Pictured: Johnson & Johnson’s Talcum Powder involved in thousands of lawsuits.
Ethics Case Controversy
Johnson & Johnson is a multibillion-dollar company in the pharmaceutical industry that produces medical devices, pharmaceuticals, and consumer packaged goods. Johnson & Johnson is responsible for the household items that many of us are familiar with, including Band-Aid, Tylenol, Neutrogena, Johnson’s Baby, and countless more. In October 2019, the U.S. Food and Drug Administration found asbestos in one of the containers of their talc-based baby powder retailers to pull this product off of their shelves. Talc and asbestos can naturally form together in talc mines, causing asbestos contaminated products with very little way of filtering it out. Asbestos contamination in talc products can lead to cancers such as mesothelioma and ovarian cancer. For over a century, consumers have used talcum powder, otherwise known as baby powder, to perfume, dry, and protect their own and their children’s skin. Not only has Johnson & Johnson denied that their talcum powder causes cancer, but the company has known that this harmful substance was in their product since as early as the 1970s. In an investigative report by Reuters, they revealed that, “J&J didn’t tell the FDA that at least three tests by three different labs from 1972 to 1975 had found asbestos in its talc,” (Reuters). The company has faced around 38,000 lawsuits claiming the asbestos in Johnson’s baby powder caused ovarian cancer and mesothelioma in consumers (NPR). Spokespeople from the company made statements that claimed that the company had made sure through many tests that the ingredients in the powder are safe. One stated, “Our [powder] has been routinely tested and confirmed to be asbestos free by a range of independent laboratories, universities and global health authorities''. In an attempt to quiet the angry public the company has spent around 2 billion dollars in costs and settlements (Jolly 1). Despite the enormous backlash that the company was experiencing, in an effort to maintain their profits and buy themselves time, the company took to doing some immoral financial actions.
In October 2021, Johnson & Johnson filed for bankruptcy under the weight of thousands of lawsuits. This quiet tactic effectively puts a hold on all outstanding and unresolved lawsuits that Johnson & Johnson was facing concerning the contaminated talcum powder. The company’s legal maneuver of filing for bankruptcy was controversial to many people. Johnson & Johnson worked with the bankruptcy court to set up a trust fund of $2 billion to resolve outstanding and future claims. By doing so, the company will save billions of dollars and allows them to settle claims through the trust fund instead of litigating them individually. Johnson & Johnson is not facing the problem head on, but rather trying to get out of the claims anyway they can without having to take responsibility for the health risk they put their consumers in. In addition, Johnson & Johnson transferred all of the potential liability linked to the talcum powder cases into a subsidiary, called LTL. This way, Johnson & Johnson could keep their valuable assets separate and the subsidiary absorbs the liabilities as a protective maneuver. The company claimed that their choice in actions would help resolve claims in an efficient and equitable manner. However, their strategy halted the cases, allowing them to remain on hold for months or even years. Anger and frustration sparked from families that were seeking compensation from Johnson & Johnson’s contaminated products. Companies facing similar situations have found openings in state and federal law such as creating and pushing a new subsidiary into bankruptcy, which Johnson & Johnson did.
Pictured: A telltale needle-like shape of asbestos found in a 1978 bottle of J&J baby powder.
At age 22, Hanna Wilt realized that she was not able to walk right, her first symptom of an aggressive cancer called mesothelioma. Her illness rapidly advanced after unsuccessful treatment, causing Hanna not only fear, but outrage towards the company responsible for making her sick. Her lawsuit against Johnson & Johnson was suddenly blocked weeks before her passing at age 27. Wilt used Johnson & Johnson’s talcum powder every day, sometimes even multiple times a day. Wilt was angry that the company had known about the powder contamination and kept the information from customers. “This powerful group of people, they lied and were able to potentially ruin so many people’s lives,” said Wilt (NPR). Hanna’s mother, Hope, knew that seeking justice would not have saved her daughter’s life, but she did not want a company like this to get away with their actions that have caused so many families heartache. Tens of thousands of people have filed these baby powder cases and have still not received justice for the company’s actions. Not only did Johnson & Johnson deny responsibility that their talcum powder caused mesothelioma and ovarian cancer in consumers, but they used an ethically controversial tactic to get themselves out of it. Hanna Wilt is not the only one that has died from the effects of using this product and many others are seeking justice from the company who claimed false bankruptcy as a maneuver around responsibility.
Pictured: Johnson & Johnson’s headquarters in New Brunswick, NJ.
In an episode of The Weekly about the case on Hulu, an interview of a woman, Patricia Schmitz, discussed how she was diagnosed with mesothelioma, after realizing that she too had used the baby powder for most of her life and filed a lawsuit against the company. Her lawyer, Mark Lanier, discussed his research and similar cases that found that a known material found within Talc mines (Talc being a main component of baby powder) was asbestos. This was also a very hard substance to identify and remove because the material was scattered within the Talc mines. When he dug further into the company’s internal files he found that there were actually tests done on samples of the powder that showed a positive match to asbestos found within the talc in the product. Using the results he found within Johnson & Johnson’s result, as well as within his own tests, they found traces of asbestos in the products as well as within the tissue of the bodies of the individuals that were affected. He argued that they had in fact done tests but created the tests in such a way that they knew they could not accurately pick up traces of the asbestos because they were not sensitive enough. Documents dating back to the 50s even show that results of tests done on the talcum powder show that it contained asbestos. The company has known about the dangers and the contaminants of its products for upwards of 70 years and had lied to the public and refused to acknowledge the dangers of it. In the result of Patricia’s case, Johnson & Johnson was required to pay her $4.8 million and the Justice Department had opened up an investigation of the company as a result of all of the suits filed against them (The Weekly).
Timeline
Stakeholders
Johnson & Johnson has a large number of key stakeholders in their company but there are three that hold the most stake within the company. First and foremost is their Executive Chairman and CEO Alex Gorsky. Alongside him is the second largest stakeholder who is the Chief Executive Officer Joaquin Duato (JNJ). Coming in as the third largest stakeholder of their company is the investment group The Vanguard Group Inc. who holds over $36 billion dollars within the company. In addition to these stakeholders, future shareholders, current shareholders, consumers of Johnson & Johnson products as well as the general public all play a major role in those who have a stake within the company. Shareholders are affected by the outcomes of lawsuits filed against a company which they have billions invested into because it could impact their return on investment. These groups and people could lose all of their money put into the company if the company were to file for bankruptcy. The consumers and general public that use Johnson & Johnson’s products are affected because they are either looking for justice for wrongs committed against them from using the products and they are also important to future consumers' well-being if the products are a danger to their health. Justice must also be served to those who have suffered as a result of the product.
Individualism
When it comes to defining “Individualism” Professor Salazar states “Business actions should maximize profits for the owners of a business, but do so within the law.” (Salazar 17). This definition explains how a business, like Johnson and Johnson, makes its decisions to best serve its long-term interests of maxing profits. Therefore, it could be argued that the company decided to make this bankruptcy choice because in the long term they believe they will be able to sort out all these lawsuits and will bring closure to them and the families affected, without having to spend millions in fines. On the other hand, it can be argued that using this “Texas two-step" method to pause the lawsuits was not in their best interest because when all is said and done many individuals and their families were harmed in this process and the company will lose a lot of their reputation and could eventually lose out on profits over time. A business that believes in individualism would only want its workers to focus on how to maximize the goal of the company, which any companies' main goal is profit. This would lead to Johnson and Johnson agreeing with the individualism theory because they are solely focused on making a profit, and stalling these cases allow them the time needed to figure out how they can get out of it while losing the least amount of money.
Is this situation ethical? No, obviously because many people have potentially been harmed using its product they knowingly put on shelves with dangerous chemicals. This case has way too many stakeholders involved that will for the most part all be negatively affected. Johnson and Johnson cannot view this in an individualistic way of just wanting to act in their self-interest to earn profits because people’s lives and health are on the line. But this potentially is how they are handling the situation, only caring about their profit, and trying to hide their wrongdoings. However, they are performing all of this within the laws, as unethical it may still be, this is all legal. Professor Salazar also writes, “Since laws can be changed, these laws simply represent that the business will abide by commonly agreed-upon standards” (Salazar 18). The previous quote explains how those who believe in the theory of individualism do so and believe as long as they are acting within the laws, they can do just about anything in order to maximize profits.
In conclusion, the theory of individualism would find the circumstances of this case permissible as the company is acting to maximize their profits within the laws. Unfortunately, it is in a very unethical manner, but the main goal of a company is to profit and what Johnson and Johnson is doing is stalling the lawsuits to give them more time to figure out how to get out of this without losing too much money and their reputation. When thinking about it, they are certainly acting in an individualistic way because they are only worried about their self-interests, profits, and paying no attention to the irreversible damage they have potentially caused to a number of families.
Virtue Theory
Being a virtuous person can be described as behavior showing high moral standards. Therefore virtue theory in relation to companies and their customers, owners and all who work for that company, have a moral obligation or duty to consumers of its products. This includes being honest, transparent, and fair in their business practices. Johnson & Johnson did not use virtuous and ethical business practices in handling the lawsuits made against them in recent years as well as simply being an ethical company to their millions of customers for decades before the scandal was released. When a company knows of the dangers of its products and they continue to withhold those warnings from their consumers that is an immoral and unethical use of power. “A warning on the product that has even a chance to cause harm or illness to those using it would be the least that a company could do in the way of being ethical and just” (The Weekly). For upwards of 70 years Johnson & Johnson has been a household name of purity and safe products to be used for babies as well as adults. It is the company’s responsibility to uphold these values and promises of the quality and safety of their products to customers. When there is even a shadow of a doubt that a product is dangerous and can cause harm to those who will use it, especially one marketed as being used on babies, the company has an ethical and moral standard that they must inform these people. Then at least the people using it can make their decision based on weighing the risks with the rewards of buying the product.
Utilitarianism
A utilitarian would view Johnson and Johnson’s way of handling the situation as the opposite of their belief. Utilitarianism is described as in simple terms, the greater good for the greater number of people. In this case, Johnson and Johnson did not care about the health and the state of the people who were affected by the baby powder, they only cared about the reputation of their company and keeping their company making money. In Johnson and Johnson’s case, no stakeholders were happy at all with the case, and is as follows:
Hanna Wilt/All 38,000 other cases: All of those who tried to bring Johnson and Johnson to court will be negatively impacted by this case, because Johnson and Johnson used the Texas two-step to freeze all these cases, and they were never settled. Johnson and Johnson was never held accountable with legal action against the company, and those who were affected by the baby powder were either dying or very sick.
Shareholders of present and future: Both shareholders of the present and the future will also be negatively impacted by this case. The company was looked at by the public as not owning up to their mistakes, and the value and stock of the company dropped. The company’s stock value was down, and was not a consideration for future investors at all.
Customers/Society as a whole: Customers of the billion dollar company also will be negatively impacted by this case because they are the ones that have been using Johnson and Johnson products and can themselves be affected by the baby powder and they might not even know. These customers will lose trust and faith in Johnson and Johnson especially after the way they handled all of the court cases, and did not take ownership for what they did.
Johnson and Johnson’s actions were unethical and the opposite of what a utilitarian would believe in. The greater good was not the greatest for the greater number of people. Johnson and Johnson handled this case very poorly and it's very sad to see innocent people die and be very sick from a health product that they thought they were using to benefit them.
Kantianism
It is clear that Johnson & Johnson’s actions were impermissible based on a Kantian’s view. The company went against the Formula of Universal Law, Humanity, and Autonomy, determining that they did not make a rational action. The Formula of Universal Law prohibits people from making exceptions of themselves and forbids all forms of deceit. Clearly, Johnson & Johnson deceived its loyal customers by failing to report the talcum powder samples containing asbestos in the 1970s. They market their products as safe and trustworthy, however that is disproved by this case. The Formula of Humanity states that people should treat others for what they are and not as a mere means to get something they want. Johnson & Johnson used its consumers to get monetary gain, regardless of an unsafe product. They withheld information about the asbestos in order to get people to buy their product they would otherwise be wary of purchasing, knowing the dangers. The company then blocked the lawsuits with the bankruptcy and settled matters through a trust fund, costing them the least amount of money possible. The Formula of Autonomy regards legislating laws everyone can agree to. Johnson & Johnson agreed to obey laws about product safety and standards the FDA sets yet failed to do so. The tactic that J&J used is not clearly legal. Lindsey Simon, a professor who teaches bankruptcy law at University of Georgia stated, “I think if you really look closely at what bankruptcy code allows, it’s not altogether clear this is permitted,” (NPR). Based on the formulations of the categorical imperative in Kantian ethics, Johnson & Johnson’s actions are impermissible.
Action Plan
Johnson & Johnson acted in an entirely selfish way to a massive number of customers as well as stakeholders in their company. For monetary gain and protecting their assets, they continuously put millions of people’s health at risk and caused cancer and subsequent death in many. The outrage and backlash towards them that the scandal had caused forced the company, however delayed, to take action in an attempt to remediate the burden they have put on people. Though there are some who suffered irreversible damage and loss of life, those individuals could not be helped. In order to repair the damage to their reputation as one of the safest companies whose products are prided in safety and purity, Johnson & Johnson would need to make a number of steps to do so. Starting with continuing to make settlements with the lawsuits filed against them and repay the best they can to the families who were impacted by the product. Conducting a mass recall of all of the baby powder that consumers may have in their homes and provide compensation for the products. They should also conduct an investigation and publicly own up to the mistakes that were made as a company and express their apologies and plans for moving forward to making the company safe and reliable again. Johnson & Johnson must be completely transparent in the production of their products and have the customers' very best interest and health at heart. For a company who prides itself in purity and care, these values must be top priority in all matters of the business. Johnson & Johnson strives for good and the wellbeing of their customers but being honest about where products come from and making sure that they are not risking the lives of their customers should be more of a priority than it seems to be currently.
Johnson and Johnson should emphasize multiple core values within their company after this situation. One of these core values should be testing all of their products, this is something that seems to be giving the company a lot of past issues, and that is where this entire controversy originated from. Once, they find an issue in one of their products such as a dangerous chemical they should immediately take that product off the shelves. Another value they need to recognize is honesty. Johnson and Johnson cannot try to hide their mistakes, especially in this case, and admit their wrongdoings in order to protect their customers' safety. A third relevant core value needs to be integrity. This encompasses the previous two values and overall emphasizes ethical practices within their business. Trying to hide mistakes and potential harmful products is a terrible look on any company’s reputation, especially such a large and powerful company like Johnson and Johnson. Having integrity is the most important core value that every company should take seriously.
In order for Johnson and Johnson to ensure ethical productivity to prevent this problem from happening again they need to have discussions with the testing departments and even upper level management. This needs to be done in order to ensure they minimize putting harmful products on the shelves. Having harmful products seems to be becoming a theme for Johnson and Johnson showing they need to be more careful in the future. Having discussions with upper management will also mention the company’s ethics and making sure they admit their mistakes to once again get harmful products off the shelves so they do not cause any problematic situations like this case. Customer safety needs to be Johnson and Johnson’s number one priority as they currently dug themselves into a huge hole with lawsuits and even possible deaths at their fault.
During the case controversy, many executives knew about the asbestos contaminant. Products from every company are required to be tested and regulated through the Federal Drug Administration. When Johnson & Johnson had their products tested in the 1970s, there was evidence of high levels of asbestos in their talcum powder. Johnson & Johnson must have gotten these lab results back and had to have known about the contamination. In this case, the executives and others who had been notified of this danger should have been fired for failing to do anything about it. To prevent cases like this in the future, Johnson & Johnson should hire people who show integrity, check employment history, ask about their ethics, and administer personality assessments. The company should also promote those who show these qualities and are focused on the health of consumers and doing what is ethically right. If any employee proves otherwise, they should be fired immediately because this will set a standard for what the company expects in its workers. If people act unethically and get away with it, others might take advantage of that and act unethically (potentially for monetary gain) because they too can get away with it. By doing so, Johnson & Johnson will gain a better reputation if customers see that they want ethical people working for their company.
Johnson & Johnson needs to remarket their company. For a company who has faced thousands of lawsuits for their dangerous products, they still claim they value safety, health, and ethical practices. It is wrong to claim this if many of their products have been known to be dangerous and harm their customers. If Johnson & Johnson were to take the steps in this action plan to better their company and the safety of their consumers, they should show the public how they are doing so. For example, Johnson & Johnson can decide to go through more thorough development and more regular testing of their products with a third party neutral lab. This way, if a product is deemed unsafe, the lab will be able to report this to the FDA instead of potentially keeping quiet if they are working with Johnson & Johnson. In addition, they can prove to consumers that they are taking a more ethical approach to their company and hire new people to replace ones that have shown unethical behavior. By marketing their company as a more caring and ethical company and by taking the necessary steps to do so, people may put trust back into their company.
Authors:
Kathryn Bentz
John Oliver
Taylor Tenerowicz
Joe Contino
References
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Retrieved April 15, 2022, from https://www.npr.org/2022/04/02/1082871843/rich-companies-are-using-a-quiet-tactic-to-block-lawsuits-bankruptcy
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