J&J Recall: Manufacturing issues believed behind CEO departure

In what appears to be the ultimate step to address its manufacturing and quality control issues, Johnson & Johnson ($JNJ) has announced the retirement William Weldon (photo) as CEO. For now, he remains chairman of the board.

He is being replaced by J&J insider Alex Gorsky, whose supply chain experience as the executive overseeing medical devices is believed by some to have given him a leg up, The Wall Street Journal reported.

The revelation comes weeks after two top executives on the consumer health side left J&J. Patrick Mutchler, who was put in charge of overseeing the McNeil Consumer Healthcare unit last April, is retiring, and Pericles Stamatiades, strategist for consumer businesses, is also leaving.

The idea of naming new manufacturing and quality control management for a reputation overhaul and to change operations cultures seems to be catching. Hospira ($HSP), which has been dealing with quality and shortage issues, has just announced a senior vice president of quality and the new position of vice president of pharma operations excellence, "to ensure that process change is systemic across the company's U.S. plants."

At J&J, manufacturing and quality issues have been ongoing for more than two years. A string of recalls began in late 2009, affecting such products as Tylenol, Benadryl, Motrin and Zyrtec (and prompting FDA intervention and congressional hearings). McNeil Consumer Healthcare immediately closed its Fort Washington, PA, plant after an April 2010 recall of more than 136 million children's and infants' products. And it just last week recalled 574,000 bottles of children's Tylenol because of possible problems with its dosing mechanism.

McNeil entered into a consent decree with the FDA in March covering plants in Lancaster, PA, and Las Piedras, Puerto Rico, in addition to the Fort Washington facility, which is undergoing a $100 million renovation.

There have been other problems as well, including the mess over recalls and litigation involving DePuy orthopedic implants. And last month, sources told Bloomberg the company was prepared to pay $1 billion to settle a civil investigation into marketing of the antipsychotic drug Risperdal.

All of this has taken a toll on the J&J name. Long one of the most revered brands among consumers, it fell to 7th place from second in the recent Harris brand reputation study. It was the first time in the 13-year study's history the company did not hold first or second place.

For agreeing to take on all of these issues, Gorsky will receive a $1.2 million salary, which is the only a small part of his total compensation package. Weldon, who was recently tagged one of the worst CEOs of 2011 in piece on The New York Times DealBook blog, received total compensation of more than $28 million in 2010, Forbes reports. 

- read The New York Times story
- see Forbes' compensation ranking
- get the DealBook piece
- check out more from the WSJ

Related Articles:
J&J picks Gorsky over McCoy to fill CEO's seat
Executive suite not spared in J&J reorg tied to quality concerns   
Hospira beefs up quality management team