of its surgical equipment.

A representative of People for the Ethical Treatment of Animals said two Johnson & Johnson subsidiaries that make surgical tools do procedures on about 1,500 animals a year, mostly pigs but also dogs, rabbits and sheep.

Two PETA representative dressed in hot pink pig costumes were among the two dozen protesters hoisting signs criticizing J&J as shareholders entered the hotel opposite company headquarters where the meeting was held.

Johnson & Johnson shares rose 34 cents to $64.77.