According to CNBC money madman Jim Cramer, the best way for Johnson & Johnson ($JNJ) to restore credibility among consumers and maintain value for investors is by getting rid of CEO Bill Weldon (photo). He's hardly alone in critiquing J&J as 2010 comes to a close.
Cramer believes Wall Street hasn't grasped the significance of the Tylenol and other drug recalls, FDA warning letters and unfavorable facility inspection reports. That explains the stock's staying power, he reasons. But "the FDA could crack down on the company any time now, and that could do a lot more damage to sales and earnings than we've seen so far." The agency could shut down the Las Piedras, Puerto Rico, plant, for example, causing what he projects may be a 5 percent drop in 2011 earnings.
Last week's posting by the FDA of details from an inspection of the idled Fort Washington, PA, plant supports Cramer's view. It shows that quality control problems remain within J&J, despite the plant being closed last April for a manufacturing makeover. Also last week, Congress sniffed out previously unnamed J&J contractor Best Sweet as the party behind the contaminated Rolaids recall.
Such events have all but eradicated the reputation for integrity of the world's largest healthcare products maker. And as the year comes to a close and the list-writers get to work, J&J and Tylenol come quickly to mind: OnPoint Consulting's Rick Lepsinger places J&J at number 5 on the execution gap-makers list (companies that create a gap between strategy and execution), behind BP but ahead of Toyota. "Poor execution doesn't happen overnight," he says of J&J. "It can often be traced back to a pattern of behavior that gradually erodes a company's ability to deliver consistent high-quality results." In this case, it's a misalignment "between leader actions and company values and priorities."
J&J also makes the top 10 PR blunders list compiled by Fineman PR. Delayed corporate action, the phantom recall, and "a glaring lack of corporate transparency turned a bad situation into a nightmare crisis."