J.& J. Chief To Resign One Role

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added Feb 22, 2012 2:24:36 AM
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FILE - In this Thursday Nov. 15, 2007 file photo, health care products maker Johnson & Johnson's CEO William Weldon poses for photos at the company's world headquarters in New Brunswick, N.J. The company on Tuesday, Feb. 21, 2012 said Weldon is retiring this April, following an embarrassing string of product recalls that has stretched for more than 2 years, costing the health care giant hundreds of millions of dollars and consumer trust.

William C. Weldon, who presided over Johnson & Johnson during one of the most tumultuous periods in its history, will step down as chief executive in April, the company announced Tuesday.

Alex Gorsky, head of the medical device and diagnostics business, will take over as chief executive. Mr. Weldon will remain as chairman.

The news of Mr. Weldon’s retirement comes as Johnson & Johnson has struggled to emerge from a swarm of product recalls, manufacturing lapses and government inquiries that tarnished the name of a company that was once one of the nation’s most trusted household brands. In 2010, the company recalled millions of bottles of liquid children’s Tylenol and other medications, as well as tens of thousands of artificial hips and millions of contact lenses.

Much of the blame for Johnson & Johnson’s stumbles fell on Mr. Weldon, the son of a Broadway stagehand and seamstress who became chief executive in 2002 after spending his entire career at the company. Critics said the company’s once-vaunted attention to quality slipped under his watch. The company said in a statement that neither Mr. Weldon nor Mr. Gorsky was available for comment.

There was little doubt that Mr. Weldon, 63, was going to retire this year, said Erik Gordon, who teaches business at the University of Michigan. “I think what he really wanted to do is clean up his image,” Mr. Gordon said. “He didn’t want to leave at a time when it looked like he was being thrown out.”

Plans for Mr. Weldon’s exit became clear in December 2010, when the company promoted Mr. Gorsky and Sheri S. McCoy to vice chairman and vice chairwoman of the executive committee in what was seen as a race to succeed Mr. Weldon. There were other signs that Mr. Weldon planned to step down: over the past year he has sold more than one million shares of Johnson & Johnson stock; the sales earned him nearly $69 million.

In 2011, critics of Mr. Weldon, including a group of shareholders, complained of his compensation of about $30 million a year, saying it ignored his troubled leadership.

Mr. Gorsky, who is 51, was considered the favored candidate, said Les Funtleyder, a portfolio manager who owns the stock at Miller Tabak & Company. Mr. Gorsky is well-known by the company’s investors. “There is a comfort level with him,” Mr. Funtleyder said. Ms. McCoy will continue to lead the pharmaceuticals and consumer groups, the company said, but analysts said she may leave after having been passed over.

The ascension of Mr. Gorsky, who first joined Johnson & Johnson as a sales representative in 1988, continues the company’s 126-year tradition of hiring leaders from within. The medical devices division generates the largest amount of sales for the company, and it is expected only to grow with the acquisition last year of Synthes, a Swiss-American medical device maker.

“Alex and Sheri are two extraordinary leaders,” Mr. Weldon said in a statement Tuesday. “The future of Johnson & Johnson is in very capable hands.”

But Mr. Gordon said the board’s decision to hire another insider showed that it was not serious about changing the corporate culture that had created so many of its problems.

“I think it’s a big mistake,” he said.

In the wake of the product recalls, Mr. Weldon and the company went on the offensive, initiating a public relations campaign aimed at restoring consumer confidence and revamping quality controls to create a single framework for the company’s drug, medical device and consumer health care divisions.

“From Johnson & Johnson’s perspective, our response to this issue was the most responsible it could possibly be,” Mr. Weldon said in a telephone interview in 2010.

Even so, Johnson & Johnson has continued to struggle to put its troubles to rest. As recently as last week, the company announced it would recall about a half-million bottles of liquid Infants’ Tylenol because of a faulty dosing system.

Still, Mr. Weldon’s retirement comes as the company shows signs of improving, said Jeff Jonas, portfolio manager for Gabelli, which owns the stock for investors. “He’s wanted to stay and get through the worst of it,” he said.

Some products are back on the market, Mr. Jonas said, and the company has a well-defined plan with the Food and Drug Administration to bring the plant that was a source of many of the over-the-counter recalls up to federal standards. A drug to treat prostate cancer, to be marketed as Zytiga, was approved by the Food and Drug Administration last year, and the consumer business is recovering.

Mr. Jonas said the fact that Mr. Weldon plans to step down in April, during the company’s annual meeting, indicates that his departure was not abrupt. “The annual meeting is always a classic time to do the transition,” he said.

Johnson & Johnson’s stock closed at $65.04 Tuesday, having rebounded from a low of $57.50 a share over the last 12 months.

Source: New York Times
 
 
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